Gudgergirl

NQDC Plan states that a change in control is a distribution event. Employer is 100% owned by X. X dies and all the stock in employer passes to X's Estate, then to his Revocable Trust and then to Marital Trust for X's spouse. 318(a)(2)(A) attributes stock owned by an estate to its beneficiaries and 318(a)(3)(A) attributes stock owned by a beneficiary to an estate. However, I do not see a way to attribute X's stock from X to his estate. So, did a change in control occur upon X's death? Any thoughts?

Individual lends money to company that invests in distressed properties. Individual's IRA also lends money to same company. Company issues a note and gives mortgage to each individuals and individual's IRA. Company is independent third party - not owned by individual or his family. Neither investment was conditional on the other (i.e. Company would have accepted only IRA investment without individuals' investment and vice versa) Did a prohibited transaction occur? To me it has the look of one, but I am having a hard time fitting it within IRC 4975 and ERISA 406. Any thoughts?

Can a small business owner offer both a SIMPLE IRA ad a SEP IRA to his employees? Can the business contribute the maximum amount o each plan?

Thanks

In the case of a plan that has not been amended since GUST, would you use Schedule 1, Schedule 2 or both to report the non-amender failures?

Plan has 6 year graded vesting schedule. Employee terminates employment with 4 years of service for vesting purposes and is thus 60% vested in his account. Employee does not request a distribution of his account balance. Later, the plan is amended to shorten the vesting schedule to 4 years. The effective date of this amendment is after the employee's date of termination. The now former-employee claims he is now 100% vested because he has 4 years of vesting service and wants a distribution of his entire account. Is former employee correct? Does it matter whether former employee had incurred 5 consecutive one year breaks in service before the effective date of the amended vesting schedule?

Thanks for you input. I agree that employer should make the contribution. I am just looking for some definitive black letter law on point. (Anti-alienation rule? Anti-cutback only applies to plan amendments? Follow the plan document or risk plan disqualification rule?) This is a pretty acrimonious situation and Employer (who is a lawyer) is not familiar with ERISA and is focused on the following language in the Severance Agreement FORMER EMPLOYEE hereby relinquishes and waives any rights to other forms of payment or benefits under any other agreement between FORMER EMPLOYEE and Company, whether written, oral, express or implied...

401(k) Plan provides for safe harbor contributions and profit-sharing contributions. There is no last day rule or Year of service requirement. Employee is fired mid-year. He signs a severance agreement with a general yet broad release of all claims. Employer believes this means it doesn't have to make contributions to ex-employee under plan. Thoughts?

Client has SARSEP and allows employees to defer up to 25% of compensation and client makes annual employer contributions = 4% of compensation. Client has been determining all contributions based on gross wages. Client uses model IRS Form 5305A-SEP which to me seems to say the term "compensation" is w-2 wages excluding employer contributions and elective deferrals. Which means that for purposes of calculating employer contributions means that the 4% should be applied to the employee's wages less elective deferrals. Anyone have any thoughts?

Client's Profit-Sharing Plan was last updated for GUST using a proto-type document. I have prepared all amendments required to have been made since then including an EGTRRA restatement. I think I need to use Appendix C, Part II, Schedule 2. My problem is I can't figure out which box to check. Do I check the box for Cumulative List for Cycle E individually designed plan (EIN ends in 5)? This seems wrong because the last time the plan was restated it was done so with a prototype document. Or do I check "Other" and list each individual amendments along with EGTRRA restatement? Any assistance is appreciated.

Thanks. That makes the most sense to me.

Here the sole shareholder terminated his corporation after he "discontinued actively engaging in a trade or business." It makes sense that the former sole shareholder should continue to be treated as the sponsor. The plan has language in it that it will terminate upon the earlier of the employer adopting a resolution to terminate the plan or the employer dissolving. I am wondering whether it makes sense to take the position that the plan dissolved in 2008 (when the corporate dissolution occurred).

I have looked at EPCRS and the DOL procedure and am having trouble figuring out how they would apply to my situation. In this situation, there were originally 9 participants. The sole shareholder had some legal trouble, terminated all the employees, dissolved the corporation and paid out all the participants except for himself. This all happened 10 years ago. I think there was an intent to terminate the plan but int he midst of the legal trouble no one ever followed up to make sure it got done. Form 5500s have been filed annually but no updates to the plan document have been made since the GUST restatement. Both of you said you don't think this is an orphan plan. Why? The plan sponsor was a corporation that has since dissolved. Does the former shareholder somehow become the de facto plan sponsor upon the corporation's dissolution? I agree that the EPCRS orphan plan correction method (which just says to follow the DOL rules and terminate the plan) seems inapplicable here. Do you think the proper procedure is to correct for the failure to update the document under EPCRS and then just file a final Form 5500 (and perhaps Form 5310)?

Thanks for your help. I will concentrate on EPCRS.

