ESOP Guy

Has anyone even come up with an estimate of the lost earnings? I mean the mutual funds were sold if I read it right. Was the money put into a money market account? If so, even on that much money and interest rates so low the amount could be immaterial. I mean there is legal and it needs to be thought of, but there is the practical also. Has anyone even figured out if there is enough money at stake to make possibly starting a fight with the broker is worth it or not?

I have a self directed brokerage account with an employer 401(k). I always get the proxy info. And anymore with electronic voting proxy I just go online and vote. As far as I can tell the trustee doesn't ever enter the picture.

I have also seen one example where the judge made it clear if the bank teller paid the stolen money back by tapping in this case their ESOP account he would take that into account when determining the amount of jail time the teller would get. The teller paid money back to the employer by depositing her ESOP distribution check into the account of the bank she stole from, signed it over to the bank. But once again strictly speaking they choose to give the money over. In this case the judge did reduce the sentence. One would think a good defense attorney would make that part of an agreement up front.

I THINK the rule is the rule. Besides bonds are cheap. Advise the client to suck it up and buy the bond.

Does the plan say the distributions are made in the form of shares and then the ESOP buys the shares back? That would be a rare set of provisions. More likely as Marcus says the shares never leave the trust so there is no share transaction to report. It is just a 1099-R.

A former employer of mine did this work and the price would vary a great deal depending on all the facts. Contact me if you want a name at my former employer that can get you to someone who can respond to a RFP.

I am not aware of that change. The one that I think one can technically be in violation of is the participant statement requirement. Strictly speaking if you send an annual statement on a trustee directed plan isn't that due to the people by the day you file the 5500? If so, if you prepare them all at once, something I used to do with very small 401(k) plans, and send the paper copies of the statements to the sponsor on the same day one e-files you have done a technical violation haven't you? Mostly asking not taking that position. In this case it seems like the rules failed to keep up with the new ability to e-file.

If there is enough money in the person's account and just a shortage in a source why can't you just move money between sources to correct? The point of correction is to get people back to the point where they would have been had the error not been done. So it seems like the correct amount was paid in the QDRO, but from the wrong sources. So why can't the first correction be get the amount in each source correct and the second correction fix the excess contribution? I am asking, not recommending, but that seems likes the quickest fix. And at first glance seem like it is a legit fix.

Financial Headhunters in WI

To be very specific the QDRO is going to be whatever you two negotiate it to be as GMK says. (When I say you two that doesn't imply that you shouldn't use good lawyers, but in the end lawyers just advise -- you make decisions) But for example if your husband values the annuity and you value current liquidity you could agree to to let him have the annuity and you get something of value outside either plan. I seen the following example. The husband had a PhD and could earn a good living. The wife had a small business and a high school diploma. The husband got 100% of his retirement funds and wife got the house with a very small mortgage and an agreement he would make the house payments for x number of years. He did this because he knew he could get a mortgage again with his earnings. She did this because she knew if she ever lost the house she would never live in the town she was living in again. In short she traded future retirement value for current home equity. My point is in a divorce everything including the terms of a QDRO are negotiable. That is where good legal advice from someone who knows your situation can really help you.

If it is a contribution I would put it on the contribution line. I understand you might worry it exceeds a limit, but I have not found that to be a problem. It has been a long time since I had this issue come up with a plan I was working on for someone.

Google EFAST2 In the upper left corner is a 5500 search. The DOL has published all 5500s on the web since 2009 filings. Before that Google Free ERISA they tended to put 5500s pre 2009. They have a free service and a cost service depending on what you want.

Besides my experience is that bond is one of the cheapest insurance. I would have the owner even ask his insurance agent. It is very common for an ERISA bond rider to be included with his general liability policy automatically. In short I have found that often times the person has a bond and doesn't even know it.

Margin loans MIGHT cause PT issues. It also creates taxable income in the plan. I forget what happens if you have an uncovered loss. Here is a very old thread on it, but I don't think the law has changed since this discussion. http://benefitslink.com/boards/lofiversion...php/t13275.html My understanding is these issues are large enough it is why no one uses margin in plans

Pension Pro are you Poo Pooing their use of the term P O O? edit: sorry just had to say it.

I would defer to QDRO's answer. It sounds like has looked into this question more then I have. I haven't because I can't think of a really good practical reason to make such a transfer. If the ESOP is ever going to need the money have the trustee control the investments. That doesn't require the new disclosures and really doesn't add that much burden to the people running the plan. The reality is that was how most 401(k)s and PS plans were ran not that long ago.

