jpod

If there is no QDRO, and if you have not seen a court order directing the participant not to borrow from the plan, there really is only one answer: You have to follow the Plan rules and the existing loan guidelines in effect at the time the participant applies for the loan.

Per the DFVCP rules, you can't use DFVCP once you've been contacted by DOL, but you can use it if you've been contacted by IRS, even if IRS has assessed a penalty (as long as you have not been contacted by DOL). The above assumes that the Plan is subject to Title I of ERISA. If not (e.g., an owner-only plan), DFVCP is never available. If MSN is saying that he has been able to have his clients slide in using DFVCP and escape harsher penalties even after the DOL has contacted the client, that may certainly be true, but that's not what the rules say.

Are you talking about FICA tax on the sole proprietor, or the employee(s) of the sole proprietor? I will assume that the sole proprietor does not operate through a corporation and his/her business income is reported on a Schedule C to the Form 1040. If you are talking about FICA on the sole proprietor, there is none. The sole proprietor pays self-employment tax, which is reported on Schedule SE to the Form 1040. There is no exclusion of the profit sharing contribution FOR THE SOLE PROPRIETOR when computing the self-employment tax (but contributions for the sole proprietor's employees are deducted because you start with Schedule C net income when doing the computation and the contributions for the employees reduces Schedule C net income). If you are talking about FICA on the employees, employer contributions to the plan for employees are not subject to FICA tax.

ebailey: My apologies. Obviously I didn't realize your question was so narrow: restatement vs. add-on. I don't know why a restatement is necessary, and if not I doubt you'll find anything from IRS confirming that. ON the other hand, the good faith EGTRRA amendment might not be sufficient if the model amendment published in 2001 was used.

There are plenty of places to find the authority for plan amendment deadlines. That is a horse of a different color from the deadlines for submitting DL applications. I agree with rcline's suggested approach, but if you are forced to come up with something you will be able to find it. I must say, however, that the question in your original post suggests that you might be over your head a bit here.

drakecohen: What, in your opinion, is the faulty reasoning?

kimb: A plan can be written to permit mid-year change in status changes, but it doesn't have to be written to permit it. Therefore, you shouldn't be looking for language denying mid-year changes; you should be looking for language permitting them. If you can't find that language, then the employer is correct!

If the plan document itself does not contain any restrictions or limitations on investments, is an amendment to reflect 401(a)(35) even necessary?

Who (in your opinion) is the most knowledgeable senior person at IRS with respect to multiemployer plan funding rules? If you can offer two names, even better.

Either Gracie/George stole that line from Henny Youngman or vice versa.

leevena: French asked if he was incorrect, and the response to his question is that he probably is incorrect, assuming that the plan says what I suspect it says. Obviously, however, you and I agree that it's a bad idea to do it and the employer should advise the employee not to do it, even though in the end the employee can do it if he wishes to do it. Also, good point about the possibility of termination of employment.

It depends on what your plan says, but I don't think there is anything in the law that would prevent your plan document from saying that he can participate even before he has a dependent. However, unless there is some reason embodied in your particular plan, which would surprise me, by all means he should wait until he needs to participate before he begins to participate. If his thinking is that he will need to use the full $5,000 after the baby is born and through the end of the year, but he'd prefer to spread the $5,000 over a full year rather than only 6 or 7 months, I understand where he's coming from, but as someone who is probably much older I would advise him that what we plan on doesn't always pan out (for example, he may have a perfectly healthy baby born in May but for one reason or another he will not need dependent care in 2010, or he won't need $5,000 worth of dependent care in 2010, or he'll have an arrangement where he decides to pay "under the table" and can't use the dependent care plan for reimbursments).

There are only two reasons to permit the type of in-service distributions you described, at least as far as I've ever seen. 1. The employer simply doesn't care (e.g., the employer doesn't care or isn't concerned about the effect of distributions to non-keys on top heavy status), and its attitude is that it's the employee's money, so why should it care. 2. The employer does not want people to quit in order to get their hands on their qualified plan money. Given those reasons, what exactly is the value of the so-called symbolism?

I am pretty certain that COBRA by its terms, or at least via the IRS' regulations, applies only if the plan was subject to COBRA at the time of the qualifying event. I can't speak to what the state mini-COBRA law says, but it would be quite unfortunate and indeed odd that state law mini-COBRA rights would be lost in 2010, in which case the participant is in no man's land.

