Belgarath

All excellent points. EBE - I suspect, for many reasons, that the employer does NOT want to attempt to claw back any funds already contributed, but I'm just exploring possibilities before talking to them. I was assuming the retroactive amendment would be the path taken. About the only thing that can be said that this plan did RIGHT was to properly restate, and file 5500 forms. Peter, great point - I'm pretty sure that these are in fact annuity contracts with TIAA, rather than custodial accounts.

This is a general question - have just been presented with an ERISA 403(b) plan that has been operationally botched for an as yet untold number of years - could be 4, could be 13. VCP all the way unless ERISA attorney advises them to ignore the problems and start clean next year. Very doubtful... Among the MANY transgressions, people ineligible for employer nonelective contributions have received them, for as far back as this goes. Plan is 100% immediately vested. Just wondered if anyone has ever SUCCESSFULLY negotiated with the IRS to have such contributions removed from their accounts and reallocated? I can't imagine that the IRS would allow this, but maybe someone has tried it with success?

A controlled group is based on ownership. There doesn't need to be any relationship in the business activities. Example, I own 100% of A and B. It doesn't matter that A manufactures firearms, and B is a clown service that plays at Birthday parties. As to your other questions, you have ownership attribution between spouses, and you would have a controlled group. There is such a thing as the "spousal noninvolvement" clause under IRC 1563(e)(5) and the regulations thereunder - if you can satisfy all those requirements, then not a controlled group. But watch out for community property states.

Brian and Peter - I only have a copy of the document, but I'd LIKE to think they kept records of such notification. Thank you both for your comments. Leevena - good question, I'll be interested to see how they respond.

A question came up on a HRA. I was able to obtain a copy of the Plan document, and the language is, shall we , a bit sparse, and not terribly enlightening. But here goes. Plan was established in 2008. In the adoption agreement, under "Maximum Benefits Per Coverage Period" it says: "Other: A discretionary amount to be announced by the Employer at the beginning of each Coverage Period." It then goes on to list the maximums for 2008. So here's the question - the coverage limits have been increased several times since then. Do you think this language would be sufficient, if the amounts are properly communicated to employees each year, or should a Plan amendment have been done each time the limits increased?

Very interesting. Thanks so much!!

Thanks Brian, I appreciate it. I have very limited involvement with cafeteria plans, but I have seen a number of failures on the 25% key employee test - but this is on very small plans, family businesses, etc. They don't have a TPA and are very surprised when they find out they are subject to testing! And yes, on these small plans, if even one HCE utilizes the DCAP, then it usually fails. Again, my experience is limited, and involves just a very small slice of the possible plans/situations. Some of those people might possibly benefit from the SIMPLE if they were willing to make the employer contribution, but the cost might well exceed the benefit! If you don't mind expanding a bit, what other added complications might you encounter with a SIMPLE? Again, just curious - please don't waste your time if it requires any effort!

Curious as to thoughts on this. I don't think I've actually seen anyone utilizing one. Any thoughts on why? Is it that the 2% employer contribution is a major sticking point, or are there other reasons? Seems like it would work well for many really small employers, if it isn't the required employer contribution that's the problem. Thanks for any thoughts.

Without taking time to look up "the rules" - I think it might depend on facts and circumstances. If your spouse is the client's CPA, or the client's investment advisor, for example, then I'd say yes - even if not necessarily required, likely a good idea. If your spouse is the client's veterinarian, then I'd say no. But you can always "over disclose" if there's any doubt - doesn't hurt anything. Just my gut response.

Yeah, coffee hadn't kicked in yet. (My standard excuse for being dense...)

I respectfully disagree with ERISA-Atty. Suppose the individual has never had a Roth IRA, and the designated Roth account in the 401(k) Plan (which had satisfied the 5-year period while in the 401(k)) is rolled to a new Roth IRA. The 5-year period begins when the Roth IRA is established in this situation. See 1.408A-10, Q&A-4. It gives examples of how all this works. Sorry - I hadn't read Luke's post - he already provided the references!

