Lou S.

I think it would depend on how your document is drafted. Also are you refering to acutal entry in the plan or testing based on statutory exclusions?

Mike maybe I'm way off base and if so I'd like to know but with I would say the following would apply. A has Bob 100% owner, beacuse that is more than 50% adult child daughter is deemed to own 100%. B has adult daughter own 60% more than 50% and is deemed to own the 40% by Bob for 100% A & B controlled through Daughter. Unless the exceptions of 1563(e)(5)(A)-(D) apply, duaghter would similarly own 100% of C through Son-in-law 100% ownership of C. The daughter becomes the common thread in all. But maybe I've got my logic all wrong and the step that passed from daughter to parent is bad leap but I thought that went both ways.

Assuming 1 year wait dual entry they should enter 7/1/13 if 1,000 hrs between 7/1/12-60/30/13. It is a relius related issue depending on how your plan is setup. I think it might be on their FAQs, if not call them we have simialr problems on occasion. If you are processing annually and don't have them as 1000+ hours in 2012 it looks the next computation period 1/1/13-12/31/13. You can manualy fix by overwriting the "met plan entry date" field prior to running eligibility.

You are most likely going to be a conrolled group in this situation. Unless the 60% is given to the daughter and not the son-in-law AND son in law only works for C, not A or B and daugher only works for A/B and not C and daughter and son in law meet the exception on seperate unrelated business which can be a bit complicated and may depend on whether or not it is a community property state.

Thanks. That seems like a solid argument. I'm not expecting problems with this client, just want to have my ducks in a row so to speak if there are issues as another month or two of interest will likely increase their final deposit to make the plan whole by whatever that interest credit is.

Thanks I agree with that position but was wondering if there is any specific IRS guidence I can fall back on if the client wants to take a different position.

Plan has fixed interest credit credited at year end. Assume it satisfy's reasonable rate. Pay credits frozen in past so not an issue. Plan terminates partial year, say 6 months. How is intrest credit done in final year? Though date of termination? Through date of pay out? Through end of Plan year, even if a futre date? We don't want a prohibited cutback issue to crop up.

Any way to take an in-service distribution of the nonqualifying assets? That might be be your best bet.

From a deposit timimg issue you are fine. You need to get into the trust, not necessarying particiant accounts. The money is trutee directed though until you allocate it to particpant accounts so you may or may not have a fiduciary issue depending on how long the money sits and whether or not you allocate earnings on it while it sits. Presumable it is in money market making virtually zero these days.

Sounds like discrimination against an HCE which the IRS is generally cool about. DOL is usually worried about non-owner employees so I personally don't see a problem with it. But I can't say that I've ever seen it done quite like this either.

As one who once tried to live in our house with 2 small children while our sewer line was repaired and we did not have sewer or water for 3 days, I can say that that should definietly qualify as a hardship. The hotel say after day 1 was nice though.

What is the definition of compensation in the Plan document? That should tell you if you include of exclude for the basis for deferral.

How do you ignore the catch-up for top heavy? While catch-up does not count for nearly all testing limits, it is included in the participant's balance for top heavy determinations unless my understanding of the rules is compeletely off base. edit - I should have read your followup response which I agree with 100%.

B is much worse. Unless you've picked a horrific set of target date funds that have an ungodly expense ratio and/or fail to invest according to its stated goals, I think a participant would have a hard time finding a judge who would rule the trustee made an imprudent decision with the participants money by putting them in a target date fund. OTHO if you default participants to MMK you may find a lot of judges who think that is an imprudent long term investment strategy for retirement, more so with the current DOL guidence out. Especially with MMK rates near 0% even before any possible program charges.

I seem to recall that eligibility is NOT a protected benefit and you are correct in you analysis. Though as a practical matter it could be a potential PR nightmare to axe half the employees from the plan. Especially when you tell them, "by the way you aren't eligible for distributions either because you are still employed." edit - In cases like this the employer often (but not always) grandfathers those who met the prior eligibility into the plan.

This is what we've been hearing lately. In one case, it looks like the broker is not getting paid, but that's because his fee is shifted to another "category" (I really don't understand all of these kinds of fees). I think that's the point. And austin is spot on with his post. The more the expenses can now be "hid" in the exense ratios of the funds, the more it probably will be.

You have to disclose if you are getting direct or indirect compensation, assuming you'll meet the minimum requirement ($1,000?). So if they are paying your fees from the trust that has to be disclosed. If the client is paying 100% of the fees outside plan assets (or from forfeitures - which I thought was an odd exception), then you don't need a disclosure. If the client "can" pay expenses from the trust but doesn't do so, then you don't need to disclose as the DOL said that would be confusing but if they later decided to actuially charge then a disclosure would be required at that time. That's my uderstanding but if I'm wrong I'd like to know.

