ESOP Guy

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.

I am assuming this question is related to your other questions about loans and plan mergers. Not sure if this helps or not but if the new company simply doesn't want to offer new loans I believe you can amend their plan to allow the existing loans into the plan and nothing else about loans changes. So it can be drafted such that no new loans are offered, you can't refinance the merged loans and so forth. The existing group of loans are simply grandfathered into the new plan. Once this set of loans is gone there are no more loans. Would that make the new company more open to allowing this set of loans into the new plan? I am just trying to figure out why so much resistance to allowing this group of loans into the new company's plan I guess.

I would go back and double check the promissory notes also. Back when I worked 401(k) and ESOPs some of the 401(k) TPAs I worked for wrote the promissory note such that if the note was not paid back via payroll deduction the note was immediately due. It was not a plan term that was an issue. However, a promissory note is a contract and to pay the note any way other then via payroll deduction was a breach of contract. (edits to fix a few unclear sentences)

It's gotta be good! Either that or none of the people writing on this board qualifies as a "leading benefits attorneys and advisors". My ego is crushed.

I did miss the part about the involuntary job loss. I guess I didn't read well. Although I seem to have gotten stuff in the mail that would pay my credit cards off in case of job loss as well as death and disability over the years.

Just a guess but since it only covers death and disability it sounds like so form of life/disability insurance product. My guess (once again) is the benefit level is set so you are made whole after the loan default but I guess if it pays fast enough it would allow you to pay the loan back before default. Yes because what this world needs is more credit life and disability plans!!!

Investment choices are a benefits/rights/feature that must be offered in a nondiscriminatory manner. it is all part of the 401(a)(4) rules. https://www.law.cornell.edu/cfr/text/26/1.401%28a%29%284%29-4 (Edit I had said the rules were 401(a)(1) I quote the 401(a)(4) rules which are the BRF rules)

Let me be more precise. What isn't it wages for a hour(s) worked? Once again you actually have to show up and work your first day to collect a signing bonus. I have never seen a signing bonus that is paid if the guy shows up and says, "I am here were do I sign for my bonus-- oh thanks for letting me sign I quit mail me my check!" You have to actually perform some labor in order to get that bonus. In all the years I have worked in this field this is the first time I think I have had anyone try and make the case this isn't just simple wages. I have never seen someone try and make the case this group is trying to make that you can exclude it as a fringe benefit. To me it is W-2 wages if your plan uses any of the safe harbor definitions of compensation it has to be included.

Why isn't this just compensation? Despite the name you really aren't getting paid to sign on but to show up and work the first day. So why isn't this just compensation for worked performed?

I am not an expert on DFVCs but it is my understanding that yes it is too late. Once you have the letter saying the amount of the fine you can't use DFVC. But I am willing to be told I am wrong on that. On the other hand if it is determined that it is too late to use DFVC I would ask for a waiver of the penalty. Over the decades I have had good results doing that. If you can show there isn't a pattern of missed forms and give a good reason for why this form was missed I have had the penalty waived every time. I really think I am batting 1000 on getting the penalty waived. I will admit I have never tried it with a form filed this long after the deadline. But to me it will cost the client maybe a few hundred to pay you to write a good letter and it could save them $8800 is a good cost/benefit/risk ratio.

I don't understand why you would pay out more money. As you say the correct amount has been paid out. Aren't there really two problems here: 1) The 1099-R was wrong in terms of how much it said was taxable. So isn't the solution to that to file a corrected 1099-R? The person would need to file an amended 1040 to get back the excess taxes paid. (If the 1099-R was issued to long ago that they can't amend I am not sure I wouldn't let a sleeping dog lie as they say) 2) The amount of basis on the recordkeeping system needs to be changed to reflect the amount of the correct after-tax basis that should have been paid. I guess if the after-tax money is in a separate daily account you might need to do a transfer to get things in the right place. I would have to think about that more. Once again I can't for the life of me see why you would send more money from the plan. That seems to make the mistake worse as you now have paid more money that was needed to pay the distributions. That really seems like you would be going in the wrong direction.

Has the 1099-R been issued?

Back to the original question. I can not cite anything for this answer but here is what I would do in most cases. I would compute the amount the people would receive as you state pro rata based on the final balance payments. If it is cost effective to issue forms and so forth do so and make the payments. I simply wouldn't file a new Form 5500. The 5500 rules just don't seem to contemplate this kind of fact set. I think the risk of the lack of a form 5500 coming back to bit the plan administrator is small enough to risk. Obviously, it is a risk and each has to decide what risk they are willing to take but I have helped clients do what I described above before as a TPA.

Just double checked the instructions http://www.dol.gov/ebsa/pdf/2014-5500inst.pdf Top of page 44 tells you things to include 3. Other liabilities such as acquisition indebtedness and any other amount owed by the plan

We always put it on the Sch H and I. I am curious what is leading you to believe it should be "no"?

In almost 25 years of working in the DC field I have seen this letter lead to one person finding a benefit they forgot about. It was a DB plan benefit for a company that he had worked for in his 30's.

While maybe in theory you can defend the idea the employer gets to choose every year as a practical matter I don't think you should do it. I have heard short discussions about how much flexability the rather loose ESOP rules give you regarding changes to distribution methods at various ESOP related conferences. The general consensus seems to be while you can change -- changing too often opens you up to too much risk of charges of discrimination and so forth. I would add in the now over 20 years I don't think I have ever seen the need to choose and change year to year. I guess you might have finally found that fact pattern but a well crafted distribution policy combined with a good repurchase study ought to allow you to find a method that should work for the plan sponsor. If you have want to give more details maybe you can get insights from this board on ways to meet the sponsor's goals. Lastly, you can go over 5 years on the installments if the balances are large enough. A rarely used part of the law but it is there.

While VCPs can be a little expensive I find that often times if you can show the intent was to allow Roth deferrals the VCP will allow the correction to be a retro amendment of the plan. You might want to talk to an ERISA attorney that has experience with VCPs. The client might be able to get what they want with IRS blessing.

You may know this but if the person is being paid in a tax treaty country and completes a W8-Ben the withholding rate would be well below 30% in many cases. I also believe the 30% rate only applies to non-US citizens being paid outside the US. If I recall correctly a US citizen outside the US would still be 20%. See page 24 https://www.irs.gov/pub/irs-pdf/p15a.pdf It guides you to more details.

Sorry I missed the ee vs er in your fact set.

I can't think of any way to get earnings on those funds. For one thing who would make up the lost earnings? Whose fault is it the funds weren't invested. It seem like the person who threw the check away is the responsible party and he is the one wanting the earnings made whole.

It doesn't sound like it would meet the definition of post severance comp in the regulations. Check the plan definition again. Most seem at some point talk about earned for service or not and so forth.

Something in the back of my mind (and I am willing to be told I am wrong) says that the law allows you to write a document that says non-5% owners are required to take an RMD before they terminate it is just no one actually writes a document like that.

I think you and your co-worker are mixing up terms and that is causing the difference needlessly. If the plan allows for in-service distributions then they can take an in-service distribution. It isn't an RMD. Even if the person were to say compute what my RMD would be if I had to take one and pay me that it is simply an in-service distribution and not an RMD. In short if the plan allows for an in-service distribution they can ask for a payment but it isn't an RMD by definition.

The thing i remember from A&W was being served in your car by a lady on roller skates. My family stole a complete set of A & W mugs from their tiny one to their largest one. They were made from real glass. I still have them on display for the police if they want to solve the cold case from the early '70s.