ESOP Guy

Why can't you allow the employees into the plan? I mean they will accrue a benefit of 0% of compensation every year. I tend to be more troubled by the idea of a 0% MP plan. I know several ERISA attorneys who took the position you can't do that and so when the companies I knew wanted to keep the plan for various reasons but stop accruing meaningful benefits the plan was amended so the benefit rate was 0.5% of pay.

I am with QDRO I would start asking questions. Since it happened in Oct that might be an issue but I have never seen a situation where a loan default results in a check being issued. Something odd happened here is my opinion.

In fact assuming there was no balance in the IRA before the rollover there is no way to compute the RMD. Simple example: Person turns 70.5 in 2014. They take a distribution from a 401(k). The RMD is paid and on 7/1/2014 they put money into the IRA. Any 2014 RMD would be computed on the 12/31/2013. The balance as of 12/31/2013 would have been zero. Even if the IRA has a balance as of 12/31/2013 since the distribution wasn't added until 2014 the new money wouldn't be included in the computation. In that case there would be an RMD but like I said it would be based on the money in the IRA as of 12/31/2013.

I vote yes also. I also think this is one of those cases where the plan administrator is able to make a reasonable interpretation of the plan document in a non-discriminatory way.

I have had to hand IRS auditors copies from their own publications before. Odd thing is I used to work for the IRS and they actually do train their people on the law. So I have always been a bit baffled by having to do that. I guess there are that many rules that one can lose track of them,.

QDRO I am unsure what you think about this topic.

Bird the IRS is looking at the 8955-SSA a little more when the audit. I had an ESOP audited recently. They asked why they had people listed on the form 5500 as terminated with vested benefits and no form 8955-SSA filed. So they are thinking about it a little.

My experience is like MoJo's. I have had DOL auditors take the position that if you can get a tax withholding deposited in x number of days you can get the 401(k) deposited in x number of days. In one case for a large employer I believe they were required to transmit the tax withholding in 24 hours. The DOL auditor said 24 hours was the deadline for the 401(k) funds. I would add it is important to remember what is key here is DEPOSITED not allocated. While it might be a pain and require some fees you can comply with these rules by opening a checking account in the trust's name at the same bank as the corporate account and do a simple transfer from one account to another. If this company is large enough they might be able to get the bank to waive any fees on the extra account to keep an important client happy. You then transmit the 401(k) deferrals to where they need to go a few days later. But the legal requirement would be met the moment the cash hit the trust's bank account even if the money isn't allocated and it is a non-interest bearing account (but can only stay that way for a very short time but that is a fiduciary issue-- different rules) Short of it is you don't say how large is large (101 employees or 10,000?) but I doubt 7 will work and I would be careful going past the tax deposit deadline.

I will also tell you that the IRS is now sending out fine notices for late 8955-SSAs. So to file the 2013 late will cost. So while maybe not the 100% right answer i would think about taking the audit lottery and put it on the 2014 8955-SSA.

Does anyone really believe the government won't bailout the PBGC when the time comes? Back in the '80s everyone one of my finance prof said the same thing. Legally Freddie and Fanny were not guarantee by the government but their bonds sell like their is an implied government guarantee. The market was right and the lawyers who said there was no legal obligation were wrong. The government couldn't afford to allow the repercussions of Freddie and Fanny going under. The market saw the political reality. The simple fact is if the PBGC defaults you are going to have the news showing you pictures of retirees many of whom took pension cuts because the PBGC payment cap now being told they might get little or nothing more from the PBGC and congress will fold and vote the funds to pay those people. So if you were to ask me about the pension I have earned at a former employers: Which would you prefer PBGC protection or the idea Pru won't go insolvent I would pick PBGC every time. Don't get me wrong. Nothing I am saying here makes me believe these people have a case for court or if my former employer de-risked I would be up in arms over getting a Pru annuity. I think the odds of Pru going insolvent is very, very low. I just so happen to think that the PBGC in fact has a very rich sugar daddy that won't ever allow it to go insolvent.

