My 2 cents

Thank you for the cite. I looked up 404(a)(6), and found this as the full text of that section: "For purposes of paragraphs (1), (2), and (3), a taxpayer shall be deemed to have made a payment on the last day of the preceding taxable year if the payment is on account of such taxable year and is made not later than the time prescribed by law for filing the return for such taxable year (including extensions thereof)." Has 404(a)(6) been changed subsequently? I am not an attorney, but in my view, the reference is solely with respect to the taxable year, with no coordination required or implied with respect to the application of that contribution to a particular plan year or its MRC. I fully agree that if it did, then it would be necessary to coordinate the handling on the Schedule SB with the sponsor's handling of the tax deductions.

To the best of my knowledge, citizenship is not required for plan eligibility purposes, and non-citizenship would not be a reason for exclusion. "Linda told us she isn't subject to SS and Medicare taxes but is for state and fed. taxes." First, who is Linda? Second, is there anything in the Social Security law exempting non-citizen workers (under a J Visa or otherwise) from SS and Medicare taxes? I think that instead of "so I'll have to exclude her under the 70% test" you really mean "so if we do exclude her, we will have to pass coverage under the 70% test, since this person is not per se considered excludable under IRC Section 410."

Hope for the best and, if possible, head for the hills! It is probably easier to hope for the best up there.

Do you have something you would not define as nothing that is counter to the statement that it is perfectly fine to make a contribution early this year, deduct it for last year and count it towards this year's minimum funding requirements? Anything that would call into question the safety of handling the deduction like that? Assume that the contribution is substantially below the 404 limit for any recent plan year and is not actually needed for the 2015 funding requirements. Assume that the tax filing has been made and also the 5500 filing with a Schedule SB not showing the 2016 contribution as applicable to 2015 (so aligning it with the 2015 plan year would necessitate amending the 2015 5500 filing). Is there any reason to consider that deduction in jeopardy?

If they are actually required to file a 5500 instead of a 5500-SF but file a 5500-SF, how long does that money stay saved? And is this auditor charging anything for NOT providing an auditor's report?

Unfortunately, the person being unpaid now (who is supposed to be forced out) probably means that they are missing. When the person is missing, it can easily happen that they are not paid out before filing for Social Security. If, after this year, they are found/forced out, they are just reported again with a "D".

My guess is that only the enrolled actuary and accountant are explicitly named within the 5500 package. If the regulators wanted to receive documentation concerning changes in trustees, insurance carriers, administrators, investment managers, or custodians, they certainly could have arranged to require it. If this year's 5500 shows a different accountant on the Schedule H or a different enrolled actuary on the Schedule SB, report it on the Schedule C and see to it that the explanation given is not an outright lie. Ideally, the letter notifying the prior accountant or enrolled actuary will show the same reason as the Schedule C (if there was anything possibly improper about the termination of services, putting a different reason on the letter from the one on the Schedule C, which is a matter of public record that the displaced professional can view at will, will only intensify the DOL's scrutiny when the displaced professional files a statement disputing the reason given).

I just looked it up to make sure. In my opinion, 1.404(e)(14) addresses lining up plan and tax years for purposes of the deductible limit. If the fiscal year and plan year coincide, the deductible limit for the tax year is the maximum amount from the plan year. If they do not coincide,1.404 gives you either plan year beginning in, plan year ending in, or a proration from the two plan years overlapping the tax year. It is important to distinguish between the deductible limit and the amount to be deducted. Assuming that the deduction limit (as it often will) is substantially greater than either the minimum required contribution or the amount actually being contributed (due to the funding cushion's effect on the size of the maximum deduction limit), the amount actually deductible will reflect the amount actually contributed. And, as I noted before, there is absolutely nothing (of which I am aware) in the law or regulations that says that to be deductible for a tax year, the contribution must be recognized for the applicable plan year. Nothing. So if the tax year and the plan year are both the calendar year and the sponsor makes a contribution (greater than the 2015 minimum and less than the 2015 maximum including the 50% cushion) between January 1, 2016 and the filing deadline for the 2015 fiscal year corporate tax return, the sponsor can surely deduct that amount on its 2015 taxes whether or not the contribution is recognized on the 2015 Form 5500 Schedule SB. The Gray Book question from 2011 that concluded otherwise is irrelevant (in part because it assumes, incorrectly, that the amount to be deducted for a tax year is based on the amount recognized as a contribution for the plan year and in part because the late lamented Gray Book, while providing insight into IRS thinking, had neither the force of law or regulation and was, by its own disclaimers, not to be relied upon).

Absolutely!!! And, if the certain period is less than 10 years, each monthly payment is subject to the 20% mandatory withholding!

