ESOP Guy

As a rule "yes" but most ESOPs don't allow for participant direction. In almost all ESOPs the trustee directs all the investments. That ruling by the IRS that is the issue with them. The plan was taking away participant's ability to direct their investments. So if you had an ESOP with participant direction I might have to think about it harder.

That rule really applies to distributions since the trust owns the share in the ESOP. There is a way in ESOPs to force people out of the shares by doing segregation. However, ESOPs don't give people investment choice so the logic of that IRS ruling you speak of doesn't apply. That ruling the example was a PSP that gave people investment direction and forced all terms into a MM fund. The IRS objected to taking their investment choice away from them. I believe this is the Rev Ruling CuseFan speaks of. http://www.unclefed.com/Tax-Bulls/1996/RR96-47.PDF

There are plenty of 401(k) plans with fiscal years ending on a date besides 12/31. Things like the 402(g) limit is a calendar year limit. I can think of a number of practical reason why a 1/1 to 12/31 year are easier but that is if the sponsor's corporate year is also those dates. But it isn't a requirement.

Even back when I did pooled balance forward 4ks and PSP plans I think I had one plan that made the plan loans part of the "bond fund". All the other balance forward plans the loans were the one thing where the earnings/loan interest went back to the person taking out the loan. So in my experience at least seeing loan interest going back to the whole group was rare. It sounds like Larry sees something different.

While it is true the real question is opportunity costs I would contend your listing of them MIGHT be incomplete. You have to look at this cost of credit vs other credit costs. If this person's other choice is a 15% credit card giving up even an 8% rate of return might still be a good choice it would seem. This actually can be a complex calculation with many assumptions that may or may not come true. I am not a huge fan of 401(k) loans mostly because if you lose or change your job you have to pay the loan back at a time it might be very hard to do so and that harms your retirement. However, I have taken them a few times in my life when things were tough and my other choice was very expensive other credit.

Oddly, my local credit union I use will give you a loan that is secured by a CD for 4.75% (their 5 year CD rate plus 2%) which would be the closest commercial loan to a 401(k) loan. After all a 4k loan is fully secured by the account balance. Yet, I doubt anyone would advocate that rate. It has been years since I did 4k loans but back when I did them I never had an IRS and DOL auditor question it and the most common our clients used was prime plus 1% or prime.

Larry is correct. You can get your 401(k) document from any number of firms across the nation. You can get it from an investment firm or mutual fund house. You could find a Third Party Administrator (TPA) firm that specializes in 401(k)s to help you. You might even find in your area a CPA firm that does administration and has a document that it offers people. There is even a vendor section on this website that has the names of a few 401(k) TPA firms. You have a ton of choices. If you are talking about helping with the investments you have a ton of choices there also. Any mutual fund house, local bank or broker has a way to help you. If you want daily values and the ability to call or use the internet to do 401(k) activity there are TPAs that work with the large insurance companies and mutual funds that will help you do that. I agree with Larry I would find a subject matter expert in a CPA firm or TPA firm to help guide you through all the choices you actually have.

Even if it is a discretionary match or PS contribution my understanding is if there was a board resolution declaring it then there is a contractual obligation to pay it. I would check with an attorney to ask what, if any, conditions reporting it say on participant certs as existing for years makes a discretionary contribution obligatory under employment or contract law. To be very clear here I am not talking about pension law but in both cases contract or employment law. I can imagine someone raising an issue if a match had been show as part of my account for years and suddenly someone says, "we were just kidding about that". Maybe one of the lawyers that comes by this board as an insight but I would definitely look beyond pension law.

I might not be the most useful person. I know enough to say "stop we need to do more research" when I encounter this. Bill got you a link to help you determine if you have a statutory employee. This talks about how they can have their own plan. https://benefitslink.com/cgi-bin/qa.cgi?db=qa_who_is_employer&n=49 And this might not apply as it is talking about a person who gets a W-2 but uses a Sch C to report their income. This whole grey area insurance agents occupy is very odd. Like I said I know enough to know to ask more questions not answer them well.

And often times the errors are easier to fix when they do happen.

To me the better question is does your husband have a good work/life balance? If so, than 120 isn't too many. If not than it might be time to look for a change as life is too short to be a slave to your job. Don't get me wrong I like what I do. I get to work from home and all that now. But at one time I was in a bad place and I look back on that job and think their cost cutting that lead me to be laid off was doing me a favor. I was working long days, coming in on the weekend and bringing my frustration and anger home to my wife and kids. I needed to find a new job and at the time I had 30 large, balance forward clients.

