ETA Consulting LLC

1) There is no 411(d)(6) protection on plan eligibility. So, once eligible, always eligible is no correct. A plan may be amended to increase eligibility (but not beyond statutory maximums). Many plans, however, grandfather participants who have already met prior eligibility (making the new eligibility requirements apply to only those who have not yet became participants in the plan. So, be mindful of the difference between what is driven by the plan and what is required by law. 2) If the rehired employee had previously worked and satisifed the 3 month requirement, then they should enter the plan upon rehire. Remember, when you satisfy the service requirements, you don't have to be employed on the plan entry date. If you terminate, and are hired beyond that date, then you enter the plan then. This is your "can't prove a negative" case. In order to use another approach, you'd need to show an authority under your plans terms to eliminate or discount the service worked. So, even if it was not a year of service provided, but only a few months, where is it written in the plan that you get to discount that service? If it's not there, then you should include it. Good Luck!

The check should be made payable to the "Estate of 'deceased uncle'" and delivered to the nephew. Not sure if the estate has a tax ID number (probably not). In such event, I'd use the uncle's SSN. Not sure, but the tax id of the estate is likely the uncle's SSN. But, to your question, we know the death distribution should be made payable to the participant's estate. Good Luck!

"Like" Okay, maybe this is getting a little old, but Benefitslink could really use a like button. Austin, you use the original figure (i.e. $1 Million) and then begin to reduce. You would, then, cap the final amount to the 401(a)(17) limit. Good Luck!

You're right, it's the "rose by any other name" situation. Written in the underlying definition of "Insurance", there is one thing it is not; an investment. The UL is designed, however, to meet the legal definition of insurance while providing an investment component. Even outside of a qualified plan, the policy itself as income tax deferral on the gains in the contract. Good Luck!

I'm pushing the "Like" button.

I'm saying it does. The rule for deductibility (as we all know) is 25% of eligible 415 compensation. 415 Compensation for a Self-Employed individual is "Earned Income". Earned Income is reduced by contributions made to the plan. While the "Employer" Contributions to the employee are taken as an expenses on the Schedule C, the Employer Contributions to "EACH OWNER" is used to reduced "THAT INDIVIDUAL OWNER's" Earned Income. This resulting amount is that individual owners 415 Compensation. Now, if this were a SEP (Just think about what the Pub 560 talks about), then the owners 415 Limit is actually 25% of Compensation. There is no aggregation of income. Therefore, when we are discussing these matters, it's important to distinguish qualified plans from SEPs, because the actual 415 limits are different. Good Luck!

As a rule, the taxpayer would've had until the extended 2010 tax filing deadline to recharacterize. I don't "think" that date was extended with the spreadout of taxes during 2011 & 2012. I know the rule was written to make paying the taxes in 2011 & 2012 as the default while the participant was allowed to pay all taxes in 2010. I just don't recall the deadline for recharacterization being impacted. Good Luck!

It's not a SEP (where 25% is actually the 415 Limit and the Deduction Limit). Being a qualified plan, the deduction is 25% of all compensation, but the resulting compensation after all contributions to the owner is added to the total employee compensation for calculating the 25%. Remember, the 415 limit goes to 100% of compensation in a qualified plan. You would be entirely correct if it were a SEP, but the TPA is correct for the qualified plan. The 20% is merely an algebraic method of getting to the 25% limit. You should never mistake 20% written as a rule. If Net Schedule C is $100,000 and the owner receives a contribution of $20,000, then Earned Income is reduced from $100,000 to $80,000. $20,000 is 25% of $80,000. There is nothing to preclude the owner from receiving $30,000 (and having earned income reduced to $70,000), if that $70,000 (when added to the Compensation of all other "eligible" employees) keeps overall contributions less than 25%, then you're fine. What MAY also "blow your mind" is that the owner's elective deferrals and "employer contributions" are deducted on the same line on the Form 1040. Don't worry, this situation burns everyone; got me 10 years ago Good Luck!

Sure, there are. The question is whether or not the advantages outweight the disadvantages. Ultimately, it would depend on what the client wants to accomplish. Notice how I answered the question without giving specifics. What are you trying to accomplish?

With respect to what? I would say yes with respect to reemployement for zero vested, but "may" have an issue with forfeiture timing (the time non-vested amounts are actually removed from the participant's account). We do know the document must govern. Not sure if a letter would be issued stating a participant will not be forfeited until 10 consecutive one-year breaks in service. We do know that you don't have to use the rules of parity with respect to retaining service upon reemployment. Good Luck!

The goal of correction is to make the plan as if the mistake never happened. Had the mistake never happened, there would've been no distribution and, therefore, no taxes. So, when you get the funds back in the plan, you'd issue a corrected 1099-R showing there was no distribution taken. Good Luck!

You are drawing two lines in the sand; one at the 5 year anniversary of first payment and the other at the date 6 months after the 59th birthday. You are continuing the stream of payments through the farthest line in the sand. If you've been taking annual payments for 8 years in December while you turn 59 1/2 in November, then you won't have to take another distribution after your 59 1/2 date. In any instance, you're going to commit for a minimum of 5 years. When you discontinue, there are hard-fast dates. Good Luck!

Sure. You may not need VCP (if self-correction is available). Good Luck!

"Like"

This is a non-issue with respect to deferrals; as long as the Compensation on which deferrals may be made is "reasonable". It doesn't need to be non-discriminatory, but "reasonable". Now, this standard does not apply to "Employer" funded contributions (Match, or nonelective). Good Luck!

There is a contengent deferral rule that basically states that a "matching contribution" is the only contribution that may be contengent upon a participant making a deferral. What this says to me is: if you must defer in order to receive it, then "by definition" it is a matching contribution and should be tested under ACP. Many plans have a zero compensation match stating that anyone who contributes will receive "x" percent of pay; regardless of the level in which they contribute. It's safe harbor since those who contribute at a higher rate will receive a lower "rate" of match. In your case, those who contribute at 4 percent or less will not receive a match. This will create the need for additional testing, but it's doable. Good Luck!

Correct. The ASG rules require a "joint ownership" as well. Instead of saying an HCE is employed with both, you're saying that an HCE owns a certain percentage of the company. It is what it is. Good Luck!

Who has 1st lien on the property; the bank or the plan?

It's in 414(m). It's not merely employed, but an HCE must own a portion of the other company; making my last statement a little off. Good Luck!

It applies.

It is, likely, not an ASG. Remember, one of the requirements for a ASG is a shared HCE (an HCE working for both companies). It could, however, be a management group (which is the same effect), if the consulting services provided are actually management services. Details are very important in making such determinations. Good Luck! Edit: The rule is actually that an HCE must have a certain level of ownership in the second company (not merely being an employee).

Yes, they would be included. Good Luck!

He would have to, at the very least, receive his calculated RMD based on his age and account balance each year. The installment exception to that works on a payout over the calculated life expectancy as opposed to an abitrary amount. Good Luck!

I'm pushing the "like" button. Another situation I've run into what when an ADP test failed and deferrals were reclassifed as catch-up. They would, then, not be entitled to the match after reclassification to catchup. But, below 5%; never saw it.

True. With respect to the 10 year rolling surrender, I'd look for alternatives (since the plan must be fully distributed within 10 months of plan termination). Will the company issue individual paid up contracts (non-transferrable annuities) for the participants' account balances? Good Luck!