ETA Consulting LLC

What you appear to have here is a poorly written plan. If the plan is going to allow in-service distributions at age 70-1/2, then do that. If the plan is going to have a provision to start RMDs at age 70-1/2 regardless of severance from employment, then do that. But to say "we are going to allow a participant to elect an RMD" goes against the grain. If the distribution is not an RMD, then it would be eligible for rollover and the 20% withholding would apply. You could argue that it is not an RMD, but merely a participant's election to receive a distribution that is made available by the plan at age 70-1/2 and is limited to an amount that would've been received as an RMD. Everything that is legal is not administratively feasible; this is one of those things. Without seeing the actual document, it's likely the best anyone could provide. Good Luck!

No. Nothing illegal. Kind of goes against the grain as employee participant has become quite common in plan designs. A clear fact pattern on what the employer is seeking to accomplish would help, but there isn't anything to prohibit a prospective elimination of provisions allowing individuals to defer. Good Luck!

"Like"

Agreed. I, too, 'believe' that qualified plans are governed under the Federal Defense of Marriage Act (DOMA). This would apply to attribution rules under Section 318 and Spousal Beneficiary rights under Section 401(a)(11). Not sure the impact on controlled group attribution under Section 1563 as there are some 'community property' concerns there. I would like to see some study analysis that addresses each of these areas where spousal issues many arise. Good Luck!

I think the answer is quite clearly "no." Internal Revenue Code Section 401(a)(13) makes a retirement plan assets not subject to "alienation" except as provided for in that code section (none of which apply to embezzeling from the plan sponsor). Such a Court's order is unenforceable against the plan. I have actually been involved in a situation where the participant/criminal "requests" a distribution and then signs the distribution check over to the company (in a pre-arranged deal where immediately before sentencing this occurred, to show the court an attempt to repay the employer for their losses - as a show of remorse to get a lighter sentence). Didn't work. He got the max. Pushing the "like" button. We should be aware of the "bad boy" rule exception. Even here, those provisions must be written into the plan's document and may not violate the maximum statutory vesting schedule (i.e. 6 year graded). The rule, itself, usually has minimal (if any) effect. Good Luck!

I was not aware of this, but was curious. Can you provide details as to whether age 59 1/2 is the only exception? Or, does it also extend to death or disability? Good info! Thanks

Good question. You're already tracking the basis for Hardship Determinations. However, this doesn't differentiate the state (i.e. PA). If you have an individual who is a resident of PA for the entire employment, then the hardship basis would be the amount. PA is the only state in the union with no income tax deduction for deferrals to 401(k) plans. NJ joins PA when it comes to 403(b) deferrals. Not sure many recordkeeping software systems consider this signficiant enough for reprogramming. Some of them, however, may have the flexibility to create it. Without it, the participant would end up paying State Tax twice. Good Luck!

From a tax reporting perspective, the employer would ensure the amounts are properly reflect in the State Income box on the W-2 Form as there would be no income tax exemption. The basis, however, should be kept in the plan to ensure they aren't taxed again during the ultimate distribution (assuming they are still PA residents). Good Luck!

Well it would be invalidated on that merit alone. The resolutions are typically created to show that the decision to amend was made by the appropriate authority. A cook at Burger King can draft a plan amendment and execute it, but it would not be binding since the appropriate decision authority did not make the decision. From a process perspective, it should be discovered quickly as the plan's operation will either conform for fail to conform. If it conforms, then that would normally imply that the appropriate decision authority authorized the change. For instance, changing plan eligibility from one year to immediate where employees are given enrollment kits on their first day of employment. That would be clear intent when the company operates the plan pursuant to the new amendment. If they don't, then they can argue the amendment was not valid as it wasn't approved by the appropriate authority. So, it depends. Good Luck!

If the restatement deadline for DB was April 30, 2012, then you would've amended your plan to terminate prior to that date. Technically, a restatement wouldn't have been required. Good Luck!

I don't know without research, but wanted to ask this; why not seek a prototype that contains the age-weighted provisions? Is the provision being sought not on 'any' prototype or just the one the plan is currently one? Good Luck!

Sure, it's a plan of "deferred compensation". There doesn't appears to be an exclusion for a governmental 457(b) plan; especially considering the distributions are eligible for rollover. Keep in mind a top-hat plan is paid out as W-2; so I would imagine the payroll withholding rules apply. Good Luck

The correction method is simple, adopt the plan retroactively to the time the affiliated company started to participate. I'd just submit it through VCP and be done with it. Technically, VCP is a part of EPCRS; and should apply when there is no approved self-correction (SCP) method to fix. In this instance, there doesn't appear to be a approved alternative under SCP. Good Luck!

2011 Good Luck!

Absolutely. Think of it like this; just because the DB terminated (and let's assume it actually distributed), the employees are still employed. So, you still have a 5 year look-back for in-service distributions. Good Luck!

I don't think it would. There's W-2, 415 Safe Harbor, and Withholding. The withholding wages would generally be the wages reflected on the last paystub during the year. These will be amounts for which taxes were withheld before paying the employee. The premiums, on the other hand, would be additional amounts reported as W-2 that wouldn't have been reflected on the last paystub of the year (as it would've been taxable income that is reported at year end). I could be wrong, but based on your fact pattern this would be my approach. Good Luck!

2012. Good Luck!

But this is not about the benefit. The OP is about the determination. I'll let you in on a secret, I'm slow; SOMETIMES

That would be discriminatory. Only if it was lowered for an HCE. But it would be a failure to follow the written terms of the plan; 401(a)(1). The loan procedures are likely a part of the Plan's terms by reference in the Plan's document. Without an expressed exception to reducing the fee from $100 to $93 would constitute discretion in the plan's operation

No Key Employees "benefited" under the DB plan during 2010; so it should be reasonable to make the Top Heavy minimum to only the DC plan. Good Luck!

Yes. I think that is perfectly fine. I cannot begin to imagine that being challenged. Good Luck!

I would think that the document should not specifically preclude it. I would, however, look for language that would support it (e.g. vague references to the Code itself as opposed to specificity on each step). I normally look at the task of proving a plan is non-discriminatory as a mathematical test outlined in the Code and Regulations that may be applied unless there is document language precluding its use (i.e. a fail-safe option for a failed coverage ratio test). I am sure this is a matter of huge debate. Good Luck!

Morale and intra-office political issues aside, you have a plan that has failed to follow its written terms of providing each participant under the plan a uniform allocation amount. A VCP submission would be a way of sorting this out and attempting to amend the plan, retroactively, to conform to the way it was always operated. There is a chance. The IRS is certainly not going to take it lightly, but in well documented instances (i.e. the various levels have been communicated through company memos to employees but not reflected in the SPD or Plan's document) the IRS "MAY" allow for a retroactive amendment reflecting the employer's original intent. Good Luck!

Up to the plan's loan procedures. Typically, the loan fee is deducted from the loan amount. If you take a $1000 loan, you'd receive a check for $900. The plan could charge the participant's account with a fee, where a $1000 loan would generate a check for $1000 and an account fee of $100. To say that there is a minimum of $1000 but you must borrow $1100 in order to pay the $100 loan fee and receive a minimum check for $1000 is reading too much into it Good Luck!

No argument here. Was a bit scatter-brained when making the point that the method in Rev. Proc. 2008-50 is a preferred method which "may" be negotiable with the IRS during a VCP filing. There has to be some limit to applicability of any approach (i.e. suppose the makeup contribution was calculated at $10 million). Good Luck!