ESOP Guy

Allow me to clarify while most of my clients use MT for just their lost participants I don't believe it is limited to that. So what I describe would be a work free method for such people (who I don't understand as I care about my money more that what you seem to describe. But I digress). All it takes to get a person into an IRA at MT is whoever does the distributions get a spreadsheet to MT and wire the money. After that MT sets up the IRA. The person can go online and see their IRA after it is all. It kind of sounds like what you want.

I am not sure I understand the question. Millennium Trust will set up the IRAs for a plan. You get an agreement and all that has to happen is you send a spreadsheet in their format and wire the money. The IRAs get set up. A lot of our clients use it for their lost participants.

It is more amusing when the come back and actually terminate They get a contribution in that year. The next year they come back and terminate and get another contribution. I have seen that go on for years and years. As long as the termination is legit it is how most plans read. You get an allocation the year you retire and you retire any time you terminate after NRA. I have had that happen a number of times. I have also seen plans that get amended to say you can only retire for the allocation condition once. The other thing is many times in an ESOP you don't get paid until the year after you terminate. So those coming and going stops the person from getting a distribution. I have had clients amend their plan to allow a person who is over NRA and has retired once to keep getting a distribution in the year they are rehired. It was just to allow one person get his distribution otherwise he wouldn't have come back for a short time and they really needed him to come back. To the original question. I agree if the person is NRA and terminates that is a reasonable to say they retired.

It seems clear the plan needs to be made whole for the amount that would have been forfeited. EPCRS is only speaking to if it was paid in error for the lack of a distributable event. In such a case no one is "hurt" as the person only got their money- just early. In this case anyone that would get a forfeiture allocation would be hurt if the forfeitures are re-allocated. If the forfeitures reduce then the money is being paid to the plan regardless as less forfeitures means large contributions. I would still go through the process to cover the plan and just in case no contribution is made- at which time it becomes like the forfeiture re-allocated fact pattern.

What is the distributable event in your mind to allow what you are proposing?

I know you said resource not a list but I will say the following (which maybe obvious sorry not trying to insult anyone's intelligence): 1) Remember only an ESOP can have leverage in regard to the stock that is purchased. So if there is still an acquisition loan this won't work. 2) Remember if the company is an S corp a PSP would have to pay taxes on the flow through income every year. Only an ESOP gets to not pay taxes on the flow through income. So if you have an S Corp ESOP and are planning on keeping the stock in the PSP this will tend to kill the idea. Just a couple of thoughts. I would poke around the NCEO website and ESOP Association's website for resources that you are looking for. They both have a large amount of free information and published information for sale on ESOPs. I might be biased but unless the company is a C Corp and the sponsor really wants to use some kind of highly biased allocation method (some method that uses age/service to skew the benefits towards the HCEs that require all the best testing methods that ESOPs can't use) an ESOP is better for company stock than a PSP. That is why there are so many more ESOPs than PSP that own most or all of a company's stock.

I have made wire (not ACHs or direct deposits) payments to countries outside of the US for a few participants of my clients. Bill's idea might be simplest.

While the plan might (this one is pretty grey they were allowed to make the payment at the time) have to ask for the money back if the person doesn't pay it back nothing really bad happens. The self-correction method is pretty clear. https://www.irs.gov/pub/irs-drop/rp-19-19.pdf' See page 38 of 125 4(b). I quote: "(b) Make-whole contribution. To the extent the amount of an Overpayment adjusted for Earnings at the plan’s earnings rate is not repaid to the plan, the employer or another person must contribute the difference to the plan. The preceding sentence does not apply when the failure arose solely because a payment was made from the plan to a participant or beneficiary in the absence of a distributable event (but was otherwise determined in accordance with the terms of the plan (for example, an impermissible in-service distribution))." So make the good faith effort to get the money back. Send the needed letters and so forth but the correction method in the end is nothing. The paid the person that was otherwise due the money except for the absence of a distributed event.

