ESOP Guy

So in these other people's mind how do you get around that if you don't want to defer when you first enter the plan? Do you have to complete a form that says in effect I want a 0% deferral election just to preserve your right to change your mind later in the year? It has been a while since I worked 401(k) plans and I am stunned at these people's position. As for your DOL question I would start first by talking to the powers to be at the plan sponsor and saber rattle that these people come up with a good documentation for their position or the plan sponsor starts looking for new service providers. I would only bring the DOL into this as a very last resort as that will "shine a light" on the whole plan and employer that you might not want to do.

It can be done. I had a client do it once. There are a number of issues that you need to watch out for including many of the ones you mention. Do they have an ERISA attorney helping them set this up? There is at least one law firm I know of that seems to specialize in doing this for people and they help their clients avoid many of the pit falls of this kind of set up. They tend to call their product ESOT instead of ESOP. To answer you questions: 1) It can be either Treasury stock or purchased stock. What market is the stock traded on? Some markets count as valid markets to use to value the stock and other aren't. 2) It seems like most of the fiduciary concerns are around value of the stock. It seems like there are ways around the concern of too much investments in one stock. 3) It isn't clear what the goal is? If it is to allow the employees to share in the growth of the company via share price growth then maybe a non-qualified plan, phantom stock or stock appreciation rights might do the trick. 4) I am not sure there are any special risks to the TPA here. I would look out for Prohibited Transactions between the plan and the sponsor. The classic example for an ESOP that would seem relevant here would be if the stock was apprasied on 12/31/2012 and they now sell stock to or from the plan to/from sponsor the general understanding in the ESOP world is too much time has passed to use the 12/31/2012 price. You would have to get a new price or you have a PT.

How it gets enforced is if you were to file a 12/31/2012 8955 now the IRS wll send you a bill. We had it happen recently. Yes, one solution would seem to be put all the people on a 2013 8955 and file it now. As you see there is no termination date listed on the 8955.

Yeah I can't think of any reason you can't do it that way. Just have to admit I don't recall ever seeing it that way.

Read your document very closely. My guess is it will say RMDs are an exception to the lump sum rule. It will likely say this in the lump sum section-- something to the effect "except as provided for in section (RMD section listed here).... pay in lump sum...." It might be in the RMD section and it will say something to the effect this is an exception to what is send in the regular distribution section of the document. I have never seen a document that requires one to take their full lump sum in order to fulfill the RMD rules.

The 415 question is the easy question. Dividends are never Annual Additions regardless of how they are used. I don't recall ever seeing dividends on unallocated shares being passed through. I have to admit I don't recall ever researching the question. It seems like all I recall ever seeing is pay the loan or allocated to the participants. I am doing this from memory. But as you say the document should tell you how to do it every time. I know I have never seen a dividend allocation that wasn't spelled out in great detail in the document.

Check the Form 5500 for each plan my guess is they are not both 001. If they are both 001 that is more likely a mistake on the 5500 and it will not change the answer about the audit. For what it is worth I have seen a company that had a plan for the people whose last name was A-L and one whose last name was M-Z to avoid the audit requirement. Odd but true.

I really am not trying to be harsh or mean here but you might want to review your procedures. It has been a while since I worked for a firm that had the 401(k) plan loans automated to the point where it all could be done on the web. But the last step was to have a human look at the loan before it was given final approval to fund just to make sure it followed all the rules. It sounds like it is possible for a loan to get fully approved and funded without a human ever looking at it. I am all for automation to save costs and allow each employee to be more productive but this might be just a little too automated. I guess I could be over assuming here and the issue is something else.

It appear they can go back forever. http://www.usatoday.com/story/news/nation/2013/05/06/mother-social-security-debt/2138219/ Why doesn't this person just call them up and ask a few simple questions?

I agree with Lou they have to pay the valid QDRO. If the AP were alive yes they could modify the agreement in my mind to reflect no payment from the plan. But that seems hard to do now.

I have seen it both ways and I understand the people who would argue the 1/1 date. As a counter I would point out no one says they turn 40 on the day before their birthday or are married 50 year on the day before their anniversary. So there is a convention that would point to the idea of your 1 year is up on the anniversary day. I think this is one of those areas where the plan administrator can make a judgement call (as all plans allow) and as long as they are consistant will not get called out on it.

It can be done and we have done it. You need to make sure the document are written so reflect this fact. Since you are the 401(k) provider you will want to make sure you plan is clear the S.H. non-elective isn't also being made to the 401(k). It can count towards the T.H. and non-discrimination rules.

