jpod

What the heck is the difference? We know what the resolution is here: amend the plan to conform to the CBA and make contributions (plus earnings, if applicable) accordingly. Next step is VCP, which will be a slam dunk absent bad facts which we don't know about. Having to make this fix and go through VCP is simply the medicine the employer needs to swallow - or its lawyers if there was malpractice involved - for screwing up.

Two reasons you might see that: (1) the attorneys didn't know what they were doing; or (2) the goal was that the wife would be liable for all the taxes.

MoJo is right that you need to go back and look at the divorce papers. I don't know what MoJo was thinking, but the ex-wife may have an obligation to pay the ex-husband money equal to a share of her pension now that she is actually receiving it.

MoJo is right. They may have decided to skip the qdro procedure and impose an obligation on her to pay him a part of her pension as, when and if she receives it. Unorthodox, but possible.

I mean, alternative eligibility requirements.

It is not immaterial. See 410(b) regulations addressing dual eligibility requirements.

I agree with Mike Preston. However, I also agree with Flyboyjohn that the first six months of the next year can be problematical, and to be safe he should be excluded for those six months. ON THE OTHER HAND, I don't know why the client is spending any time, let alone money, to consider amending the plan and how to amend the plan, and then amending it, to make this person immediately eligible. If they are going to pay him a million dollars than they can afford to compensate him in some other way to make up for the lost tax deferral on $18,500/$24,500 and any lost employer contributions.

Yes, I agree with that more nuanced analysis.

I completely agree that it's a fiduciary-plan administrator decision, not an employer-settlor decision. The money has been contributed to the plan. You then look to the plan document to determine how to allocate it to participants. That is the pa's role as a fiduciary.

They could always skip VCP, clean it up for 2018, and pay him cash equal to the lost match, assuming he's vested, or when he would have become vested in it.

Not outside of VCP.

I wouldn't no where to look in the document for a favorable solution. However, while I believe what you say about what the plan says, what it says makes no sense. If "Company" is defined to mean only the one named entity, then read literally that means an employee of an affiliated entity that adopted the plan would never be entitled to a match, even if he remained employed by that entity through the end of the year. Since that makes no sense whatsoever, I would not be bashful about ignoring the literal definition of company, and concluding that the employee is entitled to the match as long as he is employed by any participating employer at the end of the year. However, if the entity to which this particular employee was transferred is not an adopting employer, then you are out of luck presumably.

Assuming the employer can take it out of the last paycheck, either because the employee consents in writing or it legally can be done without consent, keep in mind that the employer must treat the mistaken payment as fully taxable. If it cannot be taken out of the last paycheck, and the employer decides not to try to collect it, then it is an extra taxable amount with respect to which the employer did not withhold and deposit taxes, including the employer share of FICA/Medicare. Also, there would be additional taxable income attributable to the employer funding of the employee share of FICA/Medicare. An amended 941 might be necessary.

Ok. Will there be years subsequent to 2011 where you'll actually be requesting refunds due to "backing out" the RMDs? It would be interesting to hear how the IRS reacts to that. Also, assuming the SOLs for 2012, 2013 and 2014 are already closed, what are you going to do for those years for which the client was short on taxes? (The IRS can't grant a refund if client was overpaid for one or more of those years.)

Also, have you considered the possibility of a retroactive pt exemption? Again, I don't know the amount of $$ involved or the nature of the pt.

Fraud is a fairly high bar, but you have the facts and I don't. Not sure what your role is here, but, and with complete respect, if you're not an experienced tax controversy attorney and the dollars are significant enough the client should consider consulting with one. I'm not that type of attorney either, so I am sure I would recommend the same thing if he/she were my client.

Are you assuming a 6-year SOL on the 2011 1040? If so, when does it expire? If it expires 4/15/18, or if it was a 3-year SOL that expired long ago, maybe more thought needs to be given to this.

Why would it not be paid by the end of 2018? As to how to split the remaining 2018 RMD, let me make sure I understand the beneficiary designations. Is it: A, B and C are entitled to receive $20,000 each (i.e., like a specific dollar bequest under a will) and D is entitled to everything else? If so, I would do it proportionately based on the entire account balance. So, if the entire account balance is $2,000,000, A, B and C would each have 1% of the remaining RMD and D would have 97%.

But is that rule about 2% shareholders of S corporations effective yet if the Secretary hasn't acted on it yet?

Resolved how? It was perfectly clear to all of us that the 5500 filing did not transform the plan to an ERISA plan. What we, or at least I, were suggesting was a way to prevent getting threatening letters from DOL or IRS in the future because you stopped filing.

I also agree with Mike Preston: the uniform dollar formula must be prescribed by the terms of the Plan document. That's the essence of the safe harbor provisions.

Ok, then that's the question for Vlad401k: What is the allocation formula in the plan?

Does the safe harbor apply if you in fact allocate the same dollar amount, or must the terms of the Plan require that you allocate the same dollar amount?

I am guessing that they wanted to keep the 403(b) employee money only, and therefore not subject to ERISA. (I am not necessarily vouching for the viability of that position.)

A perfectly wonderful ERISA lawyer who has no experience with church plans may not be able to readily identify those PPA changes (and other changes) which are inapplicable to church plans, and which the client does not want in the plan (whether it knows it yet or not). While SoCal's recommendation is a good one, regrettably you may end up with the same type of ERISA lawyer. I would google for this by looking for attorneys in your area using key words such as "church plan" and "ERISA." Or, better yet, first contact the bar association in the biggest city in the state in question.