ETA Consulting LLC

Correct. Stated differently, once you reach your Required Beginning Date, you cannot die out of your age 70 1/2 distribution. Just think, you know your RMD on January 1st of each year, even though you have until December 31st to take it. If you die during the year without receiving it, then your beneficiary must receive it. Hope this helps.

I see you point on 'by plan design' but do believe it is a fiduciary function to make decisions on how the plans are designed. When you 'signal out' a group for whatever reason, then you set a precendent and then bring into question why other's weren't signaled out. If I am an NHCE who used the brokerage window and lost dearly, I may then question why you never required me to obtain my CFA as you did for the HCEs. That protection to the HCEs (protecting them from their own ignorance) should've been afforded to me. You can see I am merely playing devil's advocate and do not prescribe to any argument. I am merely saying that, in todays environment, people can sue for anything. They may not win, but they can still sue. So, the question would be what is to gain by opening that door and creating an unnecessary precedent. Good Luck!

I agree. Without something stating it must be made available on all participants on an equivalent basis. It 'may' bring an additional risk element to the plan sponsor for those HCEs who are not CFA under the argument that they were not afforded the investment opportunities that other's in the plan (many of whom where clearly less equipped to handle investment matters) were allowed that option. What prudent man would do that to himself? Good Luck!

No. Apples and Oranges. The late deposit rule is a prohibited transaction issue designed to preclude the employer from making personal use of amounts that were withheld from employees' pay. In your case, nothing was actually withheld. Good Luck!

I think there is common ground here. I think that the separate trust agreement in question would've been reviewed by the IRS for use with prototype plans, but was not submitted with the used of any particular prototype. The issue, then, is that you cannot use "ANY" trust agreement and maintain reliance on the opinion letter, but it is possible given the trust agreement has been approved for use with prototypes in general. I think there are trust agreements that were approved by the IRS with that understanding. With that said, I admit I never researched directly but this type of understanding was consistently applied with several organizations I worked with. Nonetheless, it is always good to actually look at the rule to actually see what's driving this operation. You guys rock!

You are correct. That loan doesn't become an asset of that plan until rollover. That establishes the highest balance within that plan. Just ensure that, unlike before, all repayments go directly to the rollover source of funds within the new plan. Good Luck!

Typically, when I ask three different auditors a question like this, I get four different answers.

I agree it "looks" odd, but is obvious. Would it actually error out when you submit it? If not, I would not sweat it. Just to ensure my thought processes are correct, the zero balance on the Schedule H of the terminating plan is by result of the total amount being entered on the 'transferred out' line. This amount includes the Insurance Balance; and all those totals are included in the ending balances on the Schedule H of the continuing plan. So, the Schedule A is the only hold out, and does not have a transfer line. Good Luck!

K2retire, you have an interesting situation. It is an imperfect world. I would suggest maintaining a perspective on the roles and responsibilities of your position relative to other positions within the company. As a professional, you rendered your expert analysis to the appropriate authority within the firm who (as a result of his incompetence, among other things) chose to disregard it. I would maintain documentation and let sleeping dogs lie. Now, with respect to the failure to operate the plan pursuant to the written terms, there is a correction (under VCP, of course), that even though the provision was written to apply to everyone, it was operated to apply only to new employees. The application was applied consistently and merely the result of a clear misinterpretation of the document. The IRS would typically look at the facts and circumstances and conclude that the violation was not eggregious and the interpretation itself was not arbitrary and capricious. I've seen worse, and was no less disgusted than you are. Not to go religious, but sometimes it helps to pray: "Dear Lord, please grant me the courage to change that which I can, the serenity to accept that which I can't, and the wisdom to know the difference". Good Luck!

Not by that fact alone. It would be a good idea to ensure the Trust Agreement has been vetted by the IRS. Not sure about the semantics, but a plan is allowed to rely on the prototype's opinion letter while using a separate trust agreement. Typically, that separate trust agreement should've been reviewed by the IRS. Good Luck!

Here's what I gather: A taxpayer with $2M is due an RMD based on that amount. At the same time, his ex-wife is receiving a tax-free transfer of half of his account due to a divorce decree. So, he is wondering if he can have his wife take a distribution from her half in order to satisfy the RMD requirement and allow him to leave a larger balance in his IRA, or if he must satisfy the entire distribution amount from the half he has remaining. There are ways to structure the agreement so he wouldn't have to take the entire taxable distribution (and shift some of it to her), but she would have be willing to cooperate; which may not be the case. I don't think it looks good for him. Good Luck!

