shERPA

Absent a QDRO properly delivered to the plan, how can the plan place any restrictions on the participant's account balance?

What Tom said. See IRC 404(a)(6), the due date for deductibility is the due date of the tax return, including extensions, absolutely NOT 30 days after. The 30-day-after rule allows contributions within the 30 day period to be treated as IRC 415 annual additions for the prior year. This is sometimes useful for other reasons, but it doesn't affect deductibility, governed under 404.

He is paid for teaching on a 1099, that makes him a sole proprietor trade or business. He owns 100% of this sole proprietorship, so it is a CG with his other business which he owns 100%. So if he does a SEP for his teaching income he needs to cover the employees of the business as well. If he were paid for teaching on a W-2, he would be an employee of that business that pays him. This would not be a CG with his own business, but he would not be eligible for a SEP because it is wage income, not his own business income.

Doesn't work, sponsors of SEPs are subject to the controlled group rules. See 414(b) and © which both specifically reference 408(k).

The important thing is that you as a non-producing TPA don't get sucked in to fulfilling the financial advisor's role as you are not being compensated for it and presumably are not licensed to do so.

Likely a PT issue as it could be considered an improvement to a disqualified person's personal property. Also, most solar deals I've seen only pencil out when various state and federal tax credits are included. The plan is not a tax paying entity, so it would likely not benefit from these subsidies. Does it still pencil out as a viable investment? Or is the client mistakenly expecting to personally benefit from any tax subsidies (in which case this is yet another item making it a PT)?

Don't pay the rent, use the money to pay the water and sewer bill instead. Then apply for a hardship to pay the back rent to avoid eviction.

In my experience when clients have asked me about making contributions in kind, they are often under the mistaken impression that they will get a tax deduction for the FMV of the contribution without recognizing any gain due to appreciation of the asset. Once I explain that the contribution is treated like a sale for tax purposes they usually lose interest in this. The other reason they often want to contribute an asset is because they have a required contribution and not enough cash. As noted above however, PENSION plan contributions must be in cash, otherwise it is a PT.

Greg, Sometimes clients come up with things, for what in their mind is a good reason, but actually doesn't accomplish their objective at all, and often makes it worse. Agree with SFSD, you need to find out what the client is after here. Then you educate them on why it is a bad idea and won't do what they want.

I agree with MoJo and Bird. And I agree with Austin's statement "The DOL has really ruined 401k plans. If I owned my own business I swear I would never start a 401k plan." What made this career tolerable is I am passionate about helping people save money to better take care of themselves, and truly believed qualified retirement plans are one of the best ways to do so. Now? Not so sure anymore. IRS at least seemed willing to work with employers not to kill the goose, so to speak (although they seem to be getting much more aggressive in setting unreasonable high CAP sanctions). And now the DOL heaps on more abuse. Setting employers up for nasty results from "investigations" and making them eventual sitting ducks for plaintiff lawyers. I'm asking myself, knowing what I know, and what I anticipate coming down the road, should I convince an employer to establish a 401(k) plan? Are the tax benefits really worth the risk at this point?

Yes, RTFD. In our document it has the normal retirement benefit section, then the accrual language. 415 is in a separate section that basically says no matter what the benefit paid can't exceed 415. So in your example we'd use the $20K times the accrual fraction, then limited by 415 as necessary.

There are just so many ways to design a DB plan superior to the DB/k, it's hard to imagine any practical application for one.

See IRC 401(k)(4). Benefits (other than matching contributions) must not be contingent on election to defer.

I don't see much hope either. Consider a plan with 10 hospital based physicians, no other employees. Each physician is a 10% shareholder in the group, a board member, an HCE, and a plan trustee. Each has their own brokerage account. Who is the employer who will "monitor" the plan investments? There is no one else except the 10 docs. And frequently, at least some of the docs don't want the other docs to know what they are doing with their investments.

Don't they overlap thru the B-Org? Vet A and the B-Org are an ASG. Vet B and the B-org are an ASG. In testing A's plan, 414(m) related employers must be aggregated, so B-Org is aggregated. But B-Org is affiliated with Vet B and therefore they are aggregated as a single employer. So when Vet A goes to aggregate the B-Org, it gets Vet B too. And so on thru the group. Also, could the B-Org also be an A-Org FSO and all the Vets A-Orgs? They are service orgs, they are regularly associated, there is ownership. If the B-org is not incorporated it may be an A-org FSO as well assuming the B-org would not be a professional service corp if incorporated.

