ETA Consulting LLC

If they buy it, then the 3 year rule does not apply. If the policy is gifted to the ILIT, instead, then the 3 year rule would apply. Good Luck!

A loan is not a withdrawal, but a plan asset. All you are doing is trading one asset (cash) for another asset (a receivable). Good Luck!

Typically not. While the trust must meet the death distribution rules, it will govern the use of the funds. That does not involve assigning ownership of the entire account to another individual so they can roll it over. What, exactly, are you trying to do? There is nothing precluding a trustee transfer of the assets, but your question implies they want to change the entitlement of the assets from the trust to another individual. Good Luck!

VCP. You would want a clear fact pattern. For the union exclusion, the benefits must be subject to good faith bargaining in order for this exclusion to apply; merely being "union" does not make you excludable. There are also mandatory disaggregation issues. For instance, a union employee is only union with respect to compensation received as a union employee. Hard to fathom, but if there is non-union compensation, then that would be plan eligible. These are just a few thoughts to structure the issue. Good Luck!

Without details, it appears as if the Administrator used Plan Assets to pay a tax penalty. While plan assets may be used to defray reasonable plan expenses, the question is whether or not an IRS tax penalty is a reasonable expense. In my opinion, that is a negative. Given that, the administrator used plan assets to pay expenses that may not have been reasonably borne by the plan, so the plan should be reimbursed. This creates a grey area, but there are several 'reasonable' methods to correct. Sorry, I am not more definitive, but would recommend not treating it like the 'end of the world'. Good Luck!

I am not sure, but you may want to check out FT William. To my, very limited, knowledge, they have preapproved prototypes that may be used on a one-client at a time basis. Again, I am not sure, but it may be worth researching. Good Luck!

This would be up to the terms of the plan. For instance, if one year of service is required, then a failure to work the 1000 hours during the first 12 month computation period will result in the employee having to meet that requirement during a subsequent computation period. If the unpaid intern actually worked the 1000 hours, then they would have met the eligibility requirements and should enter the plan upon rehire. Again, this should be verified within the terms of the plan, but there is nothing to state that service for eligibility purposes is excludable merely because it was performed as an intern. Vesting, on the other hand, may have service prior to the age of 18 excluded. It may be best to refer to the plan's language. Good Luck!

Your understanding is correct. There must be a distribution available for this provision to be used. Remember, it may still be used for those who terminate employment. Good Luck!

No. It is business as usual. The deferrals will start 'after' the election is received. The participant may choose to increase their election prior to year end to make up for the late submission of the form. Good Luck!

It was never applied to the type of distribution, but whether or not the plan is subject to QJSA. Your plan document should outline the requirements for the hardship. Good Luck!

You are asking the wrong questions. The first question should be 'who is the employer' with respect to each plan. Keep in mind that merely leasing an employee from an organization doesn't make them a leased employee, there must be work on substantially a full time basis for one year. However, in order for that definition to apply, the employee cannot meet the definition of a common-law employee. There's a revenue rulling 97-41 that outlines the 20 factor test in making this determination. I would begin the analysis there before I actually engage in how the plan will be tested. You have to know, exactly, who the employee of the employer sponsoring the plan. Good Luck!

Yes. This can be corrected under SCP. Just make the corrective contribution to the missed employees (plus earnings through date of correction). You could use VCP (with a $250 filing fee) if you want the extra security, but the correction will be the same. Good Luck!

I deleted a previous post with incorrect information. I was, orginally, under the impression that the other arrangement would need to be an eligible deferred compensation arrangement under 457(b) for the exclusion (as outlined in the Code). The Regs, however, do provide for an exclusion for those who are eligible to defer to a 401(k). Thanks Kevin C!

You seem to have a pretty accurate grasp. There is no payroll tax advantage, since the Schedule is already reduced by 1/2 the self-employment taxes prior to the allocation. One advantage from the partnership is that the partnership side gets to the TWB sooner in the event the individual is employed elsewhere. Suppose an individual works full-time making $110K and is self-employed making $50K. For his self employment income, his payroll is at 2.9% from the beginning. If he were incorporated, the S-Corp would not get the 6.2% reduction for him already being above the TWB on other employment. I mention this to express that, while I don't know all details, the S-Corp is more retirement plan friendly but there are many other contengencies outside of the retirement plan arena that may have a greater impact. Also, the S-Corp allows a little more flexibility with respect to how much W-2 the owner should take (as long as it is reasonable). This opens the door to take less income (and maximize the deferrals for deductibility) as opposed to recognizing payroll taxes on on potentially everything. There's always another vantage point. But, in all, I agree with your view. Good Luck!

Same answer for both scenarios. He died before he reached his RBD, therefore age 70 1/2 distributions no longer apply. Let's suppose that he died on March 30, 2011 (the day before his RBD), his beneficiary would not have to receive a distribution until December 31, 2012. Remember, the 1 & 5 year rule would apply if his beneficiary is not the surviving spouse. Also, if the beneficiary is not a human, then the 5 year rule would apply. Good Luck!

