Belgarath

My apologies. I was only looking at the "D" EIN # on the Schedule R.

The Trust ID# was not previously required on these forms either. The forms you list use the Employer ID#. So yes, you are correct.

You may find this very helpful. And we always recommend that they consult their legal counsel. http://www.dol.gov/ebsa/publications/qdros.html

Just a wild thought - Did the plan have an in-service distribution provision for which the participant was eligible? If so, perhaps this could be claimed as a distribution and therefore not a PT. There are of course other problems, such as back taxes/penalties/interest, so not a great outlook regardless.

I should have known better than to delve into this on a Friday afternoon. I started off thinking I knew what I was doing, and have managed to confuse myself. This isn't a real plan or document, just hypothetical. Suppose you have a 401(k) that provides a dollar for dollar match, up to 3%, and also provides for an employer discretionary contribution on a cross tested basis. Let's further assume that for a given year, the employer makes no discretionary contribution but the plan is top heavy. Some participants have deferred, some have not. The employer wants to use the match as counting toward the TH. Clearly this is allowable. Question is, is this satisfying the "multiple allocation" exception for TH in 1.401(a)(4)-2(b), and thus does not require general testing for the additional employer contribution to bring everyone up to 3% who doesn't already get 3% from the match? Part two - assuming for the moment that the above is ok and general testing of the additional required top heavy isn't necessary, now the employer wants to contribute an additional discretionary contribution to be allocated on a cross tested basis. Can this be allocated on a cross tested basis separately, or must the rest of the employer constribution for TH be brought in? All subject to gateway, of course... By the time I come back on Tuesday, maybe I'll no longer be confused. In advance, wishing you all a good long weekend.

Yes, that's my humble opinion. The fact that you waive your rights to any death benefit does not mean that you also waive your rights to receive living benefits. So I assume you have a QPSA waiver, which allows a bene other than the spouse to be named for any death benefit. So far, so good. But if the participant lives, then there will be a QJSA waiver also required to receive benefits in other than a QJSA form, and the spouse will have to sign off on this as well. This waiver can't be signed too far in advance - 90 or 120 days sticks in my head, but I haven't checked to see if that's correct.

The first question is whether or not the plan/benefit is subject to QJSA rules. There is definitive guidance available, but the answer will depend upon whether or not plan/benefit is subject to QJSA. I'm not familiar with the Corbel document, so I can't answer the first part of the question. Let's assume this IS subject to QJSA. If so, spousal consent is required for loan where account balance exceeds $5,000. See IRC 417(a)(4), and ERISA 205©(4). Now, if the plan/benefit is NOT subject to QJSA, then no spousal consent is required. See 1.401(a)(20), Q&A-24. Of course, the plan can require spousal consent for all participant loans if so drafted. Also, even if the plan does not mandate it, the Plan Administrator may have a policy/loan documents which require spousal consent.

Is it going to be rolled to an IRA? I seem to recall where the IRA itself can be used for security, which might alleviate the cost of purchasing a bond? Hold on a minute...ok, PLR 9514028. I've actually seen this approach used in 1 case, several years ago.

I think Tom's VCP suggestion is good. I'm dubious that SCP will be allowable here, since ALL of the NHC were excluded. Are there matching contributions? What % did the owner defer? If the owner deferred the max, it'll be interesting to see if the IRS lets you get away with 3% - they might, for example, require 50% of the owner deferral %. All you can do is give it your best shot. Or, as Tom says, try an SCP and hop there's no audit, but I don't advocate this approach. One thing is for sure IMHO - You can present a few alternatives, but make sure the client gets the advice of tax/legal counsel, and have the client instruct YOU how to proceed.

Take a look at 1.415(f)-1(f).

Additionally, for avoiding the second tier tax, I believe the tax is abated if the correction is made within the 90 day period commencing on the date that the IRS issues a notice of deficiency for the tax. See IRC 4961 and IRC 4963(e).

Just fyi - my boss is at some Pension Administrators conference in Las Vegas, and she asked Janice Wegesin what her opinion was on this? Janice was of the opinion that you don't redo any of the 5500 forms.

Plans (2 of them) had investments in some mutual fund through a brokerage house. Plans terminated in 2004, distributions made in 2005, final 5500's filed for 2005. Now, in 2007, due to some audit or oversight /compliance thing or something like that, the mutual fund determines that these accounts are due additional earnings. Fairly substantial amounts. Going back and rerunning distribution numbers is no real problem, other than being a pain. Locating the participants may be worse. (small plans, fortunately.) For 5500's, I'm not sure how to handle. We could file amended 2005 forms, regular 2006 forms, and final 2007 forms. Anyone have an easier (and acceptable) method that they have used for such a situation, which the DOL approves?

That's the crux of the question. If forced to opine, then I'd say you could not use the W-2, but this really is a decision to be made by the client on advice of his CPA. (And to cover your tail, make sure they instruct you in writing.)

