ESOP Guy

Based on what you are saying the document does answer your question. As of that date in 2009 the vesting sch is a 4 year sch. They could have written the amendment to exclude people who terminated before the date the amendment was adopted. Since they did not exclude them from the new sch they are included in it. This person gets the new sch as that is the only sch in the plan as of the date of payment.

These guys have a bunch of really good charts for this and just about any other RMD death combo. http://www.keeblerandassociates.com/files/...down%202011.pdf Edit Here is the full list of charts http://www.keeblerandassociates.com/education

I looked to see if there was another thread on this topic and did not find one. So here goes. Any thoughts or ideas on this one and any cite I can take to management. This is a small ESOP. PYE is 2/28 In the PYE 2009 the company had to put more money into the plan to pay distributions than they could deduct. The excess was reclassified as a 0% loan to the plan from the employer. Their ERISA attorney signed off on the idea, and made up the needed loan paperwork. There is a PT exemption for these kinds of loans. Although in my mind it is implied, but not actually stated these are suppose to be short term loans to cover cash flow needs for expenses. The loan doesn’t get paid back until 12/2010. So at 2/28/2009 and 2/28/2010 we put the shares related to the loan in suspense like you would if you had an Exempt Loan. There was cash in the plan as of 2/28/2010 that could have paid off the loan. They did not pay the loan off even though they could have at that point. They put a contribution in the plan for 2/28/2011 pye in October 2010. So now the question is how to allocate the share release. It seems like there would be three methods. 1) Allocate on the current year’s contribution like you would tend to do with an Exempt Loan. In fact the document demands only current and/or prior year contributions less previous loan payments be used to pay an Exempt Loan. 2) Use some combination of cash on hand (less distribution from beg bal) plus current contribution. 3) Use the cash that was on hand less the distributions like #2 with no reference to the current year contribution. Maybe there is a combination of the #1 and #2 I am not thinking through. My guess the answer is-- like all documents this one gives the Administrator broad discretion to decide what to do when the document and/or law doesn’t give a specific answer. And as long as that discretion is used in a reasonable manner and doesn’t discriminate the Administrator is fine. And for what it is worth I favor #1 above. But I wouldn’t mind a sounding board on this one

A couple of disclaimers: It has been around 10 years since I was the person in charge of aggressive ADP/ACP testing and I am doing this from memory. So if someone thinks I have the rules wrong please say so. I am NOT saying Tom is wrong. I am just throwing out the case that can be made to leave these people off the ACP test. This was my first reaction to the question. If I recall correctly there is a link between 410(b) testing (coverage) and ACP testing. You only put people on the ACP test who are benefitting. The other side of that “coin” is if someone is not on your ACP testing they are not benefitting for 410(b) and hurts your ratio test. Simple examples: If a person could have deferred and didn’t they are ruled as benefitting for the ACP. This is because they would have gotten a match if they deferred. (Assume they met the hours, last day requirement etc.) So they would be zero on your ACP test, but would count as benefiting on the ratio test. On the other had if the person deferred and did not get a match because of last day requirement they would be off the ACP test. This would help the ACP test, but hurt 410(b) ratio test. So I started to think about this question in terms of how would I put the person on the 410(b) test. This might be as I work with 410(b) now more than ACP test. And as the old saying goes if all you have is a hammer everything looks like a nail. To me this person has to be shown as not benefiting on the ratio test. I see no way to exclude them from this, and it hurts your ratio test. But if this person isn’t benefitting I don’t think they should be on the ACP test. This might be an exception to the idea of the link between 410(b) and 401(m) testing, but I can’t think of why that exception would happen here. I could be forgetting something. I really don’t think one is going to find a real clear answer to this one. This is just a plan provision that wasn’t thought of when the rules were made. As a practical matter here is how I would handle the situation. If would do the ACP test with this person on it and as a zero. AND I would do the 410(b) test with him on it as not benefitting. This is the worst case for both of the tests. If you pass you know you pass the worst case. If you fail one it might be time to get the client’s ERISA lawyer to make a ruling. He is the one that is paid the high billing rate to take the risk of deciding this kind of grey area incorrectly. TPA’s don’t get paid enough to make this kind of legal ruling. Disclaimer to everything said above. It is just me giving thoughts. Before anyone goes off and does something for a plan/client make sure you do your own due diligence.

