ETA Consulting LLC

You should, first, refer to the plan's written language. Does it state the surviving spouse is beneficiary? If so, does the plan provide any instances where the spouse would not be the beneficiary? Good Luck!

No, they are not. Look at it like this: 1)Assets plus Liabilities = Capital. 2) Therefore, Capital = Assets minus Liabilities 3) You have established that each year, 20 members share equally (5% each, but not more) in that capital. 4) Profit is the "increase in capital" for any one member. Therefore, you and I can own a business 50% each. I can perform 2080 hours of work at $10,000 per hour and the business can make $120,800 in revenue. After paying me $10 per hour ($20,800 for the year, a salary expense) the company will have a profit of $100,000; which is retains. Both of our capital interests has increased by $50,000 (50% each). The fact that I worked and received $20,800 does not mean I received more profit (because that did not increase my capital interest in the company). Hope this helps. Good Luck!

No. No. These aren't qualified plans subject to coverage rules of 410(b). They are self-contained vehicles with explicit rules on eligibility. Good Luck!

1) Don't know. It is definitely a B-ORG. Not sure if IT consulting would qualify as Professional Engineering. However, it is an Affiliated Service Group Between B and C where C is the First Service Organization and B is the B-ORG. 2) I'll assume that C is providing it's IT Consulting Services to A. I'm not sure if TI Consulting would qualify as professional engineering services, so that may take the A-ORG analysis way. If we were to do a B-ORG analysis between A and C, we know that A would be the FSO (depending on whether it is actually a service organization) and C would be a B-ORG only to the extent C is owned (or deemed to be owned) by one or more of A's HCEs in an amount of at least 10%. I don't believe there are enough details to perform a complete analysis. Details are important. Good Luck!

I didn't realize this was in the Defined Benefit forum. I kept wondering why everyone implied DB.

You understand

Test Question: ABC, Inc. has two employees; John and Jane. John and Jane are not related. John owns 95% of the ABC, Inc. and Jane owns 5% of the company. John received a salary of $60,000 during 2012 and Jane received a salary of $115,000 in 2012. Who are the HCE(s) in 2013? A) John B) Jane C) John and Jane D) Neither John nor Jane There are some very important concepts in this question.

Not by statute, but a plan may choose (in limited instances) to continue to allocate and correct the 415 with (let's say) a return of deferrals. But, you know this already

The plan doesn't have to, but the plan's language will govern what to do in this instance. Good Luck!

Nothing would change. The "definition of 5% owner" is one of several criteria. You'd match the individual against each of those criteria in order to determine if he's a 5% owner or not. This analysis is done only once; in the year the individual turns age 70 1/2. It's not done in subsequent years. Good Luck!

You should reference the language pertaining to non-discrimination testing in the document. These are merely definitions. A 415 Limitation Year can be the calendar year when the plan year is off-calendar. This does not mean that 415 Compensation is calculated for the same 12 months. Good Luck!

No. It's calculated on the Participant "only in the year of death". In subsquent years, it's calculated on the longer of two life expectancies: 1) The participant's in the year of death minus 1 for each year; or 2) The surviving spouse's single life expectancy in the year of distribution. Good Luck!

1) Yes. Any remaining RMD that was already paid to the participant would be given to the Spouse prior to December 31st. 2) The spouse may roll "IMMEDIATELY" after taking the remaining RMD in step "1" above. If she crosses into another year, she would be required to take the RMD for that new year prior to rolling into her own account. 3) Yes. 4) Yes. Missing something? No. However, if the surviving spouse is "older than the participant", then she may be better served by contining to take the RMD from the plan (or even rolling directly into an inherited IRA and continuing to satisfy the RMD based on the decedents life expectancy). But, like you clearly stated, if the spouse is not age 70 1/2, then immediately rolling over to "her own" IRA would cease any RMDs until she turns 70 1/2. Good Luck!

The Calendar Year option is used for HCE determinations, and even 415 Limitation Years. I've never seen a non discrimination test done to that extent. If done, it must be reflected in the document. I cannot fathom it. Good Luck!

The plan should have written language to address your situation (assuming the client in following the terms of the plan with respect to the method in which they allocate their contributions). Good Luck!

Yes. When performing a correction for missed contributions, catch-up seldom (if ever) comes into play merely because the percentages are low. Hence, you're safe in merely applying the percentages (as you just did). If, for any reason, the $1,625 would've created catch-up for that individual, then you'd proceed with the $1,625 because the percentage (as you calculated) is the driver. Catch-up merely increases the individual's deferral limit (even though there is a universal availability requirement when offered). I agree with your method. Good Luck!