There is IRS guidance dating back to pre-ERISA days regarding the treatment of shared employees. As I recall, the treatment you describe is consistent with that guidance. Sorry I don't recall the exact cite. That said, if this is truly an ASG situation, then the shared employee treatment may not be appropriate. If there was no common entity and each vet simply employed the same people directly and paid their own share of wages directly it would be more like a shared employee situation. With the common entity it sounds like a bunch of overlapping B-Org ASGs or even possibly A-Org ASGs as well (depending of facts and circumstances such as the type of entity that employs the staff). If they are a bunch of overlapping ASGs then it is common to test them all as a single employer. Although I know some make a case for testing each ASG separately. This situation sounds like it warrants its own legal analysis.

Yes, Q&A 13 applies. I assume Jim is suggesting putting the spreadsheets together to identify overlapping investments within the brokerage accounts to attempt to comply with Q&A 30. I say "attempt" because if there are any participants who are active traders, the 5+ threshold could be hit on any single day, so it would seem that all activity for all accounts would have to be tracked on a daily basis. I'm virtually certain none of our clients will be willing to pay what this would cost. This might make the separate plans look inexpensive.

We have a number of plans with self-directed brokerage accounts. There is no platform or window, just FBO accounts. IMO this is clearly a "similar arrangement" as described by the FAB. The simple answer is that plans like this will not be in compliance with the requirements of Q&A 30 as there is no monitoring of the investments by the employer or anyone else. Indeed some of the doctors and lawyers with plans like this absolutely don't want their partners to know what they invest in. And many of these plans have the brokerage accounts at different firms, based on the financial advisor each participant works with. Nice how DOL drops this bomb on short notice circumventing the normal propose/comment process of developing regulations. I read where some group pushed back that this is a new requirement that should go through the process but DOL is standing its ground. One of my clients like this is a medical group with 40 docs. I suppose I could recommend spinning off into 40 separate single participant SH 401(k) plans, each of which is trustee-directed and self trusteed. Great way to generate fees but hardly consistent with the intent of the regs and a waste of my client's money. Waiting, hoping, for some other insights on this before I tell my clients - and what to tell them! The results of government action are never as intended, and it's always a surprise.

There is a posting on the ERPA group on Linkedin, IRS "forgot" to send reminders to the ERPAs ending in 7,8 and 9. Renewal is due June 30, 2012. I did it on line. The form is a PITA, but it seems to work, took my money and emailed me a confirmation.

The ERISA Outline Book by Sal Tripodi, distributed by ASPPA, has far and away been the best resource available. However at the moment I cannot recommend it due to the new user interface they rolled out for the 2012 version, it is unusable. They have said they are going to be improving it. I hope so and I hope that I will then be able to recommend it. Otherwise kill some trees and get the hard copy.

Instructions to form 5310 Who May File "Any plan sponsor or administrator of any pension, profit-sharing, or other deferred compensation plan (other than a multi-employer plan covered under PBGC insurance) may file this form to ask the IRS to make a determination on the plan’s qualification status at the time of the plan’s termination." [Emphasis added]

"Enjoy"?

The real question is "what is your 415 maximum at age 50?" Like frizzyguy, a quick calc shows something just under $1.4m, so your administrator is giving you good advice not to put more money in the plan. If you get too much, when it comes out you pay income taxes and a 50% excise tax on the excess assets. You are right in today's environment this money won't necessarily translate into a $195K income at 65. In computing the maximum lump sum equivalent to the pension benefit, IRC section 415 specifies a rate of no less than 5.5%. If you go to sites like www.immediateannuities.com and play with the lump sum and benefit amounts, you can see that actual annuity prices are much higher than IRS maximum lump sum limits - because the insurance companies are guaranteeing much less than 5.5% in this market. Things change in the pension world and 15 years is a long time. 20 years ago the IRS had pension plans in court over a 5% interest rate, insisting that the plans must use 8.5%. IRS lost, fortunately. It's law, it doesn't have to make sense.

Might be easier to go to court to change your name! Congrats.

OMG!