Sorry about that! I probably shouldn't have even made the original post until I had more information.

To the moderator - please delete this post. Information now coming in is very different from originally received, and at this point, no one should be wasting their time responding to the original post. Thanks!

Thanks. I'm sure something else is going to pop up on this as more information becomes available...

Encountered what was (to me) an unusual situation on a possible takeover. Details a little sketchy at this point. John Doe, Sole Proprietor, sponsors a 401k plan, using a volume submitter pre-approved document. John has several employees, all covered under the plan, everything seems fine. However, it turns out that unbeknownst to the prior TPA (and if there's a problem, likely not their fault, as apparently neither client nor CPA ever informed them) the employees of John are actually PAID through another company. Details on this other company not yet known, but apparently has a different EIN than John. The reasons why it is handled this way are unknown. The CPA likely had good reasons for it - I'm not making any judgments since this is outside my sphere of knowledge. Now, my understanding has always been that the IRS will only issue one EIN to a Sole Prop. If true, (?) then this other company, apparently 100% owned by John, must be something other than a Sole Prop? At any rate, my question is this: Assuming these are "employees" of John, is the fact that payroll is run through another company in the controlled group a problem in and of itself? This other company has NOT signed on as a Participating Employer, and the document provides that employees of another member of a controlled group are not covered under the plan unless a Participating Employer Agreement has been signed. Although it is the CPA's purview, can John deduct contributions if payroll is through another company? I'd love to hear any thoughts on the situation. Thanks in advance.

I'm FAR from expert on this, but I'll put in my thoughts, FWIW. First, is it certain that they are taxable? I seem to recall that if the exercise price is equal to (or higher than?) the fair market value at the time the options are granted, then they are not currently taxable. Assuming that they are in fact currently taxable, then I'd be very inclined to agree with you that they qualify as a fringe benefit.

Seriously - your desire to help is truly commendable, but take heed of what these experts above are telling you. Do you really want to knowingly assist in a Fiduciary Breach? It is great to try to help people, but if they aren't willing to take the steps to help themselves, they don't deserve help. And while I would feel bad for the rank and file employees, I certainly wouldn't let that lead me to put myself at risk. If they are unwilling to pay VCP or VFCP fees, they are unlikely to spring for an ERISA attorney. At least in my experience... Best of luck on this one. Be careful not to sprain an ankle while sprinting for the exit!

Ok, thanks.

Hi John - do you have a citation for that? 1.401(k)-1(a)(3)(B)(v) refers to "any other plan or arrangement of the employer that is described in 219(g)(5)(A)" - I don't see that this applies to Health and Welfare plans? Thanks. (I can't remember the last time someone attempted to waive participation in one of our plans anyway, but having said that, someone will doubtless ask about it momentarily...)

Still allowed (although not in a standardized plan) if done before the employee first becomes eligible to participate in any qualified plan maintained by the employer.

I agree. After I thought about it a little more, I realized that just cutting a check, in this circumstance, wouldn't be correct. I just hadn't gotten around to re-posting. Thanks to you both.

This is truly a hypothetical question, but comes to mind since there have been a couple of "mistake of fact" distributions recently. Suppose you have a legitimate mistake of fact contribution. In order to return it to the employer, it is supposed to be returned within 1 year. Now suppose it is past the 1 year, before it is even discovered. I believe it then needs to be allocated as an employer contribution. Other opinions? Other solutions you have used or heard of in "real life" situations? Just curious.

Hypothetical for the moment, but could become real. Participant dies, no named beneficiary. Under the plan default, it goes to the daughter. Daughter is non-responsive, although her location is known. This doesn't really fall under the "can't be located" missing beneficiary. Let's assume after a period of non-response, the plan just cuts her a check. If she doesn't cash it, what then? Does anyone happen to know if Millenium Trust or similar organization will accept a rollover to a beneficiary IRA in these circumstances? (I realize I can contact them - just wondered if anyone already knows). Other options? P.S. - let's assume it is over $5,000, in case it makes any difference in your thoughts.

Yes.

Thanks Luke.