If I understand the question correctly all the major insurance companies do that. I know our firm has Dr. offices with 4 to 10 employees with John Hancock as the recordkeeper. We have at least one client with around 50 employess at Securian. Not sure about the plans at Principal or American Funds but they both recordkeep and I don't believe they are large clients. This side is not my strong point, but I also know no one from my firm besides me reads this forum.

As RLL pointed out one of the key elements here is the person deciding if the ESOP should sell and if the price is FMV needs to be independent from the president. I would strongly recommend advising the client to hire an independent trust company to represent the ESOP for the purchase. There are a number that specialize in ESOPs. It can be an added cost that the client will push back on, they won’t want to spend that money. However, it can offer a fair amount of protection if the DOL comes looking into the deal. I have experience with several of these situations where management in effect was both sides of the deal. They were buying and were the ESOP’s trustees. Just the fees for accountants, TPAs and lawyers for time spent on the DOL audit was more than the upfront cost of a trust company. And the DOL demand to pay more to the plan’s participants because the price was too low was greater than a trust company’s costs also. In short the trust company looks expensive, but in my mind it is cheap insurance.

I have always been amazed at how hard it is to find that answer. So here are some material to look at. http://www.cshco.com/News/Articles/Article...;cat=&view= http://carpentermorse.com/pdfs/CMG_ASPPA_article.pdf

Learned something new today. I really thought you could not answer this question without reading the document and knowing how it is written. Although we aren't told if with is a 401(k) plan or a PS plan. It would make a big difference. But I went back and re-read the whole rule of parity stuff again. Thanks Tom. Edit: In my defense I would add, one could always answer this question by reading the document.

The best way to answer this question is to go and read you document’s eligibility sections. I can’t remember ever reading a document that doesn’t answer the question of how to handle rehires.

We have done what Austin is saying above at least twice this year for plans that terminated in 2/2011 and they were accepted by EFAST. We did it in May 2011 and we have not gotten any feedback so far.

I am almost afraid to ask this but.... Did they make this mistake because they have been following the terms of their document? If so, does that mean it hasn't been restated since those provision could be used? Drafted wrong? Oh the questions one could ask and fear the answer to them.

Unfortunately the 2010 SH contribution is not enough. THe sponsor is required to make the 2010 contribution, he has no other option correct? He cannot say to her that he will hold that until she repays the $2000 plus interest correct? Can he make it, and then forfeit it and she can then fund the difference? I wouldn't think so since it's 100% vested. You make a bunch of confusing statements in my opinion. One of them is this conversation about forfeitures. You would put the money into her account. If it still has a negitive balance there is nothing to forfeit. Her balance is just less than zero. Also, the 2010 contribution and this error just have no bearing on each other. He must fund the contribuiton for 2010. By the way if the employer puts any money in it is NOT a contribution. It can NOT count towards the 2011 S.H. contribution. I also seem to recall there are DOL rules that say the trustee has to make an effort to collect the money due from the person before the employer can put the money in. I am not trying to be mean, but I have been slow to offer advice because the nature of your questions seem to reflect a serious misunderstanding of how a balance forward plan would work. If you can find experienced help from someone who has full knowlege of this plan and its particular situation I would advise it. Edit fixed minor typos

The hard part will be to get the IRA company to NOT issue another 1099. That in the end is what I have found to be the the pain. Most IRA companies basic default position is any money leaving an IRA is a 1099 event. And while the broker might want to do it right he is most likely not in charge of the 1099 being issued. It is the company that he works for or uses to clear his accounts. So take this from somone who has been there and done that.. Have a long talk with the broker about the 1099 issue and make sure it gets done right up front. You don't want to be running around next Jan when the 1099 comes in the mail trying to fix it.

