Belgarath

First time I've run into this. At first glance, it appears to be a form of business structure that allows "sub-LLC's" underneath the overall umbrella of the registered LLC. Specific legal requirements, only in certain states, apparently many unresolved or untested tax/administrative issues, blah, blah, blah. Wondered if anyone had encountered this in the retirement plan arena? Seems like it would be handled rather like a controlled group - that is, everyone in the multiple "sub" LLC's included for coverage/testing, and one or more groups could be excluded assuming you pass. We would, of course, have them discuss with tax/legal counsel before setting up any type of plan... Anyone had any dealings with a "Series LLC" in the retirement plan world?

No - a non-profit organization isn't limited by 404, which deals with deductions. Since the non-profit doesn't have deductions, they aren't limited to the 25% of payroll - they are just limited by 415 limits. So, theoretically, if everyone gets paid less than 56,000, the employer could contribute 100%. (Not saying I've ever seen this)!!! But I have seen a contribution in excess of 25% in one plan.

There are other folks on these boards who are ESOP experts - I am not one of them! However, perhaps(???) one of the following methods might be a possibility? Ask the experts!　 Use excess company funds to repurchase shares; sell newly issued shares of company stock to meet an ESOP repurchase obligation; or leverage or re-leverage the ESOP by borrowing money to fund the obligation.

Really splitting hairs here, but... When looking at Appendix A, .05(9) and (10), let's suppose that everyone has been having deferrals withheld correctly, and all of a sudden, for ONE payroll, everyone who is deferring doesn't have anything withheld on a small piece of irregular (but not excluded) compensation. If corrected immediately, does this qualify for the "no QNEC" correction? (Assume no match anyway) While it seems reasonable, I suppose one could interpret the language in (10) that this isn't a "failure to implement" - in other words, it seems like that might be designed more for an INITIAL "failure to implement." Has anyone seen/heard of the IRS addressing this issue?

Thanks Kevin - we actually had one large plan that uses this exclusion get audited by the IRS. However, this one did it right in that they NEVER had a "less than 20 hour" person work over 1,000 hours. Can't count on that...

You've convinced me.

That's fascinating. So if I'm a bank, and I lend you 200,000 to buy a house, and you don't pay the HOA fees, the HOA can foreclose and my lien is subordinate to theirs? (I realize this is a non-qualified plan question - I just happen to live in a state where a very small percentage of the housing is in any sort of HOA, so this concept is alien to me).

Me too, but I'd allow it if they state that eviction WILL occur. If it is just saying "one of the remedies we could pursue is eviction" then I don't think it rises to the required level. As an aside, I assume foreclosure isn't necessarily an option, as most likely the condo association isn't the lender?

Seems like using the <20 hour exclusion would therefore realistically require using 12 month periods based on date of hire - otherwise you end up with most employers not properly tracking the hours to make an accurate and TIMELY determination for a 1/1 entry date, and now you have missed deferral opportunity corrections, etc., etc. - yuck. Theoretically reverting to plan year is fine, but in the real world of plan admin, that data is never given accurately and timely (really, for this, in advance). Ah, that's why we love our jobs... P.S. - lest anyone read this otherwise, I am absolutely NOT suggesting that Kevin doesn't understand the real world of plan administration! Just my musing/blathering on an unpleasant and difficult topic.

Thanks. As far as I could tell, the IRS person is just wrong. We'll push back and see what happens.

401(k) plan has designated Roth accounts. Participant receives a QUALIFIED distribution - over 59-1/2, over 5 years. Reported as a 7 B on 1099-R. IRS is saying it should be a code "Q." When you look at the 1099 codes, "Q" specifically states that it is for a Roth IRA. There is no letter code for a qualified distribution from a designated Roth account. Are we wrong? I can find nothing to indicate that this should have been reported as a code "Q." Thanks.

Plan has fairly standard language that the beneficiary, if other than the spouse, will be designated on a form satisfactory to the Administrator. Spousal consent is required. Anyway, it appears this subject has been beaten to death, and is unlikely to generate a solid consensus, so I thank you all for your comments. It is now officially Summer, so I will retreat to my survival mode (I hate hot weather) and try to think of more interesting subjects than this one! Thanks again. In such event, the designation of a Beneficiary shall be made on a form satisfactory to the Administrator.

Plan's definition of beneficiary doesn't seem to be very definitive in answering this question? Basic definition follows, and then you get referred to another section (excerpt below) and of course also refers to the standard "has to be the spouse in a J&S option unless the participant and spouse have validly waived, etc., etc..") "Beneficiary" means the person (or entity) to whom the share of a deceased Participant's interest in the Plan is payable. Section 5.4 contains a definition of "designated Beneficiary" for purposes of that Section. Excerpt from 5.4 - (b) Payment of other death benefits. Death benefits payable by reason of the death of a Participant or a Retired Participant shall be paid to such Participant's Beneficiary in accordance with the following provisions: (1) Upon the death of a Participant subsequent to the Annuity Starting Date, the Participant's Beneficiary shall be entitled to whatever death benefit may be available under the settlement arrangements pursuant to which the Participant's benefit is made payable.

