Belgarath

Ignoring the wisdom or folly of starting a DB plan for a start-up company... A question came up as to whether a new business - started up on 9/3/15, and has a 9/30/fiscal year end - can install a defined benefit plan, and participants accrue a full year's benefit for 2015? Is there a minimum hours/service requirement? Also, and I believe this is debatable, can the plan effective date predate the existence of the corporation? I've seen this done a lot in DC plans, to avoid short plan/limitation years, but I'm not sure if this is common in DB plans? I've not heard of the IRS challenging this in a DC plan - but I don't know what the actuaries of the world think about this on DB plans? (debatable in DC plans as well, but that's a different subject) Thanks.

Well, if you have someone who has already terminated, with more than 500 hours, then you have an issue...because they have already satisfied the requirements for an allocation based upon the current formula.

Seems to me there are two separate issues. The failure to do 1099 reporting is, as MoJo mentioned, irrelevant to the question of subsequent loan repayment. The deemed distribution occurred, and if a 1099 wasn't produced properly, then that is an error that needs to be corrected. Failure to report such a distribution is subject to all the appropriate penalties. Then the subsequent repayment to the plan is basis, and should be treated as such upon later distribution.

This is so unbelievable that I have to wonder if there isn't SOMETHING more to it than what you have stated - and I mean no disrespect to you. It is just hard to even imagine that any company sponsoring an ESOP, which almost always requires an attorney and TPA involvement, would do something so blatant.

Does the fact that 14A is for a general partner, and 14C is for an individual partner make the difference? For example, 14C means no deduction (I think) for unreimbursed partnership expenses? Just tossing out a random thought.

Well, no, I wouldn't go quite that far, depending upon your definition of "comfort." I would feel comfortable using a document provided by any of the major providers - with a good faith compliance effort like that, the client should be fine with retroactive adoption of an approved document (once available) to correct any defects as to form. Naturally, if they want an additional layer of comfort, they could see their friendly ERISA attorney. Basically, once the documents are approved, everyone will have a grace period to adopt retroactively and have reliance (for form, not operational compliance of course.) It's just that adopting a document now, even if ultimately approved unchanged in its final form (which seems unlikely, but possible) wouldn't give you that same reliance - in order to get it, you have to adopt retroactively AFTER the IRS issues the opinion/advisory letter. Plus, I rather expect that the IRS is going to have, at least, certain streamlined operational corrections available for what is likely to be an avalanche of corrections for common errors, once documents are approved and everyone gets up to speed. But that's just a guess.

No. See the following excerpt from Section 19.03 of Revenue Procedure 2015-36. (2) An adopting employer has no reliance if the employer’s adoption of the plan precedes the issuance of an opinion or advisory letter for the plan.

See link. The IRS had extended the deadline for providers to submit docs to April 15, 2015. Presumably they did this, unless it has been extended further - if it has, I don't know about it. Yes, you'd want to check with the providers to see, but I assume pretty much all of them that do 403(b) docs have in fact submitted already, unless there was a further extension. http://www.irs.gov/irb/2014-16_IRB/ar16.html

I believe the answer is currently "none." Everyone has their docs with the IRS now pending approval, which will come at a time still unknown. There are prototype "style" documents out there, however.

Random musings... Unusual drafting. All the pre-approved plans I have seen (or perhaps those that I've noticed) have a default which is generally the state (or commonwealth) of the principal office location of the employer, or corporate trustee, etc... - UNLESS specified otherwise in the adoption agreement/appendix/whatever. Are you sure there is no such default language in the body of the plan you are looking at? If not - if it is truly a fill-in-the-blank option and there is no default language, then as a non-lawyer, I would tend to agree with my 2 cents. I doubt that the IRS would disqualify a plan for failure to complete this option, but relying on their generosity might not be a good policy.

http://www.irs.gov/Retirement-Plans/Rollovers-of-After-Tax-Contributions-in-Retirement-Plans Excerpt below Can I roll over just the after-tax amounts in my retirement plan to a Roth IRA and leave the remainder in the plan? No, you can’t take a distribution of only the after-tax amounts and leave the rest in the plan. Any partial distribution from the plan must include some of the pretax amounts. Notice 2014-54 doesn’t change the requirement that each plan distribution must include a proportional share of the pretax and after-tax amounts in the account. To roll over all of your after-tax contributions to a Roth IRA, you could take a full distribution (all pretax and after-tax amounts), and directly roll over: • pretax amounts to a traditional IRA or another eligible retirement plan, and • after-tax amounts to a Roth IRA.

