ESOP Guy

Or ask Grubhub what can happen when lawyers think you have done it wrong! https://techcrunch.com/2017/09/05/grubhub-versus-lawson-1099-trial/

I can't get past that sentence. Outside of of insurance agents is there a person who is a 1099 "employee" that is an actual employee? Exactly, what kind of 1099 are they getting and how are they employees if they are getting a 1099? As a general rule they are not employees but independent contractors. An employee gets a W-2 and an independent contractor gets a 1099. If this is the insurance agent fact pattern that is an important fact as they have special rules.

I agree your use of the term transferred here is vague. A spouse isn't required to take a distribution under the law for years assuming both were under 70.5. So if all Alliance did was re-name the account to keep clear the spouse is the owner of the account I am not sure I see the issue. I guess they could have left it in the deceased's name with a note they are dead and who the beneficiary is. The net effect is the same in those two cases. The plan might require an earlier payment but I doubt it. I can't remember seeing a plan that forced a spouse beneficiary out beside the RMDs.

Given that no one can point to clear guidance raises the question if a "right" answer is knowable or even exits. Note I only commented on the 5500 treatment. I think your answer on the tax treatment was spot on. By all accounts this person had Constructive Receipt of the check so it was taxable in year of issue. That is a very clear rule in tax law and easy to follow in many cases. On the other hand the people who wrote the instructions for the Form 5500 clearly never even bothered to think of such real life issues as asked about here. They don't even bother to read Benefitslink.com on a regular basis to see ways they could issue better guidance as I am willing to bet if someone did a search of this website one would find dozens of instances this exact question has come up. (My guess is some of them have me telling the person it is immaterial do what seems reasonable also.) That has been my view on many issues in this field. For all the rules it is amazing how many real life ideas never bother to get addressed. Still waiting for guidance on what "de minimus" means for purposes of 414(s) testing since I first learned the test in the early '90s. This website is a testament of what I am talking about. There are people who come here who have decades of experience and yet regularly they find situations that long debates happen over what is the right answer with no clear conclusion. I stand by my basic view too many people spend too much time worrying about the minutiae of the Form 5500 when it is clear neither the IRS nor the DOL care. I can't tell you how many audits I have helped a client with and never once have they asked the question, "how are checks issues but not cashed shown on the Form 5500?" If it is material I will give it some thought by asking the CPA if they have any thoughts but a $150 check sorry it has taken me longer to reply to you then I will every think about it.

I did put most of my comment in the form of a question.

Ok, not the rules but here is my take on the 5500. Do whatever you want it is immaterial to spend this much time thinking about it. What I would do is not include it in the ending assets as it was paid and move on. But if the CPA doing the audit (assuming it is even an audited plan) said put it in the ending assets I would give them what they want without any additional thought. Too small of an amount to care about. I have never seen an IRS or DOL audit of a 5500 that has ever looked at the assets of a plan hard enough to get into this issue.

At risk of asking about the obvious but is the mother really going to save more then $5-6K? If not wouldn't it be easier to open up an IRA with automatic monthly deposit? I guess if she is planning on putting lots more then that it still might be easier to open a SEP or Simple for just her.

At least with DC plans I don't think I have ever seen them ask for proof the SAR or SPD was sent other then to ask what is the procedure and a copy of them. Once again at least with DC plan there isn't a rule that says you have to mail it via certified mail or some such thing. So how can they demand such proof? Maybe there is a rule for some of the DB funding notices and such. But I have a benefit in a frozen DB plan and none of my notices are sent to me any way other then regular mail. My point I find they don't ask that many detailed questions for ESOPs and back when I did 4k plans regarding this topic.

Sorry towards the end I used "her" when I should have used "his" it is edited to fix that. If I am correct they are a Controlled Group then she can be part of the plan as she is effectively an employee of his company for plan purposes. So if she did his books before 2017 she should have been part of the testing for all those year regardless if she adopted the plan or not. But to me are they a Controlled Group is the most important question here. It determines if this is a single employer plan if she adopts or a multiple employer plan for example. For the record I am ignoring the question if she is a legit contractor vs employee that is someone else problem.

Double check the document. I would say most of the documents we have around here tell use what happens if the beneficiary dies before the participant dies. They are pretty clear that part of the beneficiary election is void and you go to a contingent beneficiary lacking that it is as if the person died without an election.

If he child is over 21 and assuming he owns 100% of the business then isn't any business the mother owns in his controlled group and via versa? I am happy to be told I am wrong as I as a rule don't like doing controlled group rules from memory but I thought a parent and an age 21 child who is a majority owner of business was subject to the family attribution rules. So she is allowed in his plan but I think she is an HCE and even if they don't put his in the plan she has to be factored into the whole thing due to family attribution.

As pointed it sounds like the loan can be rolled over to the IRA so all the plan needs is to get the over payment back. So if you can get the guy to write a check for the $12,842 (ignoring earnings at this point) from his own bank account (not the IRA) the plan would be good. You could then file a corrected 1099-R for the amount that was taxable. By the way you need to review your procedures if no taxes were withheld on the cash payment to this person. One of the 4k people can confirm this or not but doesn't the withholding not only have to be on the $25k that was paid in cash but also the $12k related to the taxable loan amount? So not only was the wrong amount paid in this case but required taxes weren't withheld on 1 or 2 parts of this payment. It sounds like your firms has some serious systematic issues on how people get paid.

