Belgarath

I agree that if zero % vested the question is moot. However, if not, it seems to me that the 12/31/2008 issue isn't applicable for a DB plan - only for a DC plan. For a DB, under 1.401(a)(9)-6, Q&A-1©, it seems to me that an annuity payment (IF there's any vesting of an accrued benefit as of the 8/31/09 valuation date) must commence on or before 4-1-2010.

Thank you both. The initial response was provided 3rd hand, so we've requested the employer to authorize the new PA to speak directly with us. I anticipate that something reasonable can be worked out! We assume they will want copies of all the documentation - we certainly would, if the situation were reversed.

Well, I'll weigh in on this. The situations are of course wildly variable. In general, we value professional courtesy, and try to give it. This does NOT mean working for free. If we are requesting data from an incoming client, that client will be expected to pay their prior TPA's charges for any information that they must get from their prior TPA. If authorized by the client who is leaving, we are happy to provide anything we have in the way of valuations, documents, etc., but for a reasonable fee. We don't give it away (we wouldn't charge for something trivial like a quick question or two about our documents or sending a copy of the 1-page mandatory rollover amendment, for example, something like that.) If the new TPA doesn't like our format, they can fry ice - it's their responsibility to take the data and put in any format they want or need - not our responsibility. Every single thing being requested by the new TPA is either something the client should already have (we automatically provide the client either originals or copies of everything) or something that was never sent to us in the first place. If a client is unwilling or unable to get us the data we need, we have to refuse to accept the case. We often end up talking directly with the prior TPA's, and we almost always find them to be cooperative, but again, justifiably unwilling to provide stuff for free. As a prior poster mentioned, there are often situations with bad blood or unpaid fee disputes. Since we have no knowledge of who is in the right in these situations, we don't judge - we just ask for what we need, and if we don't get it, we refuse the case. Naturally, you will sometimes get a rotten apple who is completely unprofessional, but that's a rarity. Our approach is to extend the type of professional courtesy that we would hope to receive, and leave it at that - and we don't expect professional courtesy to extend to unpaid work on the part of a prior TPA.

I've never seen anything quite like this. Plan termination. Participant has $20,000 account balance. Elects to receive $5,000 in cash, and roll over the $15,000 remaining to her new 401(k) plan at new employer. Distribution is processed, but unfortunately the entire $20,000 is sent to the new 401(k) plan and accepted and deposited. New 401(k) plan does not allow for in-service withdrawals/distributions, and initially at least, PA is ostensibly refusing to allow the transaction to be "reversed" in any manner. Participant, very reasonably, doesn't give a hoot how it is fixed, just wants her money. Any bright ideas? It isn't really an "ineligible" rollover distribution, so it's hard to use that line of argument. If you were a PA, what line of argument/documentation would induce you to send the $5,000 back to the Trustee?

Yes, deferrals should have been taken out of the bonus, assuming there was no otherwise applicable limit that they had reached. As you suggest, this should be corrected. While one can never tell what would happen upon audit, this is likely to get picked up. The auditor looks at the W-2, which says $20,000, then looks at a deferral election that says 5%, which means there should have been a deferral of $1,000. The auditor then sees that only $900 was deferred, and now you have a problem.

Let's see... Chapter 6 Plan Distributions. Part D - protected benefit options. 1a - definition of optional form of benefit, wording in bold at the bottom of the paragraph 1a.

Hmmm - AtA - FWIW, I decided to check to see what Sal has to say on the subject. While he's not necessarily correct, he seems to take the approach that it is an optional form of benefit. See pg. 6.51 of the 2009 edition. Or maybe I'm even misinterpreting what he has to say! Anyway, I'll now bow out of the discussion - it has been in interesting question to consider. AndyH - I hear rumors that they are considering Bucholz, or Ellsbury, or both in a trade. If they trade Ellsbury, I'm going to officially sever my loyalty and find another team to root for.

Andy the Actuary - I'd argue, for now at least, that this IS an "optional" form of benefit, as the term "optional" form of benefit includes the "normal form of benefit" under 1.411(d)-3(g)(ii). As such, then extending the timing of the payout to the extent discussed would seem to be an impermissible cutback. Do you have specific support for your contention, or is it just that you disagree with my interpretation of the same citations? (And mind you, I'm by no means certain that I'm interpreting this correctly) AndyH - it seems to me that your cite applies to adding an involuntary cashout distribution where non existed before, or changing the threshhold amount, but not to the timing of such distribution?? The de minimis exceptions to changing the timing would not seem to be satisfied in the situation that David discussed.

Can you explain how the de minimis rule is applied to extending the timeframe under which a cashout distribution is made in the situation described? I'm not getting that under 1.411(d)-3(e) - or anywhere else for that matter. I'd have said you could not so amend the plan for option #2 as you describe, with respect to benefits already accrued. (These regs are less than a model of clarity, by the way, IMHO) Is there additional guidance from the IRS addressing this issue? Or is it just there in the regs, and I'm missing it, which seems the most likely answer...

Naturally, they probably didn't listen to your advice to send them certified return receipt requested? Ours never do... As much as electronic filing is going to be a pain, at least it should alleviate some of this kind of foolishness.

Going from memory on this, so you'll certainly want to double check - for 415 purposes, the contribution relates to the limitation year for which the correction is made. For deduction purposes, because there is no similar special dispensation, the normal 404 rules apply. So while still generally deductible, you'd still be subject to the 25% of covered compensation limitation, between the make-up and any "normal" contribution for a given fiscal year. While this seems odd in some respects, I suppose it does avoid some gross manipulation that could otherwise take place - employers intentionally making a "mistake" to manipulate plan costs and contributions.