Chaz, I don't know what to think, but my best guess is that the DOL thought they should put something out there because they were getting a million phone calls. However, the 12/31/ vs. 1/01 issue is an IRS issue, and therefore I doubt that DOL would issue something that it felt resolved the issue without the IRS first weighing in on it publicly, such as through its own website's Q&As.

Chaz, do you know if your client phrased the question which needed to be asked, and did so precisely? Also, do you know how high up or experienced the individual to whom the client spoke is? It is one thing to ask the correct question precisely and get a "no" answer from someone who knows what he or she is talking about. It is quite another to misstate the question and/or get an answer from someone who received 5 days of training and is a low Grade employee assigned to answer the telephone. Given how common it is for insurance to continue through the end of the month, I cannot believe that the Administration is behind a "no" answer. As noted that will effectively eliminate the subsidy for tens of thousands of people who lose their jobs in December 2009.

The notion that it is costing the owners an additional 5% of pay (or 3% or whatever) for employees assumes that the retirement plan contributions for employees is not a substitute for what would otherwise be necessary to pay as cash wages. Any consensus out there as to whether the 5% would actually end up in the owners' pockets or whether the owners would end up having to pay that amount anyway in cash or other forms of compensation?

They most certainly did not answer the question. All the first Q&A does is reiterate the law: you must become eligible for cobra before Jan. 1. It does not answer the real question, which is whether someone whose insurance is already carried through Dec. 31 becomes eligible for cobra on Dec. 31 or Jan. 1. This issue will impact tens of thousands of people, probably, yet either the DOL intentionally side-stepped it or did not realize that it is an issue. Amazing!

Unless they resolve the interpretative issue with which we are wrestling, it won't be moot, merely deferred.

All good questions, Chaz. Clearly Congress was primarily concerned with when someone lost his or her job, not so much with when that individual would be entitled to COBRA as a result of losing his or her job. The IRS was so fixated on issues concerning employer-subsidized COBRA payments and application of the "35%" rules that it muddied the waters when it comes to this very simple, real-life scenario.

I started the earlier thread. As noted therein, there is an off-point example in the IRS Notice suggesting that the "loss of coverage" occurs at the end of the calendar month if absent COBRA the coverage would continue through the end of the month of termination. Extrapolating this into December 2009, the "loss of coverage" would occur on Dec. 31, 2009, rather than Jan. 1, 2010, in which case the individual would be an AEI. Not clear, however, if this is/was really the IRS' intent. A risk-adverse employer might consider denying the subsidy, but at the same time encourage the terminated employee to file a quicky appeal with the DOL with the hope/expectation that the DOL will overturn the denial. That will, as a practical matter, resolve the issue because it is extremely unlikely if not impossible that the IRS would take a position contrary to what the DOL appeal reviewers are taking. If, on the other hand, the DOL does not overturn the denial, then the employer has not taken any risk vis a vis its Form 941 compliance. I realize this is cumbersome to the point of being ridiculous, but I don't think the answer to the Dec. 31 vs. Jan. 1 question is clear.

I'll assume you're right about the father-son attribution (because I have not bothered to check it out), but I'm not clear on how the referral of prospective clients or even existing clients back and forth throws you over the edge under the proposed regs. Please explain. The standard is "regularly associated . . . in performing services for third persons." The only examples given in the regs. for what "regularly associated" seem to raise the bar pretty high.

Here's what I would do. 1. I would research the NIP requirements. I think it may be a requirement only if the plan sponsor/employer wishes to contest an adverse determination in Tax Court. If I am correct, I would advise the employer of that, but it may be a reasonable approach just to forget about it. If I am wrong, then forget this point #1. 2. Assuming the filing is invalid, I would try to reach someone fairly high up in EP and ask "what should we do?"

No idea how to find the attorney. If you haven't considered this, I know that in the "old days" you could file a FOIA request to get a redacted copy of the IRS' ruling file. Don't know if that's still done and if so how long it takes.

BG5150: I agree with your observation. Also, note that if the $75 is paid with other plan assets beyond the amount distributed, the $75 is not taxable to the participant.