ETA Consulting LLC

I actually do believe what I said. Whenever we commuincate a point, it is imperative that we maintain the appropriate vantage point of the argument. My original comment for Dennis was to state merely that regardless of who you pay (Plan or Bank), you are paying money that has already received the same tax treatment. If I borrow $10,000 from my plan and pay $1,000 per month, that $1,000 payment can be paid from my checking account or from an amount that was withheld from my paycheck (after all taxes have been paid). That equation remains consistent, regardless of who the lender is. That was point number one. Now, as that payment goes into the plan (assuming the loan is from the plan), then a portion goes in as principal repayments and the other goes in an earnings on the investment (e.g. outstanding loan balance). This is the same treatment that would be the case if the payment had been made to a bank, instead. One portion would be treated as principal, and the back would have to record the interest payment as "profit" which is typically taxable. Nothing changes from the person taking the loan; the payments will be made with money that has already been taxed. The only thing that changes is who is the lender. Regardless of who the lender is, the "interest" will be treated as the rate of return on that investment. Not intending to be confusing, but to say anything different would be to imply that the participant is being hit with an additional set of taxes going beyond what would be required had they borrowed the funds from any lender other than the plan; a confusing point in my book. Good Luck!

6 in one hand; a half-dozen in the other. If the principal payments were pre-tax, then they would be subject to the $16,500 limit (which applies to pre-tax amounts withheld from employee pay). Think about it

It's all just a play in ideology versus math. Any loan repayment (whether to a Plan or Bank) is made with post-tax dollars. The interest payment on the loan goes in as pre-tax earnings, simular to any investment return on any plan asset. The only issue is that these interest payments are from dollars that you are paying (either from your checking account or withheld from your paycheck after taxes have been withheld). So the equation becomes either pay the interest to someone else, or pay the interest to your plan. Either way, it's a wash. The argument on paying tax twice was more idealistic than mathematical given that all loan payments (weather made to a bank or a plan are made with post tax dollars). Good Luck!

If you use a Relius document: The IRS position is that using a separate trust destroys automatic reliance on a pre-approved plan unless the separate trust was specifically approved for use with the plan. [Rev. Proc. 2005-16 permits minor changes to the trust or custodial provision of a nonstandardized or volume submitter plan, but it does not permit the entire replacement of the trust provisions with a separate trust.] Relius submitted a specific list of trusts as a courtesy to their clients. The IRS has approved a list of trusts for use with the SunGard Prototype and Volume Submitter Defined Contribution Plans. It does not matter whether the plan being used is based on the Corbel or PPD documents. The IRS does not issue formal approval letters for the separate trusts. Rather, the IRS merely retains the trusts in the file containing the SunGard pre-approved plans. This is what I was attempting to allude to; even though what I stated was poorly articulated. Thanks Nerdy

No. That is not consistent with any practice I'm familiar with; it borders on incompentence. Good Luck!

I do not believe it is an issue. Unlike other DC plans, a money purchase plan is subject to the funding requirements of Section 412. If the plan's formula is amended to zero, then it is what it is. Many years ago, it was vetted that you could actually set up a money purchase plan with a zero contribution formula and use it for purposes of accepting rollovers. I think a zero formula "MAY" be the equivalent of a freeze (which is not necessarily a termination). You may have to provide 100% vesting, but you won't have to distribute assets within 12 months. Good Luck!

I think you do count them since they are eligible to defer. The employer is obligated to deposit contributions for them if they actually decide to defer. Good Luck!

Under 72(p) yes. However, under the written plan terms (probably not). While 72(p) allows for a $10,000 loan when the vested balance isn't 10K, additional security must be picked up from outside the plan (where the $1,000 from the other plan would not appear to maintain the prohibited transaction exemption). Hence, each plan is likely restricted (under plan terms) to a limit of 50% of the vested account balance in that plan. Good Luck!

Never heard of that one. Would want to know what is so special about an S-Corp (as opposed to a C-Corp, Sole Prop, Partnership, or tax-exempt) that they would not be eligible for SEP plan. It should make sense, and this just doesn't. Good Luck!

You are correct. What he could do (assuming PS plan with QJSA exemption) is roll the plan assets over into an IRA where he is free to choose his own beneficiaries. Too many people are unaware of the simple provision you are discussing; to become disappointed (after death) to find that the long-lost estranged spouse is legally entitled to the account (and there's nothing that can be done about it). Good Luck!

I'll give it a shot, but believe many others (e.g. Tom Poje, Kevin C, or Sieve) may give you a more accurate analysis. The rule: Benefits, Rights, and features must be currently and effectively available on a non-discriminatory basis. This means that you are not allowed to write an provision in the plan that states that "this benefit will only be provided to HCEs"; nor are you allowed to draft a provision that, when operated, only applies to HCEs (or a disproportionate percentage of HCEs). In your first situation, everything is okay because there is no written provision precluding NHCEs from receiving a discretionary nonelective. When the HCEs are the only ones receiving the discretionary allocation, 401(a)(4) is passed by taking into account all NECs to the plan (including the safe harbor to NHCEs). This is not big deal; do it all the time. In your second situation, my problem would be with the provision in the plan stating that HCEs are the only ones receiving a discretionary match. My contention is that even though you will pass 410(b) and even ACP, you fail current availability by having a written provision providing this match to only HCEs. With that said, I believe any prototype sponsor could include an option in the Safe Harbor Match Section of the Document stating that the Safe Harbor Match to HCEs would be provided at the discretion of the employer each year. It would likely be a coin toss whether the IRS would shoot it down (based on there being no wait-and-see option for the Safe Harbor Match, but actually contemplating that the entire foundation of it only needing to be given to NHCEs is not compromised. In this end, this is just a cliff that I would stay away from. Good Luck!

