ESOP Guy

You might want to look into ASPA and their certifications. It might help to attend some of their conferences. You can meet vendors and future competitors. You can talk to people and get insights into which software you might want to use for this work.

In fact I am seeing more and more documents that say in these cases the old beneficiary form is not valid. Just had a situation recently where a guy died. He never changed his beneficiary form when he divorced his wife. The client was saying we need to pay a payment to her as she is the beneficiary on record. I pointed out to them their plan document is very clear upon divorce a beneficiary form to the former spouse is no longer valid. We had to treat the situation as if they had no form. In this care it turned out the plan pointed to the children which the ex-spouse had custody of them. They were minors so she had control of the money. She was fine with her kids getting the money and her watching over it until they were 18. I got the impression she never asked (or had any expectation) for the money the client simply looked to the form and was saying the ex-spouse is the beneficiary.

This is why every TPA firm I have worked for the standing orders were to not approve QDROs and hardship requests and so forth. The letters are very clear we were making a recommendation that the QDRO be approved as we believe it is a valid QDRO. We were recommending the hardship be approved as we believe the request meets the rules. But the letter was clear the administrator was doing the approving. I have no idea if that was enough to protect the firm I was working for or me as I have never been part of such a suit. On the other hand I doubt you are getting paid enough to take on the liability you are describing with no defense that you aren't a fiduciary.

You need to have your client talk this his ERISA attorney in my mind. Many of your questions should have been answered in a plan amendment. It sounds like your client didn't really think through the sale and what he wanted to do with the plan. Otherwise this questions would have been asked back when the sale was be thought about. However, if there is no other answers then I would say the last day language stands and people can't get an allocation because of it. Because of coverage and TH the owner might not be able to get allocations. I would have to think about it. In the end this is a lesson in the need for better planning. I know that might not help you much now as you might have not found out about the sale until after the year end and so forth.

As far as I am concerned you have it right there. You compute the earnings using the until values plus the fund might have paid a dividend around 12/31/2015. the goal should be to make this person so they are no better or worse off then if the mistake wasn't made. The best way to do that is make sure they have the exact number of units they would have had without the error.

It has been a while since I worked with plans with life insurance in it. But when I did I never saw a insurance company that issued the 1099-Rs for the PS58 costs. Not only did we as the TPA have to issue the 1099-Rs but we had to often times fight with the insurance company to get the PS58 costs from them. We worked on our clients to work on the agent who sold the plans to them to do the footwork on getting the PS58 cost with mixed results.

I know they aren't finals. I am just saying they have programmed their computers to look for one every year until you tell them it will stop.

To answer your question yes the IRS is being stupid. Or at least making a bad assumption. Here is what is going on as far as I can tell. Their computers are set up to expect a 945 every year. That is the bad assumption that once you start distributions you would have them every year. They are looking for non-filers. This is why it is so important to mark the final 945 as final or you will keep getting notices you failed to file. I had this happen once. We forgot to mark the 945 as final and no more would be sent. We kept getting notices until a few years after the 401(k) had been terminated and fully paid we filed a final 945 showing no withholding. It is all about how their computers are programmed as far as I can tell.

My 2 Cents I agree it is most likely the letter of the law when it comes to how to correct it. My first job out of college was with the IRS. I quickly learned there was letter of the law and there was realistic. Just to be clear I am not saying IRS agents should think of themselves as a law unto themselves but there were solutions back then I never proposed because they just weren't workable. My point was some times talking to someone with a little more experience allows for a little more flexibility in finding a solution that protects everyone.

We just had a client go through a rather painful VCP. One of the issues what the plan's failure to offer annuity payments as an option going back to the early 2000's. This agent's idea of a correction was to send letters to the all the effected people offering them a chance to pay back their benefits (once again some paid out over 10 years ago) and then they could request a distribution in the form of an annuity. Her boss quickly killed that idea.

I agree not a retire as you describe it.

