ESOP Guy

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

I stand corrected on the idea there are no states that recognize common law marriage.

it has been a long time since I looked into it but it has been my understanding is no state in the union has a common marriage law any more. They repealed them as living together became more common and acceptable. Also, part of the reason for common law marriage in the first place was in the wilderness that was the US west you could go a very long time before you met a preacher to marry you. In short I think you are right to ask for proof. It might start with even proof as to why this person thinks they are a common law married. If you below you will see I am wrong about the idea that no state recognizes common law marriage.

I agree you seem to be confusing entry with something else. You simply enter a plan. You never have to do anything to enter the plan. You merely have to meet the requirements under the plan document. Once that happens you enter the plan on the entry date it says to do so.

It has always been my understanding they want all years. They wrote the rule to clearly mean you couldn't stop at only open years. I have not seen this many years. But I have an ESOP client that just fixed a problem in their 401(k) plan via a VCP all the way back to 2003. We just helped an ESOP fix back to 2005 for problems another TPA made. I would prepare to go back as far as good records can be found. I also am not so sure this shouldn't be a VCP but if their ERISA counsel blessed self-correct go for it. I think this is a good time to go back to the ERISA counsel and have them help you determine how far back you ought to go.

That is why the participant should have a lawyer to help with the process! It certainly would seem fair to me that the QDRO not touch the 401(k) plan at all (since his balance as of the date of the divorce was $0), but it is up to the participant (with legal help if available) to fight any attempts to either assign part of the subsequently established 401(k) account or otherwise to ratchet up the amount to be assigned under the pension plan to "compensate" the alternate payee for not receiving anything from the 401(k) plan. How long are you required, by your administrative processes, to put a hold on an account when there is no QDRO in hand? If there is a limit, perhaps the alternate payee should be notified that benefits will be payable under all plans, with no provision for anything going to the alternate payee, unless a suitable QDRO has been received by [date]. Also, please clarify - was a QDRO received back around 1995 and there was no ruling made by the plan administrator that it was valid or not, or was the notice recent and the QDRO only recently submitted for review? Was the laxity on the part of the participant/alternate payee or on the part of the plan sponsor? In what way was the QDRO invalid? Receipt of a proposed QDRO followed by a decade and a half of no objections begins at some point to look like acceptance of the DRO as qualified. Was the plan administrator's rejection of the original QDRO at all timely? For what it is worth you are looking into the small issue and not looking into the big issue. The issues raised in the part I bolded above should be your real concern. None of these questions would be around if the QDRO had been sent, rejected, fixed and accepted timely. I would be more worried the plan administrator might have some kind of liability around this issue.

Part of the reason I think the 2015 RMDs have to be made before the payment is sent to the IRA is pure logic. (Although in this case I think the rules are clear also-- the RMD comes out as the first dollars) The IRA would claim the it doesn't know what the RMD amount is or would say it is zero. After all to the IRA the 2015 RMD would be computed on the 12/31/2014 balance. What was the balance in the IRA on 12/31/2014? It was zero. The plan had the money on the day that is used to compute the RMD so simple logic says the IRS got that rule right. I know logic and IRS rules don't have to match so maybe the IRS just go lucky this time. Having said that whose life expectancy I would use is another question. I always go back and review those rules and talk inside the firm before I make the final decision as I can always relate to why people feel confused on this topic.

One minor point: If the person in question passed away in 2014 and was working in 2014 it would seem like the 2014 payment could be made as late as 4/1/2015 without fear of the excise tax penalty. After all 2014 was the first year this person was both 70.5 and terminated. On a more important point I think the plan has to make the 2015 RMDs before they send the money to the IRAs. This is like any other distribution coming from a plan. The first dollars from the plan have to the the RMD payment. The regulations are very clear on that point. So net the plan has to make both the 2014 and 2015 RMD payments and then the balance can be sent to the IRAs.