Sorry for 3 comments in a row but these were separate thoughts. Back to the original question. (I am a bit of a story teller so here goes) If you are unhappy find a way to fix it. In the early '90s the company I worked for changed ownership. I went from loving my job to hating it. I was slow to leave as I was making good money. I had great health insurance, a pension plan, a great 401(k) plan..... I am the breadwinner for my family. So I stuck it out for years for my family. I was bring it home however. It was stressing me, my wife...... In the end they froze the pension and laid me off in 2009. I landed on my feet quickly. I look back and realized they did me a favor. I was hating my job and life for money and benefits. You spend too much time at your job for too many years to hate it. You owe yourself and maybe your family better. Find a way to stop hating the current job or get one you can not hate. Sorry if I am stating the obvious but some times in these situations being told the obvious is a favor.

This is one of the hardest things to get the average employee to understand. One of the hardest parts of being a team leader years ago (I now just put my head down and do my work) was annual reviews and pay raise time. They all wanted a bigger raise (who doesn't including me). And you had to explain to them where is the money going to come from? They were part of the billing process and knew we were lucky if we could get small annual increases in our rates. Their cost of health insurance was going up a bunch and they want a 4-5% raise when billing rates are going up 2%. That math doesn't work in the long run.

That is interesting. I have never not been salaried while working in this industry.

Back to the original question and the person who asked the first question. Strictly speaking I agree you can do these various buckets of vested money under the right conditions. As Luke pointed out these are all the legally correct answers and the first two answers are where the practical answer is. Unless the client is willing to pay extra for you to track all the various buckets of people's money and the complex version of who is in what group just don't go there.

I agree with David. As a practical matter I would recommend the amendment applies to anyone who enters or is hired after a given date. I would add something like 1/1 makes it easier than say 12/20. I would add get it written in the amendment how rehires are going to be treated. Easiest is to simply apply the vesting schedule that was in effect on their original hire date (date of entry). You do NOT have to do that but it is a pretty easy way to do it. It depends on how big the client is and how often a rehire is. I have several clients with thousands of employees that did a change to a worse vesting schedule and they have a lot of rehiring. This made things pretty easy to track. But unless this is a tiny client that doesn't tend to rehire anyone the rehire question will come up. You might as well get the amendment to spell out what happens now instead of running around trying to interpret what it means regarding rehires.

Please check your document carefully. I have some documents that clear say a beneficiary can't make a beneficiary election. Odd but true.... I would also read the document carefully to see if it has any provisions about a beneficiary's death before payment. Many of the documents I work with have such provisions. I will admit since ESOP documents have historically been individually written and not a prototype or volume submitter I see a much broader versions of documents. If you are using a prototype or VS I would read both the document you make selections and the base document. I find most documents have a section that describes the rights of beneficiaries and what happens if they die before being paid. It MIGHT add some clarity. If it comes down to that election I am not aware of any guidance.

Yeah, we would need more facts to say for sure. However, Lou is correct as a general rule USERRA forbids a plan to treat a person on military leave as anything but as still employed if they go back to work immediately upon returning from duty. As such it is hard to see how they would lose shares. I would start by asking questions and getting more facts. Once again it is hard to see how it would happen but given how vague the facts are more information is needed to know for sure there is an issue.

To me it uses both past and present tense. I quote: Another optional election that can be made is the Rule of Parity. If a plan has this rule, it applies only to individuals who were not vested in any benefit when they terminated employment. Under the Rule of Parity, a rehired employee’s prior service is disregarded if the employee’s breaks-in-service exceed either the number of years of service s/he had prior to the breaks, or five years—whichever is greater. If the employee’s breaks-in-service do not exceed the greater of those two periods, the service prior to termination must be counted for eligibility purposes. Remember that the Rule of Parity does not apply, even if it is in the plan, if the employee has even one dollar of vested benefit in the plan, including salary deferrals in a 401(k) plan. If the employee is vested at all, s/he will re-enter the plan upon rehire. The first bold part talks about if they were vested when terminated. The second bold part uses has and in my mind confuses things by doing so.

I have always understood the Rule of Parity measures the idea if they have a non-vested benefit on the date of termination not rehire. So I stand by my idea if they took a distribution in the past they had a non-forfeitable right that trigger that provision. This is why you hear all the time most employees ought to enter a plan upon rehire if they had any kind of service and the plan gave any kind of contributions. The difference between once a participant always a participant and Rule of Parity just aren't that large.

