ETA Consulting LLC

I would check with the plan. I think the two year may be merely a billing issue as opposed to a service issue. The payments, themselves, typically relates to when the actual service was performed. It's always best to take the details to the plan in question. Good Luck

1) It must be made. 2) It is clearly not deductible for 2010, but is deductible for 2011 since it is funded during 2011 after the 2010 tax filing deadline. Your issue is whether this amount will be considered a 415 annual addition for 2010 (the year of intent) or 2011 (the year of deposit) since you are beyond the 2010 415 funding deadline. I would argue that this is a 415 annual addition for 2010 since it was not made due to a mistake by the employer. Otherwise, how could you reasonably justify meeting the safe harbor requirements in the event an employee terminated employment during 2010 with zero compensation in 2011. I see no reason for an earnings calculation as there may not be a precedent to establish the time frame during which such calculation should be made. It's not the same as "as soon as administratively feasible after amounts are withheld from employee pay". It's also not the 8 1/2 month "Pension funding" deadline. So, any other time period would seem arbitrary. Good Luck!

Yes and Yes.

You know most, if not all, of the issues; and probably are better equipped than most of us to answer your own question. Obviously, you have a solid grasp of the plan design issues with respect to how the plan is tested. I supposed it would be easy to get beyond the "reasonable compensation" issue with the kids by ensuring they aren't paid too much. It does open the obvious question of the "only" purpose of the kids being on the payroll is to help faciliate passing of the test by artifically creating a "shaft-class" of HCEs. You're argument, of course, it that the kids are hired for purely business purposes. I can appreciate the complexity of this situation, but generally try to steer clear of these issues; for the same reasons you've pointed out. Good Luck!

This is a court issue; not a qualified plan issue. Coming from the court; it is only a DRO (Domestic Relations Order). The Plan Administrator must determine it to be qualified in order to make it a QDRO. I suppose there would be nothing to preclude a subsequent order issue by the court in addition to the one already issued, but that would be squarely in the hands of the court. From the Pension Admininstrator side, it's nothing until they receive the DRO from the court. Good Luck!

You know you can perform the average benefits test without actually cross-testing. Will it pass on an allocation basis? Also, there are some exceptions to the gateway (i.e. broadly available) that you may want to explore should cross-testing be necessary. Good Luck!

Interesting. I often wonder about this myself. I think the question is whether there is reliance for a period in which the plan was individually designed; knowing that you'd need a favorable determination letter (or opinion/advisory letter) to be eligible for Self Correction (even though the letters are not legally required). It may boil down to drawing a line in the sand; having reliance on a determination letter up to the point you moved onto the prototype. This would be the ultimate protection. Is it really worth it? Probably not. Good Luck!

You have: 1) Employees who are all part of a division 2) The division operates seasonal 3) Some of the employees in the division meet the 1000 hours requirement. When you exclude all employees of that division, it shouldn't be an issue. The argument is, however, that if you were to arbitrarily create a division for purposes of droping the part-time and seasonal employees in, then that would be a disguise. This is facts and circumstances. Just ensure you have good documentation of division (existing for business purposes as opposed to a mechanism to disguise improper exclusions) and you should be fine. Good Luck!

Typically, it would be the TPA firm. It's a simple calculation, but there really isn't a statutory requirement that the economic benefit on the policy get's taxed each year. In the event it doesn't the death benefit payout (the net amount at risk portion) would not get the tax-free payout in the event the insured dies. Given this flexibility, it should always be the TPA. They should also track the cumulative basis; I'd never trust an insurance carrier to do this. Good Luck!

Not sure, exactly, what you are asking. There are several rules you would piece together. I am assuming you have a failed test (where the employee population is being tested separately for statuory excludables); so let's run with that. Two rules are in play here: 1) The rule you are referring to that in order to the amounts that are "targeted" to the lower paid individuals to be used in the ADP/ACP tests, then certain conditions must be met with respect to how many receives what amount. 2) ANY contribution allocated to the plan must be made pursuant to a definitely determinable allocation formula. This is likely speaking to your document issue. If the 21 & 1 group fails ADP and you wish to target a QNEC in order to get them to pass, then the formula by which that QNEC is targeted "must" be written to exclude members of the "early entrant group"; or it won't be definitely determinable. I think that is what you are getting at. Good Luck!

Try the employer's tax return. It's weird, but these amounts are deductible as employer contributions instead of salary; even though it is "salary" paid by the employer that is deferred by the employee. When you try to reference it by code, the only reference in 401(k) would be that elective deferrals are "employer" contributions made pursuant to employee elections. This would establish that it is an employer contribution. Your next step would be to establish that "employer" contributions are deductible. You won't likely see it spelled out, unless you look at the employer's tax return. Good Luck!

