ESOP Guy

If it is 2020 RMDs they are talking about delaying than you would still have to take the 4/1 RMDs as those are 2019 RMDs.

Couldn't you do the General Test with the rate groups? I have had a few ESOPs over the decades with a YOS allocation and that is how we always did it. Since you aren't allowed to do a benefit equivalent basis in ESOPs we never future valued the contribution to a benefit equivalent. I am not trying to be mean but the lawyer (or whoever) set this up didn't do a projected test to make sure it would pass as set up and in doing so researched this out?

I am with austin here on the rule isn't a very good rule. I am just not sure what to do about it. I have seen cases were a company sold a division late in the year and those people exceeded 20% of the employees. They were terminated. I can see why they are made 100%. But the rule would have someone who terminated months before that worked in another division become 100% vested. Even a person terminated for cause is made 100% vested.

Let's be clear here the correction isn't write him a check like the HR group seems to be saying will happen either. The correction is a QNEC into the plan by the employer. The QNEC as mentioned is employer money into the plan.

This forum is mostly industry professionals so you will get the best answers come Monday morning when they are back at work. But here is the actual IRS guidance on correction and no it is not making a payment to you. https://www.irs.gov/retirement-plans/401k-plan-fix-it-guide-eligible-employees-were-not-given-the-opportunity-to-make-an-elective-deferral-election-excluding-eligible-employees https://www.irs.gov/retirement-plans/fixing-common-plan-mistakes-correcting-a-failure-to-effect-employee-deferral-elections I would wait until you get some responses Monday from the 401(k) experts before going to your HR department. I haven't worked 401(k) plans for almost 9 years now. The experts can give you more detailed answers.

Check your document. It will define hours. It will most likely define hours as hours for work paid. To me that means it follows compensation. Otherwise you would have the hours in 2019 and the comp in 2020. That makes no sense. Unless you have one of those documents allows the comp to be "pulled back" into the year earned. This is most likely a document question not a law question. Given how almost all my documents read I would never take the position this person has 1,000 hours.

Larry you are being tiresome so this is my last reply to you in this topic. Here is the reply to my first questions from the person who posted the question which you seem intent on ignoring: ESOP Guy - great question for clarification. instead of saying value updated for g/l through current, I should have said last valuation date. Payee received 12/31/19 values, took their time to send in forms, and is now demanding that cash amount be distributed. Sounds like plan is going to insist on an updated valuation anyway but it was a testy divorce so they are contemplating how to minimize issues. Part in bold done by me. To me the plain meaning of that statement seems to change the facts from the original comment. Have a nice day but like I said don't expect another reply from me in this topic. I simply don't care enough to keep beating the dead horse.

See the reply to my first question. it seems to be saying there isn't an adjustment for earnings in that reply. I didn't say anyone didn't say to not read the QDRO. But what was happening was a discussion of if you should allow in kind dist to happen and not answering the actual question. To me now that the facts are confused given what is said in the orginal comment and the reply to me that needs to be fixed first. But to me worrying about the type of distribuion at this point is pretty secondary to getting the how much cleared up. For one thing I still don't see how it matters.

If the QDRO actually says they get $x and there is no adjustment for current earnings isn't that what the plan has to pay? The the participant just takes all the losses and the Alt Payee gets the amount in the QDRO. I don't see how the plan can do anything about it. I think there needs to be a good look at what the QDRO actually says. If it allows for adj for earnings since split date the plan can do an interim valuation and the person gets no say. If the QDRO doesn't allow for an earnings adjustment the participant takes the losses and the plan isn't allowed to do anything about it.

I am not sure I understand the question. If the value of the QDRO was supposed to be $1k for example adj for g/l through date of payment what difference does it make? The market is down by about 20% so now the amount is $800 not $1k. It doesn't matter if they get $800 in cash or shares does it? I am curious also on this point: Share of what? Are there actual stocks or mutual funds at stake here?