I have seen firms like this (including accounting firms and doctors offices) have two plans to allow two different sets of people to work on the plans. In those cases the regular employee plan is worked on with HR based people that can see the employee's compensation. The partner plan is worked on by a very small and select group of people and the outside TPA who are the only people who get to see the partner's compensation. In short the partners were willing to pay money to make sure their compensation wasn't common knowledge even within HR. It has been a very long time since I worked on a law firm's plans but I seem to recall the exact legal form of ownership can matter at times.

What CuseFan is saying what I have always heard from the attorney's I know. Your decisions don't have to always be right. You just have to document they were reasonable at the time. So if you have a good investment policy and stick to it I would suspect it will be hard to lose one of these cases.

One of the things you might want to do is look to see how the funds you were invested in did compared to a relevant index or if they are a common fund vs published ROR. Just see if there are a bunch of years were there seems to be a large gap between the ROR of the fund and the benchmark. This isn't conclusive but if your ROR and the benchmark are close then it might point to the idea it was fund choice or investment strategy. If there benchmark and your fund seem to have a large gap it might be fee related. You need more data then you seem to have at this point.

Please try and come up with clear questions. I understand you are frustrated but the professionals here can't give you guidance until we have some clear background information (no need for company names but the nature of how you understand the plan) and then an actual question. (As an aside most of them only check in during the work week.)

Don't you have to keep it segregated for the J&S rules? In non-government MPPs if you merged it into a 4k plan you would have to offer J&S on the MPP money. An MPP is a type of pension plan that is covered by the J&S rules. Since this is a merge those are protected benefits. I am with CuseFan you always track the types of money separate. If it never comes up it doesn't take much effort to do so. If you need to separate the money out after of years not tracking them separate that is a near impossible task.

My understanding is there were several planets that were viable when you had totality.

I have seen that and that is why I suggested talking to management first then going to the DOL. I have also seen a lazy/overworked employer what just doesn't bother depositing the money. To be clear to the OP the correction in any of those cases is the same. Restore the account with lost earnings. All of these issues are still pretty serious as people count on their employer to put the money in the correct place timely. Even those fairly innocent explanations represent a break down in someone's process and systems.

it was odd seeing totality. Like they said the bugs started chirping. The lights with electric eyes came on. But yes it take very little of the sun to keep things bright. It wasn't until things were covered that it got anything like dark.

I remember when the company I worked for years ago started its daily group. A co-worker of mine became the team lead of the daily group and I became the team lead of the balance forward group. He told me I was the team lead of yesterday's technology and it was a matter of time before I got laid off. Fast forward a few years and the company decided the liabilities of a daily group was too high and they shut that group down. It was him not me that brought up that comment and we had a good laugh at lunch on his last day there. I did get laid off eventually but it was a fair number of years later. So he was right in a sense. I don't know if I could ever really do daily work day in and day out so it is a good thing I like ESOPs. But I am also feeling my age with these kinds of questions.

Have fun and keep those eyes safe. I live in an area in the path of totality so I am geeking out today. My son says we need to watch the Avatar the Last Airbender episode where they attack the Fire Nation during the total solar eclipse to honor the day as true geeks.

Related: I have a plan that says you have to work 6 consecutive months. You then enter the following 1/1 or 7/1. The person is at least 18 which is also required. 1st DOH is: 9/2/2015 1st DOT is: 10/2/2015 2nd DOH is: 5/9/2016 I am thinking because of the service spanning rules this person would enter 7/1/2016. Am I getting myself tied in knots and not thinking it through correctly? It makes a difference as this plan uses compensation from date of hire. Please give some thoughts. Thanks

And at risk of pointing out the obvious or repeating myself and others a full correction includes lost earnings.

He can talk to them and confirm his suspicions is a good first step in my mind. If confirmed he can ask if and when they are going to solve the problem. Obviously, he might want to stop deferring if it isn't going to the plan but it will make his bank account. If he wants to drop the hammer on the company this is one of the DOL's hot button issues. They will beat the company up pretty hard for doing this. Of course if the company is having cash flow problems sending in a bunch of DOL auditors is going to cost the company money they don't have which might feel good but not really help. But what they are doing is obviously wrong and the DOL's position is this is a Prohibited Transaction as it is a loan from the plan to the company. It opens them to having to put the money into the plan with lost earnings and pay excise taxes as a punishment. The DOL's postion is you have mere days to deposit the money and anything longer then that is a problem. This came out of a few high profile cases in the '90s where people lost most of their 401(k) money because it was never deposited but it was showing up on their statements. He can hire an attorney but the DOL is cheaper but slower. To me stopping or at least not deferring more then it takes to get a full match (if any) seems like a good first step. There are plenty of cases where if the company goes bankrupt the money is never recovered. If it isn't in the 401(k) trust it is just a general liability of the company making recovery in BK hard. If it is in the 401(k) trust then the company creditors can't touch the money.