ESOP Guy

I am with chc93 USERRA only requires a make up contribution if the person comes back to work for them after their military leave. You don't know if they will come back yet so USERRA doesn't apply. I believe you will find the plan document reflects USERRA's rules so you will be operating outside the terms of the plan document. That would be a disqualifying defect to the plan.

All I ever used to do was annual valued plans. If the plan really says what you say-- as soon as administratively feasible and it say to use the value as of the last valuation date-- and the person terminated on 2/20/2015 you would pay them based on 12/31/2014 balance. (Assume a 12/31 PYE). That fact they were in the plan for a few months in 2015 is not relevant. If it takes until July of 2015 to get the work done then that is as soon as administratively feasible to pay the person. (The delay needs to be reasonable you can just wait until the following Nov to start the work and say it wasn't feasible until then.) You operate the plan according to the plan's terms. You can't ignore the plan document. If people don't like how the document says to operate the plan theen change the plan to quarterly or daily valuation. I will say as others have pointed out the plan Administrator needs to think about how this provision can be abused. For example: Back in 2008 I used to work on a quarterly valued profit sharing plan that allowed just about anyone to take an in-service. It was a hospital. It dawned on one of the doctors that he could get an in-service distribution based on the prior quarter's balance and avoid all the 2008 losses post Sept. He took his money and started telling his buddies about what he did. This set off a run on the bank as people wanted to get their money out before the next valuation date. The hospital quickly changed the plan to required you to wait until after the quarterly valuation after your request to get paid. Also, using the hospital example above most plans allow the administrator to have the plan do a valuation on an ad hoc basis if prudent. In extreme years it might be prudent to have a few ad hoc valuations happen to reflect such large market moves.

I wouldn't think that they would affect actual benefit administration. Maybe I wasn't clear enough. But that was my point. If the QSLOB rules only apply to coverage then they don't apply to issues like vesting.

I will admit QSLOB rules are not a strong point of mine. However, I thought QSLOB rules are a defined in and only a part of coverage testing rules and coverage testing rules only.

This is a document question. As a general rule I find most documents say you have to terminate because of death in order to become 100% vested. But look carefully at how the plan reads.

Your document is going to answer this question. It is not a law question as far as I know. Does it say an employee or a participant can take a loan? Does it say you can take a loan from the rollover source or not? Only you can find the answer to the question you have.

I will have to admit I don't think I have ever seen someone try as hard as a Freedom of Information Act to get the desired information. Have you simply tried asking the right people? I am not trying to be mean here but I am amazed the number of times someone comes on this board with a bit of a problem. They are looking for a way to get something done and the one thing they never seem to try is simply ask management for the information.

Yes, obviously this is based on my experience. I find that whenever there is a stock transaction the DOL looks for the same things. It is always been about price of the stock, the terms of a loan, and so forth. Getting that right is all about making sure the paperwork is all in order. Was there a good appraisal done with realistic projections regarding the company? I find it always helps to have an independent trustee going over the whole thing.

I believe the answer is "no" they don't have to make it public. I would also caution you to NOT read too much into a DOL examination of an ESOP. Particularly if the ESOP is in its early years or it just recently purchased a large block of stock form an owner who is an officer of the company. The DOL has stepped up its review of ESOPs in the last 5 or so years and has concentrated on the transactions that bring stock into the plan via a purchase from people who can be seen as company insiders. In those cases they are looking to make sure the ESOP didn't over pay for the stock. In the case of new ESOPs it is close to 100% of them are getting a visit from the DOL. Most of them are ending with no action on the part of the DOL.

And hope the plan allows the plan to use forfeitures to pay expenses instead of having to reallocate the funds.

I would say "no" he can not treat this person as terminated. The transition rule is about the coverage test. It doesn't change the fact this is now a controlled group and this person never left the employment of the controlled group. Even if someone thinks I am wrong regarding the answer I would still say the answer is found in the control group rules. Either these two companies need to be treated as the same employer or not under those rules. I am thinking they have to be treated as one employer. I would be interested in other perspectives but that is mine.

