jpod

If the plan document does not address the issue (and I'm sure it does not), then the employer should refuse the request and move on, rather than making an interpretation that accomodates the employee's goofy request.

JanetM: Your recommendation may not always be practical, and perhaps it is not practical in this case. Suppose the seller is going out of business immediately after the closing of the sale. If the buyer does not assume the plan (whether as a frozen plan or a live plan), or if the plan is not merged into the buyer's plan, your suggestion would force the seller to terminate the plan and then stay in existence until all benefits are distributed. This might not be realistic if the seller's plan is a large plan. Also, if it is important to make the transition as seamless as possible for employees, your recommendation might not be practical. Finally, I'll note parenthetically that the problems you mention are the same problems which could occur if this were a merger or a stock acquisition rather than an asset sale, it's just that in a merger or stock acquisition the buyer does not have a choice and is forced to deal with the seller's plans.

The most recent discussion of this issue is in the preamble to regulations under Section 3121(a)(5), which were published in the regulations in Nov. 2007 (or thereabouts).

Do you have a history of consistent timely filing, both before 2004 and after 2004? If so, this should be cited by your accountant as factors in your favor. You or your accountant should write a letter to the DOL at the mailing address for 2004 EZ filings and ask if they have any information that will help you demonstrate that your 2004 EZ was filed on time.

This may be illegal under Medicare's "working aged" rules under its Secondary Payer provisions. There are a few factors to consider. If you are going this alone without the benefit of a knowledgeable attorney or consultant, I suggest you start by going to the CMS website and looking at the Secondary Payer/working aged rules.

I'm not attempting to answer your questions, because it's too complicated and you shouldn't be looking for guidance on such serious matters from a message board. I am curious, however, if you invest in residential real estate through your Roth IRA, how will you invest your non-Roth money? Will you invest your non-Roth money in investments that produce ordinary income or in other capital gain-producing investments? It seems to me that if you don't want to pay capital gains taxes on your real estate you should be exploring 1031 exchanges, and save your Roth for more traditional investments.

Mandatory employee contributions (i.e., as a "condition of employment") to 403bs are not uncommon. However, if the plan is not subject to ERISA, the plan would be subject to state laws, in which case you would need to check the laws of the state governing wage payment and collection, which might prohibit involuntary contributions. Assuming there is no legal prohibition to mandatory contributions, they can be pre-tax. If pre-tax, I believe they are NOT treated as elective deferrals for purposes of the 402g limit, but they ARE treated as salary reduction contributions for FICA/Medicare tax purposes.

The proposed reg. published by DOL a couple of weeks ago would impose new contract and disclosure requirements as a condition for relief under the "service-provider" exemption from the PT rules. Perhaps I am missing the forest for the trees on this one, or suffering from brain freeze, but does anyone see anything in the reg. explaining how those requirements would apply (if at all) in the context of service-providers providing services to group trusts, hedge funds, and other commingled vehicles that are deemed to hold "plan assets" (but not providing those services directly to plans that invest in those vehicles)? Did the DOL slip up, or am I overlooking some very fundamental principle?

Jim Chad: Where did you get the idea to file the late EZs with the IRS (and where at the IRS)? I am not doubting your statement that you have had favorable results, but aren't the instructions clear that you must mail them to the EBSA address?

Will the employer/plan sponsor (or the successor to the employer/plan sponsor if this is happening in connection with a merger or acquisition) continue to maintain another tax-qualified defined contribution plan? If so, consider transfering the missing participant's account balance to that plan (retaining the J&S and optional forms of benefits required to be preserved). I'm not saying it is a perfect solution, but it buys time and may be a better choice than forfeiting or purchasing an annuity.

Yes, unless it is eligible for the small welfare plan exemption. I think this is covered pretty well in the 5500 instructions.

Your interpretation is correct. You didn't explain, but I'll assume that there is an important reason why one or both of the parties want the amount to be taxable and/or deductible in 2007, rather than 2008. Otherwise you can amend the thing in 2007 to have a payment on Jan. 2, 2008. Have you considered the "plan termination" exceptions to the anti-acceleration rule? Admittedly they are pretty narrow, but we don't know the background to your original question.