You need to find a tax adviser who can review your ALL of your facts and give you good advice. For one thing your question makes no sense. The house was gifted to you but now you make it sound like you need to buy the house. Why do you need to buy a house you already own? A good tax adviser would be able to make sure they understand all the facts correctly and give solid advice. Please understand the taxes on $34k taken from a 401(k) plan wrong could be close to 50% of the money taken from the 401(k) plan. Spending a few hundred dollars on a CPA is way cheaper then doing it wrong. At the risk of being mean which I am not trying to be-- but stop being so cheap and go hire a good CPA for a few hours. Would you self diagnose a serious medical condition or go see a doctor? So why do people like you seem to think a few quick questions on a chat board is the way to go on tax questions that could cost them around $15k if done wrong? In the end free advice tends to be worth what you pay for it-- nothing.

Fascinating that this continues to be asked over and over - yet different answers are received. Since this is an IRS pub, it carries more weight. But at the 2011 Mid-Atlantic Benefits Conference in Philadelphia, this question was asked during the "Ask the Experts" session. Someone asked if there was a de minimis amount where one did not need to file the excise tax return. Someone else said that they had heard that if the tax was under $100 it did not need to be filed. George Brim and Michael Sanders of the IRS said there was no set number. But they clearly stated that if the cost to calculate, fill out, and file the 5330, PLUS the cost of the IRS to process it, if that cost was more than the excise tax, they didn't want it filed. Instead they said to calculate the tax, and add it to the lost earnings, and give it to the participants. FWIW, which apparently isn't much. There reason it keeps getting asked it the problem is very real. A few years ago when I was still working on 401(k) plans I spent nearly $300 worth of time to compute about $12 of lost earnings. Of that 80% of them went to the Dr and most of the rest went to his wife who worked for him. The few nurses who made up the rest just didn't defer much. The tax was a joke. I predicted this would happen to the Dr before I started. He told me he was willing to put $100 of lost earnings in the plan and give none of it to his wife or him as it would be cheaper then my $300 bill. As far as I can tell there simply is no authority to do something like that so my boss wasn't willing to assume the $100 of earnings was really more then enough and so forth. I get it the real solution is to get the deposits in on time. But Dr offices have things like keeping patients healthy to do that are more important then worry about ever deposit. The IRS and DOL really need to come up with a simplified method that make the employer pay enough that they don't want to be late but are grounded in reality in terms of complexity and cost of computing. Off soap box for now.

. Who can explain why clients want the things they want, but they do want them and that is that. The person who can explain that might have a chance to explain women to men!!!

The firm I work for uses Millennium Trust Company. http://www.mtrustcompany.com/Site-Navigation/Audience-Tabs/Individuals.aspx You can set up IRAs for lost people with them. I for one think the fees are a little high but if a plan wants go get rid of an account it works.

Then have a last day of the year requirement and fund it after the last day. That would seem to save more money then quarterly last day language. However, I don't see a problem with quarterly last day. I too am unsure of 15 days after the end of the quarter.

I still don't understand the concern. I am unaware (not an expert on the topic either) of any obligation to report illegal acts an ERPA becomes aware of or an obligation to fix a plan the ERPA doesn't control. At risk of over reading this question someone seems to be looking for a fight. The ERPA doesn't control the situation so they can't fix it without the owner's help. If the owner wants help then a VCP looks to be in order. If the owner isn't interested in fixing I see no obligation on the ERPA. The ERPA should let it lie.

I think that article would be a bit more complete if it gave the funded ratio of the Central States Plan. I seem to recall it is <30%. So people like tymsup can say a promise was made it needs to be kept but math is a terrible task master and if the money is not there it isn't there. It isn't like this problem sneaks up on people. An under funding like that fund has wasn't just because of the market drop of 2008. That happens because the two side of the collective bargaining table agreed to not put enough money into the plan decade after decade. They kicked the can down the road and now they are so far down that road there is no going back. You can't just say let's kick in a little more of the active members pay and it will all work out. Are workers like Bob in many ways victims-- sure but the money isn't there. To me their union and employers betrayed them and I wish there was a way to make life more fair but it isn't.

See page 12 question 6 (I found it faster then I thought I would) http://www.irs.gov/pub/irs-tege/5330_phoneforum_transcript.pdf