Thanks for all the good information!

I would never issue a 1099-R in this case.

I am being asked if there is a legal requirement to produce notices in Spanish or other languages for people whose primary language isn't English. Mind you the client agrees it is a good idea and is trying to get translations done. They just want to know if there is a requirement and if so which notices.

I seem to recall hearing many years ago (and memories are a tricky thing) that people have tried versions of that argument to DOL auditors and failed. Life is a risk as long as people understand the risk decide.

To be clear I am assuming these are individual directed investments. https://www.law.cornell.edu/cfr/text/29/2520.101-3 https://www.irs.gov/retirement-plans/retirement-plan-participant-notices-when-a-plan-may-impose-a-blackout-period

Are you sure Metlife is the trustee of the plan? It has been a while since I worked daily 4k plan using there various platforms but I don't ever recall a company like Metlife being the legal trustee of the 401(k) plan. It was the reocrdkeeper but not trustee. Who made the decision to change from Metlife? The person making that decision is often times both the Plan Administrator and Trustee of the plan. Unless there is a very large plan at which time those roles might be split. If it is just a change in recordkeepers I agree with Karoline there are a bunch of notices regarding blackout periods that have very strict rules around them. There all kinds of notices about fund mapping and so forth you need to make sure get done. Those blackout notices have timelines that need to be kept. However, the new recordkeeper often times have a conversion group to help guide you through those kinds of processes. There are people who do daily 4k work still on this board who can give you better details regarding all of that. If somehow Metlife is the legal trustee a change to a new trustee takes a resolutions. I am just doubtful they the plan's trustee. None of this requires the consent of the participants.

Some of the stories about payroll systems or providers that hit this board make me chuckle. You feel like you are in a time warp. I know this doesn't help the question. By the way I also agree this is a problem.

This is a very complex topic. Here is another resource. https://benefitslink.com/cgi-bin/qa.cgi?db=qa_who_is_employer&n=20 it isn't just comp. You at times have to look at their hours for vesting. (See the 2nd person in his example) If you can find any other material by Darrin Watson on whose is the employer he does a great job of explaining all the nuances and pitfalls. If this is going to be a regular issue in your firm they should sprint for one of Darrin's webinars on this topic. The firm I work for has people listen to his webinars on this topic on a regular basis and we keep his PowerPoint slides handy. Full disclosure after that commercial for Darrin I am not paid any commission by him. I just find this topic rather hard.

How sure are you the checks are getting to the people? I guess put another way is the problem the checks not getting cashed or do you have lost participants? Have they done some kind of address search to see if they have a good address or are they in contact with the people? I would make sure you don't have a lost participant problem first. If you do and you haven't done a search forfeiting the money is problematic in my mind. If they are sure the people are getting the checks but not cashing them have they contacted the people to find out why? I guess what I am saying if the plan is making just assumptions about them not cashing the checks vs knowing they aren't cashing them makes a big difference in my mind. the DOL is looking hard at lost participants the past year and they are taking a very dim view of lazy plan administrators.

Maybe it is me but I find this question confusing. The 404 limit is 25% of eligible gross compensation. You can have a different definition of compensation for testing and allocations that are well below gross compensation and still deduct 25% of gross compensation of the eligible participants. It isn't clear to me why a change in compensation for testing lowered the 404 limit. But to answer you questions directly if it is true you have a non-deductible contribution there is no getting out of the excise tax that I have ever heard of. If they are filing late there is no getting out of the interest on the late tax. If the IRS assess a late penalty you can sometimes get the IRS to waive that part if you can show cause and there isn't a pattern of being late. You write a letter to the IRS after they send the penalty letter to your client asking for a waiver. It has been a while since I wrote one of those letters but I think the IRS notice even tells you how to ask for the waiver.

I would disagree. I know of no authority that would allow you to have anything done but 6 separate audits. I doubt an auditor would do an audit that spans 6 years vs 6- 1 year audits. The client might be able to get the CPA firm to factor into the costs the fact they would only need to send their people into the field once and look at all 6 years at that time. Although I doubt it would be a huge savings as there will be close to as much work as having done 6 audits over a 6 year span. But the way I understand the rules you need 6- 1 year audits. They can be done at the same time but you need 6.

This conversation has come up before. This might help.

In that case the TPA needs to be very sure the Engagement Letter fees cover the cost of all the work of a refinancing a loan. A $100 per refinance fee, for example, would make a lot of people pause before doing it 19 times in less than 5 years. And if it doesn't slow them down at least the TPA is very sure they are being paid for the work.

New loan policy needed?????