david rigby

This Q appears to be from someone new to the process (nothing wrong with that). The links above are good starting points. Since you posted this in a DB forum, don't overlook anything required by the PBGC: https://www.pbgc.gov/prac/reporting-and-disclosure. There are also some other forums here that might be useful: https://benefitslink.com/boards/index.php (using the Search feature might help answer a future question). For reference, whenever the law or regulatory publications use the word "reporting", it means "reporting to (one or more) government agencies". The word "disclosure" means "disclosure to plan participants".

As with MANY inquiries from the sponsor/client/company, it's often best to ask questions, such as: Why do you want to do this? What is special about this situation? What is special about this person? There may be more than one way to solve a problem. Maybe I sound like a broken record, but I'm just asking you to act like a consultant.

IRC 411(e) reads as follows: (e) Application of vesting standards to certain plans (1) The provisions of this section (other than paragraph (2)) shall not apply to- (A) a governmental plan (within the meaning of section 414(d)), (B) a church plan (within the meaning of section 414(e)) with respect to which the election provided by section 410(d) has not been made, (C) a plan which has not, at any time after September 2, 1974, provided for employer contributions, and (D) a plan established and maintained by a society, order, or association described in section 501(c)(8) or (9), if no part of the contributions to or under such plan are made by employers of participants in such plan. (2) A plan described in paragraph (1) shall be treated as meeting the requirements of this section, for purposes of section 401(a), if such plan meets the vesting requirements resulting from the application of sections 401(a)(4) and 401(a)(7) as in effect on September 1, 1974. https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section411&num=0&edition=prelim

Just for clarification, was the effective date of the 2022 plan amendment prior to the owner/EE date of death?

There have been a few previous discussion threads. The Search feature might help you. For example, this one from 2019: https://benefitslink.com/boards/topic/63887-annulment/

Not my area of expertise, but it's possible you can get some value by searching this forum: https://benefitslink.com/boards/forum/68-investment-issues-including-self-directed/

Links to Revenue Rulings available here: https://www.taxnotes.com/research/federal/irs-guidance/revenue-rulings/rev-rul-73-553/d93b?highlight=73-553

Form and Instructions for I-9: https://www.uscis.gov/i-9

Is the auditor stating, or implying, that the ER should be doing something like this, as a normal action, to verify DOB for its EEs?

Why aren't you asking the actuary? He/she can do this, probably with alternatives you have not yet considered.

1. Does a plan exist or is this hypothetical? 2. What does "have extreme excess" mean? 3. What is the relationship between the original poster and the plan and/or the plan sponsor?

@Peter Gulia identifies a generic issue, relevant to any relationship with a vendor. That is, does a plan sponsor want to take an administrative action that "binds" it (the sponsor/plan administrator) even if such "binding" is only slight? Obviously, the corollary is, "So what? We can change it later if needed." The answer(s) might be related to the sponsor/PA perception of risk tolerance and/or whether there is a potential fiduciary risk.

Exactly! There are likely easily administered ways to get at the ultimate goal (whatever that is): maybe 1 yr w/o regard to hours; maybe 1 yr w/ 1000 hours; maybe 18 months after DOH; maybe 15 months after DOH; maybe 12 months after DOH; etc. No disrespect intended, but there is (likely) something else behind this. Possibly related to one particular person? Maybe there is a different method of addressing the underlying issue? Probe for the real reason(s).

Put on the consultant's hat and ask the usual first question: What are you trying to accomplish?

To be clear, "at least 25%". Another thing: has the seller explored the idea of having the buyer deal with it, via the buyer assuming the DB plan? Although the (apparent) reversion language might be a deterrent, there may be other reasons why the seller would encourage this option. There may be an advantage to the buyer which could result in a higher sale price. For example, if the buyer has an underfunded DB plan. (Every Enrolled Actuary will know how to find the answer to this question online. If so, you will kick yourself if you don't at least raise the subject with your client.) Don't laugh, real money on the table.

Lots to unpack. It's not clear what your client relationship is; TPA?, Actuary? Auditor? Something else? My sense of your phrasing is you are NOT the attorney; is that correct? If you are not the attorney, this seller should get its own legal advice, rather than use the advice of the buyer's attorney.

Correct, but I'm a bit concerned that something else is behind the original question. Any more details? What are you trying to accomplish?

Maybe it's just me, but there seems to be some missing information; specifically, the plan provisions that inform/guide the conclusion. If you appeal, you should request that information along with the reasoning for how those provisions lead to any particular conclusion, as well as pointing out the "shared payment" information. (Maybe they have already done this; we cannot be sure from your posting.) Also, your original post implies there was a 2012 plan amendment. You will want to know the specifics of that amendment, as well as the corresponding plan language immediately prior. You need to know the prior language so that your attorney can evaluate whether the plan change had an impact on your situation, and (if so) whether it was permissible to alter any rights you had under the Plan.

Forced rebalancing? It seems unlikely any recordkeeper would want to include this in its service agreement. Is there any advantage to doing so?

Corollary: if such limit is applied to one investment alternative (other than ER securities), would/should/must it apply to every alternative?

Does this "sponsor" have an attorney or accountant? If so, could you "persuade" such person(s) to educate the sponsor about how bad is this situation? If you do further work related to this plan, you should probably get paid in advance.

The seller could consider a spinoff. This most likely makes sense if the buyer wants to merge the spinoff into its own plan. There are pros and cons with this (or any other) process. (I won't list all the pros and cons here; that's a consulting project for which I would not get paid. In the meantime, you can give yourself some more background by searching these Message Boards; try a search word like "merge" or "spinoff".) In addition, there are other employment-related issues associated with any buy/sell arrangement, and those should be discussed in advance. The buyer and seller should (separately) engage competent ERISA counsel, preferably with M&A experience.

It's a reasonable question. I believe the answer is Yes. You should read the IRC 4980 statute here: https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section4980&num=0&edition=prelim

Well, you have a pretty good guess. 😉

Just a hunch, @BG5150 might be suggesting, "are there any state laws that describe some type of non-discrimination testing?"