shERPA

$136 over 7 years ago? Seriously? I don't see a problem here, there is always a certain "administratively feasible" time lag in dealing with these things. I assume it is a principal residence loan since it is >5 years?

Masteff makes a good suggestion. Might be able to get an expro PTE on buying the property out of the plan. Or just sell it. If it is unlikely to go up in value then what's the point of keeping it? Costs and risk outweigh the benefit.

Who knows, the document may have some language dealing with the situation where an asset is not liquid. A lot can be read into the phrase "administratively feasible" for example. As to it being "illiquid", most real estate can always be sold, it's just a matter of price. However a fractional limited partnership interest in a depreciated property is often truly impossible to sell. So it may not truly be illiquid, it is just that the fiduciaries believe it would be imprudent to sell at the current price and believe it to be a good investment for the plan and its participants. This might be a reasonable choice, but then it leads to the distribution issue. if this cannot be resolved in a manner that complies with ERISA, the code and the plan document, or the cost of doing so is excessive, then it may be more prudent to sell the property at its current low value. A certificate is a less than great option, good luck getting most IRA custodians to hold it, so then the rollover is lost, taxes due, premature distribution penalty, etc. etc. Again they need to seek legal advice. They need to make appropriate and prudent fiduciary decisions and operate the plan in accordance with its terms.

Is there something going on with the real estate such that they can't sell it, or is it that they just don't want to sell it for what the market will bear?

There are minefields on either side of this issue. The lump sum issue is no longer a problem, the distribution should be an eligible rollover distribution regardless of it being less than the full "balance to the credit" of the participant. I've seen this come up in professional groups where the doctors or lawyers got into an investment when the plan was pooled, later 401(k) was added and the plan went self-directed but it was not feasible to dispose of the illiquid asset. Sometimes it is a limited partnership interest in commercial property, and there could be litigation or other things going on that can drag on for years. If the trustee uses other cash in the plan to pay out each departing participant their share of the illiquid investment, this means that the remaining participants will be left with a larger and larger share - which might not be good for them. It also means that the fair market value of the asset needs to be appropriately determined, which may not be possible. So by not cashing out, trustee is protecting the remaining participants. By cashing out the trustee may or may not be harming the remaining participants, depending on the FMV and risk of the illiquid investment. It is not a good position for the trustee, damned if you do, damned if you don't. But there it is, and the fiduciaries need to deal with it my making a fiduciary decision as to what is best on behalf of all participants, and as noted above, operating the plan according to its terms. Best to seek legal advice. Perhaps this is what they've already done.

If I understand you correctly, the advisor is suggesting a change from trustee-directed to participant-directed investment options. This will trigger the need to comply with 404a5 disclosures on an annual basis. Is the advisor going to handle this? What is the additional cost to the sponsor and/or participants. This is not a trivial exercise and I've not seen any individual annuity products that present their performance and fee data in a manner that would make it easy to drop it into a 404a5 format.

Certainly they can be covered by one plan. The question is whether or some or all of the 10 entities involved are treated as a single employer, or multiple employers for purposes of plan coverage, non-discrimination, reporting, etc. It may be an affiliated service group under 414(m)(5).

Our firms are a niche business and we all do business differently, so there really is no single rule of thumb. I know people who have sold at a multiple of revenue, generally no more than 1x revenue. Also firms have been sold for a multiple of adjusted EBITDA, anywhere from 3x to 5x EBITDA - "adjusted" meaning adding back certain owner perks that the firm is paying for. Depending on the buyer, a "producing" TPA firm can sometimes command a higher price than a non-producing TPA firm because they control more of the client relationship. A financial buyer will be looking at your numbers and their potential return on investment. Other factors include the mix of plans, concentration of revenue and terms of the deal (stock or asset sale, cash up front, notes, stock swap, earnout period, your transition and non-compete, etc.) First order of business would be to work with your CPA to create GAAP financial statements. There are also some CPAs and other consultants who help business owners groom their companies for eventual sale, cleaning up financials, etc. Can be a 2-3 year process. At the end of the day, however, they are worth no more than what a willing buyer will pay. Good luck.

This reminds me of General Patton, who corresponded quite a bit during his career with much of it compiled in a two volume series "The Patton Papers". As I recall, he got a letter from someone with a whole bowl of alphabet soup after his name. He addressed his reply to the sender something like "John Smith, SOB".

I've always thought of ASPPA's QKA, QPA, CPC line as cumulative, so would only routinely use the highest one attained. ERPA is a separate ticket of course.

No, Jim I have not seen any increased SEP activity myself. Can you relate some details about the fixes required and sanctions imposed? Thanks!

Happens all the time. The SEP rules are in 408 and right on the 5305-SEP form itself, but they are either not read or ignored. IRA custodians such as fund companies, brokerage firms, etc. don't "administer" SEPs, they simply hold the IRA accounts, it is up to the employer to administer the plan, and they are frequently administered just as this owner suggests. I know IRS knows about it, I've told them myself. but these things fly beneath their radar. They'd rather beat up an employer who forgot to sign a minor interim amendment to a 401(k) that had no impact on plan coverage or contributions, rather than track down the rampant abuse in the SEP world that results in a federal tax expenditure for the owner's contribution and no retirement benefits at all to other employees. <rant/off>

As a NS prototype, the plan is on the 6 year cycle for amendment and restatement. Doesn't anything that happens now automatically fall into the remedial amendment period for the current cycle? See Rev. Proc. 2007-44 which says something to the effect that a remedial amendment period with respect to a plan that would otherwise expire before the end of the plan’s current 5- or 6-year cycle (and after the end of the plan’s preceding cycle) is extended to the end of the plan’s current cycle.

