ESOP Guy

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 They repealed them as living together became more common and acceptable.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

Here is one conversation on this topic. http://benefitslink.com/boards/index.php?/topic/35750-de-minimus-excise-tax-amount-for-form-5330-late-deposit/#.VJSaYMAgAY

I am not convinced this needs a 1099-R. I relieve large banks and platforms pretty much always produce one but that is their policy no the law. If this rollover is returned to where it came from why does it need a 1099-R at all?

I guess I have never looked at it that way. So would a person who was a participant from 1/1/2014 to 12/16/2014 be on the coverage test for 2014? They wouldn't get an allocation as of 12/31/2014 so do they hurt the test?

No, I think if someone met the conditions to enter the plan as of today you can't amend the plan to stop them from entering. They are a participant in the plan and you can't take them from them. It has been a while since I have looked this up but I believe being a participant is a protected benefit. They don't have a right to an allocation so you might be able to find a way to stop them from getting an allocation but not enter the plan. So anything you do to stop them from getting an allocation will hurt a coverage test. The more difficult questions is if someone would meet the entry conditions on 12/29 and you amend to today. I think you can do so as they aren't a participant. But I know some people who would want to argue the point with me.

Not trying to be insulting here but since I don't know the specific document and you are unclear which part of the prototype you are looking at. Parts of this will be only found in the base document. So you need BOTH parts. (Sorry if that is obvious) You should be able to find in the definition section a definition of the Allocation Date. There is a good chance the allocation date definition just references what is chosen in the other part. In some part it has to tell you how you allocate earnings. The base document will most likely say it will tell you that you only allocate earnings on an Allocation Date. In this case these is only one Allocation Date. In the distribution section of the base document it should tell you that you pay person their balance as of the last Allocation Date. So if 12/31 is the only allocation date and you only allocate earnings on that date and you pay the balance as of the last allocation date you get your black and white. If that doesn't help someone who has worked with the Mass Mutual prototype will need to speak up. Although my experience says that Mass Mutual has experts on their own documents. Everyone who puts out a document has such people-- so my guess is they have them also.

Yup, plan document.. It will describe how the accounts are measured and when they change. It will define the valuation period(s). The distribution section of the plan document will tell you how to pay someone including what account balance the plan pays. So is the person(s) who seem to keep generating this question from you as concerned that people were paid in late 2008 on their 2007 balance?

A quick story that sums this question up in my mind. Back when I first was learning this business from a guy who did mostly very small 401(k) plans-- doctor plans and such. We had a doctor that told us we weren't worth the money he was paying us. All we did was some easy allocations of earnings and a simple tax form. My boss wouldn't come down on the fee. So he fired us and he would save money by running his own 401(k) plan. A few months later he called me up and asked me if I could send him a blank copy of the Form 5500. (This was back before you could get all the forms off the internet.) I said "no" we had special software that helped us complete the form and it printed the form. I gave him the IRS 800 number to order the forms. A few weeks later he called up again and told me he was confused by a question on the Form 5500 and wanted to know if I could explain to him what it meant. I said "no" again. I told my boss about the conversation and he called the doctor and told him to stop calling me. It was for these very reasons he thought it was fair to charge what he charged the doctor. All due respect to the OP but to me a good professional makes it always look easier then it is. There are in fact costs to having specialized software AND the knowledge to use it. The question seem to think all you need is the software. I believe the business version of Turbo Tax has the 5500 on it doesn't mean every small business owner could or should do their own 5500. That first firm I worked for did both DC and DB plans. And yes they could give me data to process it through the software on a plug and chug basis. But I really don't think I could have done what I was doing and given meaningful results if the actuary wasn't guiding me and taking my results interpreting them for the client.

Agree with ETA.

It works both ways. In 2008 they didn't share in the losses in 2014 they don't share in the gains. it was assumed it all washed out in the end back when these kinds of plans were common. I would add back then daily plans were not cost effective for small plans so there wasn't much choice. If this really causes an issue the solution is daily valued. What you are describing is a big reason why there was a push to daily value. People didn't like the fact people could end up not getting gains or losses on the months it took to finish the annual work. But running an annual plan the way we are describing is legal and like I said back in the day common.

typo, yes? You can't just wait until November and claim unfeasibility. Correct typo should be can not.