This, unfortunately, happens too often. Sometimes, you have to remind them that someone who is duly authorized to issue the instruction (i.e. the Plan's trustee) has done so. Making a decision to 'not follow those instructions' could come have implications. I've seen this where TPAs who are on Revenue Sharing arrangements would not honor those requests for personal reasons. I've never tolerated the antics and would immeditately threaten legal action. Just send a letter (have the trustee sign) of a notice of intent to file suit for not transferring the funds. You do have to ensure the service agreements (and any other contracts) actually support your position. My experience has been that many time they are; and the TPA is merely trying to impede decisions that were already made; arguably unethical. So, without choosing sides, just treat it as a process. Good Luck!

No. HCE determinations are at the "Employer" level. If I work for these two companies during the same year; and make $75,000 for PE1 plus $80,000 for PE2, I would "NOT" be an HCE because I didn't exceed the limit for any one Employer. Now, this would be different if these two companies were part of a Controlled Group. Good Luck!

At what level would the individual's deferrals would've been classified as catch-up. If the deferral is missed, then I would calculate under the prescribe formula. When their limit is reached (including catch-up), then the contributions would cease. A missed contribution is a missed contribution, catch-up or not. If the missed percentage would enough to place the individual into the catch-up category, then it is still consistent with the correction formula. I cannot imagine a 50+ year old saying 'I want to defer x percent of my salary, but I don't want any catchup'. The percentage is the driver; no need to change it. Now, if that same person made an election to defer x percent, and you cut them off at $17,000 instead of continuing to $22,500 (because you thought they had to actually turn 50 prior to catchup instead of merely turning age 50 during the year; 12/31/2012), then you would have to correct for not allowing them to defer their catchup. Good Luck!

They are treated differently when they are actually annuitized. In that instance, the RMD is deemed met (regardless of the amount) since you are annuitizing over the life (or joint lives) of the taxpayer (or taxpayer or beneficiary). When the annuity maintains an account balance, there is no requirement to maintain a separate calculation. Good Luck!

Even though it's outside the safe harbor period, there is still an argument it was deposited as soon as administratively feasible under the circumstances. You can either document the delay to this extent and move on or correct as a late deposit under the established procedure. Good Luck!

I have actually seen the MetLife document that you are referencing. That is what led me to believe that this was possibly okay under the law. Which is why the IRS needs to hurry up with their opinion letter program for 403(b) Plans. Also, if a person from the podium is going to take a position, it would help if that position is referenced in the Regulations. We hear comments all the time about 'how the IRS gets it wrong during audit by attempting to take positions against things that are clearly supported in the regulations'. Right or wrong, all of these instances will have common ground; the "written" Regulations will serve as the frame of reference for which all arguments are made. Good Luck!

Don't be surprised if it does. I've seen some very unfortunate language in documents (i.e. accrual requirements on Safe Harbor 401(k) Contributions) in my days. Hopefully, it will become a more reasonable approach to "follow the document" when the IRS develops their review of 403(b) documents. Not saying that following the document is not currently a reasonable approach, but you are still required to "follow the Regulations" when the terms of your document are inconsistent with regulatory requirements. Good Luck!

403(b) plans have their own definition of "Includable Compensation". Unlike qualified plans, there is no concept of 414(s) allowing you to use any non-discriminatory definition of Compensation. So, I would not think that (for deferral purposes) you could exclude these amounts from Compensation. However, if the employer choses to make an Employer Contribution (i.e. Nonelective), then the rules of 401(a) apply where you could use any definition of Compensation that satisfies (if applicable) the non-discrimination requirements. Good Luck!

This is still debatable. The case I remember reading was pertaining to a DB plan where the impact was to benefits already accrued. Being a DC plan, the Contributions made each year are typically made with respect to Compensation for that year. I say that to suggest that if you were to consider this option, it would be a change in the language effective at the beginning of the next Plan Year (it doesn't have to be retroactive). In the meantime, the employer (as plan sponsor) maintains that this is how they interpreted (and continue to interpret) the plan. They are merely changing the language to clarify what was always interpreted. The concept of interpreting the documents of the plan is 'flexible'. Even the courts have ruled that the interpretation doesn't have to be the best interpretation, but it must be reasonable. In this instance, the language in the plan expressly gives the Plan Administrator the sole authority to make the interpretation. The IRS, typically, states that they are fine as long as the interpretation is not 'arbitrary and capricious'. Arguably, this provides a little relief since you have consistently applied the provision in the same way. Now, had you did the calculation annually in one year and by payroll during another (while changing in an arbitrary manner), this would not be the case. For comfort, you can file VCP. I've seen intepretations (by attorneys writing legal opinions) that pushed the envelope much further that this. At the end of the day, your "client" has a decision to make. Good Luck!