Belgarath

Thank you both. And this loan WAS initiated as a home loan.

Just encountered a similar situation on a takeover plan. Plan limits principal residence loans to 10 years, but granted a loan for 15 years (to a Highly Compensated Employee, naturally, although I don't believe there was any intentional hanky panky). Since the loan itself does not violate any of the 72(p) restrictions, seems to me that perhaps it can be considered an operational error, and corrected under SCP by reamortizing to pay it off within the 10 years allowed under the plan. I don't see why this should need to go through VCP if it otherwise can be considered "insignificant" in the larger context of the plan due to size, amount, only time it happened, etc... Thoughts?

Kind of a mess! I'm a big fan of DFVCP. First, it limits the penalty to a "reasonable" level. Otherwise, you are playing roulette. I'm not sanguine about the penalty being waived due to potential negligence on the part of the TPA. Without really knowing the facts and circumstances, conversations, agreements, e-mails, whatever, it is hard to say who "should" pay the penalty. The Plan Administrator (client) is liable for late filing penalties, but if there was a valid agreement/understanding with the TPA to handle and file the extension timely, there might be support for the TPA being liable. If I were a client, and felt that the TPA had mishandled, I'd certainly ask them to pay for the late filing penalties. If the TPA refuses, then the client can try legal action. Many States have Small Claims Courts that provide an option to file a claim for a nominal fee, and that can sometimes help in a situation where hiring legal counsel, or the hassle/time involved may be too expensive for what you get. Might be worth asking a lawyer, if it comes to it - perhaps some of the attorneys on this board will provide you with some thoughts, which will certainly be better informed than mine, as I'm not an attorney.

Gee, burst my bubble! I've been so busy this week I haven't even checked scores, so I guess I'm down to one out of two...

K2 - at this point, I'm hoping for a Royals/Pirates World Series, so good luck.

For those of you misguided individuals who are fans of other teams, I just want to say that in spite of the 2014 debacle, our enthusiasm and loyalty remain intact.

I suppose you could make it quite uncomplimentary when responding to someone who isn't a lawyer, by combining texting shorthand, and say, "UANAL."

Gosh Lou - that's an unfortunate acronym! But amusing...

FWIW - I'd lean towards allowing it.

I find it hard to believe that the IRS or DOL would assert prohibited transaction status if there's no stamp tax paid. Seems like quite a stretch.

ARRRRRRR, if I do that that, they will raise the Jolly Roger and keelhaul me. But thanks for the suggestion, matey. Draw yourself an extra ration of grog. Bosses are like Long John Silver's parrot - "They lives forever, mostly, and if anyone has seen more wickedness, it is the Devil himself."

Yeah, I think this is correct. Take a look at 1.401(a)(9)-7, Q&A-3. Since under the 5-year rule, the entire balance must be distributed by the end of the 5th year, as soon as you start the 5th year, that is a "distribution calendar year" - and since the entire benefit must be distributed by the end of that year, there is no amount that would be an eligible rollover distribution 'cause it is ALL RMD.

Appleby - I had the same problem a while ago. Try the toggle switch in the upper left hand corner - if you turn it on, you can paste, then you can turn it back off to mess with fonts, etc.

I'm really not sure. I'm assuming it is neither a EACA nor a QACA? If just a "regular" ACA, it seems like this might be possible - you'd certainly have to comply with reasonable notice requirements for the mid-year first escalation, at the very least. I think that it is an aggressive stance at best, and being of an essentially conservative nature on these things, I wouldn't recommend it to a client, and if the document is ambiguous rather than crystal clear, I'd again opt for conservatism. I'm really not as boring outside of work...

This has been driving us crazy. Wondered if anyone had an opinion. You have a plan with Husband and Wife only. Wife sets up a plan. Both Husband and Wife have separate 1-person businesses, (hers corporate, his S/E) but they don't quite meet the "spousal noninvolvement clause" so they are a controlled group. To pass 401(a)(26), you can't EXCLUDE the husband from the wife's plan. Plan compensation is high-3 of plan PARTICIPATION. Husband receives zero income from wife's business, and vice versa. First year of plan, husband doesn't do as well as anticipated, and has negative schedule C income, wife makes gazillions of dollars. One school of thought says you fail 401(a)(26) because husband doesn't accrue a benefit. But he doesn't accrue a benefit because he has zero compensation! I can see that the letter of the law would appear to say this fails, but it is such a ridiculous result that it is hard for me to accept. And how do you provide the benefit if he has zero compensation? Do you go ahead and an 11(g) amendment to provide a minimum benefit under the de minimis rules allowing up to $10,000, even though he had zero compensation? Or, do you consider some mathematical heresy such as he is accruing whatever benefit is provided under the plan, and is accruing 100% of zero, so this is ok? Has anyone ever encountered anything like this?

