shERPA

Still have one pending that was submitted August 2018 - very simple, wasn't even assigned until July of this year. Got some questions back in September (that indicated the reviewer didn't understand it). Responded right away, since then - crickets.

No.

I've encountered this a couple of times with a big payroll company, probably the same one. Of course their contracts put all responsibility for IRC and ERISA compliance on the employer. They don't advise, they "process". The only other suggestion I have is that you don't necessarily have to do 3% TH minimum, if an employer contribution is to be allocated as of 12/31/18, the TH determination date, the employer need only contribute enough to get the TH ratio under 60%. Sometimes this is quite a bit less than 3%.

Some of the client meetings I've been in, they're all running out to buy ginormous (6,000# GVW) Land Rovers by 12/31. So there's that.

Ok, didn't see that one coming. Sole prop still exists, no? Seems a stretch to say it went away.

What do you mean by "too restrictive"? I agree with your 410(b)(6)(C) analysis. IIRC SIMPLE IRAs get 410(b)(6)(C), but I don't know that SEPs do. Does it have to be a stock purchase?

Can’t argue with that!

Yes, whenever a client says they are selling their business, the first two questions are (1) when do you expect the transaction to occur? and (2) is it a stock/entity sale, or an asset sale? We can't provide any useful advice about retirement plan options without knowing this.

Good job! And you are certainly correct about that. Glad that you know this before entering into a ROBS. Yes there are ways to unwind it. The tax code doesn't prohibit ROBS, it's just that there are so many other requirements and potential traps, and those of us in the business know that these sorts of things often trip people. Good luck.

Just as well you won't have $600K sitting around, since your buying the stock from the plan would be a prohibited transaction. You won't find a lot of ROBS fans on this board, including me. Google "IRS ROBS memo" and read the 2008 IRS document for a list of some of the potential issues. If you're still interested in doing this, read the second hit about the IRS ROBS compliance project. If you're still interested, seek legal counsel from an attorney with expertise in qualified retirement plans (most attorneys, even tax attorneys, are not experts in this area). Good luck.

Yes I agree the limitations and complications are such that I’m not going to go into it at this level either.

Right, sort of. If the participant had the opportunity to deduct interest paid on the loan, then taking a loan from a bank might be comparatively advantageous, assuming all the other loan terms are the same. Interest deductions are pretty limited these days, but if the loan is for capital improvements to the home and a participant can borrow from a HELOC, it could be deductible if total home debt within the overall limit on home loans for deductibility. I say 'sort of' because saying "there is NO difference between a bank loan and a plan loan" is not the same thing as saying 'THERE IS NO DOUBLE TAXATION'.

The DB would have to meet both the reasonable and non-discriminatory classification requirements of -4 of the 410(b) regs to rely on ABPT for coverage testing.

1. No floor-offset, right? Probably works. 2. If the DB will pass coverage on a stand-alone basis, yes. If not, no. 3. Probably - Facts and circumstances need to be able to document that the insurance was effectively available if challenged. Again if DB passes coverage on its own, shouldn't affect DC and its insurance. 4. DC, probably OK. DB - plan docs will typically say how to deal with uninsurable (or not insurable at standard rates). I haven't really looked at this in years as I follow the Bob Schramm rule on life insurance in plans.

OK. Assuming the buyers did NOT adopt the plan, then things are as they should be. Participants terminated their employment with the plan sponsor (the selling entity) and were hired by the buyer entity. So the buyer entity has no plan, there are no deferrals to be withheld, etc. The participants are terminees in the seller's plan and should be receiving distribution information. It's up to the buyers to determine if they want to set up an plan, but they don't have to. If they do, generally they should set up their own new plan, not adopt the seller's plan. One of the big reasons these transactions are done as asset sales is that buyers don't want to assume the liabilities of the seller. A plan is one such potential liability, so why take it over? And it avoids spending a lot of money in due diligence on the plan as well.

This question, in slightly different flavors, comes up over and over again. Someone is getting a bunch of money, they don't want pay taxes on it. Can they put it in a plan? The nature of the income and how it will be reported must be understood first. When I get the question I ask how the payments will be reported, both by the payee and the recipient. If they don't know, I tell them they need to sit with their tax advisors and figure that out, then we can talk about whether or not a plan is feasible.

It's been quite a while, but I seem to recall a few articles by attorneys in our world who concluded that there is no duty to report for your basic non-fiduciary TPA. Re #2 - If the client took all the plan money, what makes you think you'd be paid for any further services? I'd definitely resign and not perform any additional services. I'd probably do a bit more research to locate some of the articles about any duty to report to see what they said and if they applied to this situation. If I felt a need to report it to DOL I might seek my own legal advice first.

No. Could be either an asset or stock transaction. Until this is known, it is impossible to evaluate the 401(k) issues.

"The agent wants to provide insurance..." You may have inadvertently hit the nail on the head. Bottom line you are correct for all reasons you state and then some. Ask the agent if the insurance co will opine that what is proposed meets the BRF requirements and if the ins co will indemnify the employer should the IRS disagree. Of course they won't. Every policy sold says the ins co is only standing behind the terms of the policy contract, and not any tax treatment.

Agree with @BenefitsPerson. More likely the employees are common law employees. Not really sure how you get to a "leased employee" determination in the wake of Rev Procs 2002-21 and 2003-86. Even if you did get there, I've never seen the requisite MP plan.

"Denying" an automatic extension. Gotta love it.

I haven't checked the EOB, but if you look at the (a)(9) regs, it sounds like he was a 5% owner with respect to 2019, having just divested himself in June. As such he is a direct 5% owner for RMD purposes anyway, assuming a January-December plan year. See -2, Q&A 2. 401(a)(9) references 416 for the 5% owner definition. 416 relies on 318. 318 attributes from children, so he's probably a 5% owner this way too, but looks like this probably does not matter.

All this loan stuff is great for us pension geeks (well not really), but it isn't germane to the OP's question - what does the plan loan have to do with a hiring decision? It could be the OP misunderstood what the employer said, it could be that the employer doesn't know what they are talking about, or it could be that they don't want to rehire her and are using this as an excuse. If the employer really told the OP that any hiring decision was contingent on repaying the loan, I still think this is a possible ERISA 510 violation.

This might be prohibited under ERISA Section 510. You are allowed to take a participant loan. If your employment subsequently terminates, the loan is typically due and payable; if you default on the loan, it is a deemed taxable distribution. None of this violates ERISA or the terms of the plan. But then using the plan loan as a basis for a hiring decision would seem to cross the line. Did they tell you this in writing? Probably should seek legal advice, as IANAL. From ERISA:

I haven't looked at the law again since this came up, but I think residency works too. But the recordkeeper who was involved in this (and brought it up) wanted a citizen.