jpod

You said it's payable only if there is a death, disability or cic. But I guess everyone will die, so maybe that means it's not a s-t deferral, unless death has to occur before a certain date. Sounds like a screwy design. Are you providing all the facts relating to payment timing and payment conditions? Aside from all of that, I don't think that an SAR has to provide a volitional exercise right in order to qualify as an SAR exempt from 409A. You need to confirm this by looking at the definition of SAR in the regulation.

I am not a QDRO expert like some other BenefitsLink participants. However, a DRO is not a QDRO if it requires the plan to provide increased benefits determined on the basis of actuarial value, and I think it is implicit that this determination is made at the time of the DRO. I could be wrong.

I don't know what authority you need: If at the time of the DRO there is no benefit payable to anyone, the DRO cannot order a benefit to be paid. That is not to say a judge would agree with that immediately; he or she may have to be educated.

it would. if it was reported as something else (like, "Other"), it may not

Is it reported as non-employee compensation on the 1099-Misc? If not I am pretty sure it can't qualify.

If there is evidence - and that can include credible testimony from witnesses in a position to know - that there is was an established protocol in place for informing new employees or employees in general about how to make elections and change elections and there is no evidence of the employee attempting to make an election, then it's the employee's unsubstantiated claim vs. that evidence. I would see no material risk of disqualification in that scenario, and an equally low risk that the employee would prevail in court on some type of damages claim.

I might be persuaded by your argument if you can cite some authority for it and also explain why that argument trumps the very specific rule in -11(g) for how you are supposed to fix a coverage problem for a 401(k) plan or a 401(m) plan.

Let's not lose sight of what's going on here. While there is a coverage failure, no HCE contributed or received an employer contribution for the plan year. Doesn't it make sense that this is a qualification problem that deserves a painless solution? IRS may not have contemplated this situation, but if you read -11(g) it seems to clearly fit. Let's change my facts slightly. Let's say there was one NHCE who was eligible and he contributed 0.5%, but you still have a coverage problem because one eligible NHCE was not enough. Could I solve the problem with an -11(g) amendment providing for QNECs of 0.5% of compensation? If you think I can, then why can't I solve it using my real facts with QNECs of 0%? Your thinking somehow may be influenced by the fact that this is a SH plan, but I don't see the relevance of that in working through the -11(g) rules.

Well, I guess I misspoke. The -11(g) amendment would not be an amendment to make them retroactively eligible, which of course is impossible. You are amending to provide for QNECs equal to the ADP of the otherwise eligible NHCEs, which is 0%.

My situation is not one where people were improperly excluded in that sense. Come on now.

Mike, good idea about the SH notice, but I am pretty certain it was distributed, and I would not want to go down that road in any event. I guess I get back to my original question: Does -11(g) apply in this context the way it appears to apply? Let's get rid of the controlled group and 2-plan facts because they confuse the issue. Say you had one plan that covered only the CEO-HCE, and all 50 NHCEs were excluded. The CEO contributed and received zero. Technically, there is a coverage problem. So, can you do a -11(g) amendment to make 35 NHCEs eligible (70%) and give them QNECs equal to the NHCE ADP, which was 0%? P.s., in my case the disqualification risk is a real concern because there is still a lot of money in the plan for deferred vesteds and if the plan is disqualified the trust becomes taxable and the participants taking distributions won't be able to do tax-deferred rollovers.

No; no 410(b)(6). Austin, I don't think I am any less conservative than you, but I am not following your line of thinking. I don't see how the activity under the other plan is of any relevance here where we are not aggregating for testing purposes. Also, why go to VCP if -11(g) provides a solution? I am reading -11(g) to say that all we have to do is go through the motion of amending the plan to retroactively admit the 6 or 7 additional NHCEs to the safe harbor plan, then say that they will get a QNEC equal to the ADP of the otherwise eligible NHCEs, which happens to be 0%! Granted this seems odd, but I don't know how to read -11(g) any other way.

