ESOP Guy

CuseFan's answer very well have answered the direct question. This might be outside the control of the question asker but... The determination if a person is an employee or an independent contractor is a legal question and NOT subject to negotiations. Either the person is an employee per the law at which time they by law should be treated as such. That would include having the needed taxes withheld and their income reported on a W-2. Or the person is an independent contractor by law and as such should be treated as such. Thus, the person can't be in the plan and the income ought to be reported on a 1099. The language CurseFan quotes is in plans in case a court rules a person who was treated as a contractor is ruled an employee the plan would not be required to go back and cover the person for those years. I have never understood that language's purpose is to allow you to ignore the law regarding who is or is not an employee. Thus after the court rules the company could not keep that person out of the plan by continuing to claim the person isn't an employee. They would have to change the plan to exclude a given class of employees if they don't' want to cover the person. When I say this isn't subject to negotiations I mean just because the employer and the person performing the services agree to 1099 the person is irrelevant. You can't negotiate a contract to break the law if indeed the person is an employee by law. The fact you start by calling this person an employee and then talk about them getting a 1099 suggest the real problem is someone might be breaking the law on how this person is being treated for tax law purposes. And that is the reason the plan's language doesn't seem to work. It wasn't intended to cover situation where the law is being broken.

I know of CPA firms that have represented one of our ESOPs during an IRS audit and they audited the ESOP.

The other requirements are very important. I have over the years been shocked at how many QSLOB determinations fall apart on the 50 employee requirement alone.

Back a number of years ago when I worked on Omni+ you could do this fairly easily. Omni+ had a trade date, an allocation date (not exact term it has been a few years but i will give an example soon) and a post date. So let's say you were dong the TPA work for a daily 4k plan. You wanted to post the last 2016 4k deferrals as of 12/31/2016 so they were on the 2016 ADP test, but they were deposited on 1/4/2017 and you were inputting the data on 1/5/2017. Your allocation date was: 12/31/2016 Your trade date was: 1/4/2017 Your post date was: 1/5/2017 You could write calculators that allowed you to pick and choose which dates you wanted to look at for a number of the calculations. So when you wanted the ADP test to include this deposit you used the allocation date. If you wanted to exclude this account you could run a calculator to look for a trade date of 12/31/2016 or before and it would exclude this deposit. (In fact there was a post time down to the tenth of a second with the post date so if you really wanted to select just a transaction you could do it by putting in the post time.) When I first had to learn Omni+ I hated it as it was so flexible it seemed hard to work with. I was used to systems that did more of the work for you. But over the years I came to love the ease and flexibility of the calculators. Now that I work in a shop that doesn't use Omni+ I find myself constantly thinking I could solve this problem I have in Omni+ so fast with a simple calculator. As I re-read you question I am not sure I answered your question or not.

I would look for some expenses. I believe a plan can pre-pay an expense for next year this year and use the forfeitures to pay. Can one of the service providers get you can invoice? If the sponsor normally pays the invoices I believe you can split the invoice between the plan and the sponsor. How do the expenses get paid otherwise? I have had plans with people who have $2 balances. It is a pain but it happens. Just curious does this plan have an issue of no recurring contributions? Typically you get such small forfeitures when there hasn't been a PS contribution for many years. Should the people you have forfeiting the small amount in fact be 100% vested because there hasn't been a contribution for a number of years?

I am just trying to make sure I understand the question. In #1 is the DRO trying to merely adjust the payments to reflect the taxes? Example of what I mean: Let's say the DRO says to split a $10k account 50/50. It has a provision that says the participant is to "pay" the taxes for the AP. It is determined the AP will owe $1K on her part of the $5k payment is here payment supposed to be grossed up to $6k? I am ignoring the slightly more complex math that accounts for the fact the extra $1k is taxable so it should be something a little over $1k but you get my point. Is it possible they are trying to do what I described and wrote it poorly? I am guessing as I can see someone trying to do what I described but I am having a harder time thinking even divorce lawyers would actually think they get to just decide who owes a tax without reference to tax law.

You know when I Google Lowes 401(k) login I get this link: https://leplb0180.portal.hewitt.com/web/lowes/login?forkPage=false This tells me the current TPA is Aon-Hewitt. I do another Google and I get this phone number of the Lowes' Aon-Hewitt service center https://leplb0180.portal.hewitt.com/web/lowes/pre-contactus Might want to call them and and ask questions.

You need to be clearer. Did you work for a company as an employee or as an independent contractor? If an employee then contact the company you worked for and ask them about the 401(k) plan and how you access information about your account. They should be able to give you that information. If they refuse to give you that kind of information come back here with what you find out the experts here can help you decide what is the next course of action should be. If you were an independent contractor then please give us a better idea what kind of plan you set up for yourself. As a matter of good manners I would suggest starting a new thread instead of hijacking this thread.

Some version of what you are talking about can be done and I have seen it done. It is better then having the company make the loan payment on a note held by the ESOP. I don't see how that wasn't a contribution even if the money never entered the ESOP. The ESOP got the economic benefit of the payment. The obvious big issue is what is the write down of the note. Most times I have seen this it is shown as some kind of gain due to the but it isn't allocated to anyone. There is no way to allocate it. There is no cash. You aren't releasing shares. You need to get a good ERISA attorney who deals with ESOPs regularly to do this. The trustees need to decide if this is really in the best interest of the participants. There was a DOL letter put out years ago about refinancing ESOP loans to extend the years and they pretty much demanded the trustee get some kind of economic benefit in the form of a guarantee of a minimum dividend going forward or a match in the 401(k) plan. I would suggest using that as a guide. It isn't 100% same fact set but it does give you insight to the DOL's thinking. https://www.dol.gov/ebsa/regs/fab_2002-1.html In this case the issue is people will be getting less shares released then under the old note which isn't happening here but still it might be worth thinking about how the DOL thinks about this situation. I have one client where the attorney blessed what you are describing and no new benefits were given to the participants and their thinking was they are no worse or better off before and after. As you say the share release rate is the same. In fact in the case I am thinking the rank and file might have been better off as they used only contributions to fund the loan payment vs using contributions and dividends before the loan note change.