Here are some issues that have to get vetted in whatever the client decides to do: 1) When you amend a plan to terminate, affected employees become 100% vested with respect to their accrued benefits under the plan. Once this happens, un-terminating a plan will not take away that vesting. 2) Also, when you amend a plan to terminate, plan Participants will often incur a distributable event. This effectively given a Participant a right to receive a distribution that they may have not otherwise received. You will not find any precedent on this because there are several rules within the foundation of ERISA that must be considered. Sometimes, any action taken is certain to violate at least one of these rules. When it comes to employees' rights, that would tend to be a rule that you would ever want to violate. You may need to go to the IRS (better yet, the DOL) to propose what you are trying to undo and flowchart the effect it will have on Participant's inalienable rights. At worst case, their current accrued benefits will likely remain at 100%, but you may end up taking away their rights to distribution since the plan is (in fact) not terminating. While this is a cutback, some type of relief would be needed. When flowcharting this, you would need to look closely at how the amendments were written and what was communicated to employees to determine which cutback rules apply. Notice, I am merely thinking out loud (brainstorming) as to what the issues may be. I've never seen anything like this in my short 16 years in the industry. Good Luck!

This could go either way. Typically, it is best to look at exactly what the client is trying to accomplish with the change. For instance, if the client is wondering if the change will result in an additional 1% being funded to the plan since the change will now induce employees to defer, then the chances of individuals who are not currently deferring to begin may largely depend on their salary; an 80% return on the first 5% deferred would imply that anyone who can afford it will take advantage of it. So, anyone who is (let's say) at $30K or above may be inclined to contribute. Let's suppose the client makes the change and every single employee now begins to defer at least 5% of salary in order to receive the 4% match. So, the client is out an additional 1%. Does the client give the employees raises each year? Let's suppose they do, and the average raise is 3% of salary. For the first year, the client can give raises of only 2%, and the change from the SHNEC to the SHMAC would have fully paid for itself while saving the client money from not having to pay increased FICA on what would've been additional compensation. There are many variables. You should look at what the client wants to accomplish and then address 'ALL' questions that need to be asked. Just a thought. Good Luck!

You know that you cannot defer from funds that have already been received. So, Roth or Regular, writing the check should be unacceptable. You may be left with determining the protocol for failing to meet the Participant's elections, but you wouldn't want to make a bad situation worse. Good Luck!

Since the sponsor is incorporated, the deduction for employer contributions would be taken in the same manner as the non-owner employees; against company profits. There will be no individual deductions since they are not 'self-employed' (e.g. taxed as a partnership). Each owner's benefit base will be the amount actually received as W-2. There is no circular calculation. Good Luck!

No, it is not. It is only subject to the 415 limit. Remember though, the formula must be written in the plan since it is subject to required funding, but you may have a formula that states 50% of Compensation for argument sake. Good Luck!

The client, on a prospective basis, can write a specific provision excluding HB1 Visa employees from plan participation. While these would still not be 'statutory exclusions', meaning the plan would have to pass 410(b) with those individuals 'not benefiting', it would effectively keep them from the plan. Of course, this is merely a comment on the rules and how they are applied (or the sake of argument), not encouraging a decision one way or the other. Good Luck!

One reason is that it would be tracked with any other amounts from outside Roth arrangements that may have been rolled over into the Designated Roth Account. These amounts, unlike regular Roth Amounts, will not be subject to any withdrawal restrictions and, therefore, treated as if they were rollovers. If someone is eligible for a withdrawal from Profit Sharing at age 35 (for instance) converts their profit sharing into the designated Roth Account, they would not be restricted from a subsequent distribution of that amount prior to age 59 1/2 because it is an amount that was rolled in and previously free of any withdrawal restrictions. This is a good question. Just can't wait to see what the final regulations are.

You vendor is not correct. A literal interpretation of the 72(p) rules (as illogical as it may sound) is that you subtract only the highest outstanding loan balance during the previous 12 months. You do NOT have to add any initiated loans during the previous 12 months to the highest outstanding loan balance. You should verify with the plan's written loan policy (without language specifically increasing the outstanding loan balance by newly initiated loans during the previous 12 months), then the loan availability should be $35,000; provided that the 50% rule is not exceeded. Good Luck!

You are correct. It is ugly. Interestingly enough, there are many contengencies on how ugly it is. The two sources of money each have their own regulatory restrictions on withdrawal availability (Profit Sharing being more lenient than the Employee Deferrals). These restrictions apply to the attributable earnings for the contributions, making it important to recordkeep and track separately. Yes, you would need to go back to 1998 and Recordkeep to the current time, and revise the process to ensure this level of recordkeeping is done going forward. VCP is likely, to the extent that it becomes impossible to recordkeep back to 1998. In such event, you are asking the IRS to agree with your most resonable approach giving the impossibility of providing a full correction. At this point, there are more contengencies than concrete answers.

Unfortunately, the answer does not change. It's still a QNEC, not a QMAC. But..... I would use shifting (borrowing) to the fullest extent to ensure it did, in fact, fail. It would be nice if the failure actually did not occur when exploring all your testing options. Good Luck!