ESOP Guy

I have a few ESOPs that have done that. Don't forget to keep track of diversification rights for those people while the plan is frozen.

I know fractional cents are immaterial, but I just wanted to make sure there are no specific regulations. Bird: Other than on annual valuation dates, I think valuation and allocation to subaccounts has to be done at least on each day of a contribution or distribution from any subaccount, to arrive at the pro-rated allocation depending on the balances in the subaccounts on the day of contribution/distribution. I assume the earnings have to be pro-rated for each period between contributions/distributions separately, to account for the time-varying ratios of the subaccount balances over the year. Please let me know if that's correct. Just wanted to make sure we're on the same page. Depends on the document. If there is only one allocation date then per the plan then there is only one allocation date. The plan administrator can use reasonable assumptions to give the weighting you are talking about. (Although most plans allow for special allocation dates I see no reason for the extra work) Is this a balance forward plan? If so, for example you could allocate gains to the 401(k) source by taking Beg Bal + plus 50% of the 401(k) deferrals is the adjusted balance for that sub-account,. That is how most 401(k) plans were done before they all went daily. Example: 401(k) source has $50000 at 1/1 PS source has 30000 at 1/1 401(k) def for year were 10,000 401(k) basis for earnings is 50000 + (10000*50%) = 55000 So earnings to 401(k) would be allocated on the ration of 55000/85000* earnings PS earnings would be allocated 30000/85000*earnings If this is daily valued then I am not understanding the facts.

Anyone with a balance on the day the resolution is signed will become 100% vested. You may want to consult a lawyer to help with this some. Most plans will need an amendment to terminate the plan. Maybe that is why you mean by a board resolution but it does need to be in the form of an amendment. You might also want to make sure the plan doesn't need to be restated or anything like that. That can be a trap. I little bit of legal fees now can be cheap insurance vs finding out problems later.

How is the answer to this question ever going to be material? I would always round to a penny. If you think it some how matters why not just rotate which one? In period 1 pre-tax. In period 2 after-tax..... In the end the total has to = the actual assets. And once again this just isn't a material issue and you are over thinking it in my humble opinion,.

I would agree with QDROphile here. I would not use the DOL calculator to compute the earnings. Back when I did these kinds of corrections we would use the actual earnings. You should be able to get the fund price of the day the additions were deposited-- so you know how many shares anyone should have bought that day, any dividends paid and reinvested. So you should be able to figure out how many shares of each fund by person that needs to be bought for them. I would add for the people you take the excess from them you could compute the numbers of shares that ought be sold, if those shares got dividends reinvested and so forth. In short you should be able to compute how to put everyone back to where they would have been if the mistake wasn't made. They key is compute the change in shares not dollars and you should end up with the right ending value for everyone. If there are hundreds of people (or more) that might not be practical but that is how I did it back when I worked daily valued plans. Although we at times did do these calculations for 100s of people. We just worked on automating the process.

It is all defined in the plan document. It will tell you how someone meets the definition of both early retirement and normal retirement. As a general rule if a person terminates after they have met the early retirement age but not met the normal retirement age they are early retirement. Same with normal retirement. It has nothing to do with if they say they are retired or if the company gives them a gold watch. As a general rule if you don't meet the early or normal retirement age when you terminate you are a normal termination and don't age into the new definition. But that wold be clear if you read the document. It will almost certainly say you have to separate from service after your early or normal retirement age. One last observation most documents just say separate from employment. So if the person is fired after the right age often times means the person still retired. Once again READ the DOCUMENT. This is answered in it.

I found what I was looking for: http://www.law.cornell.edu/cfr/text/26/1.415%28c%29-1 (B) Date of employer contributions. For purposes of this paragraph (b), employer contributions are not treated as credited to a participant's account for a particular limitation year unless the contributions are actually made to the plan no later than 30 days after the end of the period described in section 404(a)(6) applicable to the taxable year with or within which the particular limitation year ends. If, however, contributions are made by an employer exempt from Federal income tax (including a governmental employer), the contributions must be made to the plan no later than the 15th day of the tenth calendar month following the end of the calendar year or fiscal year (as applicable, depending on the basis on which the employer keeps its books) with or within which the particular limitation year ends. If contributions are made to a plan after the end of the period during which contributions can be made and treated as credited to a participant's account for a particular limitation year, allocations attributable to those contributions are treated as credited to the participant's account for the limitation year during which those contributions are made. Emphasis is mine. So if the deposit is made more then 30 days after the 404(a)(6) date- which is the extended due date of the sponsors tax return-- the annual additions can not be credited the year allocated but the year deposited.