This is one of those contingencies that no one anticipated, but was bound to happen sooner or later. There is no precedent, but I would put it in as a rollover into the plan; treat it as if it were a 403(b) account of any arbitrary company (since it was in FAB 2009-02 status) that was rolled back into the plan upon the participant being rehired. Not saying anything is wrong with your suggestion, but any reasonable approach should suffice. Good Luck!

Not clear on your fact pattern. Was an election to defer not honored? Or, were deferrals made but merely not deposited to the trust? If deferrals were withheld and not deposited to the trust, then it is clear that those plan assets must be deposited promptly and the match must be made (regardless of how small). It is a relatively simple correction for a small oversight, but tends to be more inconvenient than technical. If it was merely an election that was not honored, then there is a different train of thought leading toward letting sleeping dogs lie. Good Luck!

Not sure what you're getting at, but isn't the submission for a Top Hat merely to let the DOL know that one exists? With that understanding, is the question that the DOL was not notified of this in a timely fashion? What are we trying to do?

I cannot answer definitively, but you must determine if the arrangement is a welfare benefit plan subject to Title I of ERISA. It is important to note that it does not have to be a cafeteria plan to meet this requirement. Is it as 419(e) plan? Is there a summary plan description for the arrangement to help make that determination? This would merely be my approach to answering the question. Good Luck!

Technically, no. There is nothing precluding the employer from defining the date of termination as 8/15 in order to account for the deferrals that are going to happen. That would've likely made the offical company closing date 8/15 as well. The key is that no additional accrued benefits occur after termination. This is part of the workflow that should be done with plan terminations. Good Luck!

I think it would need to be a parent, spouse, child, or dependant. Was the grandparent a dependant? I would still verify this in the plan's written terms. Good Luck!

I would say that even though it was operated outside the written terms of the plan, it was not operated in an arbitrary and capricious fashion. This was apparently the result of a previous design many years ago limiting deferrals due to the 415 Limit (and perhaps deductibility rules) from way back. While the document was amended (because it was perhaps a good idea), the employer simply failed to grasp the concept. I don't think it is earth shattering, but do believe it is a VCP issue; if only to do nothing but request the IRS let sleeping dogs lie. Good Luck!

I don't understand why they would not report the entire amount on the W-2; as it was for services rendered as an 'employee' of the company. Paying on a 1099, and then withholding FICA appears inconsistent. That's just my take. Good Luck!

You and me, both. It's as if they go out an try to push the envelope as if they have something to gain. Especially considering that it is a non-profit. What is to be leveraged by the company from adding these ridiculous provisions? I, personally, do not believe it is all on the employer. I often wonder if they are being led by advisors who are trying to be cute (by offering something that the financial world has never offered for the sake of being different). It's just unfortunate.

It is one of the exceptions to the universal availability requirements. Others include employees who normally work 'less than' 20 hours per week, employees who are eligible to participate in other deferrals arrangements of the employer, and students (defined under some special code section). There may be others, but these are the ones I am familiar with off-hand. Good Luck!

This is a good one. The one thing that immediately strikes me about SCP is that in order for a plan to utilize it, the plan must have a favorable determination letter or reliance on an opinion letter (prototype). These aren't necessarily available to 403(b) plans, yet. <-- They may be, but I am unaware. Interesting that it is already an ERISA plan. Just think if it weren't; wouldn't the Employer contribution make it ERISA (and wouldn't the ERISA provisions apply only to the contracts that held the Employer Contributions). But to answer your requestion without rambling on, I would 'think' that VCP would be the only alternative for this plan; even though the correction is very similiar to that prescribed for 401(k) plans. Good Luck!

I think you have a point. I am familiar with the minimum $200 per year requirement, but to require 2.5%? I could never figure out why employers attempt to find the grey areas. I think this is pushing the envelope a little, because at what point would you say 'enough is enough'? If they can say 2.5% (an amount which may equate to more than $200 per year for some participants), what's to preclude them from say 6%? I do believe you have a point. Good Luck!

You'd typically need a strong recordkeeping system behind you. What you are doing is effectively creating a feeling as if the participant (and the employer) is dealing with only one provider, instead of many. Hence, instead of the employer coordinating and remitting payments to many different providers, they are remitting only one payment to you. You are breaking the payments downs to ensure the appropriate amounts are being sent (pursuant to participant elections that are maintained on your system). Hope this helps.

Common remitter services is merely using a single platform to disburse payroll withholdings across various fund companies for 403(b) plans. Just think, when you have a 401(k) plan, the employer typically cuts one check to the trust for funding the 401(k) deferrals, matching contributions, and loan repayments that are part of the single payroll. This is one check going to the trust. With a 403(b), you may have one participant with investment elections stating 25% goes to Custodian A, 25% to Custodian B, and 50% to Custodian C. The employer would have to cut three checks for each payroll (the aggregate for each company). A common remitter would coordinate all this so the employer would still have to cut only one check; maintaining the feel as if it were only one trust (even though there are more). Good Luck!