Isn't the answer for any one of those that ends with "took a distribution" mean they had a non-forfeitable right? So really the only two that seem hard are elig for 4k and never made any cont and elig for PS and never got an allocation. The simple answer is to get everyone to set up a once a participant always a participant plan 100% of the time! ?

Yes, too much time in the retirement world. I have edited out the error.

No, people might have been sloppy with their terms but you are either an employee and you get a W-2 or you are an independent contractor and you get a 1099. You can have leased employees but they are employees. You can have some interesting arrangements with Profession Employee Organizations (PEO) but those people are still someone's employee. The determination if you are an employee isn't based on you getting benefits. You determine if you have an employee or not and then you work through the benefits issues. You can have employees without benefits because most benefits are mandatory as long as you give them to no one. You could also convince me that someone treated you as some kind of odd mix contrary to the law. As I said a lot of people misclassify people and get away with it.

Here is the problem with you newest idea. The decision if a person is a employee or independent contractor isn't arbitrary nor is it something you just decide or negotiate. There are laws that define who is an employee or an independent contractor (by the way a 1099 employee is an oxymoron. If you get a 1099 you are never an employee. If you are an employee you get a W-2 always). While the laws on this have their grey areas it isn't as simple as saying you are an independent contractor. I will gladly concede there are plenty of places that misclassify their people in this regard and get away with it. However, as a matter of law you need to figure out if you will have employees or independent contractors. If you don't have employees you don't have an issue as they don't have to be covered by a 401(k) plan. If you misclassify your employees and the IRS figures it out they will drop the boom on you. My first job out of college was with the IRS and they trained us to look for misclassified employees as a standard part of an audit of a small company. Your choice on this one.

You are always free to max out an IRA for you and your wife. But if you are looking for a plan that allows you two to put in $10ks with pre=tax dollars and nothing for employee that doesn't get any benefit that basically doesn't exist. That is the government "price" to give you the nice tax benefits, you have to share with the employees. If you are willing to give your employees say a 3% of pay contribution which isn't all that expensive you open up a lot of options in the form of a Safe Harbor 401(k) plan. If you are willing to do that once again visit a local CPA or TPA and they can help you come up with a plan to maximize what can be done at the lowest cost to you in regards to the employees. But the employees getting nothing isn't really going to happen.

This is a pretty complex topic. Is this severance or pay that is coming in after they terminated? It matters a lot. The simple example is if a person gets a commission or vacation time paid to them after they terminate most likely (the specific facts and how the document is written will be critical in the final determination) that is compensation they could defer upon. If this is true severance pay- they are paying this person because they were terminated and the termination is what triggered being paid- it would seem like it is most likely they can't defer upon that compensation. Once again you need to look hard at the specific facts and the document. The discussions of severance paid within a given time period tends to be mostly found in the 415 rules/parts of the plan document and be interpreted in that context. One thing you might want to check is if this pay is part of some non-qualified plan that pays out a deferred compensation over 3 years. I have plenty of clients whose Stock Appreciation Rights (SARs) and other non-qualifed plans pay over a number of years after the person leaves the company. That is not severance pay but often times excluded from the definition of compensation in the plan document. In short I think you need to ask more questions about what this pay is and then read the document very carefully to see if it addresses what this is.

This is my opinion. I can't cite anything. I normally think 99% of the time people over think these counts unless you are close the line where you move from not needing an audit to an audit. I would actually amend for the reason you stated in this case. I would add with the software our firm uses it is simple and not very time consuming. The hardest part would be someone has to call the client and apologize for the mistake. I would rather do that than have a discussion why an IRS letter or agent shows up asking about the number. In short the cost of amending seems low and the bad thing of not amending seems high even if you don't know the chances of it happening. In fact your firm may have spent more man hours (minutes most likely) debating to amend or not than how long it would take to do the change on the software. That is my 2 cents.

As far as I know there can be common control. It can be something very obvious. I once had as a client a not for profit hospital group that owned 100% of the stock of a for profit insurance company and they owned 100% of the stock of a for profit medical management group. This rather old article seems to say outside of my example it might be very hard to get common control. I guess based on this I would be careful if one of the groups can remove officers and board members of the other pretty much at will. But even then it sounds like it isn't obvious. https://benefitslink.com/cgi-bin/qa.cgi?n=288&db=qa_who_is_employer