I should have said: ". . . cannot offer a medicare-eligible employee a financial incentive to opt out of the plan that is not offered to other employees." So, for example, if you have a Section 125 plan that offers employees $$ to waive health insurance, you could do that for a medicare-eligible employee too.

The hyper-technically correct answer to your question is "Yes." However, a brief summary of the pertinent law is that the employer cannot force a medicare-eligible employee out of the plan, and the employer cannot offer any financial incentive to opt out of the plan.

If this is a 100% anything goes plan (i.e., you can invest in anything the trustee/custodian is willing to hold, including hedge funds and other non-registered securities), this is a non-issue insofar as brf is concerned; case closed. If, on the other hand, this plan has limited investment options, one of which is the fund described by katieinny, than this is clearly a brf issue, in my opinion.

My one thought is that the individual you spoke with at the DOL doesn't know what he's talking about. Read the reg.; it's very short. No need to do anything not required by the reg.

mjb: I don't know what the rights of a death beneficiary are under a LI policy upon the death of the insured when there is a loan outstanding, but I assume whatever they are they are governed by the terms of the contract. But why is that pertinent to the issue at hand? Unless the QP loan is foregiven at death, isn't the note, or the receivable, or whatever you wish to call it, an asset of the decedent's QP account which then becomes distributable to the beneficiary?

I will answer you this way. 1. The QDIA regs. offer an OPTIONAL safe harbor relief from the ERISA rules of fiduciary responsibility in the case of default investments. ERISA plans do not need to comply with the QDIA regs. 2. Therefore, these regs. have absolutely no relevance in the case of a plan not subject to ERISA, which would include what presumably you have in mind when you say "governmental plans."

Bird: If the loan is offset on the participant's death, which is the result of good drafting, that means it's foregiven. In that case, that's the end of the story. If the loan is not foregiven at death, the decedant's estate is liable to the plan for the debt. MJB: What is the basis for the theory that the beneficiary "stands in the shoes" of the participant? To ask the question differently, why would the estate not have an outstanding debt to the plan if the documentation does not provide for loan foregiveness at death?

I wasn't suggesting that the loan is transferable. What I was suggesting is that absent language like yours, the participant's estate remains liable for his debts, and the note is an asset of the plan account just like any other assets. If the account is distributed to the beneficiary, the note is distributable to her and she can go after the estate.

Putting aside tax questions, what is it in the plan document or loan documents that relieves the estate from having to repay the loan balance to the plan, for the benefit of the beneficiary? Is the beneficiary entitled to the note as part of the account balance and as a result she has a claim against the estate? Or, is there something in the documentation that states that the loan balance is "foregiven" upon death? This may or may not be academic question from the beneficiary's perspective, depending upon how the participant's will is drawn and/or where the beneficiary stands as the participant's heir.

kimvp: Regarding DCAPs, Chaz raises an interesting point. Inasmuch as DCAPs are not subject to ERISA, a state COULD regulate DCAPs, including the handling of experience gains. For example, a state could say that the employer cannot collect the forfeited amounts and do whatever it wishes to do with it (even though there's nothing in the IRC to prevent that). The state could say that the forfeited amounts must be used to give all employees a benefit of some sort. I've never heard of any state regulation of DCAPs, but maybe Chaz has information to share with us.

Is the 401k being set up by the new LLC as the employer/plan sponsor, and the individual is rolling his IRA over to the 401k? If so, it is probably a "co-investment" prohibited transaction. If the new employer had been a corporation, it would not have been a pt due to a statutory exemption for the purchase of employer securities (which is not available if the employer is an LLC (although the IRS might still have had problems with it under the tax-qualification rules).

It's been a while since I had to look this up, but isn't a plan that covers only nhces exempt from 401a26 (or deemed to automatically satisfy it)?

I have to assume from your extended post that age 65 precedes the date certain. Therefore, the date certain becomes meaningless, as the amount will no longer be subject to a SRF upon attainment of age 65. As such, it will be taxable at age 65 whether or not the individual retires/terminates at that time. There is a SRF prior to age 65, but once you hit age 65 the SRF goes away. I don't think I'm going out on a limb to suggest that this would have been the correct interpretation without regard to Notice 2007-62.