Belgarath

Specifically, does anyone know if the 3% non-elective safe harbor is not made, due to bankruptcy, must the plan do ADP testing, which will certainly fail? I'm guessing that you must, absent something in writing from the bankruptcy trustee/court saying otherwise?

Yes. At least in general. I guess I'm not prepared to say that ANY tax exempt employer may sponsor a qualified plan, because I'm not sure about that.

You're welcome. Now if you can just send me a tankard of strong brown ale and a few Marag women...

P.S. - this writeup is from Taxanalysts The first tranche of guidance related to in-plan rollovers to Roth IRAs may be released as early as the week of November 22, an IRS official said November 18. The Small Business Jobs Act of 2010 (P.L. 111-240) made in-plan rollovers to Roth IRAs available to employees months ago, but the government has yet to release any guidance on numerous issues that have troubled employers. Andrew Zuckerman, director of rulings and agreements for employee plans in the IRS Tax-Exempt and Government Entities Division, said informal guidance should be available within days to help with reporting and withholding issues and that a notice with further details should follow shortly afterward. (For prior coverage, see Doc 2010-24134 or 2010 TNT 217-4 .) "We are well aware that you guys need this guidance, and it is pretty far along in the development stage," Zuckerman told practitioners at the Southwest Benefits Association's Employee Benefits Conference in Dallas. According to Zuckerman, other current guidance projects include an update to the Employee Plans Compliance Resolution System for section 403(b) plans; a revenue procedure for preapproved section 403(b) plans; an update to Rev. Proc. 2005-16, 2005-1 C.B. 674, for master and prototype and volume submitter plans; a revenue procedure to reopen the preapproved plan program for IRAs; a revenue ruling on group trusts; and finalization of regs on suspension of qualified nonelective contributions for safe harbor section 401(k) plans. (For prior coverage, see Doc 2010-18807 or 2010 TNT 164-4 . For the employee plans unit's workplan for 2011, see Doc 2010-23684 or 2010 TNT 213-21 .) Projects under consideration include a master and prototype and volume submitter program for section 414(x) combined defined contribution and defined benefit plans, a preapproved plan program for cash balance hybrid defined benefit plans, and a preapproved program for employee stock ownership plans, Zuckerman said.

According to the IRS, "very soon."

I'd ask the DOL agent to: (a) put it in writing, and (b) provide citations to support the position Then I'd ignore the DOL agent anyway.

I agree that RMD's must continue. I don't see any "dispensation" to the contrary. And the penalty tax is so draconian that being aggressive here seems like a poor choice.

I really don't know much about this, and wondered whether others had some experience. Typically, when a plan sponsor goes bankrupt, they terminate services with us, and our involvement thereafter is minimal. But let's say, for example, that a 401(k) plan sponsor goes bankrupt - Chapter 11. Let's further assume that it is a 3% nonelective safe harbor. What happens if the bankruptcy Trustee says, say for the 2009 plan year, that the 3% won't be made? I guess what I'm trying to ask is does bankruptcy override the normal plan provisions? If you file for a plan termination for 2010, would the plan termination likely be approved on its status completely disregarding the requirements for a 3% contribution? What happens if it is a safe harbor matching plan, and the match isn't made - do you have to then do ADP testing? It seems logical that the plan would not be disqualified if the reason for certain failures is that there is a court approved bankruptcy. But is that how it really works? Etc., etc... and thanks in advance for any insights.

Thank you. In this case, no. As you might guess, these groups were "creatively" named for a very specific census. Do you see any other problems?

PS plan with the following proposed groups. Do you see any issues with this? Let's asume that based upon the particular census involved, it wouldn't result in any potential ADEA violations. It seems to me that this is ok. Group 1 - All employees not defined in another group Group 2 - Highly compensated employees who own less than 3 % Group 3 - Highly compensated employees who own 3 - 16.5 % and Key employees who will have 30 or more years of participation from date of entry to normal retirement date. Group 4 - Highly compensated Key employees who will have less than 30 years of participation from date of entry to normal retirement date.

I agree with Masteff. In general, going from memory of the last time when I had to look into this, the participant should be able to apply for an ITIN on a form W-7. And then I believe the withholding will be at 30%, absent some special arrangements based upon the tax treaty between the U.S. and Mexico. Personally, I'd just withhold at 30%. I think IRS Publication 515 may be of use, and if you actually do get into the tax treaty aspect, Pub. 901.

I apologize to all for the incorrect reference - typing with all these thumbs isn't easy. I meant 3(a) rather than 3(d). So the question really should have been more focused - is a 1-person money purchase plan subject to QJSA? And it seems clear that it is. Thanks for your comments.

A little discussion going on here internally - I'm taking a poll. Do you believe that QJSA requirements apply to a 1 person plan not otherwise subject to Title I of ERISA? Specifically, see Treasury regulation 1.401(a)-20, Q&A 3(d). Thanks.

I'd like to add my voice to the chorus as well. Best wishes.

