My 2 cents

Failure to follow the terms of the plan? While he may not yet be, technically, an HCE, if push comes to shove, it won't look good when it comes to the "facts and circumstances". What were they thinking when they let him contribute early? Bet it was discriminatory in intent!

Accrual vs cash accounting etc. - one is supposed to follow the same methodology year after year, so if they counted accrued interest and/or receivable contributions, you should too!

I am not a lawyer but... Without any doubt! And provide any subsidized early retirement benefit accordingly. Any purchased deferred annuities must so provide.

What about back taxes, interest and penalties for the years in which he took money out? Did he declare those payments as ordinary income and pay taxes on them? Disqualifying the plan is unlikely to spare him back taxes, penalties and interest for underpayment of taxes over a period of years. If it's egregious enough, there could even be jail time for tax evasion. If the IRS is offering him a clean slate for a payment of $X, perhaps that is the easiest and cheapest way out, almost irregardless of what $X is.

Through what sort of financial analysis was the decision made that the best possible investment for Plan X's assets is a loan to Company Y? The decision would have been made by the Trustees of Plan X. Not by Company X and not by Zelmo. By the Trustees of Plan X, acting as fiduciaries, and not as people beholden to either Company X or Zelmo. I suspect that a loan from Plan X to a company owned by a participant in Plan X is a prohibited transaction. It being so easy to imagine conflicts of interest and self-dealing in the decision to make the loan, it seems as though it ought to be. How would one distinguish between a loan to Company Y and a loan to Aaron? Also, it could make a difference whether Aaron is a highly compensated employee with respect to Company X and/or Zelmo. I am not a lawyer, and some of the issues here could require a close legal analysis to determine if Company Y would be treated as a disqualified person on account of it being owned by Aaron (who would, as a plan participant, be a disqualified person).

I don't usually work with 401(k) plans, but is it not inaccurate to say that community funds were used to contribute to the 401(k)? Wouldn't the contributions be salary reduction amounts taken from the participant's earnings (which, I would think, are not community funds at all, at least until they have come into the participant's hands)? Not that it makes much difference.

Interesting question. Do fiduciary standards apply when the default IRA provider is selected? [Insert usual caveat that I am not a lawyer, etc.] 1. Even if they did, who is going to sue if the total amount put into the IRA prior to any fees is certainly less than $5,000? The complaint would be that when the person whose benefits were rolled over to the IRA went to collect it, instead of $3,800 under a carefully chosen default provider's IRA, there was only $1,800 (due to fees and poor investment performance), the difference being the result (at least in part) of a fiduciary failure in choosing the provider. Is it a defense to such a suit to point out that it was essentially the participant's fault that a default rollover had to be made in the first place? How often would there be enough default rollovers to lead to the possibility of a class action? Nearly all instances would be individual suits. 2. Even if there were some degree of negligence in choosing among potential default IRA providers, once the money is transferred to the default provider, the person whose money is transferred ceases to be a plan participant, and it is an absolute certainty (the sponsor and the default provider being unrelated) that the sponsor is absolved of any need to pay any further attention to that person. Unlike the selection of investments, once the default provider is selected, it is unlikely that a credible argument could be made that the sponsor has an ongoing duty to monitor the performance of the selected IRA provider.

Not an expert to be relied upon, but it seems to me that there could be issues involving Prohibited transaction - might be. Is the son, who does not work for the sponsoring company, considered to be a party in interest? Failure of the company president to discharge his duties prudently and according to fiduciary standards. Under what reasonable process did the president reach the conclusion that his son should handle the plan's investments? While it might constitute a conflict of interest, is that something that ERISA and applicable regulations address? Would the son be working under a conflict of interest, or is the concern here that the father would be? I suspect that the father is aware of any conflict of interest that the son might have (it should not be necessary for the son to inform the president that he, the investment advisor, happens to be the president's son). If the father is operating under a conflict of interest, how could it be cured? The biggest problem here with respect to conflict of interest could involve questions as to whether the president is choosing an investment advisor prudently and in accordance with the fiduciary standards.

Having heard of instances where someone who entered a calendar year plan on July 1 and who terminated employment (without the requisite service for vesting) before July 1 of the year containing the 5th anniversary of entry was denied any plan benefits due to not having reached NRA (and was therefore not vested), as well as early and late retirement adjustments having keyed to NRA being the exact 5th anniversary of entry and not to NRA being the first day of the plan year containing the 5th anniversary, yes I am being serious. That sort of thing has been going on for years and years and years and those plans are not in violation, since the plan (which had no trouble receiving favorable determination letters) called for exactly that treatment. That the regulation itself does not refer in any way to "plan years" is of great significance, and interpreting the regulation by presuming that they "must have meant" it to refer to "plan years" is just wrong (especially given the care lavished on regulations issued back then). The requirement that one must go back to the beginning of the plan year is entirely absent from ERISA or its legislative history and the so-called requirement that NRA should key off of the beginning of the plan year is incompatible with the clear statutory language. That, together with the regulation not even using the phrase "plan year", should be determinative. Looking at the regulation itself, in context that part of the regulation was surely intended to differentiate between the 8 different plan entry dates for a particular person, to specify which one of the 8 is to be used to determine the 5th anniversary of entry.