Below is 100% of what I know about QSLOBs. 1) I say this alot but it is a subject it is worth to hire an expert. The cost of getting it wrong is too high. 2) But if you wish to keep looking I beleive the part you are missing is that the Gateway has a Safe and Unsafe Harbor number. I have no idea if these are the same as the ABT safe harbor/unsafe harbor numbers. Here are a couple of links. http://pensionbenefits.wordpress.com/2009/...-qslob-gateway/ http://pensionbenefits.wordpress.com/2009/...-qslob-gateway/

For your question the only guidence out there are court cases in my opinion. You will find courts that have allowed employers to do what Sieve said, others seem a little more strict. Safe would be to make everyone 100% vested in the timeframe in question. If you want to do something else I think it pays to hire the lawyer you might need to use to defend the plan in court. If that is too costly in releationship to the number of people in question just vest the people, that seems like cheap insurance.

on the up side it doesn say if you submit it via Fire the client won't have to sign the form. That will in the long run be a good thing.

Assuming the owner makes 245,000 I would add this If you put the S.H. in place. Owner puts in 16,500 in 4k will get 9,800 in S.H. match. Now to get him to 49,000 only takes a PS of 22,700. This is 9.26% of comp. Gateway 1/3 is just over a 3% cont for NHCEs. (still need to pass test) So assume they all put in 5% 4k. They will get 4% S.H. match plus 3+% in PS, or just over 7%. This is often times the cheapest option for owner. I would add even while cheap for owner most people woould be very happy if their employer was putting in around 7% for them. Add their own 5% that means they have a little over 12%/year being saved by rank & file. That should actually fund a good retirement if done for a few decades.

For what it is worth this last April the NCEO conference an IRS rep talked about how the IRS would like to issue more guidence and crack down on the amount of dividends going into ESOPs. This in my mind has could be a game changer in EOSPs. More and more companies want to go to 100% S Corp ESOP owned in one transaction. A number of projections I have both done and seen show the only way to pay the loan off is by putting in the max contribution and rather large dividend. They could make going from no ESOP to 100% owned ESOP harder in the future.

Read about the wonderfully named "Steel Balls" court case on the topic. http://www.nceo.org/main/column.php/id/321

This might not help in this type of position but one of the first questions I ask my clients when they ask if someone should be treated as terminated for the qualified plan is to ask if you have sent the person their COBRA info. I have been amazed at the number of times they said "yes" to that, but were not sure if the person was terminated for the ESOP or 401(k) plan. To me that is a pretty good marker the company is treating the person as terminated. However, this type of position my not have had health insurance in the first place.

It should say "Filed with authorized/valid electronic signature" and the name of the person should be to the right of that. It has been about a month since I last had that happen. But I recall it saying something about an invalid signature, not being blank. I am rather sure you need to file an amended return with the right PIN. I will admit we use a different system, but EFAST2 is EFAST2. You should be able to see a valid signature message on that system. If you system gives you the actual EFAST2 error message the DOL toll free number people can be very helpful.

Check the signature line of the 5500 on the EFAST2 website. I believe it will say it has an invalid signature.

We just listened to a rebroad cast of their webinar titled, "The New Form 8955-SSA: Who, What, When, and How" and Derrin said it. I know not very strong level of proof. Kind of warned you about that in my first post. I was curious where they could have gotten this from. So try this... Here is a link to an IRS newsletter. Note it states the following: http://www.irs.gov/pub/irs-tege/epn_2011_5.pdf (see page 3) The due date for filing the Form 8955-SSA for both the 2009 and 2010 plan years is the later of (1) January 17, 2012 or (2) the due date that generally applies for filing the Form 8955-SSA for 2010. The IRS expects to issue guidance confirming this extended due date shortly. The January 17, 2012 date will not be eligible for further extensions by filing Form 5558. It says the "due date" not extended due date or special extended due date..... So far that is the best I can help. Maybe not what you wanted or hoped for, but it is what I know. This form is becoming a bigger pain then it is worth.

Sungard is saying you don't mark any box if you are filing the form and using the 1/7/2012 date. The effect is to treat that as the normal due date. I have not seen a cite by them in that regard. I am simply sharing what I am hearing them say.

Did you go online and look it up by EIN? You should be able to see a copy of the the form in a .pdf and the signature line will give you information if the filing was valid or not. http://www.efast.dol.gov/portal/app/dissem...?execution=e2s1 look for form 5500-5500-sf search in upper right corner, search by the plan's EIN.