jpod

Yes there is employer reporting (do a word search through the W-2 instructions).

Just curious, but why are you asking the Q? What is the big deal with a manual signature?

I never volunteered an answer on choice of law, and that was quite on purpose. Hopefully the instrument provides for a default and the point is moot.

Definitely a State law question. Is the IRA a trust or a custodial account? It might make a difference in reaching an answer under the applicable State law. FWIW I find it almost impossible to believe that the IRA trust agreement or custodial account agreement doesn't answer the question.

My guess is that "attributable to" has not been interpreted literally, as in "but for" the disability, but again I haven't looked into it and am guessing.

I actually think it IS likely, but I don't know for sure and am just raising the issue.

I guess mine is a chicken or egg question. If participant became entitled to a distribution because of a separation, can she avoid the 72(t) tax because she happened to be disabled?

I have no experience with this, but could the 72(t) exception even apply if the participant was entitled to a distribution whether or not disabled? My guess is that it could, but I never considered it.

A Plan is a contract; a unilateral contract but still a contract. The Board's resolution will be relevant in interpreting the contract. I am not suggesting an answer but only suggesting a line of inquiry. I am hoping that we are talking about a calendar year plan in which case I would urge that the Board rescind its resolution before the end of the year, either at a duly convened meeting or by Unanimous Written Consent if the state law in question and the corporation's governing documents permit action without a meeting. If we are beyond the close of the plan year I think the potential risk here is significant.

AdKu, to express the sentiment a little differently, your statement of the question and the facts is too vague. And, your reference to "final two payroll check[sic]" for the owner makes no sense in the context of an unincorporated sole proprietor. If you can tell us precisely and with confidence what the tax status is of the employer/plan sponsor, that may provide enough clarity for someone to suggest an answer via this message board. If you have no idea what I am talking about then you need more than what this message board can provide.

I don't think it's such an easy answer. First, you need to make sure there is no language in the plan indicating that a resolution by the Board fixes the contribution and is not revocable. Assuming you get over that hump, I would consider other factors, such as what if anything has been communicated to participants and past practices, or whether the 5% contribution is necessary to meet 401(a)(4) requirements where there is aggregation with a DB plan.

Why would you make sure the document is current? If the plan is "disqualified," so what? The only issue as correctly noted is whether to file a 5500-EZ. Why not take the 5 minutes to complete the form, file it and sleep at night?

Governmental employers cannot maintain a 401k plan, except for those grandfathered under the Tax Reform Act of 1986. Not sure if that would prevent a public school district or some other governmental employer from "joining" an existing and grandfathered 401(k) plan as a participating employer, but I am inclined to doubt it. I suspect you know this but in case not a public school system can have a 403(b).

I always thought a cash or deferred feature was the opposite of salary reduction, i.e., the employer will put money in the plan unless the employee elects to take it as salary. What is the intent here? The way you have expressed it it doesn't sound like what I just described.

EPCRS is available only for tax-qualification violations. The tax-qualification violation here is 401(a)(2) - exclusive benefit. EPCRS is not available to cure exclusive benefit violations. There is no relief available to exposure for plan disqualification here, but the faster it is corrected the better story you have to avoid disqualification. The original advice is the only advice worth giving here: the amount should be repaid ASAP and the excise taxes reported and paid ASAP. Do it today, even if the owner has to put up his own money and even if he has to beg, borrow or steal to raise the money to do it.

PTCE 77-3 is available for 40 Act registered mutual funds. There is nothing comparable for an unregistered partnership.

Might also tell the owner that right now the excise taxes are probably very little but if he let's this fester for a long period of time they could become significant AND he could be personally liable for the excise taxes as well as the DOL penalty.

I don't think the question is answerable via a message board. If this issue was presented to me I would say two things. First, securities law counsel must be consulted. Depending upon the result of that consultation you may not need to read the next two sentences here. Second, this raises all sorts of ERISA prohibited transaction concerns. One must work through the PT rules and the facts to determine whether this can be done without any PT concerns.

DB plan pays out Year 2's January monthly payments to retirees and surviving spouses late in December of Year 1, rather than in early January of Year 2 as would normally be the case. Consequently, they each receive 13 payments in Year 1 and only 11 payments in Year 2. Is there anything in the 401(a)(9) regulations or other guidance that says there is no RMD violation in Year 2? (Forget for the moment about whether VCP could cure this, or whether there is "reasonable cause" to avoid the excise tax, or whether IRS would really have any interest in enforcement here.)

I can't speak for anyone else but I couldn't possibly suggest an answer without doing all of the analysis of pertinent Code sections and IRS guidance which, presumably, you have already done, and I am not going to do that. Can you tell us what is in the law/guidance that makes this question gray?

I think the OP recognizes it all belongs to the plan, but by the same token presumably the terms of the plan permit it to pay operating expenses, which would include the audit fees. However, you're still left with the "loan" and PT issue which I mentioned.

It's sticky because that means you have to characterize the initial payment as a loan to the plan, which is a prohibited transaction. There is a class exemption that could have been used, but I am not sure that you can slide into that exemption retroactively. That is all I remember; you'll have to find and review the class exemption, including the preamble to the exemption.

ETA: Don't get me wrong, your thoughts are appreciated. What I am saying is that if an election prior to January 1 for an unincorporated sole proprietor is required, the word "election" to me implies making some binding commitment to another person which that other person can enforce if the election is not revoked prior to January 1. I don't know how that gets done in the context of an unincorporated sole proprietorship, and to me the only perfectly safe way to proceed (assuming an election is required) is to make the deposit before January 1 with some type of declaration on the check or in some other transmittal associated with the deposit.

I am focusing solely on an unincorporated sole proprietor. While I have my doubts about whether an "election" before the end of the year for such an individual is really necessary, for the sake of discussion let's assume it is. Does anyone really think that signing a piece of paper, even in the presence of a notary, is an "election"?

What if you make the deposit before the year ends and write on the memo line of the check: "elective deferral contribution to 401(k) plan" or something to that effect?