jpod

I don't think we know what the motivation is here, do we? Maybe the asset can't be sold. He should consider looking at the possibility of getting an EXPRO exemption for the sale of that asset to himself personally or perhaps to his IRA if he has enough money in an IRA.

409A may not be applicable here. Consider the exclusion in the regulations for property subject to IRC Section 83.

I think you understand the question. My follow up question is does the governing board, as you described it, have the authority to do this? One would hope that the board members know the answer, but they may not.

Your facts are murky and their clarification may impact the answer to your question(s). Is buyer buying the equity of the subsidiary entity, or only its assets and thereafter hiring its employees? What do you mean by a "carve-out" transaction? (I've worked on acquisitive transactions for 35 years but I don't think I ever heard that term used.) What is "PHS"?

Probably setting up an elective deferred comp plan under 457(b) is not a problem. Does the employer entity have the authority (under whatever law is applicable) to set up a plan requiring employer contributions?

A person cannot become a trustee unless he/she/it accepts that appointment, usually as evidenced by a writing. Also, it is not the question you asked but I believe there is old IRS guidance questioning whether you can have a valid trust where the same individual is the settlor, trustee and sole beneficiary of the trust. Is that the case here, or is the settlor a separate entity?

It is definitely ineligible compensation, regardless of how they choose to report it.

The person claiming to be a spouse, or surviving spouse, tends to drop that claim when confronted with the fact that the claim is completely inconsistent with what he/she has been telling Treasury every year under penalties of perjury. That was my only point. If he/she does not drop the claim, then you go on to the next step in the analysis.

I have had some success in dealing with claims of a "common law" spouse situation by asking for a copy of the couple's tax return(s). If they've filed as single that should pretty much nip this in the bud.

Luke, I am only pushing to see what everyone thinks about how protective a clean determination letter on the termination of the first plan can be where you end up setting up what is basically a clone new plan without skipping a year.

Correct, there was no "not" in my post. But I was changing the facts just a little bit (by reducing the life of the first plan from 10 years to 8 years) just to see what everyone thinks about my hypothetical.

Suppose the firm/employer terminates its db plan after 8 plan years, files 5310, and indicates on the 5310 that it does intend to establish a new db plan covering the same participants. Clean determination is issued, with no questions asked about the intended new plan. Firm/employer then sets up a new plan effective for the next plan year. New plan is in all material respects identical to old plan. Any risk here?

We live in a litigious world. The same exposure to a claim would exist if you deny payment in response to a perfectly kosher small estate/affidavit procedure. I think you overthink this.

FGC: You present an interesting change in wording from that in your opening post: If a participant dies with no surviving spouse and no other designated beneficiary, some retirement plans provide that the participant’s estate is the “default” beneficiary. But, even assuming that change in wording, why on earth would the PA want to take such a position? Who would have standing to complain? Probably nobody, other than theoretically the DOL or IRS, but that is extremely unlikely. If you have more specific concerns please share.

It's been so long, but while I know that after ERISA class-year vesting was permitted by Section 411 itself (until the 1986 TRA), you'll have to make sure it was permitted under pre-ERISA interpretations of 401(a). I just don't remember. The deferred deposit idea I am not sure about either. Does it violate the definite allocation requirement? What about 401(a)(4) issues? Also, 415 applies so do you run a risk of having a problem if you bunch three years' worth of annual additions into a single year? Just spit-balling here.

By the way, if the state rules are followed in this scenario, it's not like the plan has any choice in the matter. I have never seen an instance in which the state rules gives the party holding the estate's asset the right to refuse. While it may be appropriate for the plan to get legal counsel to fulfill its due diligence, assuming everything is kosher it MUST pay the money to the claimant.

The premise of the OP is a little strange, at least to me. Is their preference to leave money to charity or not? If there preference would be to leave it to children or other individuals, isn't X% of something better than 100% of nothing?

These state laws protect the payor against claims of other people who could take from the estate, such as "missing" heirs and creditors of the estate. If the state law is followed precisely I've seen it done many times. It's a very low risk proposition. No preemption concerns.

I think the investment committee of a plan of any size can safely rely on its 3(21) advisor. (If it were a 3(38) investment manager we wouldn't be having this conversation in the first place, would we?) On a practical note, unless you are a plan of a certain size or larger, why would anyone think that a target date sponsor/advisor is going to agree to an interview?

ERISAAPPLE: What do you mean? Aren't the 1099-R instructions pretty clear on what to do if part of a distribution is not taxable?

If the fiduciary loves a particular stock so much, then he can add an open architecture feature to the plan and run around the office singing its praises to all who will listen. Putting a single stock on the main menu is, to be kind, not wise.

Your scenario seems almost impossible to believe absent some self-dealing motivation on the part of the fiduciary making the decision to put that investment on the menu, thereby suggesting a possible 406(b) PT for which there is not likely an exemption. Is there such a motivation? If not, I assume I am not the only one curious to know what that motivation is. Is it just a case of that particular fiduciary being "in love" with that stock? If he falls out of love with that stock will he replace it with his next lover?

I find it hard to believe that she is on the deed but not a party to the mortgage loan. Is that possible?

Does he have some motivation for letting it be known that he intends to do this when he receives that money? If not, why doesn't he just sit tight and keep the secret to himself and just write the checks when the time comes (unless he changes his mind!), subject of course to W-2 reporting and all required tax withholdings. If, however, he wants to bind his business entity, or his estate, to that obligation, then he can draw up some type of plan document, or an agreement with each employee, but he should be talking to a lawyer about this if you aren't his lawyer. In any event there should be no 409A issues or other "deferred compensation" concerns.

Did the OP say we were talking about an IRA?