jaemmons

You can draft the multiple er plan onto a volume submitter document. If drafted by one which has received an IRS opinion letter, the employers will have reliance on the document without having to submit to the IRS. One of my clients is going through this now and I am spinning off one of the members (now unrelated) to their own plan starting the first of the next plan year. The division was sold in 2002 and I elected to test it as a single employer plan for 2002 and treat them as separate starting in 2003.

415.00

Stock attribution applies to lineal descendant/ascendants (except in the case of stock being attributed to a grandparent from a grandchild, which I wouldn't believe applies here:) ) Therefore, she is considered a 5% owner, since this is the same determination of who is a key/hce ee, and would need to take her MRD.

The employer has the option of testing each union separately for ADP testing purposes. Treasury Reg 1.401(k)-1(g)(11)(ii)(B) This is assuming that the retirement benefits of the union ee's is subject to a "good faith" bargaining agreement, in order to be treated as statutory exclusions under IRC 410(B)(3)(A) and apply these disaggregation rules.

The plan administrator received a "Discharge of Debtor" from the court with respect to the plan loan (which they listed on their filing as outstanding debt). As such, we have taken the loan off of our books (offset) and deemed the loan as a distribution to the participant. It doesn't make any sense to me to keep a receivable in the plan which has no chance of being paid off. Plus the court ordered that payment stop on the loan. With that in mind, does anyone see any reason why the loan couldn't be deemed and offset simultaneously?

thank Kirk. I didn't get a chance to respond until this am.

Yes.

A participant in a plan my office administers has been afforded debt elimination under Chapter 7 Bankruptcy. He has an outstanding plan loan and I have a couple of questions on what should happen: 1) Is the outstanding loan taken off the "books" pursuant to the court order? 2) If so, does it become a deemed distribution to the participant and is it exempt from the 10% early distribution penalty I believe that the loan is an allowable debt to be listed on the petition for bankruptcy but I am not exactly sure what if any tax implications result from this action.

But unfortunately it doesn't resolve the fact that the participant's accrued benefit was reduced. I think the employer would have a reasonable argument the other way if they decided to pay the 4-30 balance even though it was higher at the time of application because there wasn't any cutback in their accrued benefit at the time of termination.

If you have K-1's you must have partners and if you have an LLC the underlying members are generally partners. Are the other "employers" receiving K-1's from the LLC or are they legitimate outside partnerships? I really cannot give you an answer without more details on who the other "employers" are and how the LLC is structured.

You must use a compensation for ADP testing which meets 414(s) AND is not in excess of 401(a)(17). Therefore, since you have a short plan year and must apply a prorated reduction to certain plan limits (compensation max being one of them) you must use the $70,833 to determine their ADR.

As we have discussed earlier, the partial term is evaluated on a plan basis. However, if a demographic change occurs which impacts the benefits of a plan merging into another plan (e.g-mass layoffs of seller company) you may have a partial term with respect to the merged plan benefits of the seller company, which now makes it an individual member evaluation. This kind of contradicts the "plan" basis, but here me out: You have two plans merging due to an acquisition or merger of two companies. Part of the purchase agreement is that a certain division of the seller would close down as of the effective date of merger. Both plans are not going to fully vest the employees and decide to continue vesting credit recognizing predecessor service. Since the layoffs were due to the companies merging, you need to look at the impact of the layoffs before the merger occurred to see if a partial term has occurred with respect to the benefits in the seller's plan. A facts and circumstances overview is what the IRS uses to determined whether or not a partial term has occurred and, although I may be wrong, I would believe that if you presented your facts to them on a Form 5310 submission they would break the selling entity's benefits from their previous plan apart to form their opinion.

I think the terminated employee has a legitimate claim for his 4-30 account balance. There are a few court cases in which this exact situation occurred and the court sided with the terminated participant (Pratt vs. Petroleum Production Mgt. Inc. Employee Savings Plan & Trust , No. 88-2190(10th Circuit 1990) and Wulf vs. Quantum Chemical Corp., 1994 6th Circuit, US Appellate Lexix 14677) Their rulings were based upon the fact that a defined contribution plan's accrued benefit is the value of the account balance on the first valuation date following termination of employment. Even though the plan timely amended to allow for more frequent valuation dates, the court held that the participant's account balance could not be reduced by a retroactive amendment adopted after their termination date because it constituted an "accrued benefit" which is a protected benefit under IRC 411(d)(6).