Test on average comp?

At the margin there will be fewer 401(k) plans. As noted, there will be less funds available on both the ER and EE side for 401(k) contributions. EEs will choose an immediate benefit (healthcare) over a future benefit (retirement). Also the sheer administrative burden imposed by Obamacare, combined with the growing administrative burden of administering a 401(k) plan, plus 1100 new DOL investigators, some ERs will conclude their 401(k) plans are no longer worthwhile and others will arrive at this conclusion before ever setting them up.

Agree with SoCal, you say "benefit", which implies a DB plan. How does 20% exceed 100%?

Hire an adult child for 1 hour of service, no plan eligibility - PBGC.

If there was ever a mistake of fact situation, this is it. I would not have a problem recommending the return of duplicate funds. They should document the transactions that caused it and the correction for the file in case it ever needs to be explained. It is easy enough to see how this would happen and the fix is straightforward, with no impact on the operation of the plan and the proper allocation of contributions.

I'm thinking this coule work if there is a contract between the participant and her uncle that says something to the effect that in consideration of $x given to uncle for the purchase of the property, uncle agrees to let participant live there. They may even have an arrangement where she buys it over time. It would have to differentiate from ongoing rent so as not to appear as some sort of prepaid rent. The reg doesn't say the participant must own the property and I am reluctant to create requirements beyond those that the IRS imposes.

A participant wants a hardship to purchase what will be her primary residence. However apparently her uncle is actually buying the home and will be the title holder, the participant will not appear on the title at all. She apparently needs to kick in this hardship distribution for the purchase however. Is this permissible? 1.401(k)-1(d)(3)(iii)(B)(2) says "Costs directly related to the purchase of a principal residence for the employee (excluding mortgage payments); One could certainly infer from the reg that it means the employee is the actual purchaser of the home, but it does not say that, it just says it must be a principal residence "for" the employee. Thanks.

I'm having trouble too. I normally click on "view new posts" each day and today I get an error that it cant find any such messages. However when I go to the individual forums I can see that there are new posts.

MoJo's got it. There are no plan corrections involved if Savernation fails to do its thing. A participant is electing to defer to the plan, from their own wages, their regular 401(k) deferral plus whatever amount is reported to the employer (or payroll company) from Savernation. If Savernation fails to transmit the information to payroll, then the participant gets the rebate in their checking account so they are not out anything, they just didn't increase their deferral. If Savernation doesn't properly credit a person with a rebate, that is between the person individually and Savernation, just like a credit card rewards program error, but it doesn't impact the plan. Now if payroll or the employer does not increase the deferral by the amount reported to them by Savernation, this could be a plan compliance issue by not following the employee's deferral election to increase their deferral by the amount reported by Savernation. Again, I think it works, I just don't see how all the recordkeeping expense is justified for such tiny amounts.

I was at a presentation on this back in February. For reasons MoJo states, I really don't see any compliance concerns here, this is just a mechanism for employees to increase their deferral election. There is nothing that says a deferral must be X% of pay or $Y flat amount. The deferral can be either of these plus the amount reported by Savernation. My concern is that there is just so much data that must be tracked dealing with relatively small dollar amounts, and then this data must be compiled and reported back to payroll. There are a lot of moving pieces, I don't see how there is enough juice in the whole process to make it profitable. As to encouraging spending to "save", it's really no different than coupons or rebates. If you use them to get a discount on the stuff you would normally buy, you save. If instead you buy something you don't need or otherwise would not have bought just because there is a coupon or other rebate, you're not saving. It doesn't do anything for employees they cannot already do themselves, but lots of people will intentionally over-withhold their income taxes as a forced savings, others will pay a service to help them pay down their mortgage (when they could do the same by just making an extra payment each year), etc. 401(k) itself trades on the same theme. Many people are not financially disciplined and can't or won't save on their own, thereby creating opportunities for these sorts of services to help them by making savings automatic. If Savernation works, that's great, more power to them and some participants will retire with somewhat higher 401(k) balances.

No offense, but you are mixing apples, oranges and cucumbers here. The companies are aggregated under 414 as a parent-sub controlled group, not the plans. 401(k) and PS components are mandatorily disaggregated for testing. Each component may be permissively aggregated with its counterpart in the other plan for 410(b) testing if they do not pass 410(b) separately. If the plans can be aggregated for 410(b) and pass the ratio test on this basis, then they must be tested for non-discrimination (ADP for 401(k) component, 401(a)(4) for profit sharing component) on an aggregated basis. If they pass this way you are done, if not, then you need a correction, QNEC or refunds for ADP, additional NHCE contributions for PS, for example. If you are relying on the average benefits test for passing 410(b) then in addition to the 70% threshold, the non-discriminatory and reasonable classification tests must also be satisfied. There are rules about aggregating plans for testing, they are complicated and there are endless permutations possible. It is well beyond the scope of a message board to help at this level, but rather it should point you in the right direction. Hopefully this does that.

You may be able to aggregate the two plans for 410(b) coverage. Then you would have to perform the ADP test on the aggregated plans.