Blinky the 3-eyed Fish

If the spouse is being paid income that is flowing through to her Sch C, then she is being treated as an independent contractor. (I will go on the basis that this is a correct determination.) Otherwise, her wages would be reported on a W-2. Now, a normal independent contractor is by definition not eligible, but here the spouse's sole proprietorship is most likely is in a controlled group with the husband's sole prop. I can't see how it meets the 1563(e)(5) (I hope that's the right cite) exception. If that is the case, to be eligible either the spouse's entity must adopt the plan or they are eligible because the document is a standardized prototype. War the stork!

I don't see it as a PT, but rather the host of problems that come from a distribution without a determinable value. You wouldn't know if the distribution necessarily satisfied the MRD, whether it was too much and if the document allowed in-kind distributions in excess of the MRD, and obviously what do you report on the 1099 as taxable income. Also, if they are pooled accounts, you certainly have an issue where the distribution affects others. Advise him to get a formal appraisal before distribution. This transaction is reported on the Schedule R, so I imagine this increases the audit risk.

Practically, no participant is going to take it as a benefit reduction because they will be getting the same contribution per pay period as before and because they wouldn't even compute that others are getting more. I really think it's a non-issue. You could go the VCP route, but I just don't think it's practical in this case.

Well what is the greater of the two formulas for the 6/30 PYE? I see only one formula. If you are arguing it's a cutback, then you need to give to the 415 limit for everyone before you can give to those that didn't meet the allocation conditions to avoid the perceived cutback. Instead are you saying that you can only do the amendment prospectively Belgarath? Normally, I too am not for changing anything that affects other participants in a PS plan with a discretionary contribution. However, with the facts in evidence (IANAL but I wanted to use that term anyway), there is a very good argument for doing so in this case and I would support the change.

While one could argue there is a cutback issue, I think the facts would support amending the plan now to eliminate the the allocation conditions retroactively. The main fact being that the employer is depositing the contribution per pay period is a clear indication that amount is intended for each person. An IRS reviewer should clearly pick up that the amendment is an increase for those who didn't satisfy the allocation conditions rather than a reduction for those that did.

Thanks for the appreciation. I didn't understand your last sentence though. Irregardless of 415(e), they would need to know with certainty that the sole prop is not a related entity with the medical group. Otherwise the new plan wouldn't pass 401(a)(26) and wouldn't pass coverage without aggregation with the medical group's plan. And then some general testing issues would surface. Of course in this case it seems fairly obvious they aren't related entities and such they are free to live their lives in unfettered bliss.

Being the medical group is not a controlled group and certainly appears not to be an affiliated service group with the new sole proprietorship, the answer is no effect whatsoever. They are not related entities, so it is the same as if he went to work for Taco Bell.

Ritchie is a troublemaker stirring up posts 3 years old. I think he is a big meanie. Anyway, I have changed my views. I was having trouble making a cockatoo.

Tina, look at this poll and see what others think about filing under VFCP or just paying the excise tax. http://benefitslink.com/boards/index.php?showtopic=29791

Up yours airport assaulter!

Daestrom, the actual deposit into the trust does not mean an allocation day has to be set on that date. The allocation day is still the last day of the plan year, only the deposit is being made sooner. BTW, the post stated they are removing the last day requirement which makes this person eligible to receive the contribution. Mbozek, I seriously doubt there is a cite that addresses this specific question. Of course the BRF rules are under (a)(4)-4. An earlier contribution is certainly more desirable than one deposited later. Don't you think this raises a BRF issue? I do. I agree making deposits throughout the year is fine as a rule. I don't think whether or not it will be discovered on audit is a criterion on which to proceed necessarily. Although, auditors do check the deposits to the plan on the brokerage statements versus the deduction taken. I think this would be easily discovered.

It is definitely a BRF issue. A benefit (opportunity for advanced asset growth) is being provided to an HCE and no NHCE's and that ratio (0%) doesn't pass. I disagree with Daestrom's last paragraph. The allocation date is not being moved here. Just the deposit is being made earlier. As a solution you could also contribute dollars now to enough NHCE's to pass the BRF testing. I disagree with ERISA. It was already stated that the plan has (or will have) allocation groups, so that the contribution would follow the terms of the plan by being contributed for one group.