This strikes me as the "devil is in the details" kind of question. Are the plans that are ending being truly merged or are they being terminated and the people have a choice to take the funds or put them in the new plan? If it is a merge (the employees have no choice their money is going to the new plan because the trustee/sponsor said so) then I would tend to agree such characteristics as ee vs er have to be preserved. (In a merger if there is a source of money that required spousal consent that would have to be preserved also.) If the plans are being terminated and the people have a choice to take the money run, put in an IRA or the other plan that would be a rollover source. There might be other factors that could influence this decision but that seems like the most important one. (Lou must have answered while I was typing and I didn't notice it)

What costs are required to be paid by the plan sponser and what cost are required to be paid by the ESOP? This is the good old settlor expenses vs plan expenses question. Here is a good start http://www.dol.gov/ebsa/regs/aos/settlor_guidance.html Another: http://benefitslink.com/articles/expenses001213.html

It would have to be a redemption of shares-- cash from the company. or A contribution from the company-- obviously cash from the company or A dividend from the company-- cash from the company So you are correct you rarely see in ESOP pay the expenses in you fact pattern because it will tend to always really be the company that pays. It is just how will the expense be "allocated".

jpod everyone understands the issue but the IRS and DOL seem to take the issue seriously. You have to pay the expenses by the rules. Although it should be pointed out that in total you are right. It doesn't make a difference. Every dollar spend at the corporate level would reduce the stock price a bit. It could make a difference in the by person breakdown however. How you allocate expenses per the document might not lead to the same account balances if you paid the expense via the company and the stock price went down. Where this comes up the most (or it is the most obvious) is when the company is sold and you are working through the issue of getting the final proceeds to the participants. Since the company is no longer functioning and bringing in revenue every dollar spent at the corporate level is one less dollar that goes to the stockholders. Which as you say if that is the ESOP and the stock is the ESOP's only assets they tend to be one and the same in total. Like I said it might not be the same on a by person split although.

Did anyone hear something? At times I think I hear austin3515 but then I realize it is Tom Poje!

If the ESOP does end up paying then "yes" these costs would need to be reported on the Form 5500. I would add there are some costs that the DOL says can only be paid by the plan sponsor although this doesn't sound like any of those types of costs.

Are you dealing with building trade unions by chance? The little I worked with them then tended to have provisions like you are describing because the union employee could work for contractor A for a week and then contractor B for a week. They all pay benefits into a Taft-Hartley plan. So they compute everything on a weekly basis and make the company pay that way to keep the accounting simple. You work the guy for a week you pay that week's wages and benefits. As K2retire said they weren't even thinking ERISA when the contract was being written.

Yes, we do it every time even though the person doing the audit (or at least the partner in charge) is the same in each year. The way we read the instructions at our firm says you have changed auditor since it the firm that signs the auditor's report not the person.

We have plenty of small ESOPs as clients that don't have audits done and rely on the small plan exception.

Even though the example is on a fixed dollar amount the whole passage ends with this: What does your plan say? Although not common, a plan can specifically require that salary deferrals cease once a participant’s compensation reaches the annual limit. If your plan specifies that salary deferrals be based on a participant’s first $250,000 compensation, then you must stop allowing Mary to make salary deferrals when her year-to-date compensation reaches $250,000, even though she hasn’t reached the annual $17,000 limit on salary deferrals, and must base the employer match on her actual deferrals To me that makes it clear that in their (IRS') mind your plan has to specify that deferrals be based on the participant's first $250,000 compensation to get the result the auditors are talking about. I am with Austin at this point enough evidence has been given to support the belief of the people on this board. It might not be enough for the people who are asking the question but that says more about them then the evidence.

We use Millennium Trust in Oakbrook, IL for all our force outs to IRAs.

In my situation the Plan doesn't allow Dollar Elections. Whole Percentage Elections only. I would ask the powers to be to change that in the plan if they are going to also use their compensation interpretation. That would be a cheap and easy amendment and 401(k) plans should have that kind of flexibility any way.

I agree the prime rate is now 3.5% so prime plus 1 is 4.5%. I also agree with Bird prime is NOT announced by the government but set by banks. In fact i have seen some documents and/or loan policies specifically say that the plan is using prime as published in the WSJ for any given week. http://www.bankrate.com/rates/interest-rates/prime-rate.aspx

WCC unless you just don't like changing net checks during the year why not solve this issue going forward by deferring say 7% or 8% of pay? (I didn't do the math but defer a % that allows you to get to at least the dollar max either way). I think the auditor's are wrong but some times being right isn't as important as getting the right solution. I get that this results the withholding not being even through the year as you will hit the 4012(g) limit during the year but it seems simpler then fighting with auditors.