Belgarath

I guess that makes two of us. I don't see it either.

Suppose John James had a DB plan years ago (1 man business, made scads of money, put a ton into a DB plan, ten ultimately terminated plan and rolled funds over to IRA). Now, some years later, he has another business. Wants to set up a new DB plan. Do 415 limits take into account the benefit paid to him under the prior plan? I don't think he's a "predecessor employer" but it just doesn't feel right, somehow, yet I'm not sure there is actually a problem. I'd appreciate any insights. P.S. - I have no idea what type of entity prior business was. Would it make a difference if he was a sole prop? I seem to recall that sole props "last forever" for some purposes.

Here's what I think, and it is nothing more than inconclusive general blathering. I get cheaper coffee than Mike, so my thoughts and $1.25 will get you a medium coffee at a thoroughly disreputable local convenience store. I think almost anyone outside of the IRS, and likely some within the IRS, would agree that "terminated participants" is a "reasonable" classification by any rational standard. However, as previously indicated by others, the IRS appears to have taken the approach that if everyone is in their own group/classification, then by definition there is no reasonable classification, and you can't use ABT for coverage testing. (FWIW, that's how we operate - maybe we are just cowards). I have no idea how you'd fare if you took this up the ladder at the IRS, if in fact an auditor even raised the issue, and how you'd fare in court if you went beyond that. I think I'd describe the issue and options to the client, and have them decide - preferably in conjunction with legal counsel. However, legal counsel might well cost more than just giving contribution to two more NHC, so they might want to just make the darned contribution?

RCline - I sent a query to FIS on this, and if they respond to me prior to doing a general release, I'll let you know. I'm thinking the current language in the VS (in AA format, at least) would allow it. It refers to contributions that must be 100% vested pursuant to the Code when contributed. But the Code/Regulations will be modified to say 100% when allocated, rather than contributed. So I THINK it'll work. But we'll see once we actually get the IRS guidance, and confirmation from FIS.

Hurray! About time, but kudos to the IRS for finally taking a sensible approach on this.

I think I may have to retract my prior statement that you would always pass the compensation ratio test... You technically, again, don't "automatically" satisfy a 414(s) definition, because there are only 3 permitted "safe harbor" modifications to 415 comp that automatically satisfy 414(s). Any other modifications (and excluding only bonuses would be an "other" modification") are subject to testing. And while excluding bonuses is "reasonable" I'm not sure about the issue below. I'd have to double-check, but it seems to me that I recall exclusions of comp in excess of the 401(a)(17) limit wouldn't help in trying to pass the compensation ratio test, because the individual is considered as having 100% of compensation taken into account under the plan.

I agree with your logic (that is, no, it isn't deemed to satisfy 414(s) just because the HC are excluded.) And although you would always pass the 414(s) compensation ratio test in your scenario, compensation that uses other than the 414(s) "safe harbor" exclusions must also use a definition that is "reasonable." In real life, I would expect you would normally pass, but I don't believe it is automatic.

Yeah, I was assuming that there was an immediate loan offset as of the termination date. That's the way most plans I see work, as most employers (at least that we work with) don't want anything to do with loan payments from ex-employees. I agree with what you are saying when the plan still allows repayment up to the end of a cure period. P.S. - I was responding to Bird.

Try 1.72(p)-1, Q&A-19.

What kind of a plan? If a defined benefit plan, perhaps the beneficiary isn't entitled to anything, if a full lump sum distribution was made upon termination of employment.

Beautiful! Thanks!!

The following is being used as a "substantially equal" periodic payment over 10 or more years, to avoid 20% withholding. I'm not yet convinced it qualifies, but on the other hand, it seems reasonable that it should. Participant terminates at age 65. Takes a 13 year payout (well over the 10 or more years required for the exception). Account is distributed as 1/13th the first year, 1/12th the second, etc. It seems to me that in order to qualify, under Revenue Ruling 2002-62, this method would require establishing an initial LIFE EXPECTANCY, and similar methodology could then be used over that life expectancy. But I don't think you can arbitrarily use a lesser number for that same methodology. Opinions?

Is this the IRS model SEP form, or a prototype SEP? I'm not certain if a prototype SEP document may be able to have such an exclusion? You definitely can't with the IRS model SEP, as ETA has mentioned, and you may not be able to with a prototype SEP - I just don't know about the prototype. If you have a prototype, check the document to see.

Mike - is it possible to exclude "resident aliens" as a class, subject to coverage testing?

Most documents offer an option to pay by check, as well as by payroll deduction. So for your commissioned salesperson, just allow payment by check.

Thank you both.

A colleague has been receiving different responses to the following. I don't pretend to know! Any thoughts? Thanks. Is it permissible to offer both an HSA and HRA to employees participating in an HSA eligible group health insurance plan? For example; is it okay to have an HSA cover the first $1,300/$2,600 in deductible expenses and then have an HRA pick up some or all of the remaining deductible and/or co-insurance expenses? Are there other options, say where the HRA pays the first $X in deductible expenses and the HSA could pick-up expenses after the HRA benefits have maxed out.

Ah, the "service spanning" rules. It sounds like your plan is using the "elapsed time" method of crediting service for eligibility purposes. In that case, it sounds like FT Williams is correct. You can double-check your document to make sure.

Interesting exercise, but to be honest, I would never dream of questioning or "calling out" the service of the daughters, based upon the statement by the CPA that they don't work there. I feel like that crosses a line (what line, I'm not sure) but I frankly don't think it is my business to question that. Now, if the CLIENT had told me the daughters don't actually work there, that's a different circumstance altogether. Then I'd just resign as TPA. Can't correct egregious fraud under VCP! P.S. - question for the CPA's out there- is the CPA violating any professional ethics by telling this to the TPA?

Ok, thanks for the info.

"Some (but a growing number - especially for California participants) name the service provider (not the plan - because except for a DRO, the plan can pretty much ignore the court under ERISA preemption) as parties to the divorce action and then are automatically enjoined from distributing participant balances pending further order of the court." Mojo - can you educate me a bit on this? What are the requirements for validly "naming" someone as a "party" to a divorce action? If the service provider has no discretionary authority, then would it have any actual effect regardless of whether they are named or not? If there is discretionary authority, then wouldn't the service provider be a fiduciary, which is generally what we seek to avoid at all costs! I'm not a lawyer, and I really have no idea what the intricacies are... Thanks.

But, this is really "hearsay." Just because the accountant said this doesn't mean it is true, and you have actual knowledge that fraud is being committed. I reiterate my opinion that it is not your problem. (I will also say that nearly every standard census gathering sheet that I've seen or the engagement letter, etc., would all say that you are relying on the accuracy of the information provided by the client)

Yes, it is tax fraud. I responded to this in your other post. But that's the client's problem, not the TPA's.

Well, that's tax fraud. But that's the client's problem, not the TPA's.

GASP! Not...need....to....see..."Retirement...Plans"... - the answers to the meaning of life, the universe, everything? It doesn't seem possible. IS there anything else? Such a heretical act of heinousness is unparalleled in modern history. Dave would get lonesome without us, and we can't have that.