We both know that, but if the definition of compensation used for the allocation of match is not "non-discriminatory", then you have another set up tests to show the rate of match is non-discriminatory based on a "non-discriminatory" definition of compensation. I tried not to open this can of worms in my response. The important thing is to know "which" tests need to be performed when you try to do certain designs. So, we agree. Good Luck!

Sure. You can design a plan to do anything, as long as it passes the necessary non-discrimination tests. In your case, you're looking at merely have a non-discriminatory definition of compensation for "allocation purposes"; which is basically the same since you're looking to test under ACP using the same definition of compensation used to "allocation purposes". It seems as if you're on the right track. Good Luck!

You're not missing anything. I seldom seek logic in what someone else is doing. You know how the test is calculated. So, the ability to give an early terminee a relative small amount (while creating a higher percentage) should offset the advantage of excluding them from the test. In these type designs, the more flexibility the better; so why ever tie your hands with such an accrual requirement? Good Luck!

I am not sure about the recordkeeping services agreement, but the group annuity contract issued to the plan would have nothing to do with the plan sponsors bankruptcy; as the plan is a separate legal entity from the sponsor. Anything owned by the plan is "NOT" owned by the plan sponsor. It would be, therefore, "EXCLUDED" from the bankruptcy estate assuming it is an ERISA plan. I emphasize "excluded" as opposed to "exempt". Items such is IRAs, while not "excluded" from the bankruptcy estate, are "exempt" from the bankruptcy estate. Clearly "excluded" is blanket protection. Good Luck

Correct.

No issue on the self employed plan; it happens all the time. I would suggest that if you are married, you have have your spouse as co-trustee in the event of your early demise, your spouse can merely direct the payment to her (as beneficiary). Many times in one-person plans, the owner dies and all hell breaks loose when trying to make a simple payment to the spouse, because the only trustee has passed. If not the spouse, it's just good to have a backup trustee. But, as a legal matter, there are no issues. Good Luck!

I don't think it extends to in-laws, but does extend to "Stepchildren or Stepparents". The reference is to IRC Section 152. I am merely shooting from the hip on this one, but believe there is a distinction; in the event someone cares to comb it carefully. Good Luck!

No. Typically, nonqualified deferred compensation plans are contractual where the employer and the employee agree to forego salary for a promise a pay a certain amount at a future date subject to certain contengencies. This would not interefere with a hardship distribution suspension within a qualified plan as there is no longer an "election" to contribute by the employee. Good Luck!

A balance in the plan is equivalent to being a part of the plan. Until that balance is paid to the parents, then this would be an ERISA plan; unless one of the parents is a direct owner. Good Luck!

I'd run as far away from this as possible. It sounds as if they want the effect of a Cash Or Deferred Arrangement (which would effectively limit these amounts to the 402(g) limit). It must remain non-discretionary. Good Luck!

Earl, You have to determine if there are participants who have already met the accrual requirements during the year. Fact patterns are important. Does the document say you must be employed on the last day in addition to working more than 500 hours? Does the document say you must work more than 500 hours OR be employed on the last day of the year? You see how different these two scenarios are. Your fact pattern doesn't give the information necessary to make that determination. Good Luck!

Benefitslink could really use a "like" button.

You have good questions, but you're over-reading it. Everything is facts and circumstances. Just look at it like this: 1) Come "hell or high water", the employer has a responsibility (as fiduciary) to ensure each participant's rights under the written terms of the plan are enforced. This includes contributions, benefits (optional forms and all). When a plan has language stating that "if you work for the year, then you will receive this contribution from the employer in the amount of 'x' percent of your salary", then this becomes an entitlement that the participant "must" be given. What the writeup here does is to explain how or why this may be a prohibited transaction. It is already a failure to follow the written terms of the plan plus a failure to enforce the employees rights under the written terms of the plan. A prohibited transaction would merely be another type of violation (which, in my opinion, is a bit overreaching). You must give the contribution, period! The debate comes into play because the "mandatory" language in the document would make the contribution amount a "receivable" since it is not discretionary. Not making the deposit would then put the employer in the position of holding a plan assets outside the trust. I don't particularly buy it because a receivable is still a plan asset and is not in control of the employer (similiar to cash amounts actually withheld from employee pay). It's going to remain a receivable until it is replaced by another asset; cash. I think it is merely a failure to follow plans terms and also an ERISA 206 enforcement issue. I just don't buy the prohibited transaction, but appreciate the argument. It'll play out over time. Good Luck!

In order to satisfy the exemption from being a prohibited transaction, plan loans must be made available on a reasonably equivalent basis to all participants. So, does that appear remotely close to a reasonably equivalent basis? I wouldn't do it. Good Luck!