Bird brings up a good point. If the bonding and Summary Annual Report (and maybe other things also- I don't work on many small plans) then the exemption for the need to get a plan audit can be blown with this kind of asset in the plan. So one might want to see if they have failed to get the needed audits. I know this traps many small plans. In my firm the people who manage the smaller plans are constantly on the look out to make sure an audit isn't needed. Too many people are in the mode of thinking less then 100 people no audit. That just isn't what the rules say any more. I know from DOLs of our clients the DOL looks to see if small plans need an audit.

You need to watch the 415 rules in this one. I am doing this from memory. I believe if they don't deposit the money with 30 days of 10/15/2014 then this contribution can no longer be a 2013 Annual Addition but is an annual addition in the year of deposit. Double check me on the 415 regs but I am rather sure but as this is from memory not 100% sure on this. I am doing this on my home computer. When I get on my work computer I might be able to find a link quickly to support my position. Or maybe someone will read this that can confirm or deny my position. Like I said I know there is a 415 issue lurking out there and I am rather sure I described it right.

If the person was never a participant then don't think of it in terms of the loan rules but in terms of an investment gone bad. There can be a host of side issues. 1) Is the non-participant a disqualified person in relationship to the PT rules? 2) Did the various fiduciaries do their duty when granting the loan and trying to collect the loan? 3) What efforts have been made to collect the loan? 4) Was the loan secured by anything? If so, should the plan try and foreclose on that asset? Those are just the questions that come to mind quickly. There might be others and I am sure other will speak up if they come to their mind as they read this thread. If this is a balance forward plan most likely everyone will take a hit to their balance when the asset is written down. If it is individually directed then the person whose account it is in will take the hit when the asset is written down. But once again think in terms of this being an investment if the person the money was loaned to was never a participant not the loan rules. Those rules only apply to loans made to participants.

You can't exclude their prior service. For example a participant with 3 YOS at the time of the amendment would be 100% vested in the old money and 40% vested in the new money. Thanks I knew I wasn't thinking through it right. Too close to 10/15 for the mind to work 100%

Something in the back of my mind says the lawyer is right. But what I can't get comfortable with is the idea then you could amend the vesting a little bit every year as it applies to the new benefit and someone even with 10 years of service would have some money not vested. Of course any version of this tends to be a record-keeping nightmare. I saw people mess up the people who terminated before the PPA change and after the PPA change much less something like this.

Guys the auditor needs the cost information for the Sch H Part IV Line 4i attachment. Although you would think the investment house/platform that holds the investment would have that data handy. Although if you read the Sch H instructions you will participant directed accounts don't have to report cost. It is that most ESOPs that have mutual funds are trustee directed so I see the cost information all the time. Most 401(k)s being participant directed would not see cost on the attachment. So back to the original question are the mutual funds trustee directed? If so, they need cost. If not show them the instructions to the Sch H Part IV line 4i attachment.

Don't you have to file the late one? The late penalty isn't large. I have found if you can show a good pattern of not being late and have good reason you can get the penalty waived. They will never waive the interest as they think you had use of the money so pay interest. Waiting just weakens your case this was an innocent error.

Are you sure it isn't 2116? I mean my Cards have won as many WS in the 21st century already then the Cubs did in the Whole 20th century.

Once again I think the simplest read is this: If the corporation's marginal rate is 25% at the federal level and 3% is the marginal rate at the state level it wants 28%. Asking the software provider is a good idea. However, most projections try to estimate the tax saving of the deductions which would happen at the marginal rate.

Increase your fees!!!!!

Wouldn't combined be the Federal plus state marginal rate for the employer? Just taking an educated guess but that is my first reaction when I read those words.

I agree with BG5150 the 401(k) plan should have paid an RMD for 2014 before it paid a distribution to this person.

The case for dFVCP is what Belgarath said. You know the penalty and it is limited. There is a lot to be said for that and I use DFVCP myself at times. My experience is if you wait until you get a penalty notice and the client has a solid history or filing on time in the past the chances of a full waiver are good. But you are risking the need for IRS mercy. This part of the IRS is less revenue driven then other parts. So the choice is a known penalty vs a chance to have a zero penalty.

Go Cards!

Maybe you can convince the client that you need to start completing the change of auditor section of the Sch C for 2014.

I think I once even saw an IRA company that had a debit card linked to the IRA. So every purchase can be a taxable event also!

I would start by talking to the plan administrators. They know the plan and its rules. They should be able to get you the answers and guide you through the process. As a general rules spouses have rights (that is how your husband got the QDRO benefit in the first place) but like all general rules there can be exceptions. So start with the plan administrator. Sorry for your loss.

the other thing is if you don't have a 415 problem or a destructibility problem what difference does it make if it is a contribution or earnings. I have a hard time believing this will be big enough to throw off a discrimination test either. To the point I wouldn't even bother to do the test.