I am just curious how others handle this. I terminated years ago from a CPA firm. I had some pre-tax and Roth money in their 401(k). They used a well known and large platform for their plan. I tried twice to get all of my money rolled over to my Roth IRA at E*Trade. Both times it wasn't possible to do it online. In fact the first time I was told by the person on the phone it isn't legal to roll pre-tax 401(k) money to a Roth IRA. I got forced out of the plan after being gone for 7 years this last December. The part that still bugs me the most is I got two distributions to Millennium Trust (MTC) and the large platform that had the 401(k) plan charged me the $90 distribution fee per check not for the single distribution event. Every place I have ever worked the distribution fee by event not per check. So if you ask for a payment from a plan and one check goes to an IRA and one goes to you the fee is the same as if you asked for just one check to an IRA. But in the end between those fees and the MTC fees I lost around 10% of my money. I paid those two $90 fees, paid two account set up at MTC and now two distribution fees to MTC to get my money to E*Trade. To me MTC's fees are more justified they would always set up a pre-tax and Roth IRA on a force out like this and they really had to run two accounts at this point. It is the large platform that bugs me. One because Roth 401(k) money has been around long enough that it seems like it ought to be easy to get an account with a mix of money sent to one place via an online election and two I just don't care for the per check fee. So once again how often do you see a per check fee vs a per distribution event fee?

Your question doesn't make sense to me. The term "merge plans" mean they are moving the balances from the old plan to the new plan without giving the employees any choice. The decision was made by the trustee and plan administrator to move the assets from old plan to new plan and the employees get no say in it. On the other hand if they are terminating the old plan and setting up a new plan the answer could be they need to give them an option to take a distribution. So please clarify what is really happening here. Are they merging the plans and the employees have no say about it or is the old plan being terminated?

Not a lawyer here just a CPA who does ESOP TPA work. Depending on what they are asking for that is from back in the day it can still be relevant. I mean the purchase of the stock and loan agreement might have been signed 10 years ago. But if it was a 20 year loan those documents will still be driving how shares will be released today. In those kinds of situations I don't see how you will win a fight to withhold the documents.

I don't know about studies that showed they wanted to set up ESOPs to get out the market "casino" (a loaded term). There are studies that showed ESOP companies laid off fewer employees during 2008 than similar companies who didn't have an ESOP. https://www.businesswire.com/news/home/20170425006676/en/Employee-Ownership-Companies-Laid-Workers-Firms-Recession https://www.nceo.org/assets/pdf/articles/EO_Costs_of_Unemployment.pdf https://www.esopassociation.org/articles/employee-owned-companies-have-fewer-layoffs The NCEO, ESOP Association, the Beyster Institute and the place at Rutgers in the first link are the best places to find research on employee ownership. The NCEO and ESOP Association tend to require membership to get their best research or you have to pay to get the research on a per paper/book basis. The lower cost of unemployment insurance by employee owned companies has even caught the eye of several congressmen. You could lower government costs and spread the benefits of employee ownership by encouraging employee ownership seems like good public policy to them. Hope that helps.

I realize this doesn't really help or answer your question but I can't even figure out why a company wouldn't supply SPDs. Given you can do it almost exclusively electronically now a days. I work currently for a company with about 60 employees. We use I think the term is a PEO that handles our benefits and payroll stuff (that is the technical term by the way ?) I could go on a website right now and get every SPD for every benefit I have. I get why people didn't want to do it back when it cost $5/package to send a paper SPD to 2,000 employees. But now it is so cheap it makes no sense.

Maybe it is me but Lucy's question and follow up comment is vague on an important point. In both comments it isn't clear who is paying. In comment one she says "offers" and she talks about who gets to elect but never discusses who pays. Who is paying for the coverage over $50k? I have worked for employers that paid for life insurance coverage that was 2x my salary and I paid nothing for that coverage. I had taxable income on the part of the coverage that exceeded $50k and that is my understanding how it ought to go. On the other hand if the employee pays it isn't taxable. Full disclosure this is a benefit area that I am NOT an expert in. I am a simple CPA and what I learned about this was because of my own taxes and that is what I am basing my comment on.