I am going to be a bit blunt here. When I read questions like this I just shake my head and say why do people come up with these crazy ideas? I mean let's just for the sake of argument you can do what you are asking that doesn't mean it is a good idea. Here are the first things that come to my mind: 1) is the outside person in any way related to the plan sponsor and other disqualified people that would create PT issues? 2) If there 401(k) plan is something other then a 1 man plan then is doing this a violation of fiduciary duties? 3) Since I doubt this investment is to gain access to simple mutual funds to as they wouldn't need the 401(k) plan to do that it is pretty safe to assume this is some more exotic investment that isn't very liquid or easily valued. So the trustee has a duty to report the CORRECT value of the assets on the 5500. How will the trustee do that? Once again if the plan has more then 1 person in it how do you value this asset to get the benefits in case someone needs a distribution? What about a loan how do you compute the balance to know the max loan amount? Will there be enough cash to give the max loan amount? Same problem if someone wants a hardship payment. 3) You can find plenty of threads on here where 401(k) plans with real estate in them have a problem when it comes time to pay an RMD and the plan doesn't have enough cash and this illiquid investment can't be sold in time what do they do? They end up being stuck paying the 50% excise tax. 4) What happens if the 1 man plan needs to pay a QDRO and the plan allows the Alt payee to take the money right away-- a common feature in a 401(k) plan. Once again how is this going to be valued? Will there be enough cash to fund the QDRO? 5) What if the 401(k) plan refuses to give the "investor" his money back what is his recourse? How does that interact with the anti-alienation rules for Qualified Plans? Honesty, I am not even sure I understand the question. I mean how do you invest in a 401(k) plan? It isn't an investment. It is trust that is used to hold assets at its most basic level. You seem to be asking can someone put money in the trust that isn't a participant and share in the plan's returns. If so, I would say no. But to be blunt (again) even if whatever you are thinking is legal I will say these kinds of "creative" money making plans with 401(k) plans tend to end badly way more often then not. So I would say stop spending time even looking into it.

Couldn't you simply cover that idea by making sure any new plan has a provision that say any service for XYZ church will be counted as service for ABC church's plan? I used to have a client that was a bank. They went on a buying spree in the '90s. They gave every bank they bought employee's credit for service at the old bank. Oddly when they bought an insurance agency they didn't give those employees any prior service. But it was all in the amendments so it was very clear.

I agree a 501©(3) can not have owners.

I think Tom has hit on something you might want to look at and have a conversation with the client. If the plan does say to make the distributions "as soon as feasible or practical" you might be able to hold paying them anything until the last contribution is known. I realized people like to get their money fast and employers like to just get a clean break from a former employee. But rarely does the law require a plan to pay a person out in weeks or even a few months after termination. So only make one payment later when the correct amount is known. The way you explain the delay to people is that there is going to be an additional contribution so until we know your correct benefit we aren't going to pay you.

The answer to that question will always be in your plan document. My guess as you study the document the answer will be "he can def when rehired" but the plan document will tell you how to treat all rehires to determine when the re-enter the plan.

I don't say this very often but if the plan terminated in 1997 and no one has come a calling for the missing returns why not let a sleeping dog lay?

I would add that any retirement plan the LLC could use would only be allowed to make contributions based on compensation paid to employees. So if you are not employees and aren't being paid wages as employees there is nothing to contribute on for the LLC. Assuming you are allowed to be self-employed you could set up one of the various plans for the self-employed.

Here is the thing as long as this fund is one that provides its price everyday you can compute what he would have earned to the penny. You compute how many units he would have bought on the deposit date, add any units bought with dividends during the period. You now know how many units he would have owned. You know today's price. You know the value it should be as of today. In short this conversation could be over by creating a short spreadsheet.

Most DC plans I work with now don't even have an Early Retirement Age. If you get rid of it you might have to check to see if it is a protected benefit or write it such that someone who is ERA now but not NRA doesn't lose something.

The point of the lost earnings formula (method) is to make the person as if the error had not happened. No better or worse then if the error had not happened. So if the money had been deposited on time would he have made $100 or $25.20?

All due respect Fidelity did follow her direction on a valid form and you seem to be admitting as much. I can't see the IRS helping her. It isn't an issue that they should be involved in. Have you tried talking to the plan sponsor of the plan in question? My guess this is where you will get the most friendly ear to listen to the idea that you would like to have the check reissued differently. My guess is if the plan sponsors tells Fidelity they would like to have the check reissued Fidelity would listen that the plan sponsor is the customer.

Sounds like they are trying to describe the successor 401(k) rules. Just not very well maybe???

I am not very good at the search function but this has been covered before in detail. I have seen plans that charge the terminated people their share of the fees to run the plan and the employer pay the fees for the actives. I don't think you can charge the terms a fee that isn't related to the actual expenses for merely being terminated. You are going to want to think about getting a lawyer involved to make sure you get it all right. I know this needs to be disclosed in the SPD and made clear on distribution forms that if they don't take a distribution they can be charged fees. There are other things to think of . Like I said I didn't find the prior threads on this but I know they are on this boards with good amount of details.

I believe you will find your plan document will spell it all out also. The document pretty much has to reflect the rules in order to get a D letter in regards to the topic.