Could you make it a money purchase plan for year one, with a beginning of year plan anniversary date, waiving eligibility for anyone employed on the first day of the plan year? Then amend to a PS for year 2? The waiver of eligibility for people employed on first day of plan year was, I know, permitted in IRS GUST prototypes. At least it was in ours. I don't know if they still allow it in EGTRRA prototypes, because I haven't seen a money purchase EGTRRA prototype. I think many (maybe most) providers no longer sponsor them. We don't. Perhaps worth a look, anyway.

"Where'd you get the deadline for filing sponsor's tax return plus extension idea. I've never heard of that." From Revenue Procedure 2007-44, section 2, .03. I'll have to look up the reference you cited. I'm not familiar with that. So does this mean that for a Cycle E filer who adopted a new plan in 2010 and has a tax filing extension to 9/15/2011, and who under the Rev. Proc. reference I provided would therefore have until 9/15/2011, that they really have until 1/31/2012? Then they go back "on cycle" for future filings? Maybe it's just me, but I really do think this whole subject is excessively complicated. Thanks. P.S. I had a hard time finding it, but finally did. Now I'll read it. thanks for the reference.

No takers? How about this - new IDP, effective calendar year 2010, EIN ending in 0 so is a cycle E filer. Am I correct that the client has until the later of the Cycle E (which ends 1/31/2011) or the tax filing deadline plus extensions? Or is there an even longer deadline?

I don't see this as a "significant detriment" assuming the fees are otherwise "reasonable." The DOL actually provides more flexibility on this issue, I think, than the IRS does. But for anyone who wnats to look at the IRS Revenue Ruling, here it is. Pension Rulings and Other Documents,Rev. Rul. 2004-10, I.R.B. 2004-7, February 17, 2004.,Internal Revenue Service, (Feb. 17, 2004) Defined contribution plans: Allocation of administrative expenses: Employee Benefits Security Administration (EBSA): Consent to distributions.– The IRS has stated that defined contribution plans that charge former employees' accounts a pro rata share of the plan's reasonable administrative expenses without charging those expenses to current employees' accounts do not create a significant detriment and do not fail to satisfy the Reg. §411(a)(11) provisions setting forth restrictions on mandatory distributions. EBSA previously issued guidance on the allocation of administrative expenses among defined contribution plan participants (see ¶19,980E). Back references: ¶1543 and ¶4485. Part I Section 411.—Minimum Vesting Standards 26 CFR 1.411(a)-11: Restriction and valuation of distributions. Rev. Rul. 2004-10 ISSUE Does a defined contribution plan under which the accounts of former employees are charged a pro rata share of the plan's reasonable administrative expenses, but the accounts of current employees are not charged those expenses, fail to satisfy the requirements of §411(a)(11) of the Internal Revenue Code? FACTS Employer X maintains Plan A, a qualified defined contribution plan. Plan A provides that a participant who terminates employment will receive payment of his or her vested account balance under the plan commencing at normal retirement age or, if later, at termination of employment (subject to §401(a)(9), in the case of a 5 percent owner). The plan permits a participant who terminates employment prior to normal retirement age to elect at any time after termination of employment to receive an immediate distribution of the vested account balance. Plan A provides that certain administrative expenses, e.g., investment management fees, are to be allocated to the individual accounts of participants and beneficiaries based upon the ratio of each account balance to the total account balances of all participants and beneficiaries. Plan A further provides that the share of these expenses allocable to each participant's and beneficiary's account will be paid from the plan and charged against the account to the extent not paid by the employer. Employer X pays the portion of these expenses allocable to the accounts of current employees, but not those of former employees or their beneficiaries. All of the administrative expenses are proper plan expenses, within the meaning of the Employee Retirement Income Security Act of 1974 (ERISA), and are reasonable with respect to the services to which they relate. LAW AND ANALYSIS Section 411(a)(11)(A) sets forth requirements that must be satisfied with respect to certain distributions in order for a plan to be qualified under §401(a). Under §411(a)(11), if the present value of a participant's nonforfeitable benefit exceeds $5,000, a plan meets the requirements of §411(a)(11) only if the plan provides that the benefit may not be immediately distributable without the consent of the participant. Section 1.411(a)-11©(2)(i) of the Income Tax Regulations provides that consent to a distribution is not valid if, under the plan, a significant detriment is imposed on any participant who does not consent to the distribution. That regulation further provides that whether or not a significant detriment is imposed is determined by the Commissioner by examining the particular facts and circumstances. An allocation of administrative expenses of a defined contribution plan to the individual account of a participant who does not consent to a distribution is not a significant detriment within the meaning of §1.411(a)-11©(2)(i) if that allocation is reasonable and otherwise satisfies the requirements of Title I of ERISA, such as a pro rata allocation. Such an allocation does not impose a detriment so significant as to be inconsistent with the deferral rights mandated by §411(a)(11) because analogous fees would be imposed in the marketplace, either implicitly or explicitly, for a comparable investment outside the plan (e.g., fees charged by an investment manager for an IRA investment). Accordingly, whether or not such expenses are charged to the accounts of current employees, charging such expenses on a pro rata basis to the accounts of former employees is not a significant detriment, within the meaning of §1.411(a)-11©(2)(i), that is imposed on a participant who does not consent to a distribution. On May 19, 2003, the Employee Benefits Security Administration (the EBSA) of the Department of Labor issued Field Assistance Bulletin (FAB) 2003-3 which sets forth guidelines on the allocation of administrative expenses among plan participants in a defined contribution plan. Assuming that the expenses at issue are both proper expenses of the defined contribution plan and reasonable expenses with respect to the services to which they relate, FAB 2003-3 states that, for purposes of Title I of ERISA, certain administrative expenses may be allocated on a pro rata basis and certain administrative expenses may properly be charged to an individual participant rather than allocated among all plan participants. However, not every method of allocating plan expenses is reasonable and a method that is not reasonable could result in a significant detriment. For example, allocating the expenses of active employees pro rata to all accounts, including the accounts of both active and former employees, while allocating the expenses of former employees only to their accounts would not be reasonable since former employees would be bearing more than an equitable portion of the plan's expenses. Accordingly, such an allocation of expenses could be a significant detriment. Taxpayers are also reminded that the allocation of plan expenses must comply with the nondiscrimination rules of §401(a)(4). The method of allocating plan expenses is a plan right or feature described under §1.401(a)(4)-4(e)(3)(i). For example, if, in anticipation of the divorce of a plan participant who is a highly compensated employee, the plan's method of allocating expenses is changed so that the expense of a determination of whether an order constitutes a qualified domestic relations order under §414(p) ceases to be allocated solely to the account of the participant for whom the expense is incurred, but instead is allocated pro rata to all accounts, the timing of such change may cause the plan to fail to satisfy the requirements of §1.401(a)(4)-1(b)(3) and (4) with respect to the nondiscriminatory availability of benefits, rights and features and with respect to the timing of plan amendments. HOLDING Plan A does not fail to satisfy the requirements of §411(a)(11) merely because it charges reasonable plan administrative expenses to the accounts of former employees and their beneficiaries on a pro rata basis, but does not charge the accounts of current employees. Plan A also would not fail to comply with the requirements of §411(a)(11) merely because it charged reasonable plan administrative expenses to the accounts of former employees and their beneficiaries, but not the accounts of current employees, on another reasonable basis that complies with the requirements of Title I of ERISA. DRAFTING INFORMATION The principal author of this revenue ruling is Michael Rubin of the Employee Plans, Tax Exempt and Government Entities Division. For further information regarding this revenue ruling, please contact Employee Plans' taxpayer assistance telephone service at 1-877-829-5500 (a toll-free number) between the hours of 8:00 a.m. and 6:30 p.m. Eastern Time, Monday through Friday (a toll free call). Mr. Rubin may be reached at (202) 283-9888 (not a toll-free call).