I guess it depends if the $1,000 is the total vested account balance and this is a full payment. I think the gross taxable payment is $900 and you withhold on that. If this is an in-service and there is $1,100 in the account I can see how you pay $1,000 and take the $100 from the account. That is how loans are done.

I have seen both but my understanding the correct way is $900 as long as the $100 is coming from their account.

Just an observation I would always be slow to do an interim valuation. As today shows you can recoup a lot of the loss quickly. It is just the nature of balance forward plans to have a lag between the valuation and the payment. I used to do a lot of balance forward PSP and once you explained to people over the years they benefited and got hurt by the lags most of them accepted them. By that I mean most people who have been in the plan a long time got a benefit because the plan paid people out based on the last valuation and the market went up and they got extra gain and sometimes the market went down and they got extra loss. It is likely that in the long run it was mostly a wash.

Just curious do you have a policy with both up and down market thresholds for when you would do the interim valuations? I can't cite anything (haven't really looked either) but it would seem odd to say you are protection participants if interim valuations happen only with sharp down turns I mean up until the moment the person is paid the terminated person filling out the forms is a participant also. If you don't have both up side and down side thresholds it seems like heads I win and tails you lose policy. To say the payments will shrink because of interim valuations on a sharp down turn but never go up on sharp up turns seems to hurt participants who are about to be paid at the expense of the ones staying behind. I am not sure you can justify treating those two groups of participants that differently.

I would be interested in updates as the DOL part unfolds. If you don't mind send them out way. Thanks

I forget the exact wording in the rule but isn't it the deposit is late if not done as soon as administratively possible? Can a case be made the blackout makes it not possible until over? I am asking not arguing this position. It has been a long time since I did any daily 4k work but it seemed like all the plateforms would take deposits and put them in a money market fund until they could be split back in the day to solve this.

Isn't the "original sin" on Congress? Instead of reasonable penalties they do things like: Miss an RMD the correction and maybe pay a small penalty, if you want interest on the missed payment to the government. Nope it is a 50% excise tax no one at the IRS wants to impose because it is draconian. No one wants to tell a retiree on a fixed income becasue someone didn't compute the RMD right they have to pay $1,000 of the $2,000 that should have come out of their 401(k) account to the IRS. So they came up with VCP to fix it for a reasonable cost and penalty waiver. Or because one of what seems like an endless list of things that can go wrong on the client's or the TPA's side of things the plan doesn't simply make a correction to get people back to where they would be and maybe pay a small fine because of an error.... Nope it is the plan is technically disqualified. I have ESOPs that have 100s of millions in assets in them and if you read the rules literally when the disqualifying defect happens all those assets are now taxable and oh those 500 distributions you paid last year and the year before that figure out which ones went to an IRA that money shouldn't be in the IRA even though those people had nothing to do with the error. So once again the IRS has simply come up with a more reasonable way to deal with this. Yes, add to it my understanding is the IRS has less employees working for it than it has in decades because of budget cuts by congress and the POTUS and sure you have a mess. But Congress could have come up with a realistic set of penalties and corrections most of which could be handled as self corrections with maybe a form paying a penalty. The IRS could choose a sample of them to make sure people are doing it right.

If it hasn't been combined I would think about not doing so. Often times the two sets of money have slightly different rights and benefit attached to them. For example, she can mostly take their late husband's money at any time as a beneficiary and her money she might not have any in-service withdrawal rights. There is a good chance both are over 59.5 but if she isn't she could take those funds and get a death code on a 1099-R and not her money. I see this situation about once every couple of years and we always leave the two accounts separate. We might rename the one into her name as beneficiary to make it clear whose money it is but I think mixing the money is a bad practice. The exception would be if she actually signed a distribution form that gave her the option to take the money, put it in an IRA and she specifically said she wants it rolled to her account in the plan. But I wouldn't just tell her the plan is going to merge the two accounts.

When you deduct and when you allocate are not linked. I know of no way to not allocate these funds.