ETA Consulting LLC

If I, personally, am part of a plan where I feel my rights as a participant aren't being enforced, then I would not hesitate to contact the DOL. The DOL investigators I've worked with tend to be very knowledgeable and proficient in their craft; and seldom let their emotions guide their decisions. To my knowledge, prudence is a fiduciary standard under ERISA that does not yield to any plan type. There may be flexibility, but how much? So suggesting that since the value is at an all time low the owner isn't excited about selling would appear to place the owner's interest (as an individual) above my interest as a Participant in the plan. I could be way off base, but I though that's what the Prudent Man Rule was design to prevent. These are determinations that may differ based on whose being affected; which is why I would've contacted the DOL a long time ago. If nothing else, they are objective (I do give them that much credit). Good Luck!

I appreciate your position, and that works perfectly for you. They could've said a "rolling 12 month period"; or is that what we are interpreting "in any" to imply? A rolling 12 month would create a condition of no flexibility where you'd have to create an 11 month cycle. Suppose you send it out on June 30, 2013 and again on July 1, 2014. You would've clearly violated the rolling 12 month period; thereby tying yourself to create a buffer each year. If you are allowed to subsequently choose (any consistent 12 month timeframe), then you have the flexibility to choose either calendar year, plan year, or any other 12 month timeframe to base the period during which you'd meet the requirement. So, that leaves us back to my original question.

I think we agree that whatever the approach, the onus is on the participants to ensure their loans remain current. I know in some districts, teachers are allowed to choose between getting paid over the 12 month period or 10 months during work. In either case, they do not appear to be excluded from loan repayment (as it doesn't appear to be a bonafide leave of absence granting an extention). Receiving your annual compensation during 10 months appears different than going on unpaid leave for up to one year, but that's an interpretational issue. I'd send a right to cure by the end of the quarter after the quarter in which the first payment was missed and move on. If nothing else, that would reenforce the notion of it being the participants' issue, not yours or the employers Good Luck!

I would normally agree, but the system is designed to ensure the employees interests are protected; especially in situations where the employees aren't skilled enough (or versed in the rules) to ensure their interests are being protected. When you have a right to something, but fail to benefit from that right due to someone keeping you misinformed, then there are implications. The government has some enforcement mechanisms to ensure employees are protected when they do not have the authority (or background) to protect themselves. In fact, a large percentage of the "random" audits are a result of situations where employees request DOL involvement where they feel they aren't being treated fairly. If you feel the employer has set up an ESOP, refused to sell the shares to the ESOP in anticipation of the growth in value, and left amounts invested in a Stable Value fund since 2008 when markets have doubled since that time, there is no negotiation (because you're saying you were screwed by your employer). Are you being unreasonable? I don't know, but your fact pattern suggests that you believe you were. Good Luck!

Annually could mean: Once in a rolling twelve month period; Once within each designated 12 month Year (i.e. Plan Year or Calendar Year) regardless of when. I don't know, but it's a good question. Can you meet the requirement by disclosing January 2013 and November 2014 (satifying the requirement under a once inside each calendar year) without being limited to a date specific requirement within each year? I would like to think so, but it doesn't appear to be any guidance on what 'annually' means. Do we have a cite that address this?

There are several apparent fiduciary breaches that would fall under the DOLs purview. You should contact your local DOL office and provide them your fact pattern. Good Luck!

Just terminate the Keogh effectively immediately. You can then fully distribute the balance and roll over to an IRA. Prepare the zero balance Form 5500. You'd have until the extended tax filing deadline in order to establish and fund a SEP; you'd just use the SEP prototype to establish it. Good Luck!

That's a good question. I know that, generally, the spouse must consent to each beneficiary designation. I "think" they may do a blanket waiver, but would have to verify. The rules are in Section 417 of the Code. Good Luck!

No. Qualified Plans that are subject to ERISA are excluded from a bankruptcy estate and protected against anti-assignment for non-bankruptcy issues. This is the highest level of protection (ERISA). For EZ plans, you have no ERISA protection. I've always recommended the owner put a child on the payroll and make the child a part of the plan in order to ensure ERISA protection. This is all Federal Law. IRAs have many other facets, depending on the laws of the State the IRA is issued in. We know there is protection in bankruptcy since certain IRA amounts are exempted from the bankruptcy estate. Remember, excluded and exempt are different. The issue comes into play when when go outside of bankruptcy. This is only the beginning to answering your question. Good Luck!

