jpod

It is possible that in a DB plan the only pre-retirement death benefit is a QPSA for the surviving spouse and if there is no surviving spouse, nobody gets nothin'.

It seems to me his best bet is to put his 1040 on maximum extension and perhaps there will be a favorable compliance statement and a corrected 1099-R by the time he must file. Short of that, I think the choices are obvious. 1. Pay the tax reported on the 1099-R with the hope and expectation that he can file an amended 1040 and secure a refund (with interest) once the corrected 1099-R is filed. 2. Ignore the amount reported on the 1099-R, with an explanation attached to minimize the risk of penalties. I have no idea if this will hold up his refund or lead to months of aggravation, but I would bet "yes" to both.

I haven't looked it up in connection with this posting, but I don't think the IRS can assess back FICA (or Medicare) taxes against the employee, even if the SOL hasn't expired. It is an employer 941 matter.

I had a VCP case - a "perfect" case just like EBECatty describes - where the correction of an unintentional amendment by another amendment would have been a clear 411(d)(6) violation, reading 411(d)(6) and the regs literally. The fact pattern was that the plan always had allocation formula X, it was accidentally changed to allocation formula Y, and the VCP submission requested IRS blessing to amend retroactively to reflect allocation formula X. While I refrained from uttering the words "scrivener's error," or words to that effect, I side-stepped the 411(d)(6) issues by arguing that the mistaken first amendment was so clearly unintended that there really was never any "amendment" in the first place that would implicate 411(d)(6). I received a compliance statement without any other contact from the IRS. I don't know if it just slipped through or if the IRS accepted that argument.

This has evolved (devolved?) into something like last night's debate. Austin, the past is the past and all of your points are understood. If this was a $5,000 matter I would advise your client to ignore it. Since as I said it could be more like $75,000 with hypothetical lost earnings, your client should confer with an ERISA attorney with some litigation sensitivity to figure out what to do, including what to say and not say to this person.

Austin, you asked for suggestions. If you don't want any more just say so. The only one worth repeating is that the plan sponsor should retain counsel to get advice on what to say or not say to this person.

Austin, how big is the employer and is the same management in place now as in 1993, or can 1993 management be contacted? What I am driving at is that someone in a position to have known may remember that this person was absolutely paid ($30K is not chump change and suggests that the participant was employed for at least a couple of years or perhaps many years). This person may remember well enough to be willing to testify to that effect if the need ever arises, but even better that person may be able to think of something that will lead you to some form of documentary evidence.

I am guessing that the 90-10 split is to minimize self-employment taxes in the aggregate, but that would just be a guess and the viability of that technique assumes that the pie being split 90-10 is big enough for the math to work out.

I am not sure, but there may be a limitations period that starts at the NRA. If the participant is beyond NRA this is one of the issues which counsel can address. The limitations period should be the limitations period for breach of contract actions under the applicable State's law.

You can find a prototype or volume submitter that allows you to accomplish what you wish to accomplish, but in the end the amount contributed for the 10% partner could be subject to a big haircut due to that partner's 415 limits and tax deduction limits.

$30K in 1993? So, the potential exposure here is probably $75K or more. The plan sponsor should engage counsel to strategize; that's the cost which needs to be borne as a result of the failure to keep good records.

Two things to suggest. 1. If you are talking about the contributions for 2015, you're stuck with your 2015 facts and the pro rata allocation formula. 2. If you are talking about 2016 and beyond, does the Adoption Agreement allow for an "each participant in his/her own group" allocation methodology? If so, and given that you say there are no employees, that would seem to be where you should be headed.

What does the plan say?

Probably pointless, but what was the court's theory for ignoring what appear to be the clear terms of the contract (albeit a unilateral contract)? Is it a weak opinion susceptible to being overturned on appeal?

Now come on, you are all being sensible. There's no place for that around here.

Why would he be mad at you? And, sorry, but I don't believe he would have done anything differently had he known in advance. Maybe he'd try to coax his employer into paying him the $150 they were saving on his SHNC, but that's about it. You can extrapolate using any numbers you wish, e.g., a $50,000 NQ deferral and a loss of $1,500 in SHNC, but I doubt he would have done anything differently.

I am not seeing the problem here. If he wants the $150 SHNC (in your example), then all he has to do is stop deferring under the NQ plan.

I wouldn't be surprised if Executive A is shocked, but on the other hand even if he is only in the 25% bracket he is saving the $1,250 in current Federal income tax which was his goal in the first place (plus any deferred State taxes), and further perhaps he is getting a match on the NQ deferral. Your post raises all sorts of ancillary questions about offering elective deferred comp to people not clearly in the top hat group and/or with comp below the 401(a)(17) limit, but those are questions for another day perhaps.

the plan reports nothing to her if there is no qdro

Alimony, as defined in the Code, is deductible/taxable. This may not be considered alimony.

I guess I sort of assumed that the 60-day window had closed, otherwise Mister Met wouldn't have asked the question.

Perhaps not a practical solution, but if it is Ex-Mrs. Green could just collect a monthly amount from Mr. Green for the rest of his life tax-free rather than getting a QDRO which would result in the plan's payments to her being taxable to her.

There are two examples in the DOL loan regulations that address interest rates that are considered too low to be reasonable. There is no example involving an interest rate deemed to be too high.

I think the reason for allowing plan loans without it being a PT or a taxable distribution is because a loan feature is viewed as a necessary evil to encourage retirement plan savings, just like hardship distributions.

There have been many cases brought against employers/plan committees, etc. (i.e., "in-house" parties rather than outside service providers) based on so-called high cost funds in the plan's line-up. Does anyone know if any of those cases involved plans where there was a brokerage window or similar "open architecture" structure? In other words, while X number of funds were available in the plan's primary line-up, participants could invest in hundreds/thousands of other funds and individual securities through the brokerage facility.