Now that is truly funny!

I think that it is likely a prohibited transaction. Morrissey v. Commissioner ruled, as I recall, that repayment of a loan from the plan with property is a PT. Whether this woulde apply to a plan not covered by Title 1 I can't say, nor do I have an opinion, offhand, as to whether a participant loan would be distinguished from another type of loan. Maybe one of the ERISa attorneys can chime in here.

Our clients generally won't do anything we tell them to anyway, so I'm sure they would die just to spite us.

I think that arguably it is optional, as under 414(v) the plan is not trreated as failing to satisfy the normal 408(p) requirements (which include the 3% match) due to a catch-up. However, as a practical matter, if you are using the IRS SIMPLE form, then as Rcline mentioned, there's nothing there that would appear to allow it to be optional.

Let us add one more in my series of giant raspberries for the IRS. THHHHHBBBBBBBTTTTTTTTTT!!!

This isn't humor, but I wanted to avoid wasting people's time on a regular topic forum. I know many of you here are, like me, elderly enough to remember the Rolling Stones. I just heard a rendition of "Sympathy for the Devil" done, get this, in full country and western mode. This included a woman "singing" (and I use that term VERY charitably) through her left nostril, full twang, Southern accent, scooping and sliding to hit the notes, "fiddlin" and all the rest of the horrific style that represents the worst of hard-core country music. It was so bad that it beggars description. Wrong on so many levels! Since I didn't hear the intro and it was played n a college radio station, I was wondering if it was merely professional satire, like Weird Al or something from Saturday Night Live. Anyone else had the misfortune of hearing this?

Ooh, I hate that word "automatically." I'm sure there are situations where it might not be beneficial? Keeping the money in the plan for asset protection against lawsuits? I haven't thought it through, but what if the surviving spouse is lots older? Etc? Perhaps a "rule of thumb," with caveats that there are situations where it may not be in the surviving spouse's best interests?