Sieve - FWIW - I agree with Kevin, and with your thought as to what is logical - i.e. there's no group where Z is part of it. The fact that one of "such persons" (that is, one of the people who owns an interest in one or more of X and Y) has a sole proprietorship doesn't matter unless that person also owns at least 80% of one or more of the partnerships. Of course, my opinion and a dollar are worth about 9 cents.

A great way to start the week. Thanks for the laughs.

IRC 401(a)(31).

Was there perchance a QDRO that specified that the adult children were to be beneficiaries? That might at least get them a good chunk of the account.

"I think it's a harsh mischaracterization to label a business owner that wants to save for retirement, provide a retirement benefit to employees, and reduce taxes as "greedy" When I refer to the "greed factor" that's merely our internal term for plan design purposes. Almost without exception, small employers' (ours anyway, you must run with a more generous or altruistic class of clients) first design is "I want the maximum, and I don't want to give ANYTHING to my employees." Small employer plans are, in my experience, set up without any intention whatsoever to fund a retirement benefit for employees. Naturally, we then explain that this isn't generally possible, and if you want to max yourself, then you must contribute a certain amount for your employees. Then they go to "who can we exclude." "If we fire them and rehire them part time, can we not cover them? What if we terminate them and lease them back from a leasing company? Can I set up two corporations and only cover myself in one and not cover the employees in the other?" "Can I fire them before they become vested?" Etc., ad nauseaum. Now, I don't dispute for a moment that a 5% gateway is better than 100% of nothing, if the employer actually is going to terminate a plan if they can no longer cross-test. Personally, I don't think it will pass. The probability of this is at lest 90% according to a voice in my head that tells me meaningless and unfounded statistics to use.

It's an interesting sort of thing that I'll call "sales pyschology" for lack of a better term. Back when the "best" PS plan design was an integrated plan, tons of clients had them. And were very happy with them. Then comes the cross-tested plan. And everyone switched due to the greed factor. If you then take away the cross-testing, and they have to go back to integrated which they previously perceived as a very good plan, they now say, "This stinks, and I don't want it." Certainly it would damage the small plan market. I won't go so far as to say it will destroy it, because I don't think it will. I do, however, agree that it will cut into the business of those of us who specialize in the small plan market. Ah well, having food and shelter was getting boring anyway...

Interesting question. I can see why an employer would want to do this (not for the reason you stated, but in order to avoid messing with 20% withholding.) I recommend a great deal of caveat emptor, 'cause I'm just winging it, not having done any type of research. I'm not aware of anything that would automatically preclude such a provision. But there might be operational issues. First, does the document allow it? Second, this obviously could not apply for distributions that are not "eligible rollover distributions." Third, depending upon circumstances, there might possibly be a nondiscrimination issue if a NHC wanted to take a small amount. Finding an institution to handle a small amount might be difficult or impossible, and there might be surrender charges. I don't know if this might be considered a "significant detriment" or not - seems like kind of a stretch, but the DOL can be funny that way. If document doesn't permit it, you could always put it in and apply for a determination letter to see if IRS approves. I'll be interested to see what experience other folks might have with this issue, or what opinions they might have.

I assume you mean a non-standardized prototype, or a volume submitter document, that has already received an IRS opinion or advisory letter? If so, then I don't see a problem with this. You are generally allowed to rely on the opinion/advisory letter as equivalent to a determination letter, as long as you aren't doing something funky with the elections you make.

Sieve - not considering myself any sort of CG expert, this is dangerous territory, and I'm probably misinterpreting your question. But I've interpreted 1.414(b)-1(a) to essentially ignore the component member rules for a CG determination (which we don't make anyway, but tell the client to consult ERISA counsel.) So while the component member rules you mention can make a difference for corporate income tax filing, it seems to me that CG status for retirement plan purposes ignores 1563(b).

Consider yourself fortunate. Seems like mine is mostly pronounced ****head. At least by my wife. And a Happy Thanksgiving to you as well.

I, at least, cannot venture an opinion without more specific information on the exact percentage of each corporation for each owner, and the specific relationship, if any, between each of the owners. I'm also assuming that there is no other attribution from options, that there is no exluded stock, that all stock is the same value and that there is no non-voting stock, etc... I agree that you always have to consider whether there are any CG's that do not encompass all four corporations and perform testing accordingly. I have a great dislike for CG/ASG situations, as I find they offer unparalleled opportunities to look like a chump, (which I can do very nicely on my own!) particularly since the clients always neglect to tell you some little fact that changes the whole scenario. We always advise them to seek experienced ERISA counsel.

To be with family and friends, sipping wine - this is what it is to be happy.

Off topic here - Tom, what is the proper pronunciation of your last name? (So I can give proper credit when quoting one of your songs)

Jpod - I was thinking of a situation where, for example, 30% of the Son's business comes from clients of the Father. Let's say the Father's firm does estate planning, but doesn't handle divorce law. So the Father refers all divorce cases to the Son. It seems to me that this might constitute an ASG - the Father's firm would be the FSO, and the Son's would be an A-org. The A-org rules use a "facts and circumstances" and "regularly associated with" standard, which is undefined as far as I know. But since the B-org rules state that a "total receipts percentage" of more than 10% will be considered "significant" I thought that perhaps some of the same thinking might be applied to the A-org test. Even if not, I suspect that the IRS might rule that there is an A-org ASG? Presumably in such a situation the client might consider filing for an ASG determination on a form 5300. But I just wondered what folks thought about this situation.