ESOP Guy

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.

Balance forward method of recordkeeping is what all plans were before computers got to the point you could do daily recordkeeping. Typically balance forward is done with pooled investments. That is to say everyone is in the same investments or pools of investments. So everyone in the stock fund is in the same stock fund. Unlike daily where we can tell you how many shares or units of the fund you have this is just a large pool and none of the investments has anyone's "name" attached to is. So when it come time to allocate earnings you have to come up with a method. To use a simple example assume no new money comes into or goes out the plan during the year except earnings. Someone whose account that represented 2% of the pooled account's value would get 2% of the earnings. In the real world there is money coming in and going out. So you have to make assumptions/rules on how you handle those. Typical was Beg Bal - dist - forf + (50% of 4k def during the period) It was always great if these was defined in the plan document but it wasn't always there. So you would use that formula for on each person's balance as the numerator and the sum of everyone's numerators is the denominator. That got you the ratio of any given person's share of the earnings. That is the short balance forward history lesson. I have never worked anything but balanced forward back when I did PSP and 4k work. Now that I work ESOPs they pretty much are all balance forward for the cash investments. Hope that answered your question.

A few observations as we are getting way off topic. I do appreciate MoJo's view and classic views about who should practice law. There is however the theory and practice. With both the law and medicine the licensing requirements are in a large part a protection of the public and in part (only part) a legalized barrier to competition that has created two of the highest paid professions in this country. On top of that because we have a near irrational public policy of subsidizing higher education many of us lower paid taxpayers get to have a good chuck of our tax dollars subsiding those who choose to enter those professions ability to do so. This is via public universities using tax dollars and the various student financial aid. it is true this is has some truth to my profession as a CPA but the only thing we really can do a non-CPA can do that is big dollars is auditing. I have to compete again non-CPA tax prep, bookkeepers, consultants.... So I might be open to a charge of double standard. But law and medicine pretty much you have to join the "priesthood" to practice. And while their compensation has to do with skill, risk and compensation for spending years in school instead of earnings money during their 20's... some of it is simply a legal barrier to competition premium. This even becomes worse when for example I have had to hire a lawyer for a house closing (back in the '80s at least in the Chicago area everyone has a lawyer for a simple home purchase for some reason. I was 23 so I did what all the other adults were doing.) And that lawyer just sent a paralegal to the closing who barely looked at the forms. All the forms were standardize forms and it seemed like the Title Company who ran the closing did most of the work and I had to pay them a closing fee for that service. It screamed out for the creation of something like a license for a residential paralegal that allowed the paralegal to compete with her boss. My guess is back then she was making <$20/hour and I was being billed close to $350 for that hour of work. In that case I think the barrier to competition premium was very high. There are just times when I use a lawyer I feel like I am paying for that service twice. Once to help them get the education to become a lawyer and then again when they use that knowledge on my behalf.

Isn't this the same question in a different thread?

Not the correct fix. My experience is a VCP will most likely go your way since you can show it was a mistake but in the IRS' mind a VCP is the only fix. Anything else and you risk the IRS disqualifying the plan

I am happy to be told I am wrong. A couple observations: 1) In a sense you have to tend it because the HCE average can't exceed the NHCE average. 2) I have never seen a points based plan that doesn't include serviced and comp But reading it again it does seem to say you can skip the points based on comp. So maybe I am wrong.

No

I have seen QDROs that have taken months from start to finish to get approved by a everyone and the court. The lawyers are as a profession they aren't focused on the address but the terms of the QDRO. So the AP has moved out of the family house as noted above. They might have started by moving to a relative's or the first apt they can find. In the time since then they have moved to where they are going to be going forward. So I have seen the QDRO have the wrong address for the AP. Some times the law doesn't care and maybe this is one of those times. And yes I would think when you got the QDRO vs the last address update would be an important factor.

Getting completely off topic now. But my first job out of college was working for the IRS. I co-worker caught a guy with fake travel and entertaining deductions one time. What did the guy in was when my co-worker noticed all the "receipts" from the primary restaurant he took clients to eat at were in perfect sequential order. The guy finally admitted that he got a receipt book (it was the '80s so most tabs were still hand written on a paper form) from the restaurant. He was just using different pens and had different family members list out the order and he had the right costs. He thought of everything but the fact they were numbered. It doesn't matter when doing this kind of stuff you can think of 100s of things to get correct but it only take missing one to get caught. The odds aren't in your favor.

I guess you will just have to have the client sign a bunch of blank amendments and fill in the contents later. The first TPA firm I worked for in the early '90s he did a version of this all the time. People would come to him late in December wanting to set up a plan for a tax deduction as they realize they had made good money. Their CPA had told them the plan had to be in place by 12/31. There were time when they would call him on 12/30 or 12/31. He would fax them the signature page of the prototype plan and tell them to sign and date it as soon as they got it. He would meet them some in in January to complete the rest of the prototype plan provisions. As RatherBeGolfing says were there is a will....

I have worked in this industry in some form since the early '90s. In all the TPAs and one bank the primary way it was there was one person who did almost all the work. At the bank there was a relationship manager. In most of the TPA there was some kind of business development function. But as a rule I was the face of the firm to the client. My guess it has been that way because of self selection. I interviewed one at a firm that all functions were specialized and I was going to be the manager of the distribution group. I did not care for the idea I would not be working on all phases of the plan. The one observation I will make and maybe others can comment on this also. The places I know that have a distribution group, contribution group, testing group...... the one thing they had in common was they offered a very narrow set of plan documents. This was how they kept their costs down. They might have an A, B and C document. If you were in the distribution group you could look up the client and see which of the documents they had. If it was an A document the distribution rules were set and there was a flow chart explaining how they worked. By doing this you didn't have to get people with college degrees to do a lot of the work. So the pay was lower for many of the people. For the distribution group I interviewed to be the manager of the group I was going to be the only 4 year degree person in the group. You didn't need a bunch of accounting majors to do follow one of 3 flow charts all day. I have always worked in the TPA firms that sold themselves as we were willing to give the client pretty much what they wanted if we could agree on a price. So that takes someone who can read plan documents, who can listen to a client and hear when they are saying the participant statements needed to be changed, or they need the firms website to do something new.... I need to be as much a problem solver as a processor. Both models have their strengths. The limited options and highly specialized model can get work done at a low cost my current employer will never be able to match. On the other hand if you want to customize your ESOP benefit program as part of your overall benefit structure the firm I work for now is easily a top tier firm to be working with on that project. (I will stop selling the company I work for now.)