jpod

Cranky? Not me. Evidently the document addresses the timing of deposits only by establishing a deadline, which is what one would suspect, and presumably it leaves it to the employer to determine when contributions will be deposited within that deadline. If the CEO said contributions will be deposited monthly, he should be advised that if the company does not comply it would not be a slam dunk to defend the slower deposits in court.

mphs77: What's your point? Obviously the terms of the profit sharing plan forbid such a thing.

Maybe not a PT if the cash balance plan says that it will pay those expenses (e.g., rather than the employer being obligated to pay them). However it is definitely an IRC 401(a)(2) exclusive benefit violation and an ERISA 404 exclusive purpose violation/breach of fiduciary duty.

So, your advice to the CEO would be to go ahead and tell your people anything you wish to tell them because you won't have to stand behind it?

You'd have to provide a transcript of the entire announcement in order to evaluate this. However, my guess is that he did not make any particular promises concerning the timing of deposits, but was merely announcing a monthly match calculation, as opposed to an annual calculation.

As to the first step, I see no issue concerning its effectiveness to avoid the audit requirement (although I suppose it could create potential minimum coverage problems.) As to the second step, why wait until February? Why not do it on January 2? That is tongue in cheek. It certainly should create an issue, but beyond that I won't comment because I can't spend the time required to analyze it.

You've told us when it was "posted," but when was it deposited, and how was it deposited, by snail mail or electronic transmission?

Thornton, what are these "successor plan issues" to which you refer?

Following on top of that question, if you have a db plan around for say 7 years, terminate it, and then adopt a virtually identical plan for the same group of participants without skipping a plan year, do you have a "permanency" problem? (The motivation being to allow participants to get their money out of the first plan and roll it over to an IRA or do whatever the heck they wish with it, but while not missing a year's worth of contributions.)

I can't think of anything wrong with that kind of incentive, but I'm not commenting on that. If employer is so concerned about this, consider splitting the plan into two plans, each of which will have well under 100 participants. I know the DOL has made some noises about this possibly not working, but there is no legal basis for that position.

Obviously they are not in any rate group as such, but if they are counted in the denominator in your example that sounds like a "yes" to my question: In determining whether the rate group satisfies 410(b) you count them in the denominator.

Profit Sharing Plan (no 401k feature) by its terms excludes the three shareholders/HCEs. There are other HCEs eligible. In performing basic rate group testing under the general 401(a)(4) test in the regulations, can you count the three excluded HCEs in the rate group analysis?

There could be plenty of other indicia of continued employment besides getting regular compensation. In this case, you would want that employment to continue to at least until January 2017, right? Will he continue to participate in company health insurance as an active participant beyond December 31? Will he continue to be eligible for the company 401k or other retirement plan as an active participant beyond December 31? Will the company still be paying workers comp and unemployment insurance premiums for him beyond December 31 (although maybe is a statutory employee for Federal tax purposes and, therefore, a common law employee for all other purposes)?

If I were advising the employer, I would advise it to pay the money into the plan, with some reasonable interest factor. Probably a breach of fiduciary duty in causing the money to be paid to the wrong person (lack of sufficient internal controls, etc.). The employer can then attempt to collect from the individual to whom it was paid, but the employer should face up to the fact that it may have to suffer the loss if it can't collect.

I don't know what the precise authority is but since there are no plan assets (or at least there better not be) isn't the answer obvious?

Is there still the understanding that there is no Federal income tax withholding simply do to the vesting and consequent income inclusion of deferred compensation under Section 457(f) where there is nothing being paid until later? Is there a more recent statement from the IRS on this than the 1999 TAM, either another TAM or PLR or even in a speech?

I am aware of what the regs say and what they don't say. And if I were the plan administrator and concerned with the tax-qualification of my plan I would take the conservative approach too. I'm just sayin' that this obviously wasn't contemplated and needs to be cured in some fashion if the Treasury could be persuaded to do so. I see 5% owner situation as different for policy/anti-manipulation reasons.

That can't be right. You leave and come back on March 31 and there are no RMDs, but if you come back April 2 you must take RMDs forever?

What was the subject matter of the course? ERISA Title I Fiduciary responsibility, etc., or Qualified Retirement Plans, or both?

I can almost guarantee that Fidelity is not the Plan Administrator, but is merely providing a "QDRO Service" package to the Plan Administrator. If you want to apply pressure you, or preferably your lawyer, should apply pressure on the Employer, which is either the Plan Administrator or to a certain extent in control of the Plan Administrator. It might do some good if the Employer is understanding and is willing to raise hell with its Fidelity contact person.

David Rigby, good point, but that can be handled by deferring the split-up/spin-off until the dust settles. They can operate the plan as a multiple employer plan until then. Yes, lot's of reasons to dislike multiple employer plans, but this is a case where doing so for 5 minutes (figuratively speaking) may make sense. On the other hand, what are we talking about here? Are there 5, 6, 10 employees, or 100+? If this is a tiny plan with very modest assets I might turn 180 and suggest terminating it.

A spin-off or split up seems like the way to go, if only because terminating/liquidating a plan can take quite a while and it sounds like these two individuals want to get away from each other ASAP. This, of course, assumes that each owner or his/her counsel has a sufficient comfort level that the existing plan is "clean" and their respective new plans won't inherit any "warts" from it.

I think I will steer clear of that place.

It's a state law question. You need to consult an employment law attorney who can tell you whether it is ok to unilaterally take that money out of pay. Yes, I know the employee authorized it in the first place, but that may not be enough to allow for a double-dip going forward.

I know the IRS likes to hear you say (perhaps demand it) that you already withdrew the shortfall before you file the reasonable cause statement. I have never experienced one of these not being approved. What are you doing about the tax-qualification risks? I'm a little rusty on this, but isn't there a mechanism to get VCP relief that also eliminates the 50% excise tax risk for the participant?