Once again not the strongest answer, but I am not aware of any reason you can't do it. Although like last time I am hard pressed to see the advantage. Most ESOPs need or want the cash for benefit payments and once in the 401(k) plan I have never seen it go back without consent. If you don't mind me asking why do you want to move the cash to the 401(k)?

QDRO is correct there has to be a distributable event.

Consent is not an issue in segregation as no benefit payment is being made. This isn't the strongest answer you are going to get. I am unaware of anything stopping you from putting the money into the 401(k) plan. (and given the new disclosure rules if you give the part investment control in the ESOP it is a pain) This however does raise one of my most common questions regarding segregation. Why are you doing it? If the sponsor is willing and able to put cash into the plan to buy out a person's shares why not just cut the person a check? Why go through the motions of putting it in the 401(k) plan? The reason most ESOPs delay payment is because they need to save the cash for loan payments. But in this case the cash exists, it is in a plan-- but one is just unwilling to give it to the former employee.

I work with ESOPs not these ROBs as the IRS likes to call them. However, you might want to look into the PT exception that allows a disqualified person to do actions that would normally be a PT if it is done because they are receiving a benefit as a participant. Or put into English, I THINK you could distribute the shares at FMV in-kind to the participant. Once they are in their hand there are no more PT issues. I know ESOPs have an exemption that allows them to sell shares back to the employer at FMV, but have never looked into if a ROB can do that also. I am mostly sure you can do an in-kind distribution of a person's benefits without a PT. Note the plan document needs to allow for in-kind distributions which isn't a common feature in a plan document. But it could be amended. Warning: PT failures are very expensive. I would only use this forum or any forum to start the research. If the value of this stock is large ($10K) more it would pay to get good legal advice as failure will cost more.

(This might be the long version of Frizzy's comments) I would add the more lump sums being taken now is caused by the the increase in DC plans. They are not required to offer an annuity so they don't. To be honest even those that do offer it no one takes them. I can count over my 20 years in this business the number of times someone took an annuity out of a DC plan on one hand. Everyone understands a lump sum of money. An annuity takes more thought to understand. As long as I am on my soap box.... This is one of the least talked about reasons DB plans died in my opinion. I worked for 14 years for a company that had a DB plan. I can't tell you how many times I had a co-worker tell me they are leaving for a "higher paying job" and when you asked them they went for a job that paid a few grand more a year, but had no DB plan and the 401(k) plan with no match. I doubt they were making more money on a total compensation basis. But a promise of an life annuity when you are 65 vs a couple grand today most people take the couple grand today. They know what the couple of grand is worth they have no idea what a life annuity at 65 is worth, so it is for all practical purposes worthless to them. Off soap box.

If you want to learn the fundamentals and build from there I would see if your employer will send you to one of the fundamentals classes these guys offer. They are about as good as it gets. Also, once you attend you can get signed up for their e-mail updates. Maybe you can get them without attending. But their one and two day fundamental courses would be a good place to start. They tend to do a good job of documenting where in the code or regs they are getting what they are saying so you can base your research off of that. http://www.relius.net/products/seminarspension.aspx And "yes" just about every plan allows a non 5% owner who is working to not take an RMD. You will always find RMD language in the document as it will not get approved by the IRS without it.

In regards to a RMD the point of that law is to make you take money out of the tax deferred bucket and pay taxes on it. The fear congress had was the very rich could retire and have enough money to never take their money out of their IRAs and 401(k)s etc. And thus they would never pay taxes on that money in their life time. And since you can pass IRAs and 401(k) money on to say very young grandkids it could be a very long time before the gov't gets what it sees as their money. So they force a ®equired (M)inimum (D)istribution that one has to pay taxes on it.

I guess I don't understand. If the check was for the gross - withholding why wouldn't the gross, taxable, and withholding all be the same? example: first time dist was gross 10,000, withholding 2,000 net 8,000 1099-R was gross 10,000 taxable 10,000 withholding 2,000 now dist is gross 2,000, withholding 2,000 net 0 1099-R is gross 2,000 taxable is 2,000 withholding 2,000 By the way I am not taking the position that you should even be doing a new 1099-R. I think a case can be made if they guy had the check and could have cashed it he had constructive receipt of the money and it was taxable in the year he got the check. If he gets a new check it is now not taxable it is just a replacement check. I will let others debate that idea if interested. edit minor typos

MEGK: I still don't know what it is your client wants or expects. You have never answered the question what harm or what the client wants. You just keep going on and on about how this information or that notice/form wasn't timely delivered. At this point if your client could wave a magic wand what would be the perfect end result for him? Because like I said so far all I hear you saying and asking is how much trouble can you make sure the plan get into. Is the point to create trouble or get something constructive done?