Attempting to think logically about this, it seems to me that the time to report the change in auditor is on the Schedule C that is part of the 5500 filing that will be showing an auditor on the Schedule H different from the auditor shown on the prior year's Schedule H. Nothing else makes any sense to me. if they decided to change auditors for the 2015 Form 5500 filing some time last week and the new auditor will be providing the auditor's report attached to the 2015 Schedule H and is listed on the 2015 Schedule H, last year's auditor should be shown on the 2015 Schedule C without pause for thought. I would treat "during" in the quote from the instructions as meaning "with respect to" and ignore when the change actually occurred.

The IRS discrimination regulations deal primarily with discrimination in favor of HCEs. The non-discrimination rules do not seem to worry about discrimination between non-HCEs.

I would not think that a final payment with respect to a participant who had been receiving a series of payments would be considered a lump sum distribution for purposes of Schedule R. Example: Participant retired under a 15 year certain and life option and dies after 7 years. The beneficiary elects to be paid the commuted value of the remaining certain payments. I would not be likely to count that as a lump sum for Schedule R purposes.

Assuming that neither the corporation's fiscal year nor the plan year have changed (i.e., both the corporation and the plan are humming along, with there being prior plan years and prior fiscal years), the alignment between the plan year contributions and the deductions is probably governed by past practice. What was done last year? While there had been informal guidance from the IRS in the past, tying the plan year for which the contribution appears on the Form 5500 Schedule SB and the fiscal year for which the deduction may be taken, it does not appear that there are either any statutory provisions or regulations that would support that. If a contribution is made between the end of the fiscal year and the filing due date, it would appear that the sponsor could take the deduction for either the fiscal year whose filing is coming due or the fiscal year during which the contribution was made. Past practice could impact the extent to which such a choice is available. If the fiscal year is not a short fiscal year and the plan year is not a short plan year, it would not appear that any kind of proration would be required (unless the practice had been to deduct 2/12ths of one plan year's contribution and 10/12ths of the other plan year's contribution with respect to the two plan years encompassing the fiscal year).

I know of nothing in ERISA or the IRC that would prevent a qualified defined benefit pension plan from offering a certain only annuity as an optional form. If it is offered and a participant wants it (possibly because it pays a larger monthly amount than any form of lifetime annuity), then there are very limited circumstances under which they cannot receive it: 1. The plan's AFTAP is below 80%, so accelerated options like lump sums or certain only forms are restricted under IRC Section 436. 2. The certain period exceeds the participant's allowable life expectancy. 3. The participant is married and the spouse won't approve the election. There is probably nothing in the law or regulations that requires the plan to notify the participant that payments are about to stop. So there is no set timeframe or contents for such a notice. Important: It is a really good idea to have a copy of the election around, to prove to the former participant that the payments were properly stopped if challenged. Ideally, the election would have clearly indicated that payments would stop without regard to the survival of the participant.

I don't practice in that area, but the husband and wife being directors would not cause there to be a controlled group issue, would it? Isn't actual ownership required? Being a director is not the same as being an owner, is it?

Really and truly, does the plan contain no language like this: "If as a result of actuarial increases to the benefit of a Participant who delays commencement of benefits beyond Normal Retirement Age the Accrued Benefit of such Participant would exceed the limitations under [plan provision dealing with 415 limits] for the Limitation Year, then distribution of the Participant's benefit will commence." Assuming, of course, that the plan is not a governmental plan (they don't have to follow the 100% of pay limit under 415). If there is no such provision, the plan should not have been able to receive a favorable determination letter. If there is such a provision, then the terms of the plan were not properly followed.

The biggest problems would arise if the plan would not provide for in-service payments and the person "leaves" with the intention of returning to work, especially if the employer plans to permit that. The IRS uses the term "sham transaction" to describe actions like that designed to get around limitations on the participant commencing benefits without separating from service. With respect to multi-employer plans, the problem is more along the lines of people gaining an unfair competitive advantage over other union members by receiving benefits AND continuing to work. Outside of the Taft-Hartley context, there can be no such thing as a "completely retired" requirement. If the participant - employer relationship has been cut, then even going to work for a competitor cannot bar the participant from claiming retirement benefits (although if there are non-compete agreements in place, doing so could result in other issues).

If someone uses retirement funds from a 401(k) to pay for current medical insurance premiums while still employed, what are they going to do for an encore (when they retire)?