The trustee contributed to the plan? From your fact pattern, it doesn't appear as if it was an elective deferral from salary nor an employer contribution. So, under what guise was the contribution made?

I am talking about the 50% excise tax on reversion on assets. When there is a reversion of excess assets to the employer, there is an excise tax of 50% on the excess assets. In the situation above (where the owner died and the assets rolled directly over to the child's IRA), is there an excise tax (50%)? Is there a "reversion" of asset? Thanks. I had gathered that after mwyatt posted. My apologies for misreading the question.

Yes. There is no statutory rule stating the Alternate Payee must receive the funds when the Participant receives a distribuiton. They would typically want to leave it there if they are not 59 1/2; in order to have the 10% early withdrawal penalty waived when they decide they do need the funds. Good Luck!

LOL! This language is directly from the DOL's literature on QDROs. They have additional language explaining why the position is. It would be totally irrelevant to say "suspend distributions" when there is no opportunity under the plan for the participant to receive a distribution. Good Luck!

Yes. There is typically an excise tax (10%) to non-deductible contributions made to qualified plans. There is also a 6% excise tax for overdeposits made to an IRA (excess amounts rolled over and not promptly removed). We also know that excise taxes are not abated under VCP. Not sure what the appropriate remedy might be, but there always is one depending on the details. Good Luck!

No. It is merely a rule that the determination date for Top Heavy in the first plan year is the last day. Coincidentally, this is the same top heavy determination date for the following year. ADP tests deferrals during the year year, so each year would produce its own result. Good Luck!

It's item #2 in GMK's post.

Correct! This is the Schedule C amount less 1/2 Self Employment taxes. He can defer the entire amount (up to $16,500). So, you are right. Good Luck!

GMK, You are correct. We got hung up on the semantics of what it means to be 'in pay status'. I was basically stating that if the participant is eligible for a distribution (thinking DC plan), then it would be frozen. Otherwise, there would be no reason to put a hold on the benefit. However, if the participant is already receiving distributions, then they will definitely continue as his stream of payments would not be interrupted until the DRO is received. Do we agree that "in pay status" does not mean merely "eligible for distribution"?

Not really. This TPA merely performs a service for the client and is not a fiduciary under the plan. You may be better served to direct the ownership of this failure to the Employer; as they are ultimately responsible as fiduciary to enforce your rights under the plan. The TPA would be out of line to notify you, but chances are they notified the employer several times regarding the need to fund the plan. Good Luck!

Sure they can, upon written notice that one would be forthcoming. It can't be done in an arbitrary fashion, but assets can be frozen by court order during a pending DRO. It happens all the time. Ultimately, it would be up to the Admistrator's judgement with respect to the time that is most appropriate. Good Luck!

Correct, but I think uberzete was referring to the hold placed prior to the actual written DRO (prior to the 18 month determination period). That makes the equation more flexible since no 'substantive' action was taken but to merely advise the plan that something is in the works. But, you are correct for actions once the written DRO is received. Hope this helps.

I think it is typically 18 months. Just shooting from the hip. It should never get to that point, but the objective is to ensure two principles are maintained: 1) You don't want to distribute funds to the participant that his spouse or child may be entitled to once the DRO is delivered and qualified. Basicially, you're preventing the participant from raiding the account in anticipation of the pending QDRO. 2) You do not want to, indefinitely, deny the participant his right to a distribution that he would otherwise be entitled to under the written terms of the plan. 18 months may be excessive, but you cannot arbitrarily delay a distribution for an indefinite period of time. What you could do is determine the amount at risk, and place a hold on only those amounts (create a sub account FBO the same participant) in order to allow him access to other funds he would normally be entitled to (only after ascertaining the QDRO isn't being vetted at 100% of his account). I don't believe you'll find a hard-fast number as it is more of the Plan Administrator's judgement with respect to these two principles. Good Luck!

You are correct that there is not anti-cutback provision for participant, so they are no longer eligible to contribute (or receive match) upon becoming a member of an excluded class. You are also correct they they are still employed and therefore no eligible for a distribution (e.g. severance of employment is much different from moving to a excluded class). You are also correct with respect to their inability to fund a deductible contributoin to a traditional IRA in 2011, since they 'contributed' to the 401(k) at work during 2011. As for 2012, you should keep in mind that 'covered by plan at work' means that they actually "RECEIVED A CONTRIBUTION" to a DC plan or 'accrued a benefit' in a DB plan. So, unless they are married with a spouse covered by a plan at work in 2012, they would be able to fully deduct the traditional IRA. There is no phaseout based on compensation if they (or their spouse) are not covered by a plan at work. Good Luck!