ESOP Guy

I would add on the Form 5500 search if you put in part of the name you will get more results and then you can thin from there. Example: You are looking for Dover Manufacturing, Inc. but they have been filing as Dover Manufacturing. If you put the first part in you might not get a hit. If you simply put Dover in you will get every company the first word in the name is Dover in the name. So one of them ought to be Dover Manufacturing.

It MIGHT pass coverage if you test all the Otherwise Excludedables as a separate group and just about all the excluded people don't ever stay a year. Restaurants have terrible turnover so it is possible if you test the people in those two groups.. But if the demographics change on you there better be a plan for a coverage/discrimination failure.

Unless the amendment says something about rehires-- which it should in my mind. I would go with 100% vested. To me this is a risk/cost thing. How much is it really going to cost the company to vest this person upon rehire vs getting called out on it? Here is the thing it is done often for practical reason but I believe you could amend a plan to say all funds in a persons account as of a given date is vested on sch #1. All funds earned after that date are on Sch #2. The rules only talk about not taking YOS away not how the YOS are applied to any given sch. So if the amendment was drafted to say rehires after this date new money is on sch #2 could be defended. It is the fact the amendment appears to be silent that you are stuck. The real moral of this story is spend more time drafting your amendments to think of this kind of fact patterns.

Correct I know of no exception based on balance size.

Doesn't this part of the procedure answer your question? In order to remove the hold, the Administrator should request the Participant to provide written confirmation that a court will not issue a QDRO with respect to the account; such as a property settlement agreement awarding the entire account to the Participant. It just says you need the participant to respond and it needs to be written. Not both it doesn't need to be notarized.....

The document shouldn't be vague on this. If it is a C corp it has to allow the person to ask for stock UNLESS the corporate charter restricts ownership of the stock to the ESOP or employees. The plan provision ought to say something about the charter. In fact if you have the document in pdf or Word form you ought to be able to search on the word "charter" and find the provision. But if it is a force out is the person asking for a stock distribution? It seems like most ESOP documents allow the plan administrator discretion unless the participant demands stock. Are you saying this plan forces people out and NEVER sends distribution form if their balance is <$5k? I have seen plans that do that with <$200 balances but even back when I worked 4k/PSP plans I don't think I have ever seen a plan that doesn't at least send forms and give you a chance to rollover without withholding. If they are sending no forms I am less sure what to say. Are the people informed of the right to demand stock in the SPD? How does one demand if never given forms? If this is what you are saying I see your problem and I am not giving great answers.

You might want to simply read the most recent copy of the SPD and other notices. If the plan is frozen they should clearly say that. It is possible you just don't remember getting the notices. Before you lawyer up try and decide which is the case. If you don't have a copy of the SPD or it isn't online with other benefits information you might have access to as a plan participant ask for one. Asking for an SPD isn't as hostile as other actions. There can be a time for a lawyer and asking for specific notices and so forth but not sure that ought to be the first move.

As I stated above it is my understanding you are correct. I just have never seen it done in all the decades I have worked in this field. Maybe it is because not withholding is rare so I have never seen a fact set where taxes weren't withheld and the IRS didn't collect. I think you state a risk just not a very high one.

It has always been my understanding that ESOPs with less then 100 participants could count on the audit exception rule without the extra fidelity bonding if all it has was ER stock. The employer stock is a qualifying asset.

Back to read the regulations or plan as it is very important here. What they say is the first dollars distributed to someone in the year they are due an RMD for that year IS THE RMD. So not only don't you have to wait to pay the RMD but if you pay him any kind of distribution in 2017 the RMD has to be paid first then the rest of the distribution is paid.

As a practical matter if you do nothing to correct it I have never seen anyone get in trouble. What the IRS wants is their money in the end. If the person reports the income and pays the tax come next April 15th the IRS is good. I realize that is not the "right" answer in the sense of how to correct but over the decades I have seen this happen and nothing is done about it and it has never bitten anyone. My guess is KCbrim's answer is the "right" answer. If I recall the risk is if the person for some reason doesn't pay the taxes due on the distribution I believe the IRS can come back to the person/company/plan who should have withheld the taxes and get them to pay the withholding. Since people who get 1099-Rs report the income and pay whatever is due per the 1040 the risk is small in my mind.

Back in my 4k days I always would have treated that as a 2016 contribution so the 4k plan and the W-2s match. To me an accrued 2015 contribution is more like a match of PS cont that is allocated as of 12/31/2015 but paid in 2016 I would add we would have always put that on the 2016 ADP test also. . When it came to 4k deferrals we always matched how the employees W-2 would have looked like. I would add if you make that a 2015 contribution do you make the comp it was deferred from 2015 also? Even though it is clear the W-2 would make it 2016 comp? How do you make the comp/def year for ADP or 415 testing work if 4k def is in 2015 and comp is in 2016? That is why we always made the W-2 and 4k def match in terms of year.

