ETA Consulting LLC

There is an "OPTION" to take out a policy loan and to scale the value of the policy down before you distribute the policy in a taxable distribution. The policy owner may have to begin to pay the premiums at a quicker rate, but this will avoid some of the tax hit from distributing the entire policy. Good Luck!

And, of course, I remember the conversation. I never learned to add a link to another conversation into a current discussion. As a result, I often find myself merely speaking to what's right there in front of me at that single point in time :-) It's a bad habit, I know. It has to drive the bandwidth through the roof Good Luck!

When you look at the instructions on "Who may file a Form 5500EZ", there is a clear differentiation for "Partners in a Partnership". So, if you and I are both 50/50 owners of an S-Corp (and are the only employees), then we do not get the option to file a Form 5500EZ. Good Luck!

Now, you can provide the additional $6,000 in nonelective (which may result in having to provide additional non-elective contributions to other NHCEs). If his election was to defer only $18,000; then you'd normally need another $35K in employer contributions to get to his $53,000 limit. You can, instead, provide $41,000 in nonelective to get to his overall $59,000 limit (and make $6,000 of the $18,000 deferred become catchup). You'd, then, have to contend with a larger reduction to his "Earned Income" after the additional $6,000 in nonelective plus whatever else is provided to NHCEs in order to pass nondiscrmination. Call me lame, but doesn't this get you pumped (at least a little) :-) Good Luck!

I think I understand your question. What exactly is a written "notice" of a DRO? Either you have a DRO or you do not. Based on debates and discussions I've had over the past 15 years (of my 20+ years in the industry), I've evolved to just that; "a receipt of a DRO from the court". In many instances, the time frame between such "notice" and the actual DRO should be relatively small, but you cannot always account for someone else's red tape. When you consider that with respect to protecting the participant's rights under the terms of the plan, then you could easily say that the 18 month determination clock starts at the time you receive the actual court order. This approach would put the onus of getting a DRO drafted, signed by the court, and submitted to you squarely where it belongs; on the attorneys and the court. When you look at it, it basically boils down to where you draw the line. I've evolved on this (through a series of lost debates I've had over time) that the line is drawn on when you receive the actual court order. Outside of that, what other authority would you have to deny a participant any right under the written terms of the plan? [This is merely where I am on the issue. I would easily respect any differences of opinion; it's just this approach seems the most consistent to me.] Good Luck!

So, the company contributions that were directed toward each owner where used to pay the insurance premium for the respective owner? This is the equivalent of an investment of a portion of that owner's account balance in an insurance policy. Even in a balance forward system, the top-down allocation of earnings would apply only to the owner's balance that doesn't include the insurance policy (as the insurance policy would be a separate investment of the account balance for that particular owner). I'm trying to keep my semantics in check while trying to explain the concept. Good Luck!

Just a reiteration of the distinction you have already made: For the terminated at age 55 provision, it is "In the year you turn age 55" or any subsequent year. So, if you terminate employment January 1, 2016 and turn age 55 on December 31, 2016; any distribution during 2016 from the qualified plan will be exempt from the 10% early withdrawal penalty. The age 59-1/2 provision, it must be 6 months after your 59th birthday; there is no "in the year of" provision. You've already made that distinction, but I thought it was worth reiterating or other readers. Good Luck!

Are you sure they're not subject to ERISA? When making this determination, a plan covering only partners of a partnership is different from a plan covering owners of a corporation. Good Luck!

How were the premiums funded; from the entire plan or from the principals who were the insureds account balances? Typically, each insureds own account balance is used to fund the premiums for their individual policies. Therefore, any cash surrender to go directly back to them; as it presents the equivalent of an investment of dollars in their account. Good Luck!

I wasn't going to ask, but I know what you're getting at :-)

To answer "ONLY" your question about the TH minimum, you are correct. There is no "mandatory aggregation" for Top Heavy because there are no Key Employees in the 2nd plan (and nothing else that would require them to be aggregated). Good Luck!

Okay, it was actually from a position that Derrin Watson took in his book "Who is the Employer". He explained a case he worked on when the IRS threatened an adverse letter. The case given was where: X was in the controlled group with Y Y was in a controlled group with Z X was not (directly) in a controlled group with Z. In the issue he presented, Z had more employees than X and Y put together. X had a provision that automatically brought in members of the controlled group. So, when the IRS took the position that Z was a part of the group with X & Y, they ended up redoing the allocations for several prior years in order to bring Z's employee into the plan. Regardless of which school of thought you subscribe, it appears as if the IRS can arbitrarily choose to disagree depending on the facts of the case. Since my research, I chose this method because if Y is a controlled group with Z, then by definition Y is equal to XY (because they are treated as a single employer for controlled group purposes). There does not appear to be any rejection of that logic. NOW, not to change the subject, but if we look at the attribution rules of Section 318, there is actually language the rejects double attribution. [i'm just using this to illustrate my thought pattern]. If I own what my father owns, and my father owns what my sibling owns, then that DOES NOT mean that I own what my sibling owns; because there is a plain language rule against double attribution. The controlled group rules, to me, do not appear to do that. But, you did state your position on the Vogel Fertilizer case and "Informal" positions taken by the IRS. I'm still not on that because these are, at best, arguments where there is no clear precedent. {There are very few items in this industry where I remain on the fence with an issue. This will likely continue to be one of them} Good Luck