To clarify how vesting is counted when the plan year is constant, with no short year (plan uses 1,000 hours in a plan year as the requirement to earn credit). Assume that the employee is over 18 when hired, and works full time (i.e., at least 170 hours in each month). Suppose hired 7/1/14. Terminates employment 6/30/16. 2014 plan year: Worked 1,000 hours during 2014, so gets a full year of vesting service. 2015 plan year: Worked 1,000 hours during 2015, so gets a full year of vesting service. 2016 plan year: Worked 1,000 hours during 2016, so gets a full year of vesting service. So despite having worked 2 year (elapsed time), the plan would credit the person with 3 years of vesting service. That is how it should be if the plan defines a year of credit for a plan year in which the person worked 1,000 hours or more. This does not involve any kind of overlap.

I would not consider this kind of issue subject to IRS jurisdiction. If anything, it would be DOL, but if it is a question as to whether the participant survived to the Benefit Commencement Date or something similar to that, wouldn't it have become a matter for state courts to decide? How would this change if the form was signed 9/22/16 for a Benefit Commencement Date of 10/1/16, with the participant dying during the interim? That is something that the plan document ought to provide for.

Taking my employer to court sounds like a quick and easy way to get me terminated... Isn't filing a lawsuit seeking rights under an ERISA plan a protected activity? Any retaliation against you (not just termination) would be grounds for further damages (probably substantially bigger than the damages you would have sought in your first suit).

The 501 instructions do call for copies of the cancelled checks. Given the fact that there is nothing whatsoever that the sponsor can do to make the participants actually negotiate the checks and that there are deadlines for submission of the Form 501, what is the sponsor supposed to do? There are grounds for extending the 501 deadline but no reference to anything like "We sent the payments out on a timely basis but some of the checks have not been cashed yet, and if they are not cashed in the next X days, they will go stale. So please extend the 501 filing deadline indefinitely until we get all the checks cashed." Even then the plan's "trustee", by refusing to reissue the checks and saying that the money must be returned to the sponsor, is not offering a course of action that would be acceptable to any governmental agency. The money going back to the sponsor before all benefit obligations have been satisfied is totally impermissible.

I am not a lawyer, but speaking as a layman: Plans must have procedures to allow participants to appeal benefit denials. I would consider a refusal to provide matching contributions for contributions that you feel should be matched to be a "benefit denial". Follow the plan's procedures for appealing benefit denials. They must provide you detailed information (including the specific plan provision or provisions on which they are basing their denial). After having gone through the appeals process (let's assume unsuccessfully), you would have their reasons in writing, which you can share with your legal advisor. If you and your legal advisor feel that the reasons are not correct or applicable, having gone through the appeals process, you would be at liberty, without fear of reprisal from the sponsor, to file a lawsuit against the plan seeking the matching contributions.

I am not an attorney. I do not practice in the area of defined contribution plans. Anyway, here are my thoughts as a layman: If someone not having direct responsibility for repayment of the loan pays it back, and that someone is not the participant's employer, wouldn't that fall under the category of taxable gifts? If that someone is the participant's employer, wouldn't that fall under the category of taxable compensation? Prior to distribution, notwithstanding the participant's status as an owner, the 401(k) plan assets do not belong to the participant, to do with as he or she pleases. They are held under a trust prohibiting reversion to the sponsor. The sponsor cannot take loans out from the 401(k) plan - that is clearly a prohibited transaction. Treating the loan as having been made to the sponsor and not to the owner as an individual participant (who is, owner or not, an individual in this context) would not be permissible. I would wonder whether the arrangement of owner takes 401(k) plan loan, loans the proceeds to the sponsor, and the sponsor pays off the 401(k) loan strikes me as a pretext to get money from the plan to the sponsor and may well, upon governmental scrutiny, cause all kinds of problems. Then there is the issue of the plan actually requiring that the loan be repaid through salary deductions. I would distinguish this from a 401(k) rollover to IRA that invests in recipient's business venture (assuming that such arrangements are still acceptable). Such arrangements would (I presume) be set up to keep money from flowing to and/or from the recipient, maintaining a strict distinction between the recipient's money and the IRA funds (except for payments to the recipient treated as taxable IRA withdrawals).

"I have a plan where an owner borrowed money from the 401k Plan to help cover business expenses." Folks, that is entirely the opposite of what 401(k) plans are for. They are not a way to accumulate special funds to cover company expenses. If they were, there would be no favorable tax treatment needed or available. And if the business expenses became such a problem that the company failed, the remainder of the loan would become taxable income to the owner (with a 10% additional income tax if under 59 1/2) unless the owner could continue to make timely loan repayments directly with no income stream from the failed company. I also have trouble seeing the money going directly from the employer to the plan and being treated as reducing the owner's 401(k) loan balance as something likely to pass government scrutiny.