I have gotten the impression over the years that 13th checks were fairly common in government plan and unheard of any place else for the reasons you outline. A simple google found there other examples http://www.in.gov/inprs/perfcolaand13thchecks.htm http://calpensions.com/2013/08/05/can-san-jose-cut-pensions-of-current-workers/ http://www.michigan.gov/documents/MPSERS4_92713_7.pdf (see page 9) http://www.publicpensioninstitute.org/public/8768.cfm%C2'>

Benefits Rights and Features Just to be clear you always have to make sure BRF are non-discriminitory and in some cases you have to do an actual test of your BRF.

They can't send the funds a bank that has a branch in the US and Japan? They can't send a check for him to cash at a bank that has both US and Japan branches? Why can't they send the money to Japan? This isn't some third world country and this is the 2013. To answer your questions: No, I would not have the money sent to the employer's account and then wired to the person. By the way make sure you have the tax withholding correct. If this person isn't a US citizen you need a W8-Ben completed or the tax withholding is well above 20%.

Not that is was Cynchbeast's fault but that is one of the best reasons to have the owner be the last person to be paid from a plan in a plan termination.

Everyone would be out to get you if you weren't selling those evil 419(i) things that are tax shelters or maybe they aren't or maybe they are on every other Monday.

At this point I would focus on case law. I think the regulations that could apply here have been covered. I would add I think the company simply has taken a very agressive stand. I wish you luck but this is going to be a tough one to defend. I am unaware of any cases but have to admit I haven't gone looking to defend something like this ever.

Besides I have always been told that the difference between collecting at normal retirement age and 70 is actuararly equivalent. Or put another way as a group if everyone were to collect at NRA or at 70 should yield the same benerfits. I realize that for any given person it depends if they die before or after a breakeven date but as a group the decision is suppose to be net no effect. Now if some of you acturaries that hang out around here want to tell me you have run the numbers and what is suppose to happen and what does happen I will listen to that claim.

I have noticed the odd date issue before on IRS letters. My guess (and it is a guess) is they are making sure you really have the 30 or 60 days to reply from the date of the letter by adding days for the mail. The Post Office is just being quicker then the IRS guess.

Before you start a formal appeals process you might simply want to ask the questions you asked here to someone in HR. In particular if you work for a larger employer they might have someone in HR whose job it is to help run the 401(k) plan. And just see what the answer is. It sounds like they gave you some kind of earnings. So maybe they can explain how they computed the earnings they gave you and their justification for those earnings. If you don't get a good answer or you think the answer is wrong then you might want to start with a formal appeal process. An appeal process requires the employer to make very specific replies by specific deadlines and so forth. It has a confrontational feel to it. As such any answer you get is more likely to be vetted to be very proper and correct. It might even be written by a lawyer which means it might not be very clear while very accurate. However, in most cases an informal conversation can get you the answers you need. In the very end if you have tried all of that and you can't get an answer you can go to the Department of Labor of help. Once again doing that will tend to bring out the lawyers and so forth. So I tend to recommend going there last.

You have to do an RMD based on the 12/31/2012 balance which may mean there is money in the IRA that shouldn't be in there. The regulations are very clear the March payment should not have happened without the 2013 RMD being done. The IRA will tell you there is no RMD due from it as there was no balance in it at 12/31/2012. (I am assuming the IRA has not assets except the new rollover).

Here are some other discussion that might help: http://benefitslink.com/boards/index.php?/topic/53352-convicted-felon-wants-to-take-a-distribution/?hl=prison http://benefitslink.com/boards/index.php?/topic/30012-life-in-prison/?hl=prison http://benefitslink.com/boards/index.php?/topic/25797-participant-entitled-to-distribution-is-incarcerated-do-we-send-a-notice-regarding-his-eligibility-for-a-distribution-to-the-prison/?hl=prison http://benefitslink.com/boards/index.php?/topic/2887-incarcerated-beneficiary-help/?hl=prison

So you only obey the law if you think you are going to be caught not obeying it? I mean there are these great late filing programs that limit the fine. No one likes paying fines but that seems like a better route then just ignoring it. I had a boss that was famous for saying, "problems never get better by just waiting for them to go away."

Beside what is above most find it easier to have two seperate becasue very few 401(k) providers run ESOPs well. There are some ESOP providers that will do the 401(k) and do it well. But if it is one plan you either need to find a firm that can do it all or you have two firms helping you run one plan. I would add now with all the fee disclosure rules if they are seperate there is a good chance you don't have to figure our how to disclose the ESOP part. It seems like the few KSOPs we have we put a fair amount of work in getting the ESOP portion properly disclosed. I think there are good reasons most are two plans.