I have an orphan plan in which there is one participant account. The participant is the former sole shareholder of the plan sponsor which dissolved several years ago. I have read about the orphan plan procedures under the DOL regs and under EPCRS. The DOL rules seem to focus on insulating the custodian of the plan assets from liability while the EPCRS rules focus on ensuring the qualified nature of the plan assets. My client is the plan participant. Since he is not the custodian, may he just correct under EPCRS or must he also convince the custodian to follow the DOL regs? The EPCRS rules say they don't apply to a plan that has terminated pursuant to the DOL regs. I am confused as to whether one or both procedures must be followed. Any assistance is appreciated.

Thanks everyone!

In a 401(k) plan that provides for a safe harbor match - does the plan have to say "This is/is not a safe harbor plan" (and be amended each year in which it is not such a plan) or may it say "This plan will be a safe harbor plan for any plan year in which the Employer distributes a safe harbor notice." I was thinking that safe harbor plans that use the contingent notice for the 3% nonelective safe harbor contribution had to be amended each year to say they were or were not a safe harbor plan but that the rules was different for matching contributions. Any help is appreciated!

I think I am probably overthinking this but it never hurts to get a second (and third and fourth) opinion. I am designing a NQDC which has fairly simple terms. All contributions are by employer (i.e., no employee deferrals). There is a 10 year vesting schedule wiht immediate vesting for death and disability. Payment events will be separation from service, death and disability. In addition, all amounts will be forfeited if a participant is terminated for cause (as defined in the participant's employment agreement). Does anyone see any inconsistency between separation from service (which includes termination for cause) as a payment event and termination for cause as a forfeiture event?

Plan invested part of plan assets in what turned out to be a ponzi scheme. Plan Trustees recently recovered money from bankruptcy Trustee. What should plan trustee do vis a vis informing participants of recovered amount? what about particicipants who are no longer employees?

My client was recently audited by the DOL. The agent discovered various problems including chronic late deposit of salary deferrals and failure to suspend salary deferrals following a hardship distribution. My client made a contribution to the plan for lost earnings (calculated by the DOL agent at the greater of the IRS rate or the plan earnings for the year in question) and revised its policies to ensure the problems would not recur. The DOL issued a letter saying the investigation is concluded and due to the actions taken by my client, the DOL "will take no further action with respect to these matters." The letter continues to state that because a prohibited transaction occurred, the matter will be referred to the IRS and if client agrees that a prohibited transaction occurred, client should file a Form 5330 with the IRS. Client's TPA is working on this filing. When I spoke to the DOL agent handling the case I mentioned that I would be preparing a filing under EPCRS to address the operational failures of the Plan and the agent acted surprised that I would do this. Previously she had repeated several times that she would be sending the IRS information regarding these failures so it makes sense to me to file under EPCRS instead of waiting to see if the IRS will audit the plan. Now I am second guessing myself. I don't want to waste the client's money on an EPCRS filing if it is overkill. The EPCRS fee is $2500 plus there are legal expenses. Does anyone have any thoughts or advice?

The Plan has two components - 1. a self directed 401(k) part and 2. a Trustee directed Profit-Sharing part. Quarterly statements include quarterly account info for the self-directed portion and show prior year end balances for the Trustee directed portion.

Regarding the quarterly fee disclosure for "fees actually charged (whether by liquidating shares or deducting dollars)...to the beneficiary's account..." DOL Reg 2550.404a-5©(2)(ii) Plan pays quarterly fee for admin services. Participant accounts are valued annually and fee is charged to participants' accounts on a pro rata basis once annual val has been completed based on annual val account balances. For quarterly fee disclosure purposes of "fees actually charged", do you think fees are charged when paid out of Plan assets (each quarter) or when allocated to the participant accounts (during last quarter or year)?

Is it possible to amend the definition of "change in control" to increase the control % from 50 to 80? If so, would this amendment be subject to 1.409A-2(b)(6) such that the amendment would not be effective for 12 months? Any guidance is appreciated.

I am legal counsel to a 401(k) plan and have a client who received a letter from DOL informing them that their 401(k) Plan is being investigated. This client is very conscientious and does everything right. Anyway, the client asked me if they should notify their insurance carrier. At this point all that has happened is the receipt of the letter. We haven't supplied the documents, met with the agent yet or had any follow up questions. I think notifying the insurance carrier is premature at this point but was curious as to what others think/ have done. By the way, I have read the insurance policy and it seems to say that the insured must notify the insurer when the insured becomes aware of facts that could give rise to a claim. At this point, we aren't aware of any such facts. Assuming anything the agent uncovers is even covered by the policy, it seems to me the time to notify the insurer is when we have a better idea as to what the agent is focused on or if we uncover something in reviewing the paperwork before sending it to the agent. Any thoughts are much appreciated.

Employer sponsors nonqualified plan for a single employee and qualified plan for all employees. Employer wants to accelerate vesting under nonqualified plan and pay employee early under nonqualified plan. I explained that they can accelerate vesting but can't pay him earlier than what the nonqualified plan provides (death, disability, age 55). If they terminate the plan, then they could pay him 12 months from plan termination. As I was looking at the rules in 1.409A-3(j)(4)(ix)© I took note of (2) which states that the employer must terminate and liquidate all other agreements with the employee that would be aggregated under 1.409A-1©. Would this require employer to terminate the qualified plan?