Bill Presson

I definitely wouldn't do it if there was any leveraging in the ESOP. But we've got a few KSOPs where the employer stock was more of a stock bonus component and it's worked pretty well.

You would still make the amendment effective 1/1/13. But you can't do it on a standardized plan and if they have a last day rule currently, it's already on a nonstandardized or VS.

I've seen this a couple of times and, frankly, it's an issue if the union plan document doesn't exclude the non union employees. We've had to get legal counsel involved in both situations. Naturally they were takeover plans.

You still have to test. I'm betting the reason is actually because it is easier on payroll to exclude those items and no one ever told them that it was a compliance issue.

ASPPA GAC just announced that the IRS has acknowledged this issue for 5558s filed close to 7/31 and the 5500 filed soon thereafter. The 5558 wasn't processed yet.

It depends on how frequently they can make deferral changes. Is it each pay period? Then your golden. Is it quarterly? Then, not so much.

Not sure this helps, but we're telling our corporate clients to go ahead and provide the notice to comply with the regulation. But rely on the recent FAQ in case they miss someone or the notice somehow doesn't 100% comply.

Plus the 401(k) deferral will allow a difference in contributions as well. All good comments above.

The biggest issue is whether the DOL would agree that it was a single plan if there wasn't a wrap doucument in existence during those years. I've heard rumors of people creating retroactive wrap documents that were accepted by the DOL but I've actually seen as many of those as I have seen Loch Ness monsters.

But a life insurance policy is not an eligible rollover distribution, correct?

Since he didn't receive a distribution of cash, only property, withholding is not required.

Other than enforcement when something shows up on audit, I'm not aware of any ongoing activity.

TPApril, I would recommend approach 3 to the client, but let them make the choice.

I think it depends. But based on your description, I don't think you would be required to file.

Yes, the DOL is actively doing this. http://www.cshco.com/News/Articles/DOL_begins_campaign_for_missed_welfare_benefit_plan_filings/

Okay with me bill.presson@warrenaverett.com

Just to give you another option, we do lots of welfare 5500s as well. The firm is Warren Averett; we're the 27th largest CPA firm in the country and I work specifically for our benefit affiliate.

Bravo!

Do they have liability, yes. But most of the impact of the liability can be addressed in the purchase agreement assuming both parties want that hanging out there for a number of years. We've merged only a handful of plans in my 30 years in this business because of this issue. 99% of the plans in this same situation will terminate prior to the sale.

Based on what you've written here, I say yes. If the wording in the document is changed to something like "employees with direct ownership" then no. This is one reason we've had all our plans redesigned with everyone in their own group.

Yes, the person giving the answer is wrong. But it wouldn't be the first time.

How was the LLC the plan sponsor before the S Corp was created? The plan wasn't adopted by the LLC ever. If the EIN isn't the same then it's not the same company. It would be a controlled group if the owners are the same, but if it doesn't exist when the S Corp adopts the plan, I'm not sure any compensation paid by the LLC would count.

Belgarath, thanks for that. I actually now remember seeing that PLR when it came out. My fuzzy recollection is that there were differences between the recovery if the policy or "contract" was surrendered to pay the benefit (no recovery) or if the policy or "contract" was annuitized to pay the benefit (recovery). In the instant case, not sure it's worth the trouble for $1,000, but the op is free to get a more specific opinion.

You have a couple of different questions going here so you need to be very specific. 1. The cash value is not a rollover. It belongs to whatever source of money was used to pay the premium. For this purpose (moving it from the insurance company to current investments) just pretend it's in mutual fund A. There's really no difference. 2. The PS 58 costs (now I think called Table 1 costs) are the amount an insured reports as taxable income every year because they receive a current benefit from the insurance coverage. If the participant dies and the plan pays out the death benefit, the beneficiary may treat the reports costs as a basis in the payout and reduce the taxable amount. If the participant surrenders the policy, the taxable basis is lost and is not recovered.

Did the entity keep the same EIN?