Yes. The employees of company A & C could probably be statutorily excluded as "non-resident aliens" but the subsidiary of Company C (Company D) I assume has US resident employees and as such need to be counted for coverage purposes. For clarification purposes, I am assuming a parent subsidiary relationship exists between A, B, & C.

MGB, My statement was based upon the members of the controlled group participating in the same plan. If they individually sponsor their own "stand alone" plan, then I would agree with your position. Sorry for the lack of detail in my reply.

I have always taken the approach that a review of a potential partial termination is done on an employer basis. Since a controlled group of companies is considered to be one employer for all plan puposes, should a drastic change in the underlying demographics of the controlled group occur (e.g.- sale of a brother sister arm/subsidiary, layoffs within a department of one of the aforementioned, etc.) it is looked at in comparison to the entire employee group of all members within the controlled group. In a multiple employer arrangement, I have done the same, since generally, most sponsoring employers are unrelated entities and are treated as individual employers for most of the plan's administration.

If the mutual funds are participant-directed investments and the plan record keeps individual accounts, no additional disclosure information is necessary in the SAR.

Under Treasury Reg 1.410(B)-6(d) "a collectively bargained employee is an employee who is included in a unit of employees covered by an agreement that the Secretary of Labor find to be a collective bargaining agreement between employee representatives and one or more employers, provided that there is evidence that retirement benefits were the subject of good faith bargaining between employee representatives and the employer or employers." From my interpretation of this regulation, if a "good faith" bargaining agreement is absent, then these employees are not statutory exclusions, and as such, the plan must satisfy coverage if they wish to exclude them from participation.

I would self correct under SCP for those plan years that end on or after 9/30/00 (since the end of the correction period for that year is 9/30/02. For the years you cannot self correct, you will need to go through the VCO submission procedures. The only problem I see is that in the submission statement the plan sponsor must indicate administrative procedures and policies which are now in place to prevent this from occurring again. Since you would only be submitting for those years which fall out of self-correction, I am not exactly sure if this will impact the IRS' opinion. I'd be interested to see if anyone else feels that the entire error should just be included in the VCO application.

First, you will need to determine if the error is egregious or not. Also, does the plan have a favorable determ letter? Dependent upon the severity of the error, you are looking at a VCO submission under the VCP submission procedures. You should review Rev Proc 2002-47. Since the same error has occurred over the past 3 years, you may be able to self correct the last two year, as long as it can be done by the end of the "correction period" (generally the last day of the 2nd plan year after the year of "defect"). Without a litte more detail, I can't really give a definitive answer.

I don't see a problem with them being eligible for the employer's plan. Their benefits are not subject to a "good faith" bargaining agreement, so they are not a statutory exclusion and therefore should be by definition an eligible employee in the plan document.

Just a little caveat...If the total refund is $100 or less, then it is taxable in the year it is distributed and does not fall under the FIFO taxation.

The statute of limitation is a ridiculous argument for not properly amending the plan. The IRS can always open up the "books" on a plan if they feel it is necessary. That said, even if at some future point, if the IRS audits the plan and finds reason to believe that the plan was not properly amended for GUST, they can request a copy of the prior document. If the sponsor does not amend timely, they obviously do not have an IRS qualified opinion or individual determination letter with respect to the "form" or plan language, since they only have to September 3, 2002 to submit "non-amender plans for an IRS DL (Rev Proc 2002-35), and should the IRS discover defects within the document and how they are applied administratively, you do not have a DL "ticket" to use, in order to use most of the correction programs under EPCRS (as amended by Rev Proc 2002-47). Therefore, they could be potentially put the sponsor's plan qualification in jeopardy for attempting to circumvent proper restatement procedures. With the "new and improved" EPCRS program, why not just restate now and submit for a DL. Without a DL at least on the form of the plan, the sponsor loses out on 99% of the available correction methods should a plan "defect" be discovered down the road. Good luck!

Mike, I don't understand your question (or am I just reading this too early in the morning?)

Yes, and if they are not distributed by April 15th of the year following the year in which the excess occurred, they are taxed again in the year of distribution. In your case, if the excess deferrals are not paid by 4-15-02, they are taxed twice, both for 2001 and 2002. However, the allocable income is taxed in the year of actual distribution. I hope we are talking about 402(g) violations and not ADP refunds.