You have to be working for the sponsor of the 401(k) plan for the expection to apply.

Yes but what do you do when SSA sends a notice to a particiant who was reported in 1991. You take over as TPA in 1998 and there is no record of this participant on any takeover reports and you didn't get 7 years worth of 5500s and SSAs to see they had been reported but not been removed. The client terminates the plan in 2002, disolves the partnership and pays everyone out. Former TPA pre-1998 no longer exists. SSA notifies they particicant that they have deferred vested benefit in 2012. Both the ex-participant and ex-client are attorneys. Who is responsible for keeping the records 10 years after plan termination? At the time of termination the plan is required to pay out all accrued benefits. In many cases some benefits cannot be paid such as missing participants for whom there is no address or for whom the plan does not have a SS #. In this case the plan pays out all benefits to participants that the plan can locate and liquidates. ( DB plans transfer the benefits of missing participants to the PBGC) I dont know what liability there would be if a participant trys to claim benefits in 2012 since the s/l for a breach of fiduciary duty would go only back 6 years and no plan existed in 2006. I have never heard of a plan participant filing a claim for benefits against the plan admin of a plan that has terminated and paid out all benefits. All benefits were paid out, there were no missing participants. It was a participant directed DC Plan. At the time of plan termination there was no record of the particiant having any account in the plan, very likely because he/she had been paid out in the early 90s under the prior TPA. Not sure where this will go or if the participant will try to persue legal action over this, but if they do I'll be sure and let you know. Usually when we get these letters we either have the records to show payout or just tell them we have no record of them and they must have been paid out and that usually ends it. In this case with the ex-participant doesn't seem to want to let it go even though there is no longer any plan or sponsor for her to make a claim against.

Yes but what do you do when SSA sends a notice to a particiant who was reported in 1991. You take over as TPA in 1998 and there is no record of this participant on any takeover reports and you didn't get 7 years worth of 5500s and SSAs to see they had been reported but not been removed. The client terminates the plan in 2002, disolves the partnership and pays everyone out. Former TPA pre-1998 no longer exists. SSA notifies they particicant that they have deferred vested benefit in 2012. Both the ex-participant and ex-client are attorneys. Who is responsible for keeping the records 10 years after plan termination?

Assuming that the notice was delivered late (and I dont know if it was) what relief is the client seeking? It seems that no one has prevented him from receiving his distribution which he has not requested. Seems weird. Like the guy is just trying to get a wind fall. Assuming he has an SPD, receieved his quarterly statements and had the ablity to direct his funds, I'm having a hard time seeing how he was damagaed in anyway. He clealry has some form of toxic relationship with his past employer so I'm not sure why he doesn't request the withdrawal now and cut ties.

That wouldn't apply in this case as he's been gone for 850 days, more than 2 years. I suppose it could apply to plans that don't allow a distribution until NRA but those are quite uncommon in a 401(k) plan. That's much more likely in DB plan with no lump sum option. At any rate I'm curious why the OP's friend didn't request a distribution when he left? I know it cracks me up when a participant who has been gone for years, ignored the original distribution package (apparently not the case here), calls up and says they need the money by Friday or something like that and want to know why that's a problem.

I'm not sure I agree with that. If you don't pay your property taxes, states will start forclosure proceedings. If you don't have any other means to pay the property taxes, why do they need to be past due with associated penalties and interest for you to qualify for a hardship?

I think it is problematic in a safe harbor matching plan for a couple of reasons. 1st the prohibition on amending the plan durring the year. While there are some expections for merger/acquisition, I do not believe the exceptions allow a change in plan benefit formula. 2nd the "extra" match on top of the safe harbor would esentially be 0% of the first 5% + 50% of the next 3% for some participants which would violate the non-inreasing rate of match to keep the safe harbor status. If this wasn't a safe harbor plan I don't see a problem with what you want to do as long as you pass ACP and BRF.

Well when it is created as an honest to god retirement plan for the employees and/or owner of the business it can make a whole lot of sense. When it is done because "we have some extra cash this year and we don't want to pay taxes on" it usually does not. For what it is worth, defined benefit plans were once the norm in retirement plans. Unfortuantely many factor too long for this thread have conspired to make them something of a dinosaur. Sorry you had to learn this hard way but it sounds like you've done some good work educating yourself on the issues involved. Good luck with whatever you decide to do.