401(a)(9)© defines RBD. And since 416 defines ownership including the 318 attribution rules, as you have referenced, then the parents are 5% owners. So, they have to take RMD's even though they are still working. © Required beginning date.— For purposes of this paragraph— (i) In general.— The term “required beginning date” means April 1 of the calendar year following the later of— (I) the calendar year in which the employee attains age 701/2, or (II) the calendar year in which the employee retires. (ii) Exception.— Subclause (II) of clause (i) shall not apply— (I) except as provided in section 409 (d), in the case of an employee who is a 5-percent owner (as defined in section 416) with respect to the plan year ending in the calendar year in which the employee attains age 701/2, or (II) for purposes of section 408 (a)(6) or (b)(3).

Specifically, take a look at FAB's 2009-02 and 2010-01, and the regulation 2510.3-2(f).

Thanks Kevin.

Lots of documents have provisions that forfeitures will be used in the plan year following the year in which the forfeiture occurs. This seems particularly common in plans where forfeitures reduce. This seems eminently reasonable, as a forfeiture might not occur until late in the plan year, when matching contributions, for example, have already been funded. Back in 2010, the IRS published in Volume 7 of their employee plan news, a blurb about forfeitures, and basically stated that they must be used in the year they occur. In spite of this, I think they have no problem with a plan provision that requires use by the end of the FOLLOWING plan year if it reduces. I think their concern was basically forfeiture "suspense" accounts that weren't being used promptly, or were being used in a discretionary fashion. Anyway, some of the new pre-approved plans state that the forfeitures must be used by the end of the next year, but don't necessarily allow an option that they WILL be used in the next plan year. Do you really see any problems with a 403(b) document, which of course isn't pre-approved, (or approved at all, for that matter) having a provision stating that forfeitures will be used in the year following the year in which the forfeiture occurs? (And the forfeitures reduce matching contributions)

Suppose you have a non-governmental, tax-exempt 457(b) plan. No deferrals, just employer nonelective contributions only. Now, suppose the employer's contract with the employee states that a specified amount (X) will be contributed each year for the employee. There is no language in the plan itself that states this. No Rabbi trust is in effect. The employer never "funds" this - yes, I know, it is an "unfunded" plan anyway, and assets are general assets of the employer. The point being that the employer is now in financial difficulty, although not yet, at least, in formal bankruptcy, and a terminated participant wants his money, and there is no money. Am I correct in assuming that state law/employment/contract law would govern the remedies available to this participant? The plan provides, under claim procedures, that after jumping through the appropriate hoops, the participant may avail himself of the remedies under ERISA 502, but what does this really mean in practical terms? Does this participant have rights that supercede those of other creditors, until such time as they are in bankruptcy, or is that again based on state law? This is all a new one on me...

Austin - I can't quickly find the post I was referring to (but I KNOW I saw it somewhere...) but here's another brief on on the subject I did find.http://benefitslink.com/boards/index.php?/topic/45859-plan-characteristicsfeatures-line-8a-of-form-5500/?hl=line

I'm nearly certain that I saw another posting on these boards within the last several months that indicated the IRS or the DOL has been checking these, and made plans refile for prior years if incorrect codes were listed. Don't recall if it was incorrect codes, or omitted codes, but it stands to reason that if they make you refile for 1, they will make you refile for the other.

Did they do a "maybe not" notice? If so, why can't they do the SH up through the merger date (with proper advance 30 day notice, of course)? Just a thought.

I'm still waiting (and annoyed because it hasn't happened) for this to all be shifted over to the PBGC. One-stop repository/shopping, and an end to all this foolishness. When I'm elected dictator, there are going to be some changes!!!

Question - let's say you are talking about just a few dollars in interest. And suppose you take the informal approach discussed where you calculate the excise tax and allocate it to participants, and don't file a 5330. What is the potential downside for penalties? If the PT has been corrected, then is there just liability for the excise tax plus interest - in which case, if it comes up three years later on audit and there's another (pick a number - a few bucks) due, is that the end of it? Or are there additional "bad boy" penalties for willful violations or some such crapola? My point being if it is just the excise tax plus interest, doesn't seem like a big deal. But that seems too easy, so I'm sure there is a reason it can't be done!