Lou S.

If it is non-publicly traded I don't see how it would met the definition of qualifying plan assets for the bonding exemption. But maybe I'm missing something obvious.

I'm aware of the argument. I reject the notion of double taxation. Unless you are taxing a 401(k) loan because you are trying to boost the rate of return of your 401(k) plan the argument of double taxation makes little sense.

I think the biggest argument against Participant Loans is the default rate when you leave the company with an outstanding loan. I mean often you are hit with a tax bill for income you spent a year or more ago at a time when you may now have no current income. Personally I hate participant loans but they aren't going anywhere anytime soon that I see. As for the double taxation. No the principal replaces principal that has never been subject to taxation and the interest is taxed just like any other gains of a retirement plan.

Just to be clear a Cash Balance plan needs to satisfy the DB RMD rules not the DC RMD rules. CuseFan has a nice summary above.

1 - Not if you still want to be a safe harbor plan. 2 - If he is somehow amended out of the plan or allowed to irrevocably elect out of the plan, he would no longer be covered. By the way it would be too late at this point to somehow get out of the SHNE for him for 2017. And I think it is too late to irrevocably elect out of the Plan because if I'm not mistaken that action has to be done before you become a plan participant.

A But why would a plan give another loan to someone who has defaulted already? You'd think that would be prohibited in the loan policy or they borrower would be deemed not credit worthy by the Plan.

And your attorney may or may not have a copy in their files, assuming they are still in business. Though 17 years would be a long time for them to retain the records.

But you shouldn't get 2 years in one just for working twice the number of hours.

It is certainly possible to work less than 12 months and earn 2 years of vesting service under a 1000 rule but they would have to span 2 plan years. Consider the case where a plan use the 1000 hour rule in a vesting computation period = PY = CY and employee is full time hired 7/03/15 and terminates 6/28/16. It is entirely possible (even probable) that they are credited with 1000 in 2015 and 1000 in 2016 but were only employed for 360 days and would have 0 years of service under elapsed time. Of course some one earlier covered the quirks of elapsed time vesting so I won't rehash.

Once a 5% owner for RMD, always a 5% owner for RMD.

Read the plan document. Many have "fail safe" language that will "top up" a required gate way contribution to pass the required test, even if it results in differing allocation rates for employees in the same group.

If the document allows for immediate distribution on termination it would seem a regular distribution for separation of service. The loan offset would be added to the cash portion to determine the 20% federal withholding. If the plan does not allow immediate distribution as RBG notes but allows hardship to terminated employees then you would process the hardship as normal and the loan would presumably go into default under the terms setup in the participant loan program unless he keeps loan payments current (an unlikely scenario given the above facts).

Your analysis seems correct. I thought the IRS had a pronouncement that you no longer needed to go though VCP to correct the excess annual addition you could simply self correct by refund, similar to ADP or 402(g) excess.

To amplify Bird's prior response which I think it is totally on point. The participant loan issue is much more analogous to having too much tied up in an illiquid asset which does not relieve you from the RMD requirement.

Good question I'm not sure I know the answer. I'd be tempted to treat the RMD as a phantom "loan payment" that directly reduced the principal. But I'm honestly not sure there is any authority for that approach even if it makes logical sense.

Could you issue a 1099-R for a partial loan offset and reduce the outstanding balance of the loan by the portion that is considered an RMD? Alternatively you could probably just wait until the participant makes a few loan payments this year and they will more than likely have enough cash in the account to cover the RMD.

send the record keeper a copy of the instructions to Form 1099-R highlighting the section entitled "Failing the ADP Test or ACP Test after a total distribution" It is on Page 7. https://www.irs.gov/pub/irs-pdf/i1099r.pdf

Maybe they can make a claim in Bankruptcy Court against the Plan Administrator (who is probably the bankrupt sponsor) to get the penalties paid. Given their stance on Orphan Plan filings I think they would prefer a final return with no Independent Audit to no Final Return at all which appears to be the alternative in this case. But sure they can push back. I'd refer them to the bankrupt sponsor should they push hard.

Is it possible - yes but probably requires some sort of plan amendment. Are they breaking rules - maybe (probably) Are there impacts - yes if corrections are required for breaking rules. May require amendment to bring in other short service NHCE which may require contributions.

Are there any participants beside the husband and wife owners?

Just thinking outside the box why can they make a 5% of pay contribution now for all the eligible employees, pay them out at 100% vested as terminated employees then terminate the plan at year end and give the owner whatever cross tested contribution passed testing. Assuming the document allows.

I think it's a cutback of an already promised benefit. You want to eliminate for next year fine, this year I think you already have a 411 prohibited cutback at participants have already "accrued" a right to the true up in the plan document.

I agree with Bird. Is there some reason they are giving for the 415 excess. Is the Limitation Year compensation somehow defined differently in the Plan document than the compensation for allocation purposes?

Legally, no you can not "terminate the plan as though it never existed"

There is no de minimus rule. If the balance is under $1,000 you can send them the whole account in cash (less withholding) but need to inform them of the portion that is RMD and not eligible for rollover. If the balance is under $5000, you need to send them their RMD before cashing out the remaining to IRA (which will now have it's own RMD next year).