This would should be pretty easy provided that your document doesn't contain a provision providing that assets remain exclusively with the provider in order to rely on the prototype document's opinion letter. Just create a Self Directed Brokerage Account in the name of the 401(k) Plan. Unlike any other SDBA, this account would house only the Roth Deferral Amounts. The remainder of the platform could be used for all other amounts (including the pre-tax deferrals). Remember, a plan asset is an asset of the plan regardless of whatever platform it is on. You'd only have to ensure you count these amount properly any any reporting (e.g. Form 5500 EZ if applicable, and distribution taxation for amounts from the Roth Source). There's always flexibility on how the plan is recordkept; you can create a different brokerage account for each separate source of funds while ensuring you deposit the appropriate amounts to each source. All you have is a recordkeeping issue; not a plan design issue. Good Luck!

I totally mis-read the question. I thought the question was regarding a mid-year amendment

When you're attempting to correct something that shouldn't have happened, your goal is to make the plan whole; so basically you're undoing everything that was done to the closest extent possible. This means the entire amount goes back to the exact sources it came from. Not addressing the actual situation here, but just the general rule on corrections. Good Luck!

They can amend out entirely, but they cannot amend to lower while maintaining the safe harbor. Good Luck!

They are taxed as a partnership, right? He's going to experience the same tax treatment whether his contributions go in the plan as a deferral or a nonelective. I think that you have the answer in your OP. I would just design the plan to exclude the Partner 2 (even if by name) and design the plan to include all employees; since there's only one left. Good Luck!

Well, the owner could easily get $55,500 into a uni-k each year, so the question becomes how important is the additional $17,000. Anything above $55,500, he'd have to look at a DB unless he has a spouse to add to the payroll. Keep in mind that a 412(e) is a DB plan. Good Luck!

Your question is whether they should be included as participants in the beginning of the year (potentially making them a large plan in certain instances), or in the middle of the year (totally eliminating them from the count since they were fully distributed by year end). If I were doing it, they wouldn't be reflected in the count based on they way you explained it. So, they entered mid-year when they received contributions and left the plan when they were fully distributed. Good Luck!

Nothing is stated in the regulations regarding 'step parents'. I would argue that had the step parent previously adopted the participant, then they would be 'deemed' a parent. I just think there are rules that clearly differentiate step parents from biologial parents (and adoption is where the step parent would actually be treated as the biological parent for purposes of the rule being addressed). Good Luck!

Remember, there are two types of Gateway: 1) When you compare rates of allocation to different employees (e.g. 1/3rd the rate) and 2) when you provide a flat percentage (e.g. 5%). I believe the 7.5% is a comparative rate where this is the maximum level needed for any amounts allocated to HCEs. The emphasis in on the fact that it is a comparision rather than a fixed rate; in which case you'd use the definition of Compensation used for allocation purposes. You would need to verify this, but this is just my memory of how it works. Good Luck!

No. Just create an Owners' 401(k) Plan giving each member the 'right to defer'. Also, place each individual in a separate class for allocation purposes. You "may" run into issues when attempting to allocate nonelective contributions to one Partner and not the other. You want the decision to be a employer decision irrespective of the elections of any one partner (in order to avoid the 402(g) limitation on all contributions). You can design a plan with enough flexibility to have the 2nd partner eligible while not benefiting. Or, you could create an Owner's 401(k) Plan and flat out exclude the 2nd Partner; it'll pass 410(b) and all other tests. Good Luck!

There is no such thing is one is better than the other. It depends on the individual and what you're trying to accomplish. One advantage of whole life is that it is a permanent policy, so you're premiums will not change as you get older; so you did good to get underwritten at such a young age. Term, on the other hand, it limited by the term; say 20 years. Suppose, after that time, you're terminally ill and your term just expired. You'd be unable to get underwritten for a new policy. However, some term policies are now convertable to whole life where you're still in the same class (i.e. Preferred), but your premiums will still adjust for your increase in age. There are many variables. You'd just have to choose the set that fits your situation, but don't think in terms one is better than the other in all instances. Good Luck!

"Like" I am actually going to use this.

Why not? I'm thinking that once a plan has failed to timely amend, then it is an open game where amending to a prototype document that obtained an opinion letter by the time the document was due to be restated would suffice. Even if it didn't, the EGTRRA restatements could be retroatively adopted back to January 1, 2002. You're really not amending any of the plan's language, you're just restating to a document containing all the required provisions. So, I'm with you on this one. Good Luck!

Well, the contingent deferral rule, I believe it's Section 401(k)(4), states that an Employer Match is the only contribution that may be made based on an employee's deferral. So, if you give a nonelective based on who defers, you either have a matching contribution or a disqualifying event. Good Luck!

I actually tried and after five minutes began to wonder what in the heck I was doing. I got as far as: Pursuant to real estate law in some states, there is a process of effective eviction. For instance, if your landlord takes the front door off your apartment, then that would be an effective eviction because this action made it impossible to live there. Then I tried to relate that to the fact pattern and began to ask what in the heck I was doing.

"Like".