Belgarath

Hi Shot - thanks for the response. Your post is right on up to the part where you say that the $250,000 is used as a payment to the seller as part of the transaction. It isn't. Hence my puzzlement as to why someone might want to do this. So the question remains, is it acceptable to use the initial stock valuation done, in your example, on April 22, 2014, and in June, or July (or whenever they decide to use the $250,000 to prepay part of the loan and release shares to the participants' accounts) as the basis for the share release? Or, must they do a new appraisal? It seems to me that they can use the April valuation. Thanks again!

What about 54.4975-11(d)(5)? (I tried every way I could think of to paste in either the text or a link - won't seem to work - never had this problem before!) As this isn't a "put" option situation, it would appear that the most recent annual appraisal would be sufficient? Thoughts?

I'll add to the list of laudatory comments. This site is, hands down, the best of its type on the internet. Congratulations, and keep up the good work. And a thank you to all the posters out there - I learn more from this board than from most of the continuing education that is required - these "real life" situations force me to, as Tom says, use the thing between my ears (Tom, I prefer the term atrophied to rusting.)

A couple of issues here (at least). First, you have to count service with any member of the controlled group. See DOL regulation 2530.210(d). (I should note that there is some debate as to whether Treasury regulation 1.411(a)-(b)(3)(iv)(B) arrives at a different conclusion, that you only have to count service from the time they become related employers. I don't happen to agree) Then, you have the IRC 410(b)(6)© "grace period" during which you wouldn't necessarily have to cover the employees of the acquired group anyway. This will get you started in the right direction. There are some facts and circumstances that will have to be looked at.

Andy - ignoring Texas for the moment - my non-lawyer gut reaction is that just adding "legally" is probably a good idea. The determination of what constitutes "legally" married is then based on a state by state determination. It just seems to me that this might help avoid problems such as a "marriage" performed in a state that doesn't legally recognize them even though they now live in a state that recognizes same-sex marriages (so they think they are married), or civil unions where people think they are legally married but are not, etc., etc... My common sense feeling is that "married" ought to be sufficient, but my paranoid mode leads me to adding the modifier. FWIW...

Ok - but since the loan is in 2014, and there was an appraisal for the loan that pegged the stock price, any reason that value couldn't be used?

Ok, thank you very much.

Thanks - as I said, I wasn't sure if I was asking it right, and I wasn't. So the plan is effective 1/1/2013. The company doesn't become 100% ESOP owned until 2014 - loan is first effective in 2014, with first annual payment to be made on 12/31/2014. The employer just makes a "regular" PS contribution to the plan - participants' cash accounts - for 2013. Can this money then be used to purchase stock out of the ESOP account in, (pick a month) June of 2014? Are there any downsides to this that you see? Is there any particular reason that you know of that this would be beneficial? Any reasons the lender might object? Etc...? I'm just not sure why in particular someone might want to do this, other than anticipated stock price changes - maybe getting more shares released early in anticipation of a big increase? Or something like that, maybe? Thanks!

Not sure if I'll even ask this right, but here goes. Aside from "what does the plan say" I'm more interested in legal/regulatory requirements that might prohibit this, or practical considerations. Suppose you have a new ESOP. S-corp, leveraged ESOP, 100% of stock. Plan is effective for 2013. Loan doesn't take effect until 2014, with a 10-yer repayment schedule, at the end of each year. Shares will be released as usual, etc., for the second and subsequent plan years as the loan payments are made. (2014 onward) The first year contribution is cash, and is allocated as such. What happens if they want to, say in June of 2014, take the cash that was contributed and allocated to participants for 2013, and purchase stock with it? Or perhaps to make it simpler - can the Plan Trustees/Administrator/Fiduciaries, at any time, purchase stock with the cash in the plan (assuming not messing with diversification rights or anything like that?) I'm perhaps making this more difficult than it is, but maybe I'm missing something critical?

Are you still within the original 5-year period?

Just wondered if anyone has had problems in future years after suspending filing, using a code 4R, when the participant count drops below 100? Is the DOL system sufficiently advanced so that this causes no problems, or does it generate one of those stupid "where are your forms for 2011" letters at some future date? If it generates those damned letters, it may be easier just to file!

Wow, that's unfortunate. Seems like poor drafting to me. I believe someone on these boards (maybe Qdrophile?) has a technical term for it. As Lou mentioned, you should be able to do an 11g amendment.

I haven't seen a pre-approved EGTRRA document that doesn't have appropriate Gateway override/failsafe/whatever you want to call it language. I rather expect it is there if you check carefully, but of course I don't know...

And FWIW, here's a link to the IRS LRM language for SEP's. Nothing I saw would indicate anything to allow such a provision. http://www.irs.gov/pub/irs-tege/sep_lrm.pdf

I agree that no way, no how, with an IRS Model SEP. Playing Devil's Advocate for a moment - is it possible that this is a prototype SEP, rather than an IRS model SEP? That leads to the second question - would the IRS even approve a prototype SEP with the provision you describe? I do not know the answer to that. But, I would definitely ask the CPA to show (if there is a prototype) the prototype language that would allow this.