Just as I said - nothing tying it to plan years. If they meant "first day of the first plan year", they would have said so. They didn't. And that quote is, in context, in a place where the focus is on what to do if the person had more than one plan entry date. ERISA (as amended) clearly calls for NRA being tied to the 5th anniversary of plan entry with no mention of the start of a plan year. Plans defining NRA as the later of age 65 or the 5th anniversary of plan entry (with no mention of the first day of a plan year) have been getting determination letters for over 30 years, and if that is what the plan says, administration must follow that.

If the problem were from an EA exam, the candidates taking the exam are expected to be familiar with the general conditions (such as NRA being 65 unless specified otherwise). While there may be gross unfairness occurring here in the BenefitsLink discussion concerning what NRA may be (perhaps the OP should have mentioned what NRA is), there should be no unfairness at all for those taking the EA exam, who should not only have familiarized themselves with the plethora of general conditions but who would (I believe) have access to a copy of the general conditions handed out at the exam itself and available for reference during the exam.

My apologies, Mike, but I cannot restrain myself! 1. If this were from an enrollment exam, then it is to be assumed that, absent information to the contrary, NRA is 65. That is one of many, many explicit conditions (such as plan entry is on date of hire, the plan is non-contributory and the plan meets all qualification requirements). I don't know if actual SOA exams (if this was from one) have a similar set of explicit conditions. 2. On a more technical point, if the early retirement reduction is 4% per year early, one would get the early retirement adjustment at age 60 by using 5 X 4% as the reduction, not by dividing by 1.04^5. 3. Agreed that grandfathering of an adverse change in the early retirement reduction would never (absent an explicit provision in the amendment to the contrary) involve anything other than a pure wearaway.

The law doesn't say that, and the IRS regs do not refer to plan year. It is reasonable to interpret the IRS regs as providing a way to distinguish between which participation date among several is the one to be used for ERISA's 5th anniversary of plan entry requirement. Which is of no comfort if one is dealing with a prototype plan, since the LRMs require that language in any event.

It would be my understanding that any AFTAPs to be certified would inevitably be based on valuing the liabilities using the funding relief segment rates. Absolutely no recognition whatsoever of how much money would really be needed to cover lump sums (which, for AFTAP purposes would be calculated using the IRS's substitution rule - use unisex 417(e) mortality and the relief segment rates to the extent that the plan does not calculate lump sums using a basis other than 417(e)) and/or annuity purchases.

With the possible exception of those who insist on ending the plan year as of a specific Saturday, or short plan years,the only sensible way to define plan year is by specifying the starting and ending date (i.e., the plan year is the 12-month period beginning on [date] and ending on [date that is the day before the beginning date for the following plan year). This is especially important when the plan year is intended to begin on March 1. Whoever defined the plan year as the period ending on February 28 (as opposed to the last day of February) really dropped the ball. Plan years that may run from either March 1 through the following February 28th or from February 29th through the following February 28th (depending) make no sense.

Can a plan subject to ERISA use an exclusion like "normally works fewer than 20 hours per week"? Paid on an hourly (or salaried) basis, works )or doesn't work) at the Emerald City location, covered by a collective bargaining agreement would all be fine, but (to belabor the point) what does "normal" mean? If the person works under 20 hours per week five months per year or seven months per year or most of the time but they might work more than 20 hours in any given week, are they eligible or not?

Am I missing something or is that a circular reference? And do weeks end on Fridays, Saturdays, or Sundays?

Isn't the whole idea behind there being an excluded class is that they are excluded? IN the defined benefit plans I have seen, if someone stops being an eligible employee, their accrued benefit is frozen. They continue to participate and, if applicable, earn service for vesting. If they remain in an ineligible class until normal retirement age, they become fully vested and entitled, upon separation from service, for the benefits earned up to the date they ceased to be an eligible employee. How could it be done otherwise?

Wouldn't spousal consent to such a "disclaimer" be absolutely necessary for it to be effective? If spouse has "other ideas", it ain't happening!

What would they say if they did? Try not to have a plan year end of February 28th because every 4th year you won't know what to do? Based on your description, wouldn't the 2016-17 plan year run from 2/29/16 to 2/28/17? If it were a defined benefit plan with a lump sum option with the 417(e) segment rates for the plan year being based on the second month before the start of the plan year, would you use January segment rates for most plan years but December rates for the plan years beginning on February 29th?

Some plans may allow eligible employees to opt out of participation, but I think that has to be done before they become participants. Why would this person want to walk away from a pension earned over three decades of service? How can it be proven that there is no coercion involved?

While I don't consider myself an expert with respect to fine points concerning RMDs, it certainly seems to me the the "community" is pretty much lined up on the side of 4/1/17 being the due date for the first RMD! Do you know anyone who feels otherwise?

Not having kept adequate records itself, sorry to say but the first place for the plan to complain is while standing in front of a mirror! Is there a reason why the former TPA is not being cooperative?

My understanding (not based on either active involvement with servicing 401(k) plans or collective bargaining matters) is that if they do unionize, every aspect of the conditions of employment (such as anything to do with the 401(k) plan) becomes subject to collective bargaining. That is to say, any changes to the 401(k) plan with respect to them (and maybe even whether to stay or to go to a new plan) must be the result of collective bargaining. The employer essentially loses the ability to make unilateral decisions with respect to the employees covered by a collective bargaining agreement.

I think he intends it to have a meaning similar to "adherence". "When I use a word, it means just what I choose it to mean - neither more nor less." [from Through the Looking Glass]