jpod

Daisy: It is perfectly allowable, provided the extra $150 is permissible under the participant's loan limit.

This may be obvious, but based on the facts presented the amount of the loan is $10,150, not $10,000. If the participant's loan limit is $10,000, this can't be done. The participant could only borrow $10,000, and end up with only $9,850 cash in hand.

If the contract says that the employer has some responsibilities, then the employer's assumption of those liabilities by contract becomes an element of the ERISA plan. It wouldn't matter whether that language is in there because it is reflective of state law or simply because the insurance company wanted it to be in there. The preemption issue is rendered moot. At least that's how I see it.

Can't do it. Any such employer-induced "freeze" would violate the anti-acceleration rule.

I don't know where to get such a list. However, in the last few years I've corresponded with a few PBGC folks on a case and their e-mail convention was [last name].[first name]@pbgc.gov.

You don't need unncecessary language. If your goal is to draft the tightest and shortest plan document possible, don't put it in. On the other hand, if your goal is to maximize the odds of avoiding silly and time-wasting debates with an insufficiently-trained IRS reviewer, put in the language.

1. Presumably you thought of this already, but I'll ask: other entity did not have a plan? 2. Depending upon the amount at stake, before taking any action your client may wish to put prior accountant and accountant's insurance carrier on notice and see if they would like to become involved in the process of "fixing" this plan. (Also put on notice any other professional who provided bad advice and its insurance carrier). If there are damages to your client they could be liable.

This advisory opinion appeared on today's Benefits in the News. Which do you think would have cost more: the legal fees paid to secure this opinion or the extra 42-cent stamps to make the redundant filings on behalf of each member of the controlled group?http://www.dol.gov/ebsa/regs/aos/ao2008-08a.html

Ok. One last thought. I think this spousal unit needs to talk to a marriage counselor first, ERISA lawyer second.

1. freeerisa.com. It's free. 2. All records were lost, or only plan-specific records? If the latter, I'd start with the 941s and W-2s for the business. This would help you reconstruct the elective contributions for each employee. 3. Where is the plan money invested? Wouldn't that vendor have participant account information? 4. Can't paychecks cooperate by giving you what it believes to be the current plan document? 5. Ask a trustworthy employee if he/she has a copy of the most recent SPD. These are just for starters. I think the goal is to first try to reconstruct the plan's financial records and each participant's account balance. Plan documentation is very important, but clearly a second goal as compared to the fiduciary duty to account for plan assets.

Just out of curiousity, will the spouse be protected during the IRA holder's life? In other words, what is to prevent her from transferring or rolling over all of the $ to another IRA and then naming the pool boy as the sole beneficiary? Alternatively, what would prevent the IRA holder from withdrawing all the $, with or without adverse tax consequences, and then spending it or giving it away?

jukeboy: Are you sure you have a "late deposit" problem under Title I and the PT rules? The Title I requirement only requires that the amount withheld from pay be deposited to the Plan by the applicable deadline described in the participant contribution requlation; allocation to participant accounts by that deadline is not required. If the money was handed to the custodian, perhaps the deadline was satisfied. The fact that the plan changed custodians and the former custodian did not immediately transfer the money to the new custodian complicates the issue, but perhaps the custodian was still a plan custodian for so long as it continued to hold the money. Your client may indeed have a qualification problem (or even another fiduciary breach problem) by not ensuring that the money was allocated so that it could be invested promptly, in which case an earnngs component would seem to be appropriate. However, I am suggesting that you may not have a late deposit problem under the participant contribution regulation, in which case no 5330 filing would be necessary.

J Simmons' conclusion has to be the correct conclusion. Any other conclusion stands Section 409A and common sense on their respective heads. Can you find solid support for that conclusion in the regs? Not sure. If I were representing the employee I would play it safe and ask for a lump sum discounted using a reasonable interest rate, or ask for it to be paid under the 2 and 2 rule (assuming it falls below the 2x 401(a)(17) threshold). If I were representing the employer, I would advise the employer that it may be an issue, but the W-2 reporting exposure is minimal.

