ESOP Guy

No, as in does the document say they can be different or not?

In terms of conferences find out which chapter of the ESOP Association covers your area. They all have local conferences with good breakout sessions. Since they are local the travel costs aren't too bad typically. There are regional conferences related to the ESOP Association. The Midwest Conference is in the Chicago area this year in mid September for example. If you, or your employer, are willing to spend a little more money than: If you work for an ESOP company or a company thinking about an ESOP look into the National Center for Employee Ownership (NCEO), noted by another person. Look into becoming a member. Once you are a member you can get discounts on their books. I believe they still have monthly webinars for members. Their spring conference is a great learning environment. The reason I note them if you are an ESOP company or a company looking into ESOPs is their spring conference has a very large proportion of their attendees from ESOP companies. That allows you to meet and talk to the executives from other ESOP companies. You will find they are very willing to share their experiences and network with you. If you are on the TPA side of things the NCEO can still be great for first learning as they have a lot of basic sessions since so many companies show up. However, the large ESOP Association conferences have the best advance technical sessions. They have some fall conferences. They are the most expensive to go to in terms of conference fees and travel typically. Also look into: The Beyster Institute https://rady.ucsd.edu/why/centers/beyster/index.html The Ohio Center for Employee Ownership (even if you don't live in Ohio) https://www.oeockent.org/ More and more states are funding their own centers for ownership so check your own state. The Ohio one is one of the best and oldest. They put out all kinds of publications and have their own conferences. Hope that helps.

Just had a similar conversation. As I noted in that thread I would say a person hired met the requirement on 12/31. We have plans here that say once you work 1,000 and 12 mo they enter back on the 1/1 of the calendar year they meet the requirement. We have people who are hired on 1/1/2023 we would have them enter on 1/1/2023.

I don't understand your example and question. If the plan says you enter on the entry date coinciding with our next following meeting the requirements the next entry date is 1/1 not 12/31. There is no coinciding on 12/31. On the other hand if we have a plan that say a person enters retro back to the first day of the plan, 1/1 for a calendar plan, I would say the person who met the service requirement on 12/31 enters retro back to 1/1 of the same year. This isn't hypothetical we have clients where I work that is how we advise out clients to handle a 1/1 hire who worked 1,000 hours in a year with a retro 1/1 entry date.

For what it is worth this is what I am thinking about. https://www.law.cornell.edu/cfr/text/29/2530.202-2 I quote (you can use link to read full context) For example, in the case of an employee who begins employment in January 1977, the employee's initial eligibility computation period begins on January 1, 1977 and ends on January 31, 1978. If the employee completes 879 hours worked in the initial eligibility computation period, the employee is treated as having met the plan's service requirements for eligibility to participate as of December 31, 1977. If the plan provides for semi-annual entry dates of January 1 and July 1, and the employee has met any eligibility requirements of the plan other than the minimum service requirement as of December 31, 1977, the plan must provide that the employee commences participation as of January 1, 1978. You can claim it isn't the best example as it is talking about a situation where a person hired in Jan is assumed to be a 1/1 hire but note it does say that a person meets the requirements by 12/31. The ERISAoutline seems to pick up on this and agrees you if you meet the requirement by the day before the anniversary date you have your year of service. I have always explained it you have to count the day they were hired as day 1. If you count from 1/2 to 1/1 of the following year you get 365 days. So a person who is hired on 1/2 has 1 year of service on the following 1/1. If the plan says coinciding with you enter you have it made. My 10/2 person has 365 days on 10/1/2024. Note documents don't say 1 year anniversary it says 1 year of service so you don't count like a birthday or anniversary.

I have a client whose plan document says: A person enters the plan after 1 year of service with quarterly entry dates. The plan is clear you enter on the entry date coinciding with and next following meeting the entry requirements. A person hired on 10/2/2023 has 1,000 hours by 10/1/2024. I would always say this person enters on 10/1/2024. My client is asking for a cite. I really am thinking there is an IRS regulation that covers this situation. I just am not finding it. Can I get some help from the smart people out on this board? Does anyone know if it is in the regulations and where it is? Thanks in advance

I fully agree the document might not do it on its own. That is why I said "start" there. I do find some plans do answer this question. I find most do answer the question of earnings if the person pays back their distribution and need their forfeitures need to be restored under that fact pattern. I would at least consider, but not make it the only factor, how it treats forfeitures in that situation as part of my decision. After that if you still don't have a good answer I would see if the sponsor is willing to get their opinion. In the end I have seen plenty of plans to give earnings in this situation but I haven't found a clear rule from the IRS or DOL. So I go through the process that starts with the document.

This is a questions whose answers has to start with: What does the plan say? Does it stay restore the person or restore with earnings?

I am with everyone else. They have covered the law so I have only one more question: Why are you putting yourself in the middle of two divorcing people? I try as hard as I can to stay out of that position with all my clients. Divorces can be high emotion situations were people get nasty. Leave me out of it as much as possible is my position 100% of the time.

