R. Butler

You didn't blink in this post Blinky. Really I just figured if I can repost the same response 5 or 6 times I can keep my numbers up and hopefully one day become the top poster.

If your question is whether Co. A and Co. B are a controlled group and you are further saying Co. A owns 100% of Co. B, then yes I am saying that individual ownership of Co. A, as well as the relationship and age of Co. A's shareholders, is irrelevant.

I might not understand your question. I don't see an attribution issue in your scenario. Attribution is used to treat a person as owning an interest that they don't actually own. You have stated that A actually owns B. You don't have to attribute ownership of B to the individual shareholders of A, A owns more than 80% of B; that is a controlled group. Again, I might not understand the question, but it appears that you may be over analyzing this. In your fact pattern Company A owns 100% of Company B; that is a parent/subsidiary controlled group. See §1.414©-2(B). I hope this helps.

The controlled group rules are found in IRC §§414(B), 414© and 1563. In your example you state that B is a wholly owned subsidiary of A. That is a controlled group. The ownership of A is irrelevant to that determination. It appears to me you are trying to analyze your situation using rules applicable to brother/sister groups, but again according to your fact pattern you have a parent/subsidiary relationship.

If A owns 100% of stock in B then you have a parent/subsidiary controlled group.

Deferrals by a key employee still considered an allocation for determining top-heavy minimum accruals. Catch-up contributions are not counted as an accrual for top-heavy purposes.

The DOL Opinion letters of which I am aware always focus on the direct or indirect benefit to the fiduciary. The DOL Opinion of which I am aware concerning IRA's is 89-03A. Although I don't have a copy of that ruling, I am fairly certain that the DOL actually allowed the purchase. (Please correct if I am wrong.) The Opinion focused on the degree of company ownership of both the indiviual and the IRA. Clearly the greater the degree of ownership, the more likely there would be a direct or indirect benefit, and thus self dealing. I would agree that if the owner was getting some kind of kick back from the brother-in-law, there would be a problem. I don't agree that the owner is necessarily receiving a benefit merely because the brother-in-law is the broker.

Thank you for your replies. There seems to be an issue as to whether the brother-in-law is a person whom the Owner has an "interest" in. Although I don't agree that this a prohibited transaction, we will still present both views to the client. Kirk, when I read 2550.408(B)(2)(e), the last sentence states that for examples of parties in which a fiduciary has interest see ERISA §§3(14)(E),(F),(G),(H) & (I). When I review ERISA §3(14) I don't see that brother-in-law fits in those definitions.

What does your son have to do with your brother-in-law?

Owner of Company A wants to make his brother-in-law the broker for the Plan. Is this a prohibited transaction? The brother-in-law is not a relative under ERISA §3(15), so I don't see that this is necessarily a problem, but just wanted to see if I was missing anything.

You actually can do a job search by location here in Benefitslink. Make your location a city in North Carolina. If they are hiring an administrator, they do administration.

If you do a search on Administrative Expenses in the BenefitsLink Board you should find several good articles on what administrative expenses can be charged to the Plan. $1,000 charged to one participant for two years of administration, does seem high, but I don't know all of the facts. If you really want to pursue this, you should probably start by contacting the DOL. You could always contact an attorney, but that is a cost/benefit thing.

We have similar situations occur fairly often. 401(k) deferrals deposited a week or two late, penalty usually under $10. Ultimately it is the plan sponsors decision, but we always strongly recommend they file.

I'd be leary of eliminating the catch-up provision in 2002, if people have already deferred the $12,000. If catch-up has been made it is difficult to argue that a benefit hasn't accrued. I'd probably amend the other Plans to include a catch-up provision in 2002. I may be missing something, but why doesn't the Plan Sponsor want to include a catch-up contribution?

I'm not sure I agree that only one 5500 is required, even if this one Plan. The instructions state that "a separate Form 5500 with box A(2) checked, must be filed for each employer participating in a plan or program of benefits in which the funds attributable to each employer are available to pay benefits only for that employer's employees, even if the plan is maintained by a controlled group." I agree with LVanSteeter's inclination to go with the initial date of the Plan, not the date it was adopted by the particular division. I haven't seen any real guidance on the issue, but it just makes sense to put the initial effective date. Regardless of how many 5500's you are filing it still is the same Plan.

See EGTRRA §616. In your example he could get a profit sharing of $8,000 and still defer the maximum. Why does this matter for the Schedule C?

1. ADP done on plan year basis. 2. If Person is an HCE include the excess deferral in the ADP test, if NHCE do not include. If Person is an HCE and later gets a refund due to a failed test. The amount of that refund can be reduce by the 402(g) excess distributed. 3. I am fairly certain the W-2 is not amended. A 1099-R should be issued for the distribution. I am not sure about the issues concerning the corporate return.

The amount cannot be reclassified, it must be distributed. Since it is after 4/15, the entire distribution will be taxable in 2002. In addition the participant should not have excluded the excess from income in 2001. See 402(g)-1(e)(8).

"Where you have an even more interesting issue is where the employer decides not to make a discretionary profit sharing contribution for the plan year but the provison allowing for a discretionary contribution remains in the plan. Arguably, this employer will also not qualify under the "solely" test." That is an interesting thought I had not considered. I hope that it is not the case. Just for flexibilities sake, most of our Plans provide for a discretionary contribution even if one is not made.

Yes. §613 provides that safe harbor 401(k) will not be top heavy if it consists "solely" of deferrals and the safe harbor 3% or matching contributions. EGTRRA does allow matching contributions to be applied towards top heavy, so nonelective contributions won't necessarily have to be provided to participant's receiving a match.

I am fairly confident that the refinancing of Loan #1 does not violate the the maximum repayment period as long as I have treated the loan as outstanding for purposes of applying the loan limits on the refinancing date. The proposed regs. are fairly clear on that. In regards Loan #4, I am still counting Loan #1 as outstanding 02/02. My only concern is whether Loan #2 would also be also treated as an outstanding loan on the date off refinancing for purposes of applying future loan limits. I think the answer is no, but I am not 100% sure. To be specific I am trying to determine the highest outstanding loan balance within the past 12 months. If I have to count both Loan #2 and Loan #3 as outstanding on the refinancing date, obviously my maximum loan amount changes.

I don't care how many are outstanding, I am concerned with the maximum amount. If both Loan #2 and Loan #3 were considered outstanding at the time of the refinancing transaction then wouldn't I have to consider both in determining the highest outstanding balance over the past 12 months?

Schedule T, Line 4e, the line for Exception

A question about loan refinancing. Facts are as follows: Participant A takes Loan #1 for $11,000 in 2/99; loan fully amotized in 2/03. Participant A takes Loan #2 for $10,000 in 10/01; loan fully amortized 9/06. Participant A refinances Loan #1 & Loan #2 into Loan #3 in 2/02; loan fully amortized 9/06. Participant A wants to take Loan #4. I am fairly certain that for purposes of 72(p)(2) that we currently have 2 outstanding loans, Loan #1 and Loan #3. Loan #2 would not be considered outstanding because it was refinanced into Loan #3 and the amortization period was not extended. I am easily confused with multiple loans, is my analysis correct? Thanks for any guidance.

New calendar year Plan effective 10/01/01. At 12/31/01 the receivable exceeds 5% of plan assets. All assets other than the receivable are qualifuing plan assets. 2 questions: 1. If I prepare on the cash basis, can I exclude the receivable as an asset for the small plan audit requirements? 2. I'm not certain if the bond was purchased prior to 12/31/01. Assuming the answer to #1 is no, is it sufficient that the bond is obtained prior to the due date of the 5500 or must it have been purchased by 12/31/01?