jpod

It does not appear that this was intended to be a DRO, much less a QDRO. Perhaps the judge could have modified the prior DRO to treat the ex-spouse as the surviving spouse, in which case we would only be dealing with the issue of whether that done posthumously was valid, but that's not what the judge did. The PA needs to be concerned about its fiduciary duties here, and whereas fiduciaries usually only have to review facts in this case it is incumbent upon the PA to consider the law.

My client is the potential lender, and it just wants to get comfortable that the potential borrowers/guarantors have considered all the issues. The basis for my concern is the decision in Peek v. Commissioner. While it involved an IRA investment, and the Tax Court's broad opinion is questionable in my view, if one accepts the Tax Court's view then I don't know how to distinguish it from a ROBS situation. Yet, many commentators believe it shouldn't apply in a ROBS situation. Thoughts?

By the way, please assume that the guarantor is a party-in-interest and/or disqualified person with respect to the plan. Is it an "indirect loan or extension of credit" to the plan?

Putting aside all of the other complications and concerns with ROBS, let's assume the structure has already been finalized and implemented. Now, the C corporation that is owned by the Plan goes to a lender to borrow money to finance its inventory, general operations, what have you. The lender is happy to lend the money to the corporation as long as the principals - i.e., the individuals whose Plan accounts own the stock - will guarantee the loan. Would providing that guarantee be a pt?

Is this a partnership (or an LLC taxed as a partnership)? If so, there shouldn't have been a W-2 and it should be ignored. The tax return preparer needs to recalculate the partner's total net earnings from self-employment as if the tax reporting was done correctly from the beginning. If this is a Sub S corporation, you just ignore the K-1.

Your position is certainly the most logical. However, I would want to make sure that there isn't any loose language in the surviving plan that could conflict with that position. You say it's "silent as to the effectiveness of these beneficiary designations," but I would give the pertinent provisions a broader read just to see if they might trip you up.

I don't know. Let's say after the plan consults with counsel it is determined that the judge was completely off his rocker and there was no basis under state law for what he did. When the "spouse" files a claim for benefits and the plan denies it and they end up in court, either federal or state, I don't think that court would be bound by a crazy decision of the court in the divorce action. However, not being a trial attorney I am just guessing.

There may be established case law supporting the judge's action in vacating the divorce nunc pro tunc. (Precedent may have been created, for example, in will contests.) I don't have a clue, but assuming that is the case that easily resolves this matter to the detriment of the plan. That ERISA is federal law doesn't seem relevant to me because marital status is determined under state law.

I guess the question is to what lengths does the PA need to go to investigate/challenge the Judge's actions to comply with its fiduciary obligations to the plan under ERISA. I think it should at least hire an expert family law attorney to render some sort of opinion or at least provide advice - not on the ERISA fiduciary responsibility issue but the validity of the Judge's actions under state law. Unless the opinion or advice is that the Judge's action is 100% valid, the PA may then need to consult with ERISA counsel.

Guess: Something less than the end of the 3-year statute of limitations period.

I think what FDG is getting at is a situation where the individual is still a partner but no longer doing anything to generate net earnings from self-employment.

I asked you not to ask why.

I thought FDG's conundrum was a non-last participant who simply would not deposit a check? How do you solve that problem by driving to his house unless you also throw him in the trunk of your car and drive him to the bank?

I see no inherent pt by this "co-investing," although as you noted there may the potential for a self-dealing pt based on actual facts. I do see some complications: (a) LLC needs to file an annual 1065 with k-1s; and (b) How are the LLC start-up expenses and on-going expenses going to be paid (e.g., legal fees in connection with formation and ongoing accounting fees and other expenses). Perhaps there are more complications which don't occur to me right now.

Thanks PensionPro. We knew about IRA MRDs; just looking for a sanity check on the plan-to-IRA rollover.

employee will remain active well beyond the year of the distribution; perhaps years

Non-5%-owner is well past 70-1/2. Wishes to take an in-service distribution from employer's DC plan and roll to an IRA. (Please don't ask why.) Must some portion of that distribution be withheld as an RMD or can it all go to the IRA?

Ok, agreed in this scenario it's a puzzle. I think you just take your best shot and where it's murky err on the side of not providing an allocation for any such individual who is an HCE for the plan year.

Employed would mean either employed or being a partner. Why wouldn't it be obvious? There should be some clear indicia to resolve this one way or the other.

Please tell us what you mean by "investment fees"?

If there was no beneficiary designation, I find it hard to believe that the default beneficiary is the father, rather than the mother and father. For some reason you seem to be making this very difficult for us to understand the facts so we can try to help.

Another option for avoiding the excise tax is that the excise tax does not apply to that portion of the reversion equal to an amount contributed based on a mistake of fact. IRS is very rigid in how it interprets "mistake of fact." If the employer's estimate of what the insurance company would charge was too high and/or the employer over-estimated the number of participants who would take annuities as compared to cheaper lump sums, could that be considered a "mistake of fact"? Bottom line here is that it seems grossly unfair that an employer should be so heavily penalized for being conservative in estimating its termination liability.

I was aware of that ruling. But note that it took almost 4 years to get the ruling, and you need a ruling in order to effectuate the disallowance. By its terms a submission under 90-49 gets processed very quickly.

I don't see how it was deductible if the amount was beyond what was than necessary to fund all benefits at termination, but I don't know for sure.

DB Plan subject to Title IV is terminating. Shortly before the termination date, the employer contributed way more than the amount ultimately needed to purchase the necessary annuities and pay lump sums (either high 6 figures or very low 7 figures). Can Rev. Proc. 90-49 be used in this situation to secure a disallowance of the deduction? 90-49 seems to be limited to a situation where you had made excess quarterly contributions towards minimum funding. Am I reading it too narrowly?