jpod

Assuming you are right about 6058, and I am not suggesting that you aren't right, don't the 2009 5500 instructions say you can follow the FAB? I know that IRS forms and instructions aren't high on the authorities list, but let's be real here.

What is the Code requirement for a 5500 for 403(b)s? 6057? Assuming there is a Code requirement, what is the purpose of your question? If you can't find an answer to this brain-teaser would you advise a client that it has some risk if it takes advantage of the relief set forth in the Bulletin?

I know that the statute imposes the obligation to determine if an order is a QDRO on the PA, but does that automatically make it a fiduciary act (rather than an act of reaching a legal conclusion)? Maybe it does; I don't know. I don't think I am acting as a fiduciary when I render a legal opinion to an Employer/PA client that an order is a QDRO (or advising a fiduciary that a transaction is not a PT, or any other number of examples). Regardless, implementing an order is a fiduciary act, so it probably is a breach to implement an order that is in fact not a QDRO unless the PA has a legal opinion from competent ERISA counsel that the order is a QDRO (even if that opinion is incorrect).

My response to the employer would be as follows (so as to convey truthful information while not becoming the object of much ridicule). The idea presents a technical problem under the "contingent benefit" rule in the 401k regulations, and therefore presents a theoretical risk of plan disqualification if the IRS were to find out about the raffle (and then I would go on to explain what the regulation says). However, while still technically a potential problem, a true contest whereby only a small percentage of the NHCEs are rewarded for contributing the greatest percentages, or increasing their percentages by the greatest amount, and those rewards are modest, is not likely to inspire the IRS to make a stink over it.

I believe the STD exception refers to "all amounts received" by the 2.5-month deadline , or something like that, rather than a "single payment." In any event, your idea clearly does not work, I am just not sure of the precise explanation (without reviewing the regulation).

The DOL's model notices include a section to enable the participant to waive the subsidy.

I agree with GBurns observation. Also, if for whatever reason an employee covered by an HDHP doesn't cooperate in opening up an HSA, why can't/shouldn't the employer just give the employee the money as a taxable cash payment? Stated differently, what is the logic in not giving the employee the money?

Is it still the case that a change in control of a partnership, or an LLC taxed as a partnership, is an allowable payment event under 409A, or has something changed in that regard? If nothing has changed does anyone remember where the most recent IRS statement confirming that can be found? Preamble to final regs? Preamble to proposed regs? Something earlier?

mming: I am not addressing the technical joint venture issues; I'll assume for the sake of argument that the sister is NOT a disqualified person or party in interest. Nevertheless I think the client should walk (run) away from this idea. It seems to me this has a very high degree of risk of being a self-dealing pt under Code Section 4975©(1)(E) and ERISA Section 406(b)(1), and this has nothing at all to do with the fact that they co-own a rental property. To the contrary, this is because the propsective borrower is the fiduciary's sister.

Assume employer never had a 403(b) plan document, and blows the 12/31/09 deadline. Is it clear that you can use VCP to correct this error? This is not a failure to "amend;" it's a failure to "adopt."

Sal: Not true. See 409A(a)(1)(B)(i)(II) and (ii). I am not talking about interest due to late payment of taxes. Depending upon the facts the combination of regular income tax, 20% penalty, and interest charge could equal or exceed the amount of the deferred compensation (unless there is some guidance from IRS which I missed which says that the total tax can't exceed the amount of the deferred compensation).

Doesn't the interest charge increase the penalty to something in the aggregate that is greater than 20%?

lawman98: Step 1: How does plan define compensation for purposes of SH contributions? Step 2: How does 414(q) define "compensation" for HCE purposes? Step 3: Consider the doctrine of "constructive receipt" and determine whether whatever it is that employer is attempting to do would work to shift "compensation" from 2009 to 2010. I kinda doubt it.

If you can conjure up a realistic scenario under which one could show some self-dealing, or effect on his judgment as a plan fiduciary, then this might be a pt or at least an investment which a risk adverse person should avoid. However, this is very fact sensitive, and the fact that he owns 7% is not enough to make the plan-level transaction a pt. Of course, there are other issues to consider, such as the prudence of the investment generally (assuming it is a plan subject to Title I of ERISA), and liquidity issues.

Why would it have to identify the plan? Sorry I can't be more helpful, but I'm just not sure what you're driving at.

XTitan: At first glance the IRS' conclusion might suggest that it is permitting separate distribution structures based on voluntary vs. involuntary, because of its "objectively determinable and nondiscretionary" caveat. However, I think the reason for the caveat is something else; namely, to remind readers that the employer can't get around the "anti-acceleration" rule by mischaracterizing a termination as involuntary when it is really voluntary. This was a very silly caveat and had no place in the discussion.

401Chaos: I agree with your conclusion. XTitan: Don't know what your intentions were in citing the Q&A, but I think it is addressing a different issue, as it deals with two different payment triggers: a SFS and a fixed date. 401Chaos was addressing two different types of SFS.

Gosh, I always thought it was clear, but maybe it's not. My reading of ©(1), (2) and (3) is that you can have one structure for a SFS that is described in (1), another for a SFS that is described in (2), and another for any other type of SFS that is not described in (1) or (2). Hwever, you can't have multiple structures for different scenarios that all fall under (3).

I'm confused. You say it was a stock purchase, which I assume means that A bought the stock of B, so A now owns B and B is still in existence, or maybe B was merged into a subsidiary of A or a subsidary of A wa merged into B, but the legal result is more or less the same. Given that, what do you mean when you say that A is not accepting the plan? What is it that A is in a position to accept or not accept? Did you mean that A will require B to terminate the plan? If so, and it's a 401k, be careful (if the plan was not terminated pre-closing).

Marbury vs. Madison aside, if the employer/plan administrator's options are (a) deny the loan and face zero risk of plan disqualification, or (b) risk having to deal with an angry judge, I think the correct choice is obvious. Naturally, I would advise the employer/plan administrator to use all of its powers of persuasion to get the participant to change his mind about the loan, and stall for a while, and maybe even write a letter to the judge informing him/her of the situation, but in the end I would advise the employer that it faces no risk in denying the loan.

GMK: If I felt that there was any risk of disqualification, I would agree that would be a compelling reason, but as I said I believe there is no such risk. BG5150: Try giving that explanation to the angry judge after the participant has blown the $50,000 in Vegas or used it to pay off a credit card debt (or whatever).

Not only is the extension complete, but they changed the wording of the original legislation a bit. Now, it is perfectly clear that if the involuntary termination of employment occurs on or before Feb. 28, 2010, the subsidy applies even if the first day of the COBRA period is March 1, 2010.

How about being summoned to appear before a very angry judge for enabling a participant to violate a court order? What is the compelling reason for an employer/plan adminstrator to suffer that aggravation? The "sanctity" of ERISA preemption? Give me a break.

I was referring to an order aimed at the participant, ordering him/her not to take a loan, and I was assuming that the order is not directed at the Plan. In view of the ERISA preemption, if the Plan Administrator has knowledge of the order should it go ahead and process the loan anyway? Absolutely not. While it may be an interesting academic issue, it is a silly one. There is absolutely no risk that the IRS would disqualify the plan over something like this. Could the participant file a lawsuit for a remedy under ERISA? Lot's of luck with that one.

I am not seeing a clear instance of noncompliance. Requirement is that plan must be amended to reflect laws and regulations in applicable as of the termination date. Are you concerned that the terminate date was "no good" because it took nearly 1 year to distribute assets? I think you're ok if you are inside of a year, but if you feel uncomfortable about it plan sponsor can go in for a quickie vcp and pay a very low fee ($375, I think).