jpod

Whether a risk of forfeiture is "substantial" is a facts and circumstances issue. Generally speaking, if the individual would fofeit everything only if he voluntarily terminates without good reason (assuming it is a 409A-compliant definition of good reason), there is a SRF. Your case must involve a pubilc company, so it's not likely that there are any facts to suggest that the RF is not S.

If that is what the article said, it's wrong. If the article said "there is no substantial risk of forfeiture if a forfeiture would occur ONLY upon termination for cause," then it's correct.

The effect of the over-contribution is the imposition of the excise tax under Section 4973 of the Code on excess IRA contributions. You need to work through Section 4973 and the regulations thereunder to figure out how to address this situation.

fivepoint: Look on the bright side: maybe you lost money over the past six years! Just kidding. Point 1: There is nothing in the Federal QDRO laws that would prevent a DRO from being drafted at this late juncture that qualifies as a QDRO. Point 2: I agree you should consult with a lawyer, because whether the DRO can now seek gains/losses would be a question of applicable state law. Without knowing anything more, I think your lawyer might be justified in feeling a bit "sheepish" about arguing to a judge that the ex-spouse should not share in gains since the separation date, if there were gains. Perhaps I would be wrong if there was evidence that the ex-spouse and the ex-spouse's lawyer were solely at fault for the delay, but I'm merely speculating on that point.

You better check the plan document and applicable state law governing trusts. This may not be a question of what the plan sponsor WISHES to do. My guess is that the plan is PROHIBITED from paying any benefits to any third party before they become due. As a result, benefits could be paid to a former spouse pursuant to a court order only AS AND WHEN they are payable to the participant.

Has anyone given any thought to how the former spouse/survivor annuitant might have to say about such a change?

Bird, I would be interested to know what provision(s) of the Code and/or regulations suggests to you that you still might have the same nondiscrimination issues. But putting that aside, what if the spin-off termination was done in reverse? i.e., Company A spins off the piece of the plan that will remain in existence, and then the "old" plan that covers only the employees subject to the divestiture is terminated.

Suppose (a) Company A is not a grinch, (b) an amendment to fully vest the employees WOULD BE a discrimination problem, or at least a potential discrimination problem, and © the buyer will not accept a plan-to-plan transfer. Can you do a spin-off termination of a piece of the plan attributable to the employees subject to the divestiture, thereby requiring full vesting as a matter of law, without the same discrimination problems?

I don't have any of the information you requested, but if all else fails I would (a) contact your client's Congressman and/or its Senator and request assistance, and (b) ask the client to permit you to advise the IRS that the employer is more than willing to allow the plan to be disqualified rather than to spend anything close to the amount of money it would take to do what the IRS is proposing.

You can exclude anybody you want to exclude as long as (a) the nature of the exclusion does not have the effect of establishing an eligibility requirement of more than "one year of service" (as defined in the IRC); for example, excluding "part time employees;" and (b) the exclusion does not result in discrimination in violation of Federal or State civil rights laws. The IRS has published a good deal of guidance on (a). Of course, once you've implemented all legal exclusions, you still must pass coverage.

What do you mean by "active"? For example, if a db or mpp plan is frozen, but employees still receive vesting credit as required by law, would you consider them to be not "active"? Certainly in that situation you have to count those participants in determining whether there is a partial term. of the frozen plan.

Though unusual, there are reasons why a 457(f) might be written to defer payment after the vesting date. Typically, what will happen is that there will be a distribution of an amount that is estimated to be sufficient to pay the taxes due as a result of vesting, but no more than that. Then, the subsequent earnings are not subject to Federal income tax until paid, and then taxed under the Section 72 rules where there is a mixture of tax-free basis recovery and taxable earnings. Reasons why this might be done: 1. Thinking that this type of tax-deferral of the earnings is better than having the executive simply purchase an annuity loaded up with insurance company charges. 2. Depending upon the state involved, the state income tax on the amount deferred, as well as earnings, may be deferred until actual payment. Possibly a big tax savings for someone planning to retire to Florida or another no-tax or low-tax state. 3. Possible protection from the executive's creditors until payment is due.

skv7: I believe your question is: Can the Company shut down the ESOP and put the employees' money in the 401k plan without giving them the option of actually receiving the money? The answer is "yes," for at least a couple of technical reasons I won't bother getting into here. However, masteff points out, correctly, that you'd pay the same tax if your husband received the ESOP money directly as he would if he received the money from the 401k plan (assuming your husband is eligible to receive the money from the 401k plan under the terms of that plan). Whether he can actually withdraw any 401k plan money while he is still working for the Company is another question.

