Belgarath

Gracias. I think I'll try to digest this tomorrow morning when I'm fresh.

P.S. - is your Corbel document you are looking at a volume submitter or a prototype?

I'm not sure either. But Q&A-8 refers specifically to health FSA's that are not offered through a Section 125 plan, so I assumed that they are possible. But since I'm concerned only with the FSA's through a 125 plan, I guess I'll ignore that for now. Masteff, so this means that it is theoretically possible for a $5,000 BENEFIT amount, right? ($2,500 deferral x 2) - I think I was confusing benefit limitations and deferral limitations. But the SALARY DEFERRAL can't exceed $2,500 - right? Or have I got that wrong too? Assuming I've got that right (a risky assumption at best) is there technically no employer contribution limit? Granted that if this is so, why would any employer contribute more than could be paid out in benefits...

Thanks - so the $2,500 plus 500 is only for the FSA's NOT offered through a 125 plan? Maybe it's just me, but it seems like this Notice was poorly done. But to be fair, I can't imagine being in the shoes of the poor saps at IRS who had to draft this stuff, with all the confusion swirling around the law...

I'm with Kevin on this. I don't interpret any of this as saying that IF your document requires that keys receive a TH minimum, that elective deferrals by keys count toward the required employer contribution for those keys.

I'm frankly a little confused on this. Per IRS Notice 2013-54, it appears to be the $2,500 salary reduction cap plus 500 (for the rollover, I presume.) My question is: does this limit include employer contributions or not? And if not, then is there any limit on employer contributions and or benefit payouts?

Do you mean the 0.9% additional tax? If so, then the answer is no. This is paid at the "employee" level, and doesn't affect the 164(f) deduction. So it doesn't enter into the earned income reduction calculation.

Try this. https://www.charitableplanning.com/document/668526 Also, in 2010 the IRS Employee Plans Newsletter dealt with this issue directly, that might be even more helpful to your client. http://www.irs.gov/pub/irs-pdf/p4278.pdf

The "tax" year for 1099 purposes would be 2014. No way to tell from the information if this RMD is for the "distribution calendar year" 2013, or "distribution calendar year" 2014. For 1099 purposes it is immaterial, but for the actual RMD calculation it makes a difference. Odds are good that this is for the 2013 "distribution calendar year" and that a second RMD, for "distribution calendar year" 2014 will need to be taken by 12/31/14.

I wondered about that myself. That's certainly a "reasonable" argument by most standards - I just can't help being apprehensive, since the IRS clearly delineated in 1.401(m)-1(a)(1)(ii) the fact that nondiscrimination testing for BRF's is in ADDITION to the ACP testing. It seems like if you could use ACP results to justify BRF, then BRF wouldn't be necessary at all? I may just be getting paranoid in my old age. I like your idea a lot better. Maybe I just need to visit the Wizard of Oz to see if he can give me courage.

I admit I find this subject a little murky. I understand that it isn't safe harbor, so is subject to ACP testing. Let's assume you pass that. Where I find it confusing is how you satisfy the 401(a)(4) testing for BRF. I have no problem with current availability. It is available to anyone who is willing to defer that amount. How do you test "effective" availability, which is facts and circumstances? At what deferral level is it no longer "effectively" available? I suspect most of us would generally agree that you'd probably be ok if the discretionary match was 0% on the first 1% of deferrals, and 100% on deferrals of 2-3%. I also suspect that most of us would generally agree that 0% match on the first 15%, and 100% above 15%, would not satisfy effective availability. So you are left with something in between. This is one of the reasons I heartily dislike increasing tiered match formulas. Suppose instead we look at a little more moderate example: plan is safe harbor nonelective 3%. Employer wants to make a discretionary tiered match that "sort of" takes into account the 3%, so wants a match formula of 0% for the first 3% deferred, and 50% of the next 2%. Would that pass BRF testing? Again, how would you "prove" or justify it?

Austin - I'm not so sure about that, although really I guess the ERISA lawyers could provide a solid answer. But it seems to me that I keep reading accounts of the DOL suing fiduciaries for various breaches, although perhaps most of those are criminal, which I presume the fiduciary liability policy wouldn't cover.

I don't think "fiduciary liability insurance" pays the plan, nor does it provide the plan benefits. That's what the ERISA fiduciary bond is for (although I never understood why only 10% coverage required - that leaves room for mighty big losses that may not be recoverable!) Fiduciary liability insurance only covers the fiduciary? Although maybe I'm misunderstanding what is being said - perhaps you mean if the fiduciary is personally sued, and doesn't have sufficient assets to pay the plaintiff(s) for the breach, that the plaintiff(s) can recover from any payment to the fiduciary under the policy? Or maybe I just need to go home and have a glass of wine, and hopefully gather my wits by Monday.