E it sounds like you are saying you need to pay the excise taxes even if you file under VFCP. That is not the case if you meet the criteria of PTE 2002-51. See the EBSA website or the 5500 instructions.

I can think of three things against the thought that the benefit is limited: 1) Why would (a)(4) reference testing with or without regard to 415 if you could never accrue more than 415? 2) Why would the document I just pulled out reference what I described in the last post? 3) How would you generate an amendment base under unit credit for a COLA increase if the benefit was limited to the prior 415? I take it to be a yearly comparison of the plan benefit versus the limit in effect that year versus a static plan benefit.

Well, this goes to a document specific question and I gave the short answer. First, a frozen accrued benefit, if limited by 415 can be increased by the COLA increases if allowed by the document. This increase would only apply to benefits limited by 415. I think this is fairly standard document language if you want to research LRM's and it certainly makes sense. If the plan is a safe harbor, the participant is merely recapturing benefits earned but otherwise previously limited by 415. If general tested and the testing did not cap at the 415 limit, the benefit recaptured was already tested and no additional testing is required. If the testing did cap at the 415, the COLA increase would require testing (and probably fail). So in any situation, the benefit is properly considered. Any frozen plan would have required a change to the benefit formula and that would create a fresh-start date and a frozen accrued benefit. So, I certainly feel it is acceptable to just provide the COLA increase to the 415 limited benefit only. BTW, I don't consider this person a retiree, although I don't think that necessarily matters.

While you have some document specific questions, I will try and answer anyway. First, a frozen benefit can be increased with COLA increases if that is allowable by the document. A retiree's benefit can be increased with COLA adjustments too, although I wouldn't classify this guy's pension as "commencing" simply because he is receiving RMD's. The 415 dollar limit should be increased with age no matter if COLA increases are applied or not in the document. Even in a frozen plan the 415 dollar limit is age applicable. An increase in age past NRA is not an increase in the value of the benefit per se, but rather a increase to account for a delay in receiving payment.

There is weeping and gnashing of teeth.

I don't understand Mbozek's argument. Here is ERISA 510 It shall be unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of anemployee benefit plan... Note that it says a participant or beneficiary. A LS is available to other participants, so why is it not discriminatory to deny participants the LS if they are restricted HCE's? Or is your argument that it is discriminatory and that the nondiscrimination requirements of 401(a)(4) are in of itself discriminatory? (Mike beat me.) (Then I couldn't stand the typo and bad English.)

For what? A limited or general partner in crime? No, a plan is an inanimate object that is incapable of committing a crime. (That last comment was WDIK's fault.) Anyway, sure a plan can be an investor in a limited partnership, which I suppose makes it a partner. Be wary of UBTI though.

Mike's back!!! I thought you were dead. I took you 15 months to get out of that Chinese prison huh?

You shouldn't praise my childish ways as it will only encourage me. You're a vindictive little primate.

Careful on the 50% rule. It applies to parent-subsidiary controlled groups only, not brother-sister.

answer not given.

I couldn't disagree more with that last sentence. I mean, I really really couldn't possibly take a more polar opposite view. I guess I can sum up your position as saying that first, the alternate payee is not who they are talking about in the (a)(4) reg, second, it wouldn't matter anyway because of -13 because the (a)(4) reg is the equivalent of a talking head. You take some odd positions sometimes. This horse is beat. We can agree to disagree. I need to move on now.

So the cite provided by JDuns means exactly what? To take -13 which says ,"A plan shall not be treated as failing to satisfy the requirements..." and take that to mean the plan must distribute the QDRO to a restricted employee is a streeeeeeeeeetch. And to boot it contradicts the (a)(4) cite, the IRS' consistent interpretation and the INTENT of the rule in the first place. I know I can't convince you otherwise, but that island must be lonely.