This is a weird situation. Controlled Group with two employers. Employer X has a non-safe harbor plan. For 2015 (calendar), there was one eligible HCE and about 50 eligible NHCEs. Easily passes 410(b). Employer Y, which is Employer's X's parent holding company that is essentially winding down out of existence, has a safe harbor match plan. One eligible HCE, zero eligible NHCEs. It doesn't pass coverage under any of the available tests. As I understand it permissive aggregation is not allowed because one plan is safe harbor and one is not. Here's the catch. The one eligible employee - who was an HCE - did not contribute anything or receive any employer contribution. So, technically it flunks coverage because he was eligible, but is any corrective action required to avoid disqualification? In looking at the -11(g) rules, we can amend to make enough employees of the other controlled group member, Employer X, retroactively eligible for Employer Y's plan to satisfy 410(b), and then make QNECs for them. However, the QNECs for them only have to be equal to the ADP and ACP of the otherwise eligible NHCEs, but THERE WEREN'T ANY OTHERWISE ELIGIBLE NHCES! I know that -11(g) says that the amendment must have substance, but when you read -11(g)(5) it only describes certain instances where there is no substance, and this isn't one of them. Any thoughts? Am I missing forest through the trees?

As long as that bug is exterminated by July 30, or October 14 . . . .

If an employer with employees other than the owner(s) adopted a SEP plan document then it is an ERISA plan subject to a private right action and DOL enforcement under Part 5 of Title I of ERISA (as opposed to under state contract or employment law).

Not sure about that advice. The SEP document, even the IRS model form, if adopted by the employer of these employees likely gives them rights enforceable under ERISA.

Ugh: Your tax dollars at work. Remind me to never let a client change the name of its plan.

The only thing the IRS guidance says is that it would be neither a contribution subject to the plan's allocation rules, nor the deduction limits, nor an annual addition. You are still exposed to claims for breach of fiduciary duty and liability for damages as a result of the breach, and the DOL penalty. Perhaps you've mitigated damages by pouring money back into the plan, but your assessment of the damages might be a whole lot lower than what the DOL or a court might find and you are conceding half the battle by the fact that you are basically admitting liability by pouring the money into the plan. Consult an attorney.

Neither interpretation is ridiculous, but I have to say that I think the better interpretation is that it is 6 months and only 6 months and the deferrals should have started automatically thereafter (assuming the Plan document doesn't help on the opposite interpretation). Look at it this way, you are giving the participant a pre-printed form, or a computer screen, that gives him only a statement to acknowledge, and it says "6 months," not "at least 6 months." I think the participant's fairest assumption in that case is that it will re-start in 6 months unless he elects something different. I wouldn't let this wound fester any longer and I would do the following. I would ask the participant whether it was his intent to restart or not. Worst case scenario is that he says "yes," so you restart and correct for the past via SCP. Maybe you'll get lucky and he'll say "no," and you'll get that in writing, in which case you won't restart and you can perhaps decide to take your chances and decide not to self-correct, although I don't think that's particularly advisable.

414(m) and the proposed regs under 414(m) don't catch them because the 4 other docs allegedly providing services through their PCs and Doctors Group, PC aren't connected by ownership.

Isn't this one of the "holes" which 414(o) was designed to fill? I would look at the proposed regs under 414(o) and see if they capture this situation. If they do, then the docs and their respective ERISA counsel need to make a judgment as to whether they will fall in line behind the proposed regs or say "the regs are merely proposed and we can ignore them."

For tax purposes, the way this has to work for tax purposes is that the IRA is titled in some fashion as "IRA FOR BENEFITSGURU'S UNCLE, TRUST FOR BENEFITSGURU'S BROTHER SOLE BENEFICIARY." There is no other individual or entity that could be the "owner" other than the Trust, or Benefitsguru as the Trustee of the Trust. If the Bank doesn't want this piece of business there's not much you can do about it.

Introducing the concept of "transfer" makes your answer confusing. The one-per-year rule applies to distributions rolled over, not how many plans the distribution is rolled to, so for that reason Pension RC is correct.

The title of this post asks us to assume that this attorney is part time, so the last comment about attorneys working "those kind of hours" doesn't necessarily fit here. I agree with that you can't use equivalencies if the document doesn't provide for that. I would fix this problem via a prospective amendment. As to the past, I think the only thing which can be done is to make a judgment call using the DOL reg's definition of hour of service. Unless there was a clear expectation that the individual was expected to work so few hours that he/she could not realistically have worked 1,000 hours or whatever hour threshold you are looking at, you err in the employee's favor.

May I turn the tables? How are you only "leaning" towards that conclusion? What is it that only causes you to lean, rather than fall all the way down?