No, my speculation about funding strategy was merely an attempt to explain why the Company was the beneficiary under the policy (assuming it was the beneficiary under the policy). Authority? I would have to say Section 61 of the Internal Revenue Code, and the fact that Section 101 of the Code provides no relief in this case to the person to whom the Company paid the $$.

I thought the issue was whether the money paid to the so-called beneficiary by the Company was taxable to him/her. If so, we answered by saying that it is taxable unless he/she is the beneficiary under the policy. If the Company is the beneficiary, but there is a separate agreement to pay money to this person equal to all or a portion of the amount of the policy death benefit, then it is taxable to this person. Is there some other question we are not answering?

He does not wish to change it to a double trigger. He wishes to change it to alternative single triggers.

If the beneficiary is not the beneficiary "under the policy," the payment to the beneficiary is taxable. Presumably this is intentional: the company is seeking a tax-free receipt of death proceeds, coupled with a deduction for the payment to the beneficiary, as part of its overall deferred compensation funding strategy. By the way, great User name!

It's done all the time. Check the documents, particularly the trust instrument, if it is a separate agreement, or the trust provisions of the plan if the trust provisions are integrated into the plan document, to make sure that you dot every i and cross every t. If buyer has experienced counsel he or she will insist on fairly broad reps and warranties and an indemnification with respect to the plan.

While you can exclude employees by groups (provided you comply with the coverage and nondiscrimination requirements), note that if it is an ERISA-governed 403b plan it must also comply with the Title I equivalent of IRC Section 410(a) (e.g., cannot require more than a "year of service" to be eligible for employer contributions).

Doesn't the "definite allocation formula" requirement state, or at least imply, that you need to know by the close of the py how contributions will be allocated?

I agree on the 409A grandfathering, assuming there was in fact vesting before 2005 (as opposed to backdating or a lame attempt to make the vesting "as of" 12/31/04. Also, absent more facts I am inclined to agree with your implicit statement that there was constructive receipt as of the first date on which he could have elected an immediate cash payment. Kind of off topic, but just out of curiosity, what happens if he dies before the 30 years are up? How was the FICA/Medicare handled under 3121(v) for 2004?

Word of caution: If you are shopping for coverage in the individual market, don't get caught up in the question of whether or not the plan qualifies you for an HSA. Your first obligation to yourself and your family is to get the best coverage you can afford. Pay particular attention to any lifetime maximums and other exclusions or limitations that some less-than-forward thinking State Insurance Dep't may allow. Once you've identified a good plan, HSA-eligibility is nice, but it shouldn't be the driving force.

May we have some more facts? I am not suggesting a resolution at this point; this is just fact-finding. 1. Were the 100 people told that they were being capped at 6% "because they were HCEs" and given an explanation of why "they were HCEs"? 2. Why don't you know exactly what percentage they would have contributed? I have the impression from your post that the 100 completed election forms specifying a %, but your recordkeeper capped them at 6%, thus their elections must have been for a % greater than 6%. Am I correct? 3. Are we talking about only 2007 and not any prior years? If it's only 2007, is it feasible to go to those 100 people who still work for the company and tell them about the mistake and give them the opportunity to make it up through the balance of the year? (This would stop the bleeding somewhat.) 4. Is there a Company match, and if so is it an annual match, or a pay period match with a true-up, or is it a pay period match without a true-up? 5. Does your recordkeeping admit responsibility, and/or has it notified its E&O insurance carrier?

If capital is NOT a material income-producing factor, you are automatically a service org. (although I think there is something that kicks out corporations for purposes of the (A) test). I can't imagine any facts that would suggest that capital IS a MIPF for a headhunting business.

I will not attempt to answer your Qs, but I offer the following observation for your consideration. If what you are contemplating is elective deferred compensation by an employee of a tax-exempt entity, I suggest that you give it no further contemplation. See IRS Notice 2007-62.