That is a fair request. This is something that I researched years ago and held that position since then. I can retrace my research to determine why I came to that conclusion. This will take a little time. Again, it is a perfectly fair request. When you take a position, you explain why it is you have that position. Right now, all I have is that I confronted it years ago and held this conclusion based on research I did back then. It's only reasonable that I should be able to research it again and either defend that conclusion or determine what I may have missed. To be continued...

This is true for qualified plan purposes. This illustrates one of the major differences between being part of a controlled group for income tax purposes and being part of a controlled group for qualified plan purposes. For qualified plan purpose, it's exactly the way actuarysmith illustrated. For income tax purposes, your logic seems correct; except that A could get to choose whether to file with "B/C" or "D". Good Luck!

No suggestion. Just submit and see what happens. This actually happens all the time. Sometimes, they may send a letter, which requires an extra step of providing them an explanation. It's just one of those unfortunately imperfect situations we deal with. "Merry-go-round" may be a bit of an overstatement. Then again, it may be a bit of an understatement :-) Good Luck!

It is, and we're looking into that possibility. Unless it is a related employer though it wouldn't matter. As far as this plan is concerned it's not technically a catch-up contribution at this point. Thank you, Lou. I don't think I have anything else to add. Maybe one thing. If some who's 50 (or older) is making $1million a year and choose to defer 6% of salary. I never understood the notion of asking that person would they want to defer at $18,000 or $24,000. Just take the 6% until you hit their eligible limit. Anything else would appear to be overthinking an otherwise simple concept. Good Luck!

When they exceeded the 100 employee limit for 2013, that means that the limit is considered as met for 2013 and 2014. This would mean they continued to be eligible for the SIMPLE IRA for 2014 and 2015. So, if they failed to get back below that limit by 2015, then they would not have been eligible for a SIMPLE IRA in 2016 and VCP is used to correct the Eligibility failure and for having another plan. For these types of Employer Eligibility Failures, there doesn't appear to be applicable excise taxes. Good Luck!

Hmmm... That's a good question.... I don't think it would be consistent with the notification criteria before each transaction. I think it would be safer and more consistent to have the election done once a year. How many times is the employer actually funding the NEC, once a year? I would put the onus on them to say until you take the initiative and inform me that you're ready to do this, then I have to assume that you're not. I know this seems to run counter to the 'white glove treatment' we attempt to give to our clients, but you also don't want to set yourself up to fail by not managing realistic expectations. Just some thought, but a good question. Good Luck!

Sure they can. Being "subject to ERISA" simply implies that the DOL has some enforcement of employees' rights. Rollovers are under the IRS's purview as it deals with moving funds to other tax-advantaged vehicles without a taxable distribution. There are some 401(k) plans that aren't subject to ERISA ( solo-k). Good Luck!

That was my initial thought. Did the resolution amend the plan until the plan could be formally amended. I've seen many of these. Good Luck!

So, you're asking if the participant is part of a plan that provides for hardships, can they be granted one? I know I'm missing something, but what is the question? 99.9997% of the time, you are safe following the terms of the plan. The other 3 out of a million, the plan may contain language that is inconsistent with the Regulations, and you would then follow the Regulations. Good Luck!

I got the fact pattern mixed up. I was reading that the payroll date was 9/25 and the funds were withheld at that time. It's my bad, but 99% of the effort in answering questions is actually determining the fact pattern; and I failed miserably! :-(

Yes, it would be receivable since it was actually deferred by 9/30 but not actually deposited by then. This is actually consistent with what chc93 stated. Good Luck!

Yes. I'm saying that I cannot see where a Form 5500EZ would be the appropriate form given the limitations on the rule requiring those S-Corp owners to be treated as Partners in a Partnership. Had the rule stated "for all tax purposes" or something less limited, then a blanket application would appear more reasonable. In this case, it appears that the rule was created with the limited intent of having a fringe benefit treated as "not" being given to an employee by the company. There's a tax impact, but not intended to change which plans are considered covered by ERISA. Good Luck!

Don't listen to 'hr for me' or ShERPA. Just listen to David. I cannot fathom any risks with your approach. Please forgive me that this post is a bit out of character for me. I just had to do it. On a serious note, this discussion should end at your ability to take out a loan of about $12,500 (depending on your plan's loan provisions). Everything else involves a personal investment strategy that doesn't impact the plan; and (I think we all agree that) your reasoning sounds very dangerous. Good Luck!