ESOP Guy

It is my understanding the DOL does not believe an ERISA plan can turn assets over to the state ever. You need to either put it in an IRA, now the PGGC program (if elig) or reallocate as forf (if applicable which is hard at plan termination.)

I know no one who thinks you can change it for people in pay status. Most will cite 409(o)(1)(c) which requires ESOP payments to be substantially equal. You can get vigorous debates on people terminated and whose payments have not started. It is clearly more aggressive. Most people I know shy away from it and make the change to the policy to say something like: This policy is for anyone who terminated after xx/xx/xxxx date. I have however, seen change apply to terms not in pay status. I have never seen any clear ruling or cite for the terms not in pay status. It is more of a risk tolerance thing as far as I can tell. I have to admit I have never seen an SDP warn people it could change after they terminate either. Not sure if that boosts the case you can do it. I know you can search and find a thread on this board were a person was asking about a person who completed the form but the check hadn't been written. That was cutting it real close! (I believe I advised against it but I am going off memory.)

I am more concerned by the idea you aren't going to pay anyone until NRA, death, disability or diversification. Unless there is a loan that purchased all the shares in the plan don't you have to offer a distribution after the 5th year after termination? https://www.nceo.org/articles/esop-vesting-distribution-diversification

It isn't obvious that the employer can do nothing. Most employment law requires "reasonable accommodations" of religious beliefs. I am assuming this is what Jpod is referring to when he says Title VII doesn't apply that he is saying either those rules don't apply here or this isn't a reasonable request. But it is dangerous to just dismiss this out of hand as the employer gets to decide end of story. Let me be clear here I am NOT an expert on this part of the law so it very well maybe you either don't need to accommodate the person with ERISA plans for some reason or asking a plan to amend so it carves you out is not a reasonable accommodation. I am merely pointing out you have to ask those kinds of questions.

If you are going to amend (not endorsing or objecting to the idea) the plan why not make it more generic and long term useful? Something like the plan excludes any employee who certifies they have a religious objection to the plan? Maybe getting a waiver is the same thing. Just guessing but if there is one such person there might be a community of them in the employer's area. The objection might come across as off beat but typically they congregate at a place of worship and not come up with the objection on their own. I would add if it is an objection to interest one of the world's largest religions has that as a core belief.

In the past were they more people in the plan. If you read those rules carefully the full vesting goes back to when the plan first stopped making regular contributions. So if you go back were there people paid less then 100% of their balance? That retroactive look to this rule catches people at times. Other then that I got nothing coming to mind as to why one would need CAP.

I think the original question has been answered as best as it can be. If there was no form, which the question implies, then the document tells you who the beneficiary is.

Not trying to be evasive but isn't the answer to your question- depends? It seems like if they are really offering the right to all the other employees to defer and roll money into the plan and they are simply choosing not to do so I am not thinking of a reason why it isn't legal. On the other hand I do think it is odd no one is deferring. So if it turns out that the owner isn't really given the other people an opportunity to defer that would be a problem. That at least is my initial reaction. One needs more facts to know for sure if it is all on the up and up. But on its face I can't see a problem.

The document is going to tell you who the beneficiary is if there isn't a valid beneficiary form for whatever reason. As for the question if no one shows up to claim the money the question then becomes at what point, if any, does that then fall under the lost participant section of the document? But once you decide this is a lost participant the document drives the results. And to me this is the only hard question. The first question- who is the beneficiary- is a simple question of going through the steps the document spell out for who the beneficiary is when there is no form. So I like I said before and people keep saying look to the document.

If all else fails I will take the money off everyone's hands! On a more serious note the document will tell you what to do.

This group will make them for you!

On a serious note I would make the client go to an attorney and have them tell you how the plan should view the compensation.