Just to play devils advocate here: What if one month he had to pay a large medical bill because the HCE's spouse just had expensive cancer treatment and the next month the kid went off to college. If the savings had been drained for the medical expenses to the point they needed the hardship it seems reasonable there is no money for the kid's tuition. In short I think you need more facts to even start to go down that road. I can think of a number of valid reasons for a pattern you described. So to me the answer is "no it doesn't seem like abuse on the surface". And as noted above the idea of abusive hardships seems undefined.

I suppose that is one way to get your terminated people out of the plan in the long run. You have to take a lump sum when you turn 70.5. Seems extreme to me but that is just one guys take on the issue.

Are you asking if the only way to meet the RMD requirements is to pay out the whole balance because the plan only allows for a lump sum? If so, I doubt it. (But can't be 100% sure without looking at the document) Re-read the RMD section it almost certainly says you must pay out at least the RMD amount or says you must pay out the RMD amount. I have always read this to mean you can pay out just the RMD amount even if for a regular termination payment (after the person completes the forms) you are only allowed to pay a lump sum. Or put another way one section tells you what to if the person is terminated and over 70.5 and doesn't ask for a distribution you then pay the RMD amount and another section of the plan document tells you that the plan must pay a lump sum if they request a distribution after termination. I don't think I have ever seen a document that requires you to pay a person 100% of their balance in order to satisfy the RMD rules. But if the document really says you have to pay 100% of the person's balance to meet the RMD rules then you do have to follow the document. I am just thinking you might not be reading the document right. Once again if you think you are you might want to go to the people who wrote the document to make sure you are reading it right. If you are not asking the question I opened with then I am not sure what your question means.

I think you need to look harder to find the definition of the RBD. I don't think I have ever seen a document that doesn't have that defined. That is because there is a choice so the choice has to be recorded. If you have to go back to whoever provided the document and get them to interpret their document. But I just find it nearly impossible to accept the idea that the answer isn't in the document.

Your story reminds of a time many years ago I got a call from a client saying one of their employees is saying his 401(k) account is missing $1,500. Thinking wow did we make some kind of mistake I said I would look into it. I looked at what the client had sent in as saying the person deferred and what we had show on his statement-- they matched. I looked over the trust accounting nothing like a receivable for some amount that needed to still be deposited. So I called the client back. The client talked the employee to ask why he thought he was missing $1,500. Well it turned out last quarter his account had made around $3,500 in earnings and this quarter it only made $2,000. So where was the other $1,500? And no it wasn't in the stable value fund. Back to the original question. Based on all that has been said I agree with the people who say you will have a very hard time getting your claim paid. I don't see any decision that is actionable on the part of the people in the decision making roles of the plan.

I don't know if he made the day lighter he used a pretty dark green.

I would seek an to amend the plan to clear this up based on past practice. I would add that all plan document give the plan administrator the power to interpret the plan in a reasonable and non-discriminatory manner if the document is unclear or silent. So the plan administrator could interpret the document and set precedence if this is the first time it comes up. At which time I agree with Lou S I would make sure the interpretation is documented and followed going forward.

I agree that was is being described sounds more like a non-qualified plan then a qualified plan. I would also say seek clarification from the consultants.

B considers itself an Affiliated Service Group. A's former employees are now B's W-2 employees (except for the doctors who still get their W-2s from A). Since B's plan has no company contributions the question is what the doctors in A can do: a) Keep their plan as is and include B's employees as if they were their own; or even b) Keep their plan only for themselves knowing there would be no company contributions allowed but make their $24,000 in 401(k) deferrals. I am not aware of any situation where b above would be true. If you thought they can't make employer contributions because of what is going on they can't make 401(k) deferrals. One of the most forgotten or misunderstood part of 401(k) law is that even though they are coming from people's pay checks 401(k) deferrals are still employer contributions. So if you think there is a situation where they can't make ER contributions they can't make deferrals. I would add it would be clear that once the plans became T.H. and there were 401(k) deferrals a 3% ER contribution would be due. Based on your last comment it sounds like you have a situation where you would have to test everyone as if they are in one plan so the Dr. appear to either be out of luck or need to find a way to cover the staff along with themselves. It also sounds like people need to get a better understanding of the exact relationship between A and B.