I'm not sure you are going to get a concrete answer on this one. Generally, if an LLC is taxed as a partnership, then it would be reasonable to assume that the K-1 "earned income" would be the appropriate income to consider for qualified plan purposes. I would note, by the way, that if you had an S-corp, then you clearly cannot use K-income - for an S-corp it is W-2 only. Every reasonable discussion that I have ever been able to have on this subject ends with only one thing on which there is general agreement - that it is highly unusual at best, and likely incorrect, to have an individual be both a "Partner" and an Employee of the same LLC for income tax purposes. Revenue Ruling 69-184 reaches the conclusion that the same individual cannot be both a partner and an employee, but this was probably before LLC's were around... I think you would normally have to rely on the written instruction of the Plan Administrator/client, who should be intructing you on how to proceed based upon the advice of their own tax/legal counsel.

I believe the deciding factor is what SEP document you are using. The model 5305-SEP must be maintained on a calendar year basis. A non-model SEP could presumably be maintained on a fiscal year basis that is other than calendar year. I've seen a lot of fiscal year taxpayers who nevertheless use the model SEP.

Oooh, I don't know. This doesn't smell so good. Depending upon facts and circumstances, there might not be effective availablity for the NHC, depending upon the limits that apply to them. I'd look really, really hard at this before giving a go-ahead. Although non-uniform plan limits are permitted under 1.414(v)-1(e), I don't feel comfortable with pushing the edge of the envelope to this extent. This could be an end run around proper ADP testing. I'm also conservative by nature on these questions, however, and perhaps unnecessarily so.

I agree that according to 1.401-1(b)(1)(ii) this could be permissible. However, in this circumstance with essentially no restriction whatsoever (age 21) I share Pax's concern. Granted that I have no idea what the IRS would use for their basis in making this assertion, it does make me squeamish. I'd certainly recommend that they check with ERISA counsel first. Why in the world does the employer want to do this? I hope you at least charge extra for distribution work/reporting!

1. Yes. 2. While there's always the demon "facts and circumstances" I would not generally have a problem with this. In merger situations, I have found the IRS to be pretty fair and reasonable about such things.

It may be a bad idea from an administrative viewpoint, but I don't necessarily agree that there's automatically a compliance issue such as Pax raises. The plans I have seen utilizing this provision are drafted to comply with the "2 year/5 year" rule of Revenue Rulings 71-295 and 68-24. The IRS routinely approves plans with this provision. That said, most employers who allow it regret it! Causes far more trouble than it is worth, and they find it out too late.

And a hearty ditto to the above comments. Thanks a million!

Caveat: I have done no research whatsoever for this response - I'm merely firing off random thoughts as they occur to me for the sake of discussion. Have neither seen nor witnessed such a plan. I do not know if it is legal. But let's assume for the moment that it is. I presume that the employer would keep the formula pretty low, since the employer is required to fund the necessary amount to provide the promised benefit. So if the participants pick stupid investments, employer is liable to make it up. If the formula is high, then successful investment return could cause 415 problems. So there would likely be a fairly low "floor" and then participants could reap additional benefits by successful investing, but in no event in excess of 415. As long as the formula benefit is guaranteed, at least top heavy if not higher, then at least in theory I can't see why the IRS or Congress would necessarily object. But, as I said, I haven't looked into it.

Sorry, I don't agree. See the following from IRS Notice 87-16. A24: If an individual who is eligible to make elective deferrals under a CODA declines to make elective deferrals for a year, and no other contributions or forfeitures are allocated to such individual's account for the plan year ending with or within the individual's taxable year, is such individual an active participant for that year? A: No. An individual shall not be an active participant merely due to eligibility to participate in a CODA.

What are the plaintiffs asking for? As a non-attorney, it would seem reasonable that they should receive contributions based upon actual income as defined in the plan. But in a profit sharing plan, the employer isn't generally obligated to contribute a specific percentage. It would be interesting to know if their contribution was based upon a percentage (in which case the case for additional contributions would seem pretty strong) or on a dollar amount (in which case, not so strong, perhaps, although some reallocation of the contribution might be necessary.) Are the plaintiffs asking for additional damages of some sort?

"I've read Rev Proc 2006-27 and Rev Proc 2003-44 cover to cover dozens of times. This isn't within the spirit of EPCRS. The "spirit" of the EPCRS is that employees are returned to the position they would have been in, had the error not occurred. Shorting an employees take home pay in future paychecks to make up for an employer error is not returning them to the position they would have been." I think that perhaps your many readings have been unnecessarily rigid in this regard. I don't know of anyone else who takes this interpretation. In fact, these employees were not really excluded from participation. And if they are "shorted" in their next paycheck, that places them in the same position they would have been otherwise, since their prior take home paycheck was LARGER than it should have been. I do believe that most of us would argue that this is precisely in the spirit and overriding principles of 2006-27. There is actually specific support for this general idea, in a situation where employees are actually improperly denied the opportunity to defer. Take a look at Appendix B, Section 2, .02(F). Since this clearly and specifically allows for a result where the employer is NOT required to do the make-up contribution that you deem is required, in a situation where an employee is ACTUALLY excluded - then it would seem absurd to not allow a similar fix in a situation which is far less egregious. But heck, if your employers don't mind paying the extra money, there's certainly nothing wrong with your approach. I just don't believe it is required.