ESOP Guy

There are plenty of solid, low cost mutual funds that will set up an IRA for $1,000. I would add this program only offered one terrible invest. You could invest US Treas that paid a little over 2%. The cost for one investment option that is the government's own bonds should have been much lower then the numbers we are seeing.

This reconciling note in the auditor's report can be used for any difference. It is under used in my mind. While most of my 5500s and the auditor's reports agree there is no rule that says they have to agree. The auditor merely has to put a reconciling note in their report detailing what and why the difference. I see them 1 or 2 times a year.

If you decide I have it wrong because of the nature of the trust let me know. I dislike trusts for payments as they make things too complex. And I for one agree RMD rules are too complex. For one thing it is taking a sledge hammer to kill a gnat. I get the government didn't' want large balances to be taxed at some point but they have made a set of rules that effect all balance sizes that are some of the easiest to get wrong.

I thought the 9/30 deadline is when certain decisions had to be made by not the split.

So a trust is being paid? If so, I believe it is the participants single life divisor in 2016 minus 1. That is the rule for a non-person being paid. I believe you use the oldest beneficiary's age only when the beneficiaries are going to be paid directly (including them doing a rollover) AND the account has not been split by the 12/31 the year following death. It is important in this case the first payment isn't to a non-person like the trust.

The times I have Googled a retirement question it is amazing how many times a thread on this board is the top result!

I am with TPAJake on this one. The union bargained for the benefits provided with the union plan but there was no bargaining with regards to the plan being set up. I would get a lawyer to opine if that is a problem.

I am still not sure your reading of the code is solid as you say. I used the word day here is the exact language from the code: the outstanding balance of loans from the plan on the date on which such loan was made, or Clearly the IRS reads that as meaning before the new loan is issued. It would be interesting to know if the example (or something like it) is in the regulations. (I don't care enough to check as I think Juan is wasting his time this stuff was put out over a decade ago and is about as settled law in the pension world as settled law can be). But if it is my experience as a tax CPA over the decades is unless you can show the IRS' interpretation of the law in regulations is simply contrary to the written law the courts give a lot of deference to the IRS. Maybe this kind of stuff even ties into the recent discussion of the Chevron Doctrine that has come up for debate recently in SCOTUS news. In the end maybe you are right Juan the IRS' postilion is too extreme or doesn't make sense. But I have worked in this field since the very early '90s and before these rules the abuse of loans was rampant and these rules ended most of that. Yes, I understand good intentions aren't law but it is simply true. Back in the day I used to work on a balance forward 401(k) plan for a small employer (back then all small employer 401(k) plans were balance forward). Two weeks after I issued the certificates to the employees the same two brothers would come in asking to refi their loan. They would take the loan up to 50% of their new balance (the plan had a PS contribution every year). They would move the final payment day back out to 5 years from the date of request. It was clear they intended to retire with 50% of their retirement money in the form of a loan to themselves. That for better or worse was seen as public policy to give tax deferred benefits to. In my mind they were adults and they want to spend their retirement money now and eat dog food later so be it. But my guess is those guys now are retired and my taxes are paying for them to live as they are in poverty as they clearly couldn't save. Off my soap box for now.

Getting way off topic but.... I to this day think the late '60s to the late '70s was the golden age of album cover art. To this day one of my favorite one is Rush's Moving Pictures album cover. It has a triple entendre: On the front cover you see the members of Rush carrying art work into a museum looking building. They are moving pictures. On the back cover the band is watching a movie. The old fashion term of that was "moving pictures". On the side of the album cover the band can be seen crying while seeing the pictures. Thus, the pictures are emotionally moving pictures.

Just remember the union exclusion rule does NOT say you can exclude a union member but you can exclude a union member if their benefits have been subject to good faith bargaining. People tend to short hand the rule by saying you can exclude union employee. And 99.99% of the time that works as the union will have done the good faith bargaining. However, has there been good faith bargaining regarding those ad hoc employees not being covered? I am not saying there is an issue as much as I am asking if this is an issue that needs to be looked into?

I would add some rock historians claim Disco Demolition was the first event that marked the start of the death of disco in the US.

I lived in Chicago back when Disco Demolition happened and that still doesn't do what happened justice. Watch some of the Youtube videos of it After the DJ blowup and set the disco albums on fire a full fledged riot between pro and anti-disco fans broke out. The game was called and if I recall correctly it this was the first of a double header the the White Sox had to forfeit both games.

I would add if you look at the example Mike P links to one of the quirks of these rules is you are often times better off taking a 2nd loan (if the plan allows) then repaying the 1st loan. In that example the person with an $80k balance and an $18k loan balance could take ANOTHER $22k taking him to the $40k limit. (IRS seems to ignore the 12 month look back part of the rule in the example.) If the person in the example pays the $18k he can take a $23k loan. But that nets him an only an additional $5k and his total loan balance is the $23k. Everyone I know seems to acknowledge this is an odd quirk but also how the rules work.

The problem isn't his cite it is his math or maybe his understanding of the words in the Code. When you write this you are wrong: 50,000- (49,000-49,000)=50,000 The amount of current outstanding loan the moment before the new loan (and moment is a better word to understand what the IRS is means when the say day) is $0 So the math goes like this: 50,000-(49,000-0)=1,000. Look at the IRS example in the link provided by Mike P. If you don't like how the IRS is using the words " the outstanding balance of loans from the plan on the date on which such loan was made, " take them to court and good luck. But what they have consistently said in examples, regulations and so forth is the balance the moment before the new loan is issued is what those words mean. .

Is the term "Bozo No No" found in the regulations?

As for corrections if they don't want to make everyone whole they could file a VCP and try for a retro-amendment. Since the retro-amendment would only mean the HCE stay at the lower benefit level the IRS MIGHT bless it. An experienced ERISA attorney could give better insight on those odds.

Before you go too far down the path this is an operational failure double check the plan doesn't allow some place for everyone to be in their own group. That is this plan's best hope is that provision is hiding in the document some place.

I do think the sentence would read better if it started this way: Under this method, the employer takes reasonable steps to have the Overpayment corrected,

I believe you are looking in the wrong part of the notice. https://www.irs.gov/pub/irs-drop/rp-16-51.pdf On this pdf see page 31 for small overpayments (limit $100) so not your issue but I thought I would point it out. Then see page 37 for corrections overpayment DC and 403(b) plans.

Or the distribution fees which is a place I think one could really complain about. I have seen $100 distribution fees in 401(k) plans charged to the participant. That seems easier and cheaper to get then some loan processing fee on terms.

Ac Actually I thought employers put these plans in place as part of an overall compensation program for their employees. It make little sense to send money on a former employee instead of the current employees. Nice hypothetical, sob story that doesn't represent anything close to a large minority of 401(k) loans much less a majority.

Why isn't the plan's job to get the withholding back? Depending on how the withholding was done it is possible to make a smaller deposit on a later need and make all the forms reconcile. In other cases you might have to get a refund. But so far it looks like the participant did their part for the correction. I wouldn't have made the participant pay back the withholding in case that isn't obvious.

It crossed my mind as being true as I used to be an IRS and this smelled bad. But I am not sure there is anything one can do about it now.

This law firm raises the issue if a state court can't enforce the loan is the loan adequately secured? If not, do you have a technical PT and operational failure. If that happens then it would be a serious repercussion. http://benefitsbryancave.com/florida-stamp-tax/

Was the purchase of the father's business an asset purchase or a stock purchase? Does that make a difference in terms of counting his service as an independent contractor?