Just a repeat, but it is April 16th... to the tune of the Beatles' "Yesterday" Yesterday... Income tax was due, I had to pay... All the funds I tried to hide away... I don't believe, I'll eat 'till May. Suddenly... I'm not sure that I am fiscally... Ready for responsibility... Oh yesterday, came suddenly. Why, I Owed so much, I don't know, I couldn't say May be Forms were wrong, how I long, for yesterday. Yesterday... Seemed like prison time was on its way... Now I need a place to hide away... While keeping IRS at bay. Why, I Owed so much, I don't know, I couldn't say May be Forms were wrong, how I long, for yesterday. Yesterday... Taxes due, I filed come what may... Losing all deductions that's my way... Of giving IRS my pay. mm - mm - mm - mm - mm - mm - mm.

There are a lot of prior threads on this type of question, and you'll get differing opinions. If you take your approach, you can't get in trouble - it is safe and unassailable by the IRS. A lot of people would allow this amendment. I'd probably discuss it with the client first, and see how important it is to them to do it now as opposed to next year, and whether it is worth any risk to them. If by some chance it ever went sour, you can bet they will blame you! The IRS is frequently pretty reasonable on plan issues, but they are just flat-out ridiculous on this one. I can't help thinking that someone there stands to lose face if they change their stance, and doesn't want to - I can't think of any other reason for their recalcitrance on this whole mess.

If you want a citation, see 1.403(b)-5(b)(3)(i). I don't have any experience actually using this - seems like it could be a pain ignoring the CG for this purpose yet having to pass nondiscrimination on an overall basis. But I suppose if you had deferral only plan, or maybe in the right census situation, it could be useful. Hopefully I'll never have to deal with it!

Thanks Bill. Would I be correct in assuming that you must have a "wrap" plan document to file as one plan?

Haven't seen this one, although it perhaps isn't all that rare. And I have no other details other than the following. Employer merged with another business at some time in the past. The other business had a plan that allowed participant loans, and those loans were transferred to plan of new employer. To make a long story short, the participant loans were originally set up for weekly withholding, and the new employer had bi-weekly payroll, but continued to withhold, on a bi-weekly basis, the original weekly amount. So under-withheld by 50%. So, even though the loan was correctly set up, withholding was incorrect. It is now WELL past the original 5-year limit - by a year and a half, and there is still an outstanding balance. Since they are beyond the original 5-year maximum period, under Revenue Procedure 2013-12, Section 6.07(2)(a), it appears that this can't be "fixed" - even under VCP. It is just a deemed distribution, no correction available. Is there any other solution that I'm missing? I know that the listed corrections in the Revenue Procedure are not the EXCLUSIVE corrections, and I wondered if anyone had submitted under VCP to attempt to correct such a situation anyway. As a practical matter, since the loan was mostly paid off and the deemed distribution would be small, I suspect the employer would just make the participant "whole" outside the plan, because the cost of VCP filing and correction would exceed the cost to make the participant whole.

I think I've answered my own question. After looking into this in more depth, it appears clear to me that the cafeteria plan would not count the people in question as "participants" - in fact, the cafeteria plan itself apparently isn't subject to the 5500 filing requirements, but all the underlying "plans" are subject to 5500 filing requirements, absent a valid exception. Does that sound right?

Stupid question, but I'm not all that familiar with these plans. Let's suppose that you have a cafeteria plan, that allows salary deferrals for vision and for dental expenses. Not a "wrap" document. The plan also provides for automatic withholding of health insurance premiums, UNLESS you elect out of it. My question is this: for those people who do NOT elect out of the health insurance premium being withheld from their pay via the cafeteria plan, (and don't participate in withholding for the dental or vision) are they counted as "participants" in the cafeteria plan? They are already reported as participants in the health plan 5500, so it would seem to be "double counting" to also count them in the cafeteria plan 5500? I'm not certain the regs actually support this, but by the same token, it seems reasonable. Any opinions? It's a big deal, because if they don't have to be counted, a lot of cafeteria plans will be below the 100 participant count and won't require filing. Thanks!!

Thanks. I think one of my additional sources of confusion is HEALTH FSA's vs., say, a DEPENDENT CARE FSA. Different rules and limits, I believe. Hooyah! More fun. Starting from scratch on cafeteria plans, etc. gives me a little more appreciation on how challenging it must be for someone starting out in qualified plans, when they have no background with them. It takes a while to even build up a proper frame of reference, so that you can match up the right questions with the right answers, rather than matching up the right answers with the WRONG questions...

Yes, it's certainly made me rethink some of my previous assumptions. Of course, none of our plans provide TH to Keys anyway, but it's useful to consider this if I run into it in an outside document anyway.

I'll be interested to see what Corbel says. FWIW, I took a look at one of their prototypes, and the language is not the same as what you have, so I'm assuming you have a VS. I'll be interested to see if their answer to you differentiates the treatment for a VS and a prototype.