I go to church with a guy who owns his company and he is in the union and all the plans. From what he tells me the union is more then happy to have more people paying into the plans. I had at lease one client that also had the owners in the union. Once again the impression I got was the union was more then happy to have more people paying into the plans. My client the owners said all their comp was union comp. I never really challenged it They paid due to the union were covered by the plan the union had with the company which included a company specific PSP. Everyone in the TPA firm took the position there was no coverage testing as it was all union employees. You might be over thinking it. Of course we might have been under thinking it way back .

My guess is they just don't record the owners hours as he isn't paid by the hour. He knows if he is working the time he is supposed to work. I would ask if he worked at least 1,000 hours.

If this is daily value what do you do with the earnings? What if there is a loss? I think they need to stop doing this or suck it up and say what was deposited is going to be allocated.

That I agree 100% with. I will not defend that ever!

What I will tell you is this is more common then you might think. This happens to me for one of my clients maybe 1 or 2 times a year. A check gets sent to one of the big mutual fund houses for a rollover. Their practice is to cash all checks as they come in as part of their security. They don't want a check lost of stolen. They then worry if they know what to do with the money. If they don't know what they are supposed to do they simply write a check back to where the money came from. Every now and then the only reason I find out about it is I am reconciling the cash in the client's account and there is too much cash. It sounds like it is the new plan's problem as it sounds like the new plan failed to send the paperwork they should have to Empower.

That is my understanding. The other choice is to file late and know what your fine is with a DFVC filing.

I don't believe it was ever acceptable. It was more you could get away with it becasue it took them so long before electronic filing to realize it was missing. What I can tell you is I have a couple clients that do this every year. I just a few weeks ago filed a 12/31/2016 5500 with the report. We filed with a note back last October. So far they have never been fined for doing it. But I always tell them they are at risk of it being ruled as incomplete.

One part of your facts are unclear and it might make a difference in my mind. When you say "the plan administrator never gave the authorization to Empower..." Is this the PA at the new plan that was going to receive the rollover authorization (seems like the most likely answer) or the PA from the sending plan? To me at least it sounds like a PA failed to so their job and that caused the problem and it seems like that PA ought to be responsible. I would think sending needed paperwork is a fiduciary responsibility. Maybe the answer won't change anything. I am doubtful the old plan has any duty to the person. They did what they needed to do unless it was their PA that failed to send the paperwork.

In the other thread on the pot topic I mentioned this but don't see it here. Review IRC 280E: https://www.law.cornell.edu/uscode/text/26/280E Many expenses of operating a drug business aren't deductible so even if you get a 401(k) set up how does all of that work? Maybe it doesn't matter I have never looked into it. But a PS cont could easily be paid with after-tax dollars so do you have a basis in the PSP or does the person have to pay taxed again when they take a distribution? If it gets taxes twice it might not be worth it to the owners- maybe even the employees. They might as well as get an IRA and invest after-tax after that.

The other way to put what Lou is saying that by the time the 1st payment is made in the quarter following the quarter with the missed payment the missed payment was paid. Of course that means the current quarter is missing a payment. But that is made up the first payment the next quarter and so on and on. You could go on like that until the end of the loan and have only one missed payment at that time and no default.

Oddly, while the famous line is, "I think therefore I am" his proof was related to doubt. His proof was if you doubt you exist then there must be something doing the doubting. So the "think" he was referring to in the line was doubting as the type of thinking that proves you exit

austin you strike me as one who historically thinks through things well so forgive me if this is pointing out the obvious but I just took over a plan that did a vesting sch change and this issue came up imminently. I would recommend the amendment makes it clear how rehires are handled. Maybe becasue of that base document language it is clear as the vested percentage can't go down. But my new client is going from a 3 year cliff to a 6 year graded and the amendment is silent on how to handle someone who was hired years ago but now rehired. We found a guy with 2 YOS who gets to keep that service. Is he 1 year from 100% vested or 4 years from being 100% vested? It would be nice if the amendment was clear on the topic.

Card has a good point. At risk of getting too much on my soapbox but that part of the law is always in the plan document also. So once again if you read all of the plan provisions about distributions you will hit these rules also.