jpod

You, or the attorney who blessed this, should consider reading the regulation interpreting 4975©(1)(E), if you or he/she hasn't already done this. Attribution is irrelevant. That's not to say there definitely is a PT, but it should be considered.

And what about the PT exposure?

ESOP Guy: All good points. As to ERISA fiduciary concerns, it sounds like the wife's plan could be a one-person plan exempt from Title I of ERISA, albeit still subject to the IRC 4975 PT rules.

Please tell us why whoever opined on this feels that it is not a 4975©(1)(E) self-dealing PT?

All I said was that the birth of a child is NOT a free pass in the sense that you can make any change you want. You still have to work through the other requirements set forth in the regulation.

I don't think birth is a free pass UNDER THE 125 REGULATIONS, and whatever the plan says or doesn't say you need to interpret it with the limitations in those regulations in mind.

My assumption is that they charge a whole lot more because of the purported liability shelter derived from them (supposedly) assuming 3(16) status.

The Plan Sponsor will retain the fiduciary responsibility to monitor the performance of the hired 3(16) PA and fire it if it does not perform. So, IMHO the liability shelter you are paying for is quite possibly pie in the sky.

I wasn't even suggesting a scavenger hunt here. All I was suggesting was that unless it is known for an absolute fact that the effective date in the 1950s was the other date, it would be reasonable to just follow past 5500s and forget about it.

Could it be that this is done if the borrower is an older person who declares his or her pension money as a major source of income? How old is the borrower?

Did you pull the documentation from the 1950s? If not, how do you know that the effective date wasn't really May 1? Maybe a mistake was made in some subsequent document to say December 1 when it was really May 1, but that mistake just got repeated over and over again. This is just my way of saying it seems reasonable to go with what the 5500s have said consistently unless you know with absolute certainty that those 5500s are wrong.

This should not be a tax-qualification issue. However, trustees cannot be replaced "retroactively." The existing trustee must either resign or be removed by the settlor, and then the settlor appoints a successor trustee, but unless you believe in time travel that can't be done retroactively. The Plan's Trust Agreement, or the trust provisions of the Plan document, will spell out the procedures for resignation and removal and the notice period associated with that.

I think attempting to get law enforcement involved is probably the worst thing to do, at least as a first step. She needs a lawyer to start applying pressure, maybe a not-so-veiled threat of contacting law enforcement would be a part of it, but her first concern is to get the money if she's entitled to it.

I am not aware of any IRS or DOL position that delayed employer contributions = a pt.

The thought occurs that they may be taking the (questionable?) position for tax purposes that there is no earned income so as to avoid self-employment tax.

why an excise tax?

Huh? Are you saying that you risk disqualification because you've made an impermissible distribution of $0?

You say a partnership. What about the other owner(s)?

But, Mike, isn't it only that the termination is not a distributable event (and in this case there is nothing to distribute) if you start up a new plan?

Depending upon the plan language, wouldn't you have an operational violation if an elective deferral opportunity to employees was not offered? However, if that was the case I guess you'd just treat the plan as disqualified and "terminate" it (with no adverse tax results to anyone) and start a new plan, that is if you really wanted a plan.

Relax. It was a little bit tongue in cheek.

Even though he/she is wrong, kudos to the auditor for trying to save you money.

I have to say that the simplicity of ERISA-Bub's suggestion is brilliant (at least insofar as 409A is concerned).

For what it's worth, the statute, Section 103©(4) of ERISA, does not use the term "termination." It uses the phrase "change in appointment." Does that influence the interpretation of "termination," or did DOL intentionally means something more severe than a mere "change in appointment" because it is not interested in hearing about scenarios like yours?

I don't see how, in this situation, there is any proration for purposes of 401(a)(17) or 415. What else did you have in mind?