Yes. Anything $200 or more. See 31.3405©-1.

No sanctions that I'm aware of. Yes, VCP fee for SIMPLE IRA in this situation would be $250. I'd make sure, before you file, that everything else was done properly - proper eligibility, match dollars, etc., etc., because if there are any other errors, you can correct them in the same submission. After you do your checking, if by some chance you find you have Excess Employer Contributions, and you propose to retain them in the plan, then the VCP fee is increased.

If future premiums are paid from funds other than the rollover account, then there might perhaps be an issue? Mike, what do you think?

If you have a CG/ASG, then all employees of both companies would have to be considered for purposes of coverage, nondiscrimination, etc. - and with only one NHC, obviously they would have to participate in order to pass. MB - assuming for the moment this is NOT a CG/ASG situation, how is this a problem with nondiscrimination/ADEA etc.? Just a corporation setting up a 401(k) plan that doesn't provide for any PS contributions. Does ADEA have rules which create a related group (for ADEA) even if not a CG/ASG under the IRC? I know very little about ADEA...

On the surface, this doesn't appear to be a controlled group, as A & B don't own MORE than 50% of Company 2, assuming no attributed ownership. Are they an affiliated service group? If they are neither a controlled group nor an affiliated service group, then they should be able to have two separate plans. These situations usually turn out to be either a CG or an ASG - sometimes with "hidden" attribution such as stock options, or additional ownership due to voting vs. nonvoting stock, or family members, or something, but not necessarily. I always recommend that the client seek the advice of ERISA counsel when determining if a CG/ASG exists.

What you have is an Operational Failure (Plan was not operated according to its terms). This can be corrected by amendment, under VCP, as per Section 4.05. You'll obviously have to consider other appropriate sections of the Revenue Procedure as applicable, for example, Section 6.05.

IRS Revenue Procedure 2013-12 - VCP program.

I think the answer is that the plan must permit Roth deferrals. But, even if you believe otherwise, the question may be moot if you are using a pre-approved document that limits the availability of such a rollover to a plan that permits Roth deferrals.

Sounds like you worked for the cable company...

High blood pressure is one of the most prevalent health problems in America. However, I have determined that the main cause of this epidemic is NOT, in fact, due to obesity, sodium, etc. No, the real problem is that when you have an appointment at the doctor’s office at a given time, you are invariably ushered in late. This, in and of itself, is annoying but not unduly so. Where it gets bad is that you are then ushered into an examination room, so you think, “Aha, finally getting somewhere.” Instead, you then wait for anywhere from 45 minutes to 6 months before the doctor actually comes in for your SCHEDULED appointment. At this point, you are so mad that your blood pressure is likely to show that a stroke is imminent. So, the cure is simple, and will save Medicare billions. Instead of medication, just make sure the damned physicians get you in on time!

"If 2% was a legitimate rate, 1% is not, so you can't amend to legitimize 1%. If 1% is a legitmate rarte, then 2% is not and the loan terms are bad." I don't necessarily agree with this. It is not uncommon for local commercial lending institutions to have different rates. So the fact that you initially select a given rate does not necessarily mean every other rate is invalid. But maybe I'm misinterpreting what you are saying. I offer no opinion as to the allowable "fixes" because I haven't recently reviewed the Revenue Procedure regarding this specific question.

Thanks Kevin. This could be difficult for one of those big MEP's with hundreds of employers who sign on with cookie cutter plans if the sponsoring organization decides to terminate the entire arrangement... As I said, I haven't done any research, and don't have a "real life" situation - just one of those discussions that came up in a "what if" context.

Carol - if you take a look at 1.403(b)-4©(3)(ii)(A)(1), it refers to a qualified organization as (1) an educational organization described in Section 170(b)(1)(A)(ii)... 170(b)(1)(A)(ii) does not limit it to public schools. So at least IMHO, a private school should generally qualify.

No income, not in test, IMHO.