I am not even going to try and answer the distribution question. That is just a classic example why these kinds of assets should never be in these kinds of plans but you know that already. Regarding the stock's value. Since this isn't an ESOP they are technically no legally required to get an appraisal. However, both the trustee and Plan Administrator as fiduciaries are REQUIRED to ascertain a fair market value of all assets in a plan ANNUALLY. And simply guessing isn't a valid method. Since the Dr is most likely the trustee that person needs to be able to document on what basis the stock was been valued every year and it sounds like they have failed at that. That is the start of the legal mess this plan is in. My advice to you is to get something in writing from the trustee directing you on what they want the value has been determined. I might even ask them to give a brief description of how they came up with that value. If they aren't willing to do that I think you should seriously ask yourself if you need this in your life. Yes, I get landing client is very hard and asking one to go away is very hard to do. This sounds like a huge mess. But picking numbers like $2/shr or $17.57/shr out of thin air is a failure on the part of the trustee to do their fiduciary duty. That is a pretty serious problem for that person if the DOL or IRS catches it.

Make the person who wrote that provision tell you what it means? Sorry, but more attorneys need to made to be called out for writing vague provisions in plans. I know there are some wonderful attorneys who read these threads but a pet peeve of mine for years has been how disconnected some ERISA attorneys are to the practical issues of the provisions they write. Throw it back at them to tell you how to implement it. We are Third Party Administrators. We aren't paid to fix these people's messes. Off soap box now.

I get your point but since the context was vesting unless there is a very unusual vesting schedule a person can be credited with 1 year and 364 days of service and will still be vested the same as having 1 year of service. I don't care what the exact service at that point. The person doesn't have 2 YOS is what you need to know.

It wasn't my client but if my memory was the IRS or the DOL took the position that the first filing wasn't complete and rejected the amendment. Sorry, I don't recall the details better but that event is what made management here change our somewhat casual willingness to file without an audit report and amend later.

Yes, they have. It hasn't happened a lot but we have had clients get caught in this. We no longer recommend they do this but file late and DFVCP file. The fines under that program are so small compared to if the 5500 gets declared late. We will do the file and amend later but they have to give us written direction so we can raise that as a defense if they get hit and come looking to collect from our firm.

The real problem is you amended one of the key data points that their computers use to track 5500s. To the computer the amended return look like an amendment to a return that didn't exist. You should be able to get it fixed once you get the situation in front of a human. It won't be easy because since Covid working with the IRS has been hard. However, with persistence this will most likely end with no penalty.

Not exactly the answer you are looking for as we use one of the large paying agents. But our policy on ACHs is simple. You can only get one if you make an online election and input the numbers yourself. It is on you to get it right. If something goes wrong we will help obviously but we take no responsibility nor liability for the numbers a participant inputs for payment. Anything else is a risk management is unwilling to take.

You have it correct for the example you gave. And yes I have seen people not get the 2nd YOS by leaving the job a day or two before an anniversary. The real trick with elapsed time is making sure you don't lose track of the Service Spanning Rule. Using your example above if that person was rehired on 10/20/2025 they would get the 2 YOS the day they are rehired and their 3rd on 4/5/2026. That gap is ignored because of the Service Spanning Rule.

You need way more help than you can get from this board for free. There are people on this board who are qualified to help you but it won't be cheap. Your problem is fraught with all kinds of legal issues. I know that isn't answer you wanted but it really is the best answers. Unfortunately, the people who helped you in the past didn't warn you about issues like this long ago. You can literally search real estate in plans on this board and you will find threat after thread of people having this and other problems of putting this kind of asset class in a plan like this. I feel for your problem but it won't be cheap nor easy to get a fix.

I am not 100% sure I fully understand the first paragraph. But if I do I don't think you will find clear guidance in the regulations. My best guess based on what you wrote I would stop and see if you can get a call with client, ESOP TPA and yourself. A SHNE can go into an ESOP and that TPA needs to know how to do it right. They have to treat it like it is a SHNE and all the related restrictions. Or it can be done in the 401(k) plan and if the combined plan are Top Heavy for example the ESOP TPA needs to know about the SHNE is for that and combined 415 obviously. This stuff take good coordination and communication between the 401(k) TPA, ESOP TPA and client or it will go wrong badly. I am going to say it again there needs to be a conversation here to make sure everyone is on the same page and people need to get used to communicating annually to make sure everyone understands what is happening in all the plans. This is especially true if the SHNE is being paid to the ESOP.

I think what you need to consider is one is wrong but it is just as likely the one that is giving you the money as it is the one that isn't. Your questions seem to imply you think you are being shorted by the one. It is just as likely you got a windfall from the other.

Audit lottery. Put the check in the personal account. If you get a 1099-R you treat it the way that reflects. If you don't get a 1099-R don't report anything. If the IRS comes along and hits you up how much can the tax and penalty be? This is the perfect case for playing the audit lottery.

I have seen plan documents that for some reason forbid Alt Payees from designating a beneficiary.

The right participant search firm can do a "death audit". They are checking against the Social Security Administration record of SSNs that have been reported as the person is deceased. I just couldn't tell you how quickly it is updated. As noted in an earlier comment either funeral directors or corners have to report deaths to the SSA so they know to declare the SSN no longer active and if they are paying benefits to stop

I don't know about fraudulent obits but I can tell you we have found over the decades a shockingly large number of possible beneficiaries by reading obits. Including several times we called the church where the service was held and ask the minister to reach out to any known close relatives of the deceased to help get the process started. Those tended to be for small amounts as asking for people to call to get money can create issues. The first time I did this was for a benefit of about $80 and everyone was willing to risk paying the wrong person to get the benefit off the books. A guy who could prove he was the sibling saying he was the last surviving relative got the money as that who is the person the minister talked to. That was over 20 years ago and as far as I know no other person claiming to be the rightful heir has come forward.

Inspira is the most common. Next is Penchecks. Typically, if the client uses Penchecks as paying agent they use their IRA service as it is integrated.