ESOP Guy

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.

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.