ETA Consulting LLC

Need more detail. You're only using up to 5 in the analysis, but the attribution rules do apply. Hence, if the 10 individuals are 10 couples (husband and wife), you'd basically end up with 5 owning those shares. Good Luck!

If they withheld 20%, then they should've given you an option to directly roll the distribution over into an inherited IRA. They can say the plan rules require them to remove it from that plan, but those rules do not require that you take a taxable distribution in cash. You should've been given an opportunity to roll it over. By SIP, I am assuming you mean "Savings Incentive Plan" which is an arbitrary name. It does appear to be a qualified plan since they withheld 20%. They should correct this and provide you with the options you shoud've been given prior to that distribution being made. Good Luck!

True, you merely identified a "potential issue". Mathematically, if their deferral amount remains 'at or below' 4% of Compensation after the fluctuations, then there would be no change in the matching contribution; as it would equal to the dollar amount of the deferral. In other instances, you are correct. All you'd need to do is the mathematical determination of the matching contribution to determine the difference. Then educate the client on why the match 'must be calculated' each pay period and not treated as a fixed amount. Good Luck!

BG5150, While you may be joking, I'm not too far way; I do keep mine on an Excel spreadsheet :-)

Sure. You'd want to ensure the transaction is structured properly as to not convolute the after-tax account with other pre-tax assets. Good Luck!

I'd say "A", but for a different reason. There really isn't a legal requirement to report this each year. This income is imputed to the participant each year in order to ensure the pure death benefit (calculated as the face amount of the policy less the cash value; aka net amount at risk) gets paid from the plan income tax free. The reference for this is Section 72(m)(3) of IRC. So, I wouldn't have this imputed income as there would be no death benefit needing to be paid from the plan income tax free in the invent the insured dies. Good Luck!

This becomes an "apples and oranges" issue very quickly. We agree that "IF" you fund a premium for an asset of the plan, then that is a contribution to the plan. "HOWEVER", if the premium is funded to a "self-employed" individual (e.g. sole proprietorship or Partnership, etc...), then there is no deduction allowed on the contribution used to fund that premium and no tracking of Table 2001 (or any economic benefit basis) for that individual. We must be careful to keep these two issues separate when we communicate; because it can get confusing very quickly. Good Luck!

You several tests working together. I'd look at it like this: When you run your 410(b) test, you'd have a percentage of employees who actually "benefit". This is the population for whom you are running your 414(s) test on. So, your question is how is this individual reflected on your 410(b) test when they are part of an eligible class but merely fail to earn the type of Compensation that is necessary to receive the particular contribution. It is confusing; which is why I try to design the plan away from this issue :-) If a person is "eligible" to defer or receive a match for all intents and purposes except for the fact that all his Compensation is "supplemental"; is he benefiting? If you're answer is yes, then he's included in the 414(s) test. If you're answer is no, then he is not. I've seen this both ways, but typically say that he's not benefiting. Good Luck!

I agree. Both are available, and remaining available, but you're merely changing the default. Good Luck!

It's the 30 day rule. The extension of time in order to determine your compensation (arguably) doesn't appear to apply to SIMPLE IRAs. Good Luck!

401(a)(4) is the rule that requires a plan to be non-discriminatory. Without getting into semantics of "deemed to satisfy" versus "rules do not apply", the general requirement is that a plan meet the non-discrimination rules unless an exemption exists. When we look at how these plans are tested, ADP/ACP is actually more lenient in that HCEs (on average and regardless of age being used for some cross-tested advantage) may receive contributions at a rate that is 2 percentage points higher (lesser of 2 plus or two times) than NHCEs. No other test does this. These tests, coupled with "benefiting" being defined as merely being eligible to contribute (or receive a match if you were to contribute) allows the plan to pass 401(a)(4). Agree or disagree, but ADP/ACP is how you meet 401(a)(4) requirements with respect to Elective Deferrals and Matching Contributions. Otherwise, you can have a church that isn't required to pass 410(b) and design a plan where only the HCE is eligible to defer. You have no test because only HCEs are eligible to defer. That wouldn't make sense to have to test the same plan under ADP/ACP merely because you allow NHCEs to defer (when you are exempt from 410(b) if you leave them NHCEs as ineligible). This is why the rules are silent on ADP/ACP, because these are merely methods to satisfy 401(a)(4). If 401(a)(4) does not apply, then neither would ADP/ACP. Good Luck!

It would not be subject to ADP/ACP. Keep in mind that elective deferrals are "employer contributions" made pursuant to the employee's election. These amounts (like matching contributions) satisfy the non-discrimination requirements of 401(a)(4) by passing their respective ADP/ACP tests. Since church plans already satisfy 401(a)(4), then no ADP/ACP test is needed for these contributions. The difference of opinion here result from not understanding that you meet the non-discrimination requirements of 401(a)(4) by passing the ADP/ACP tests. Therefore, when you are already deemed to meet 401(a)(4), then no ADP/ACP would be required. Good Luck!