If the plan's "last day" rule is stated the way it is usually stated, then if he resigns during the day on 12/31 he is eligible for an allocation. Timing of distributions is a separate matter. Are you wondering whether he would be entitled to the distribution in 2009 or have to wait until 2010? What exactly does the plan say?

Definitely not an excess plan (which can provide benefits only to the extent necessary to exceed 415 limits in a QP). Whether it qualifies as top-hat is facts and circumstances. Normally someone earning more than $245k should be safely viewed as a top-hat person, but not necessarily. If the bonus is not by the terms of the plan or the surrounding circumstances deferred until termination of employment or beyond, then it's not subject to ERISA in the first place and you don't have to worry about qualifying as top hat.

Without studying the rev. proc. word for word, I think you should be able to file for VCP with a fee of only $750. Perhaps you can file for VCP on a John Doe basis.

I agree with Janet. That's the most defensible course of action (if not the required one).

Is the employer going to come up with the money out of its own pocket or does it hope to get the money from the plan? Is there a Code Section 401(a)(2) "exclusive benefit" or ERISA "exclusive purpose" problem with pulling the employee contributions out of the plan?

I agree with mjb's recommendation as to how to approach and deal with the employee. As to the notary, however, generally speaking you shouldn't tolerate having a notary on the loose who will play fast and loose with his/her obligations. If the employer knew that the notary had participated in deceit and did not do anything about it, that would increase the employer's exposure to liability down the road the next time the notary does something wrong.

Fair enough. That means that you don't have the luxury of waiting for IRS guidance. If your client would really like to avoid the distribution if he can, I hope the ERISA atty's advice is correct.

If you are suggesting that necessarily means that the waiver legislation is inapplicable, I don't agree. The issue is whether the payments per the TEFRA 242 election are to be considered 401(a)(9) MRDs subject to the waiver. I don't think it's a simple issue. Your ERISA attorney may be correct, if he/she did all the research and analysis to support that conclusion. But if it was simply his/her knee-jerk answer, I'm not sure it's correct. Insofar as my "wait and see" suggestion is concerned, by what date must it be paid each year?

Saying that it must be paid might be the safest advice, because the damages attributable to incorrectly advising that the individual take a taxable distribution for a year in which he did not need to take one are speculative. I'm not convinced that it is the correct answer, but I'll wait until a client wishes to pay me for the analysis before I think about it again. Or, better yet, I would advise the client to defer the distribution as late as possible into 2009 in accordance with the terms of the TEFRA 242 election, and see if the IRS says anything pertinent to the issue between now and then.

Are you sure? I'm not certain that the effect of Section 242(b) and it's relationship to 401(a)(9) and the new legislation is what you say it is.

Janet: Interesting issue. I admit to not having the time or the inclination to look at the regs or the new legislation. However, for what it's worth this is how I would proceed with the analysis. First, the new legislation (once signed by W) is law, which takes precedance over any regulation addressing the same subject matter. Second, the law waives the requirement to take an MRD from a DC-type plan for 2009. Third, is the obligation to take a distribution for the year under a TERFRA election an MRD subject to the 2009 waiver? One needs to parse through the terms of the TEFRA provision creating the right to an election, then the section of the regulations dealing with TEFRA elections, and then finally the terms of the new law. My gut tells me that your Company owner can skip his 2009 distribution under his TEFRA election (assuming it is a DC-type plan), but as I said I have not done the reading necessary to confirm.

The regulations permit discretionary cash-outs of a participant's interest if the account balance is not in excess of the 402(g) basic amount (i.e., $16,500 in 2009). You must aggregate all plans of the same type under the "plan aggregation" rules in applying this rule. Does it go without saying that you can "disaggregate" two "plans" of different types? Suppose you have one document that provides for both elective contributions and employer-funded non-elective contributions, and separate accounts are maintained for the two types and earnings and losses are separately tracked. If each account is less than the 402(g) limit, but the two combined are greater than the 402(g) limit, can you cash-out both under the discretionary cash-out rule?