Belgarath

Client first institutes a DB plan after attaining age 70-1/2. Has a 3-year cliff vesting schedule (to delay RMD's). Suppose the end of the 3rd year is 12/31/2017. Must the first annuity payment commence by 4/1/2018, or 12/31/2018? My reading is that he has until 12/31/2018, but I can see an argument for 4/1. Particularly if taking an annual annuity payment, it is hard to see how it really matters, since he would receive it all in the 2018 tax year anyway, but that's a separate issue. The later date seems a bit easier administratively, since the vested accrued benefit as of 12/31 often isn't known until later in the following year anyway...

Having a brain cramp. Suppose an owner of an LLC taxed as an s-corp sells the business. Plan is a calendar year Safe harbor plan. My understanding is that all employees terminated employment as of the sale date. (Is an LLC that is taxed as an S-corp automatically "dissolved" as of the sale, or does it continue to exist as a legal entity, until "dissolved"?) If the former owner wants to maximize contributions, do you see any problem with having the plan termination date of 12/31/2017, so there is no short plan/limitation year, and therefore no prorating of limits?

And FWIW, Sal says, "A qualified plan may offset Davis-Bacon amounts against any other allocations provided under the plan. For example, the Davis-Bacon contribution might help satisfy the safe harbor contribution obligation under a safe harbor 401(k) plan..."

Thanks MoJo - that makes good sense to me...

"If the plan is "clear" that ONLY a spouse may take under the plan (and under no circumstance can the participant name a non-spousal beneficiary), then I don't see the legal separation as having any effect on the plan provision." Thanks MoJo. Yeah, the plan language is very clear that the there is no preretirement death benefit if you are "unmarried." But that brings up the issue of whether "legal separation" means "unmarried." So this is probably a question for ERISA attorney in this state. Here's the actual applicable language - I cut out (b) and (c) as inapplicable to the question at hand: (a) Death prior to retirement benefits beginning. The death benefit provided under this Plan shall be the "minimum spouse's death benefit" provided in Section 5.5(c). In the case of an unmarried Participant who dies prior to such Participant's Retirement Date, no death benefits shall be payable under this Plan. ... (d) Beneficiary. The Beneficiary of the death benefit shall be the Participant's spouse, who shall receive such benefit in the form of a Pre‑Retirement Survivor Annuity pursuant to Section 5.8.

Re-upping this old thread. We have a situation where there is apparently a "legal separation" - whatever that means, and it apparently will never be a divorce (or not for a long time) and it has something to do with the "ex" remaining on health insurance. I really don't have any details. But, the DB plan provides for a pre-retirement death benefit ONLY for a spouse. So is this a question of State law now, as to what constitutes a "spouse" for this purpose? The plan language is silent on this issue. Or, is there some other guidance that would apply where ERISA would override state law - e.g. that until there is a divorce, you are a "spouse" and a legal separation doesn't change that. Thanks!

Thanks. I maintain that she knows a good thing when she has it. She maintains that she is paying her debt to society by preventing some other poor soul from being stuck with me. Sadly, I believe the preponderance of the evidence is against me...

I had erased that episode from my memory banks, mercifully. At this point, my memory banks erase automatically.

Kudos! And agree on the D-Day as well. Sadly, most of those involved have passed on to greener pastures, but we salute their memory. On a lighter note, and meaning no disrespect with my switch over to my strange sense of humor, it also happens to be the 36th anniversary of my wedding day. A fairly heroic undertaking (on my part, not hers, naturally)!

I'd contact an ERISA attorney in the state where your employer (or former employer) is located, and ask them this question.

It isn't nice to make fun of the handicapped! Typing with all these extra thumbs is difficult. But of course you are correct, I did mean 2016-51.

Impossible to comprehend. Unbelievable. I think it fits just fine.