74, because it's their age on 12/31 of the current year. Good Luck!

You're a 5% owner for a year is you're a 5% owner for "any time during" that year. For HCE purposes, you have a two year period for which a 5% owner would be an HCE. Hence, assuming a calendar year plan, the spouse would be an HCE until the plan year beginning January 1, 2015 (assuming the divorce is finalized in 2013). For Top Heavy, she would be a Former Key Employee in the following year (2014). Good Luck!

No problem. Your asking if it is necessary to meet 402(g) or a deferral limit in order to be catchup eligible. You do not, but need to meet any statutory or plan limit. 415 is a statutory limit, so your scenario is fine. Good Luck!

It's an asset sale where the purchaser takes over sponsorship of the plan for those employees. I would suspect there is a spinoff of the portion of each plan covering only those employees who were acquired through the acquisition. If those owners are now employees of the purchaser, then the purchaser just takes over sponsorship of the plan; leaving the seller with a company that has no assets (other than a huge sum of cash and goodwill). No big deal here. As for the HCE issue, I would look at the possibility of using the transition period under 410(b)(6) for companies entering controlled group status for the first time as the period for which the definitions must be aligned. The immediate issue would appear to be that they are not a controlled group (even though they are treated as such since the purchaser has taken over the assets of the plan). This is merely where I would begin my research, because I don't have an immediate answer to your question Good Luck!

BUT, he is implying that Company A took over B's Plan. Did this happen?

Let's suppose that the amount being distributed consists of $5,000 ($4,800 in contributions and $200 in earnings). You instruct the system to withhold 20% ($1,000). Would that seem appropriate? Also, hardships are not eligible for rollover. Therefore, there is no "mandatory" 20% withholding. Did the participant elect to have 20% withheld? If so, I'd try applying the 20% to only the earnings and see if this is what the system is doing. Of course, we know there may be a 10% early withdrawal penalty on the entire amount which may make a 20% withholding from a Roth Contribution seem reasonable in this case. I'm just trying to imagine what the system could be doing in this particular instance. Good Luck!

The intention is to provide a correction mechanism to "make the employees whole", but that one section falls short on identifying a "brief exclusion". The section references "plan year" while 401(a)(30) and customary tax planning is done on a calendar year basis. Suppose the "plan year" begins on October 1st. Under the IRS's procedure, the participants now have January 1st - September 30th to make up additional contributions. The problem is that this 9 month period is in a new tax year of the participant and does nothing to make up the fact that they were screwed in the previous tax year. Good Luck!

Correct, so they won't qualify for a "brief exclusion" exception. I think the 9 months is poorly written because it does just that; says the correction is only for deferrals missed by March 31st. However, I would argue the ratio 9:3. If you have 3 times the amount of time that the deferrals were missed, and this would be ample opportunity for the individual to adjust the deferral in order to contribute the maximum level allowed under the plan; then that should be equally acceptable. Suppose you're in September and you missed deferrals on a two-week payroll. There is an argument that 3 remaining months is more than enough time needed for each employee to adjust their deferral rates to make up for that missed two-week period; heck thats 12:2 (much better than 9:3). There is a compelling argument that this would effectively qualify for a brief exclusion exception; even though obvious argument to the contrary is that it's not reflected in EPCRS. Good Luck!

No. The emphasis is on the 9 months; providing a significant opportunity for each individual to increase their deferral amounts prior to the end of the year. This does not save the employer from making up the match that would've been provided. It saves them from having to make up for the missed deferrals, because 9 months is considered long enough for each employee to catch themselves up. Good Luck!

Thats a good reason. I assume the employer does not have "limited involvement" in the contracts (either making employer contributions to the plan or some other form of involvement making the 403(b) suject to ERISA). In such event, your approach makes perfect sense. Good Luck!

Sure, but why? Good Luck!

I agree with you, except that you have a 'semantics failure' between "separation of service" and "severance of employment". What are you going to do with the plan, if 100% of the employees are terminated, isn't that a "partial termination"? Is the new company going to takeover sponsorship of the plan (and retain predecessor service)? Is everyone's employment and vesting clock going to reset to zero? What you are trying to accomplish? Again, I agree with your analysis so far, but there is a difference between answering the question and solving the problem. The answers seem to have you back at square one. It will seem to become a non issue if the new company takes over sponsorship of the plan. Good Luck!

The plan's language may designate the participant's estate as beneficiary. In such instance, it is no longer a qualified plan issue. You "may" argue that the will applies to the estate, and then have the estate pay those proceeds to the intended person (as designed by the will). Just something to look into, because I think we all agree that the terms of the plan will govern. Good Luck!