Yes it works and no it isn't a problem. In fact if I think I can get away with it when I send the auditor a draft of the 5500 it doesn't include the attachment and see if the auditor gives it to me. As far as I am concerned there is no way the client is paying two firms to the do the job that makes zero sense from their perspective.

If you haven't asked for the money it is my humble opinion that you are wasting your time and money to contact an ERISA attorney now. Find out if they are willing to help you and only if they seem to be unwilling then go to the expense and trouble of an attorney.

Lowes may have outsourced much of the work but they still have a responsibility for their plan. I would start with their HR Department unless you have a 1-800 type number with Wells Fargo. If you have a website you could start there. What you are looking for is the following: 1) A copy of the Summary Plan Description (SPD). This is a summary of the basic plan provisions. It should tell you under what conditions you can get a distribution. 2) A website or 1-800 might be able to tell you how to get an SPD and they might help you start the payment process. HR department might be able to do the same. But what you need is at this point is simple information about when and how to get paid from the plan. It might turn out a website or 1-800 number can get you an SPD and the forms needed to start the process. Does the statement you have give a website or 1-800 number? If so, start there would be my guess.

I am with Jpod. The rules say you pay RMDs when the person terminates not the plan terminates.

I have always thought you should do 12/31/2016 for the following reasons: 1) I think the first year was 2015 so they had to 4/1/2016 to get the $0 payment made by if you get my meaning 2) It is safer. I mean how big can the RMD be if they have had 1 or 2 contributions? So if you do it by 12/31/2016 will it impact much on their personal taxes? If you do it 4/1/2017 and get it wrong now there is a 50% excise tax and a plan qualification issue. Risk/return say 12/31/2016 to me.

I am not 100% sure this will make a difference but it could. You open by saying the limit is in the loan policy later you talk about amending the plan. So is the limit in the plan document or does the plan document allow for a loan policy that is outside of the document and the limit is in that policy?

I am curious why do they want to allocate the dividends on comp? To me it make as much sense as saying in a balance forward PSP let's allocate all the earnings on the investments on comp instead of balances. I can't cite anything one way or another but I am not sure I have seen ALLOCATED dividends done this way. I have seen crazy things with unallocated dividends. The only real question I would have is this causes everyone's stock to have a different dividend rate. ESOPs are supposed to have stock that gets the same dividend rate as any outside shareholders. This would be true in the aggregate but not true by person and that makes me uncomfortable at a minimum.

I am with david if I have to make such an interpretation I question if it is a QDRO vs a DRO. This is why I urge my clients to urge their people to submit drafts of the DRO to see if we have issues that can be cleaned up before they go before a judge and it is final. I understand why people are reluctant to do that. Since it sounds like your past the draft stage the above might not be helpful. We have accepted letters from both parties (we like to have some evidence their attorneys bless the whole affair) to clarify how earnings or some part of the balance is to be split if it is vague.

I agree they should say something that you can have a taxable amount and a code G. That is typically what hangs people up. They have it in their head that a code G means there is no taxable amount. It never says that but given the history of the code I see why people think that. So it would help to say you can have a taxable amount and a G in light of that historical context.

From the instructions: Use Code G for a direct rollover from a qualified plan, a section 403(b) plan, or a governmental section 457(b) plan to an eligible retirement plan (another qualified plan, a section 403(b) plan, a governmental section 457(b) plan, or an IRA). See Direct Rollovers , earlier. Also use Code G for a direct payment from an IRA to an accepting employer plan, and for IRRs that are direct rollovers. Note. Do not use Code G for a direct rollover from a designated Roth account to a Roth IRA. Use Code H

G

I would put any and all D's you think were not reported on the current year's 8955-SSA. I have never seen the IRS really look much at the D's vs now I have had 2 ESOPs under audit from the IRS in the past 2-3 years have questions about our A's. But most important one of the biggest pains is one of those people who have been paid who was reported as an A getting the letter from the SSA saying they may have a benefit due and they demand you prove they were paid. Just search for those threads on this board and the one thing you want to avoid big time is having to search what can be as old as 20 or 30 year old records to find a check or 1099-R to prove they were paid. As far as I am concerned when in doubt if you know the person has been paid but not sure if a D has been done (or you even doubt an A was done) file a D to stop that possible letter. Once again I have never seen someone get in any trouble for filing a D you can show the person was paid. I have seen people spend lots of hours proving to someone they were in fact paid when they get one of those letters. When in doubt D!

I am really glad to hear you found a professional who will work with you pro bono. Let us know if you need any other suggestions and good luck in your endeavors to help this lady.

Now that I think about it maybe that is the reason I don't see it ever is it can't be done. But I have a recollection of having a client that did it. But maybe they were doing it wrong.

It has been a long time since I have had a discussion about allowing non-employees roll into a plan but I seem to recall there are reasons why you don't see it pretty much ever. Can it be done? Sure Is is a good idea? That is less clear to me. So allow me to ask the questions that come off the top of my head. Does this plan get charges a per participant fee? If so, who pays the fee? Does it make sense to add a person who adds a fee if the fees are spread across all the participants? Is the only spouse likely to do this a spouse of a HCE? Will that cause discrimination issues? There might be other practical issues you want to think about.

I can't imagine why I would want one and I always have a balance!