If I understand it correctly aren't there in fact two plans? 1) Old plan (pre-2015) that is a single employer plan and 2) the MEP So isn't the trustee and administrator you are asking about the trustee and administrator of plan #1 and have all the rights and powers afforded them? This isn't my area of expertise but it sounds like the business owner needs to make some decisions and have some resolutions drafted. If he wants the money going to the MEP and stop going to the old plan I think it would take a resolution. If he wants the assets from the old plan to go to the MEP it would seem like that would need to be done via an amendment or resolution. But for now I think you have two plans with two trustees and administrators. What isn't clear which plan is due the contributions as it sounds like the employer may have adopted two plans. The owner needs to make so resolutions to clear that up,. That is my take on the fact set as I see it .

I have done the payable thing also but I agree it isn't a very good answer. I am not sure what you mean the sponsor doesn't want to pay another year's admin fees. It would seem like the only additional fees would be a 5500. I don't see why you would have to do any other administration acitities. You don't have to do any testing, work with a census, depending on the facts there wouldn't even be earnings to allocate. So it would seem like the 2015 fees ought to be fairly minimal. .

Monica and K2 a simple question. How do your client's know they are in compliance with the minimum wage laws if they have no idea how many hours these people are working? I admit I am no expert on this part of the law but I am also not aware of any exception that says paying someone by the mile or by the job exempts them from making sure they are paying at least the minimum wage. Personal story here to bore you: Back in the '80s I worked my way through college one summer by painting houses. My partner and I split 45% of the gross revenue of the job and the owner got the other 55%. Owner paid the expenses. But he made us report our hours of every job so if the state of IL or the DOL audited him he could show we made at least the minimum wage.

I agree with QDROphile. The plan document needs to define how the hours are going to be computed. There are some DOL equivalency methods in the regs. They should be incorporated into the plan document. Anything else I think puts you at risk.

I work for a firm that has over 50% of its employees working from home across the country. We are paperless. I agree with the comment that it is a matter of learning to trust computers doing what they do well. HCE determinations should be automated. All you need to know is the following 1) was the prior year's data correct 2) is the ownership and family relationship coded up correctly. An automated review can tell you #1. Family will require a manual look most likely but in all but the largest family fact sets I find doing it on screen is not too bad. Same for a number of other functions. It has been years since someone has found a material error in our automated 5500 counts program. Any more that is pretty much all I check when I am reviewing HCE determinations. If it isn't a garbage in garbage out issue the results are correct. I also agree I have learned to love vlookups and other Excel tools to allow me to quickly filter data to find what I need. Lastly, I quickly learned how to write comments in pdfs. So as I review the results I leave my comments in the pdf draft of what would go to the client. As a side benefit people tell me they have the least problem with my comments in terms of not being able to read bad hand writing as my comments are one of the few not hand written.

It isn't clear to me why you can't talk to the client and give them this option: 1) The client can go through the positions and look up the closing costs and put them in this spreadsheet with the positions listed. You will use that for the values. In short make the client do the work. 2) The client can agree to pay you for the work outlined above. If the client refuses to do both and wants you to use a value from an older time period get that instruction in writing from them and do what the plan administrator tells you to do. You need to explain that you don't think at is the correct way to do . I have done what I have outlined above in these types of situations (but not the exact same set of facts) many times. You are not obligated to give your services away for free. And while I get that at times it is cheaper to give a client what they want then replace them if they leave I see no reason why you assume you have to be a "door mat". For what it is worth I agree the tax implications are small to none but it still should be the plan administrator authorizing using an old value if that is the decision. edit was to fix minor typos