What FIS document is this? We use the PPA VS in AA format, and it reads very differently, (and IMHO is much clearer). Ours doesn't have quite the same option as yours, and the closest choice is this - underlining is my emphasis: _____(not to exceed 12) consecutive month period from the Eligible Employee's employment commencement date and during which at least ______(not to exceed 1,000) Hours of Service are completed. If an Employee does not complete the stated hours of Service during the specified time period, the Employee is subject to the 1 year of service requirement in i above. I'm honestly not sure how I'd interpret yours, and I would probably ask FIS to clarify. Our document (and I had this confirmed by FIS) would be that if you don't work the requisite number of hours in the initial 3 month period ONLY, then you revert to the "Year of Service" standard, and there are no subsequent 3 month measurement periods - even in the first year.

But WAAAAAAYYYYYY more interesting.

Lasagna al Poje. Sounds good! Pretty similar to what I use, but I always use onion, oil, more garlic, all ricotta, and FRESH chopped parsley - really brightens up the flavor. Also prefer the regular noodles - purist (or maybe snob) that I am. I love the hot Italian sausage (although I usually have to use sweet, or just hamburger, because most of my family doesn't like spicy stuff - strange people). The thing is, it is pretty hard to go wrong - I've rarely had bad lasagna. I assume you make it with love... Maybe you can e-mail me a tray of it. Virtual meals are probably better for me anyway.

See Revenue Procedure 2006-51, Appendix B, .07(3).

I'm not sure - it looks like the formatting is off under the adoption agreement section you pasted in, and I'm finding it confusing. Can you take a look at it and see if it is correct as shown?

Yes, but two bottles are required - one for the sauce, and one for the cook. And stop it - thoughts of lasagna are interfering with my concentration!

Hmmm - how flattering to be called a youngster. However, the truth is that being an "oldster" my brains have turned to mush, and I just didn't pick up on the reference. Now all this talk of pasta sauce has made me hungry (for homemade sauce, not the stuff out of a jar...)

Thanks Tom.

Ragu?

Interesting situation - self employed individual makes deferrals based on a "draw" during the year, then discovers after end of year that earned income is zero. So deferrals have to be refunded as an excess. Now, in a more "normal" situation, where there is, say, an ADP failure, I know the IRS position is that those deferrals count toward determining allocation rate to the Key, even though they are subsequently refunded. However, it seems a stretch to apply this to someone who is ultimately determined to have zero compensation, so I'd argue that no top heavy minimum would be due for the NHC's. Any other thoughts/opinions?

Thanks.

Thanks for the response. Yes - but the IRS language in the "fix-it" guide was causing me some concern: "Corrective action: If you maintain other retirement plans, cease making new contributions to the SIMPLE IRA plan. You may be able to file a VCP submission requesting that contributions made for previous years in which you maintained more than one plan remain in the employees’ IRAs." So I was trying to determine if the funds could be left in the SIMPLE, and paying the extra 10%, but the Rev. Proc. language appears to say that this would result in no deduction for the SIMPLE contribution. If so, then it seems better to distribute as an excess - taxable in 2017, so big deal, then make up that "lost" deduction during 2017 in the 401(k) deferral. I don't think it is crystal clear, which is why I'm seeking other opinions! FWIW, my preferred option is just to leave it there, stop all further contributions, and contribute remaining of 415 max to the 401(k) plan - deducting all of it as normal. I'm just not certain the IRS will approve that, although there's no logical reason they shouldn't...

Wording has changed a little bit in the Revenue Procedure 2016-51 from prior Rev. Proc. - it is a bit less explicit regarding the following. So, let's say you have a SIMPLE-IRA to which you have contributed during 2017, then you established a 401(k) and contributed to that as well. Whoops. So, when it comes to correcting, can you file VCP and count the SIMPLE as an "Excess Contribution" and refund it? Can you still have the option under the VCP to retain it in the SIMPLE, but pay the 10% excise tax on the retained amounts (but apparently get no deduction for it, so probably not a savory option anyway?) Other wonderful options? I tend to favor refunding, particularly when fairly early in the year where participant can have time to make it up anyway under the 401(k). Appreciate any opinions/thoughts. P.S. - anyone recently submitted one one way or the other, and if so, with what results?