Belgarath

Yes. https://www.irs.gov/retirement-plans/403b-plan-fix-it-guide-your-403b-plan-doesnt-limit-the-total-employer-and-employee-contributions-to-not-exceed-the-irc-section-415c-limits

There's really no standard answer for this - it is heavily dependent upon facts and circumstances. Most plans provide for a special valuation at such time as the Plan Administrator deems appropriate. So in extraordinary circumstances, you can do an "off-anniversary" valuation. This, however, is a very slippery slope, especially if a HC is involved. As an example of where it might be appropriate - suppose the total plan assets are $500,000 as of 12/31/2015, with $400,000 of that belonging to the owner, who retires. By the time the distribution is made, the assets have dropped by 20%. Under the "standard" valuation practice, owner would get $400,000, and everyone else would be left with zilch. So some sort of special valuation would have to be done in such a situation. If you do it for one person, then you have to consider whether or not you need to do it for everyone. If not, what are the objective parameters you are going to establish for when you do and when you don't? So a tricky issue, with no answer that works for every situation.

Yeah, as John mentions, this is a standard provision in nearly every plan I've seen. I was just assuming you were talking about the "regular" cash out distributions. I shouldn't assume...

Right.

Well, the plan could set the cash out limit at $1,000, thereby eliminating the mandatory rollover problem. However, if the plan DOES have a cash out limit in excess of $1,000, then the amounts in excess of $1,000 are subject to the mandatory IRA rollover rules. So to answer your question, no. (if the amount is less than $1,000, then yes, it could be distributed in cash)

Is there an election of some sort? For what?

We are going to have a similar situation soon. Employer was an S-corp - just recently changed to an LLC taxed as an S-corp. Same business, employees, etc., but a new employer name and EIN. Anyone heard anything more about this issue?

Would this possibly be considered an "experience gain" under 1.125-5(o)(1)? If so, it seems to provide that the employer can retain the money. However, I'd be a little surprised if the plan would be drafted this way (for participant contributions) even if it is permissible. Seems like it would more likely be returned to the participants on a "reasonable and uniform basis" as also provided for in that same section.

Ah, great point! And I don't know the answer. But that makes sense. I hadn't really considered that angle. This is, at this point anyway, a truly hypothetical situation, but because we are looking at a client with a lot of family relationships and ownership transfers (the details of which are almost completely unknown at this point) I wanted to be prepared for possible option attribution. Hopefully there will be no options and this will all be moot. Or as Tom would say (for those of you who have been following the humor column) MOOOOOOOOOOT. Thanks for your input.

The following true story is only marginally related, but your bovine stories here brought it to mind. Many years ago, we had a neighbor up the road who stopped by one day. (I should preface all this by saying that at one time, there was a theory that it was the "wrinkles" on the brain that were responsible for intelligence). This neighbor, who has since passed away, was what might be called a character. VERY bright man, but he talked like a true backwoods type who had never been off the mountain. Somehow, the subject of cows came up. He said, "There ain't NUTHIN as stupid as a cow. Brain as big as a washtub, and not a Gawd D*** wrinkle on it!" It occurs to me that if this theory were true, there are a whole lot of bowling balls running for election this year. What am I going to be thankful for this Thanksgiving? That the blasted elections are over!!!

I noticed that there is now LRM language for prototype SIMPLE-IRA's. I was under the impression (perhaps mistakenly) that prototype SIMPLE IRA's were not available previously. So is this entirely new, or were they available and I just didn't know it? https://www.irs.gov/pub/irs-tege/sira_lrm0916.pdf Actually, as I look at this, I think perhaps this is just language for the IRA's themselves - not for the actual SIMPLE Plan document?

Small plan (15-20 participants) with modest assets.

You have cowed me into submission.

Talk about being fed a line of bull!

All excellent points, and the input is much appreciated. I will say that in situations where the employees are not losing their jobs, in general if there's a good broker, I haven't seen too much run-off of assets - they just roll it over.

Thanks Lou. Have no idea yet what they "want" to do - just sort of considering possible options in advance. However, my best guess is that neither will want to assume any liabilities of existing plan - although if cheaper, maybe they will fight over who would get to do it!

What would you say is the "best" and "easiest" way to accomplish this: Corporation "A" with two owners is dissolving, possibly with some bad blood involved. They will each form new corporations. They will essentially each take half of the existing employees. Each wants a plan. 1. Would you just terminate the existing plan and establish a new plan for each employer? 2. Would you have one employer assume the assets and liabilities of the plan previously sponsored by corporation "A" and just have one of the new employers set up a new plan? 3. Other? I don't know that it ultimately makes a lot of difference, but somewhat cheaper administratively not to go the route of #1. However, I don't know if either employer would be willing to assume the assets and liabilities of the plan currently sponsored by "A" or not. Let's also assume no controlled group or affiliated service group will exist, so shouldn't be any "successor plan" problems, since new employers won't be the same or related employers.

Udderly ridiculous!

Ugh. Then I got nuttin...

Suppose you have corporation A, where the stock is 100% owned by Mr. Big. It manufactures fishhooks for vegetarians. Mr. Little, who is the Controller of Corporation A, owns 100% of the stock of Corporation B. It manufactures very large frozen drink glasses for TPA's. These are not in any way service organizations, (even though manufacturing very large frozen drink glasses for TPA's is a valuable service in my book) or related in any manner whatsoever, so there is no ASG issue. Mr. Little has an option to buy 100% of the stock of Corporation A, if the stock price reaches $100.00 per share. Currently it is at $10.00 per share. Due to option attribution, Mr. Little is considered as owning 100% of both corporations, so there is a controlled group. (discussion of what really constitutes an "option" is scarce, but there are a couple of old Revenue Rulings - 89-64 and 68-801) So, finally, here's my question - just looking for opinions. If Mr. Little applies for a Private Letter Ruling, arguing that the ability to ever exercise the "option" is vanishingly small for the foreseeable future, and that he otherwise has no control, so that this ownership situation should NOT be considered a controlled group, do you have any guess or opinion on the likelihood of the success of that argument? My guess, and obviously it is a guess only, is that it would be unsuccessful. Just trying to think outside the box. Thoughts?

Looking first at a possibly simple solution, if they don't really care if the one union employee defers. They could exclude union employees from receiving any employer match. This, in and of itself, wouldn't keep the employee from eligibility for deferrals, but might possibly be a practical short term solution? (odds are good that the union employee won't defer regardless)

I seem to recall that if the funds representing the RMD were rolled over to an IRA, the distributing plan is treated as having made an RMD. (see 1.401(a)(9)-7, Q&A-1) However, this RMD amount is not an eligible rollover distribution, so the IRA will have an invalid rollover amount. I'm not, off the top of my head, certain about the mechanics, but presumably the distributing plan should then report two separate amounts - one as the proper rollover amount, and the other as a taxable distribution. But you'd want to confirm that.

A client is being told that a 404© disclosure must be distributed annually. I don't think this is technically correct. I hasten to say that I can see how procedurally, this might be done routinely, since the 404a-5 disclosures go out routinely anyway, and QDIA disclosures go out anyway, so it may just be easier to throw every disclosure into one document or package. But I don't think the 404© disclosure itself, separate from the otherwise required items, is an annual REQUIREMENT. Am I missing something?

Gracias. Of course, I was hoping for earlier, but I'll take what I can get!

What I've generally heard is that for "regular" plans, about 5%. For specialty plans such as ESOP's, it is higher, but some of the ESOP experts here can doubtless give you a better figure. Could be an IRS audit, or a DOL audit.