I think it clearly does not apply in the following situation, but I thought I'd solicit opinions in case I'm being overly conservative. LLC A is owned by 3 people - 1/3 each. LLC B is formed, owned 100% by LLC A. So there's a controlled group, or common control group depending upon tax structure. Doesn't matter for purposes of this question. I believe the transition period does not apply - it isn't any sort of a merger or acquisition under either the code or regs. as far as I'm concerned. Any other thoughts?

Seems to me that it might be feasible, if he is legitimately dual status. See 1.410(b)-6(d)(2)(i) However, this is a potentially tricky situation, and I'd recommend getting blessing from ERISA counsel before proceeding with such a plan.

If an employer already has a EACA, at 3%, but wants to change it to 4%, is there any problem doing this mid-year with appropriate notice? I know you can't "implement" a EACA mid-year unless it is just for newly eligible employees. Would modifying the EACA percentage mid-year be considered as establishing a new EACA, impermissibly? I think it is ok, but wondered if anyone has other thoughts?

I think there's perhaps a distinction between a 457(b) for a governmental plan and a 457(b) for a tax-exempt. For a tax-exempt, under 1.457-7©, amounts are generally included in gross income when paid or made available. Under ©(2) there are provisions for two (2) additional deferral elections, to a "fixed or determinable future time." But once elected, the payment date may not be ACCELERATED. This makes sense - if acceleration were allowed, then the funds are essentially "made available" and thus taxable, which would negate the deferral election. This brings up a question as to the practical effects of a mistake. Suppose terminated employee makes a valid deferral to, say, 2018. Then requests the money in 2013, and the plan representative and the fund company mistakenly approve it and pay it out. What are the "real life" consequences? Obviously it would be taxable. Does it "disqualify" the plan retroactively so that previously deferred amounts become taxable retroactively, including interest and penalties? It seems that just saying it is currently taxable provides no disincentive for ignoring the rules. Thoughts?

As an aside, I'm making an assumption that in general, most people who are subject to RMD will have been there 5 years and it will be a qualified distribution, so no taxation at all if it can be taken solely from the Roth "bucket." I'm just not sure if that is allowed for tax treatment purposes, or if such a RMD is required to be "allocated" for tax purposes as a return of basis and taxable amounts in the plan.

Yeah, in other words, if you have 10,000 in Roth and 10,000 in pre-tax, and you take a RMD of 1,000, then 500 is considered Roth (basis) and 500 taxable from pre-tax. But again, I'm not sure at all on this, and haven't looked it up.

Something is bothering me about this. I have a faint memory, and I don't have time to look it up now, that any such "partial distribution" from the plan would require a proportionate allocation to Roth and non-Roth for income tax purposes. But I may be dead wrong on that. You might want to double-check this.

Thank you. I did envision a scenario where someone applying for a Government Accounting Office job had to take a mathematics exam. The sole question was this: You have a 9-inch diameter pie. What is the area, in square inches, of the pie? Show your work. Candidate's worksheet: The accepted formula is Pi(rsquared). But pie aren't square, pie are round. So we must first get the circumference of the pie, which is Pi(D), which is 3.14 x 9 which equals 28.26 inches. Then we multiply that times 3.14, which equals 88.74 square inches. Result? Pass!

I agree with Bird. Without following through every cross-reference, you can start at 1.415©(2)(b)(2), which is going to refer you to 401©(1) and 401©(2). And that is going to get you eventually to "earned income." I didn't run down all the cross-references in 401©...going from memory, it isn't necessary for purposes of your question, but you may want to check them all just to make sure.

Active grandmother with original teeth seeking a dedicated flosser to share rare steaks, corn on the cob and caramel candy.

One other question that popped up - any thoughts about what the 10% for 10 YOP might do if plan is terminated after 10 years? I'm guessing that this wouldn't ordinarily be a problem? If not enough assets, a dump-in would be required, or he would have to "forego" some benefit. If too much in assets, could establish a replacement plan and allocate over 7 years if he's still working. Any thoughts on a particular downside (or upside)? Thanks!

Assuming that as you said, they were subject to FICA/FUTA when deferred, then upon distribution, the gain is not taxed. See IRC 3121(v)(2)(B) and IRC 3306®(2)(B).