Another version of this that I never had to show my work to the DOL or IRS but how I computed a large group of people's lost earns was I put $100 in the DOL calculator. It came back with a result. For example, $117.29 was the result I got. I took any given person's late deferral times by 1.11729 in a spreadsheet. I checked my work on a few people via the DOL calculator and got within a penny for results. We used those results to compute the deposit and the excise tax due. Once you know the compounded interest rate factor if everyone has the same situation it ought to work. I haven't worked on 4k plans now for 5 years and like I said I never had to show my work to a DOL auditor or IRS auditor as they never asked but I don't see how that math doesn't work every time.

By the way, if the person doesn't want to read the regulations quoted above they could read and read again the plan document. The RMD section of the document is pretty much the RMD regulations repeated, but they should be clear also that there is an RMD due in 2017 also.

it would help if the government was forced to accrual accounting. That would help measure the long term costs. It would also get rid of SOME of the accounting games. The mandatory 20% withholding on distributions is a classic example. it was my understanding that law was passed to make a budget back in the day "work". It did this because it meant some part of the taxes on retirement distributions got paid in the current year instead of the following tax season. But in the aggregate all it did was move future revenue into the current year. It never increased total revenue. It also was a one time "fix" as after then the move from the next year was offset by the loss of the previously moved revenue. A business working on GAAP accounting could never goose its income statement one time by increasing its pre-paid revenue.

Observations on the double taxation of the interest: Someone is going to pay taxes on the interest. It can either be you or a bank you borrow the funds from. I would add too many people let the tax tail wag the dog. You are still better off after double taxation paying it to yourself than the bank as long as the double tax rate is less then 100%. Simple example: You are going to pay $100 in interest on a loan regardless of the source of the loan. If you pay it to a bank you have $100 leaving your net worth. If you pay the 100 to yourself and your effective rate of taxes because of double taxation is a whopping 80%. That means you will pay $80 to Uncle Sam and have $20 still as part of your net worth. Which one are you better off with? I am ignoring opportunity costs of what your 4k funds could have earned if they are stayed in the 4k plan. I think that can be real but it isn't a tax question. If you are looking at taxes and only taxes a 4k loan isn't a bad deal. These loans can be a bad deal but it is the other reasons people talk about. Too many people get the tax issue wrong on these loans wrong.

I think I put one in this thread all ready I showed that the total taxable income of taking a 4k loan and not taking a 4k loan is the same assuming no interest is paid. If the taxable income is the same with and without taking a loan there can't be double taxation. I know there are other threads on this board over the years were people have put spreadsheet as attachments showing the same.

I thought about the Microsoft case and I think you people might be blowing by the differences too fact. If I recall the case BOTH the sponsor and PA took the position the person was an IC. A court disagreed and made the plan cover them. So people started writing plans saying if a person IS TREATED AS AN IC and later ruled to not be an IC they are still excluded. But if the PA refuses to make a distribution it is because the PA is refusing to treat the person as an IC. So how can the PA say this person was never an IC for distribution purposes but a misclassified IC for contribution purposes? There is no after the fact change in classification like in the court case. I am willing to be convinced but at this point that seems like a material fact people are ignoring. The never was a mistaken misclassifications by the PA as an IC so it can't be changed after the fact.

Let's be clear this was NEVER a late deposit subject to the late deposit rules. The rules are clear the money has to be segregated from the employer's assets in a timely manner. These rules are silent on HOW FAST THE MONEY IS INVESTED. So this was never subject to a filing of a Form 5330 as there was no loan between the plan and the sponsor which is the PT at the heart of the deposit timing rules. Now there is a fiduciary duty to investment the funds timely and it sounds like that may have been violated and corrected.

Wow this can raise all kinds of secondary issues quickly if correct. So if the plan admin decides this person is still an employee and refuses to pay them it seems like in order to be consistent they would have to count the hours worked for vesting. This person might be elig for a contribution (which the sponsor might not want to fund- what happens if it is a SH plan and the sponsor doesn't send the funds??) If jpod is correct the words going through my head is stay out of the 3(16) business.

I know that no one from the employer and TPA can give tax advice but the employer might want to encourage this guy to talk to a tax person. So he is giving up a about $5k in current deductions. He is getting a basis in his IRA instead. For whatever current savings he is giving up how much in ER money? I am having a hard time seeing how he thinks he will come out ahead by giving up free money. This is one of those examples you can't help but suspect the person is allowing the universal dislike of paying taxes to make a bad choice. It is the tax tail wagging the dog metaphorically speaking.

And if the buyer didn't agree to pick up the cost of the contribution, the seller could still do it after the termination of the plan and the sale of the assets. An asset sale means the seller as a corporation still exists. It might be winding down but part of that process is paying the remaining bills. In this case one of the remaining bills is the SH contribution.

Do I need to go to the other board until called up from the minor leagues by Benefitslink?

Would it be cheaper and easier to just amend the plan to allow those few terms to get the contribution? I am assuming you are still early enough in the termination process there are still people who need to be paid benefits so creating account balances or increasing account balances isn't going to create a new round of distributions. My guess the reason you can't find any guidance on it is because most people's reactions was like mine when I read just the "headline" of your question- you can't have an over-funded MPP. I guess someone found a way.

Some other links that talk about it that are more current. I don't think it changed.