jpod

If the position of the IRS - institutionally - is still in fact what is stated in the Publication, what could have happened here is that the IRS lawyer, who was zealously trying to win his case, made a contrary argument without checking with the IRS' National Office, and didn't think to search the IRS website, and the Tax Court bought his argument. This happens from time to time, very rarely, but it happens. If it happened here it wouldn't surprise me if the IRS concedes the case it just won.

Yes.

I think myIRA is a fantastic idea, and i don't think it will have the slightest impact on the number of employer-sponsored plans in existence or to be created in the future. Whether myIRA is actually implemented and if so whether the people it is targeting will use it is another story.

If the client has any thoughts about possibly selling the business after his current cycle the lack of a current DL may be a due diligence item which may cost him a whole lot more to address at that time then the $7,500 it would cost now ($5,000 plus $2,500 user fee). I must say, however, that $5,000 seems very high if the plan is already up to date amendment-wise ($5,000 just to plug in the amendments into a new restated document and prepare some IRS paperwork?).

Prior to Windsor, a plan could treat the same-sex spouse as a spouse (as long as there wasn't simultaneously an opposite sex spouse). There may have been a couple of things which you couldn't do, such as give a same-sex spouse veto rights over the participant's election of a single life annuity, or treat the same-sex spouse as a spouse for purposes of the 401(a)(9) MRD rules, but save for these and perhaps a couple of other exceptions there was nothing to prohibit a plan from being drafted to treat the same sex spouse as a spouse.

My Two Cents: Wondering if I am missing something. What was explicitly procscribed that is now required?

In my judgment DOL is blowing smoke if it thinks it can aggregate two plans that satisfy the separate plan criteria as outlined in the Section 414(l) regs, regardless of the motivation for splitting a single plan into two plans. On the other hand, I think it would be a very rare case where it would make sense to split a 100+ plan into 2 plans solely for the purpose of saving a $10,000 audit fee or even a $15,000 audit fee.

I agree with Kevin that either there is no "orphan plan" here because the sole shareholder is on the scene, or it is not a Title I plan in any event, or both. I would focus solely on EPCRS and figure out what deficiencies exist and then the best way to correct them (plus any past due 5500s or 5500-EZs, if any).

I have another question for an individiully-designed SEP. Can you use ANY 414(s) definition of compensation for purposes of allocating contributions? Specifically, can you use a definition that excludes bonuses provided that the 414(s) nondiscrimination test is satisfied? While 408(k)(3) has the words "total compensation" in its title, I think that's just a legislative drafting typo because the text of (k)(3) was revised in 1988 to remove the word "total" and 408(k)(7) defines "compensation" to mean a 414(s) definition. Any thoughts?

ERISAtoolkit: My question is, if your eligibility rule satisfies the 3-out-of-5 rule, can you have an enhanced alternative eligibility rule? Do you have a citation for your "cookie-cutter" answer?

Can you have a SEP with alternative eligibilty requirements? For example, an employee is eligible to participate if EITHER - (a) the employee has performed services for the employer in 3 out of the preceding 5 years, OR (b) the employee is hired on a full time basis (40 hours per week), other than on a temporary basis. Alternative (a) satisfies 408(k). Does alternative (b) cause a problem? The goal is to exclude interns and other temps.

No need to worry about Section 414 rules. The fact is that he is deriving his income by as a partner in the firm, and so he can't set up a plan for himself. The firm can set up a plan for him, but of course it would fail to satisfy 410(b) and 401(a)(26). Putting his compensation on a 1099? That might temporarily (or even permanently) disguise his relationship to his firm, but it doesn't change the fact that he is a partner in the firm and deriving his income as a partner in the firm, not as an independent contractor, notwithstanding the arguably fraudulent tax reporting.

My #2 disappeared. 2. If you have made or can make the top 20% election and some of these people would drop out of the top 20%, you can give them a special profit sharing plan allocation to bring them up to 8% if they have maxed out at the 402g limit.

I don't think there is a solution of the type you are hoping to find. However, have you considered: 1. If they max out at the 402g limit, allow them to defer on a non-qualified plan basis and provide a non-qualified match so they get the full 8% in both plans. This assumes that the people in question all qualify as "top hat" group members and that the employer is willing to take on the extra baggage of a non-qualified plan. 2. 3.Alternatively, if they max out at $17K and it is less than 8%, give them the benefit of the doubt that they would go up to 8% if they could and just pay them the extra match in taxable cash.

I don't think there is a solution of the type you are hoping to find. However, have you considered: 1. If they max out at the 402g limit, allow them to defer on a non-qualified plan basis and provide a non-qualified match so they get the full 8% in both plans. This assumes that the people in question all qualify as "top hat" group members and that the employer is willing to take on the extra baggage of a non-qualified plan. 2. 3.Alternatively, if they max out at $17K and it is less than 8%, give them the benefit of the doubt that they would go up to 8% if they could and just pay them the extra match in taxable cash.

"Self-funded" does not necessarily mean "funded" in the ERISA sense. Typically self-funded (i.e., self-insured) plans are "unfunded" for 5500 purposes because there is no irrevocable trust holding any plan assets.

My suggestion is to get a new accountant, or consult with a local pension actuary with a private practice, or a tax lawyer. You're not going to get what you need through this or any other message board. If you are inclined to DIY, you may handle things correctly or you may screw things up badly.

Why all the concern here? This is not a trifling amount of money, in my judgment. The money should not be paid until a duly authorized executor or administrator with the appropriate back-up paperwork steps forward, at which time you can make payment to the estate. It seems to me that $6,000 is enough money to cause the family members to look for a will, and if they can't find a will to get an administrator appointed. If the employer wants to help in some fashion that's fine, but I would not allow them to skip the formalities (Plus, the decedent may have had creditors who are entitled to some or all of that $6,000.)

Please explain how the mandatory contribution could be a "condition" to 401k participation if it's MANDATORY?

Good grief, who talked the employer into doing this (mandatory contributions, that is)?

I suspect that this "tool" does all the easy stuff, but none of the hard stuff, like valuing a non-compete covenant, or valuing stock options.

The "entity so described in the Adoption Agreement," or an entity similarly described, is not changing just because it's name is changing. A more fitting question might be do you have to amend when the name stays the same but the entity attached to that name changes!

It would be prudent to treat a mere change in the employer's name as something requiring the issuance of a SMM, but the original question was whether it would require a Plan amendment, which it would not.

The answer is "no."

In thinking through this again I have changed my mind. A rollover from an IRA to a Plan is, at least for 4975 purposes if not for ERISA Title I purposes, a distribution of the asset in kind from the IRA to the individual, subject to the mortgage/lien, followed by a contribution of the asset subject to the mortgage/lien to the Plan. So, moving the asset subject to the mortgage/lien into the Plan is a contribution by the individual to the Plan. However, I don't see how it is a PT because a rollover isn't satisfying any obligation which the individual has to the Plan and, therefore, is not a sale or exchange between the individual and the Plan (even if the individual is a di or pii with respect to the Plan).