Well, maybe you are right and I'm just complicating it too much. The plan language says the following, and I note that it for the "life" of the "designated beneficiary." Does that mean a J&S option is precluded here if the desired beneficiary is a trust? (b) Alternative forms of distribution. In the event a married Participant duly elects pursuant to paragraph (a)(2) above not to receive benefits in the form of a qualified joint and survivor annuity, or if such Participant is not married, in the form of a life annuity, the Administrator, pursuant to the election of the Participant, shall direct the Trustee to distribute to a Participant or such Participant's Beneficiary an amount which is the Actuarial Equivalent of the monthly retirement benefit provided in Section 5.1(c) in one or more of the following methods: (1) Monthly pension payable over the life of the Participant. (2) Monthly pension payable over the life of the Participant, with the provision that, if a Retired Participant dies prior to the completion of 120 monthly payments, such monthly payments shall be continued to the Retired Participant's designated Beneficiary until the monthly payments made to the Retired Participant and to the Beneficiary shall total 120. (3) Monthly pension payable over the life of the Participant and the life of the Participant's designated Beneficiary (50% joint and survivor annuity). (4) Monthly pension payable over the life of the Participant and the life of the Participant's designated Beneficiary (66 2/3% joint and survivor annuity). (5) Monthly pension payable over the life of the Participant and the life of the Participant's designated Beneficiary (100% joint and survivor annuity).

Ok, so I'm not being argumentative here, just having a difficult time with this whole concept. Let's say, for the moment, that it is ok to calculate the benefit based upon the joint life expectancy of the participant and spouse, and further suppose that the non-participant spouse signs off, so that the beneficiary is in fact the trust. How does this satisfy the RMD requirements, as in order to be considered a "designated beneficiary" for RMD purposes, the trust must be, among other things, irrevocable at death. Edit - just read above comment by FP - again, I don't know

Have no idea whatsoever WHY they want to do this. The question was posed to us as to IF they can do this. The question isn't necessarily so much whether a Trust can be a beneficiary, but whether the measuring life for a J&S calculation can be a person, when the beneficiary is not a person, but is a revocable trust. Not concerned with the tax implications - we'll just tell them they need to work with their tax counsel as to whether this option (if permissible) is the best way to handle. Thanks.

Hi Kevin - thanks for the input. The plan uses an initial computation period of 12 months from DOH, then reverts to plan year. So computation period 1 would be 2/15/19 to 2/14/20, then computation period 2 and subsequent would be plan years. And as consider it further, I think that means that entry would be 1/1/2020, not 2/15/2020. Well, actually I think it will still be 2/15/20...seems inconsistent with the above to end up with the entry date being at a time during that initial eligibility computation period. Sheesh.

Luke, there is no problem with the spouse signing off on spousal rights when retirement distributions begin, to have the trust as the beneficiary. So the questions still are in play. Thanks.

This is a constant headache. If we were smart, I swear we wouldn't allow it, but there is great demand for it. Anyway, suppose you are utilizing this exclusion. Someone who is HIRED at 8 hours per week, and is therefore "reasonably expected" to work less than 1,000 hours, is subsequently put on full time. Let's further suppose it is a calendar year plan, DOH is February 15, 2019 and full time status starts in July of 2019. Does the person (A) enter immediately in July, since no longer "reasonably expected" to work less than 1,000 hours in the initial computation period, or (B) does the person actually have to work the 1,000 hours, and therefore subsequently enters on February 15 of the following year, (2020) when the initial computation period is complete? Even if (b) is the more technically correct answer (which it is IMHO) do you think it is reasonable to interpret it, as long as done consistently, such that you use (A) instead?

In a way I feel better, as I'd never seen this before, either. (Even though I don't have much to do with DB plans anyway.) We are talking initially about a retirement distribution. The retirement distribution options provide for Life, Life with a 120 month period certain, and the 3 standard J&S options. Section 5.8 referred to at the end is merely the RMD rules. The plan says the following for death prior to the annuity starting date. But that isn't the situation here. From all this, it seems to me that the requested distribution cannot be paid to the revocable trust, as even if one decided it was acceptable to use the RMD rules to govern this situation, they require an IRREVOCABLE trust in order to comply. However, I'd love any and all opinions. Thanks!! (f) Alternative form of distribution. If the present value of the total death benefit does not exceed $5,000 at the time of distribution, then the Administrator shall direct the immediate distribution of the present value of the death benefit. Otherwise, to the extent the death benefit is not paid in the form of a Pre‑Retirement Survivor Annuity, it shall be paid to the Participant's Beneficiary one of the forms of annuity described below. However, any such annuity may not be in any form that will provide for payments over a period extending beyond either the life of the Participant's designated Beneficiary. (1) Monthly pension payable over the life of the Participant's Beneficiary. (2) Monthly pension payable over the life of the Participant's designated Beneficiary, with the provision that, if the Participant's designated Beneficiary dies prior to the completion of 120 monthly payments, such monthly payments shall be continued to the Participant's beneficiary until the monthly payments made to the Participant's designated Beneficiary and the Participant's beneficiary shall total 120. Notwithstanding the above, if the death benefit payable pursuant to Section 5.4 is payable in an annuity, payments shall be subject to the rules specified in Section 5.8.

Non-ERISA DB plan - a public school. A participant who is retiring wants to receive her retirement benefit in an option that used her spouse's DOB as the basis to calculate the various optional forms of benefit. But, she wants to reflect their REVOCABLE trust as beneficiary. I know this wouldn't qualify under the RMD rules, but is it allowable under the "regular" rules? Is it allowable for the plan to calculate the retirement options using the spouse as measuring life, yet have the death benefits paid to a revocable trust (even assuming the spouse is sole beneficiary under the trust)?

Does the plan also have safe harbor? Match or nonelective? Discretionary match? Additional profit sharing? Does the bonus amount get included/excluded for different purposes? In other words, is this strictly a deferral problem, or are there also missed employer contributions for 15 years? The problem could get larger than it seems at first glance. You might consider seeking ERISA counsel on this - it is possible, depending on the amount of money involved, the recommendation might be to ignore the issue and just correct moving forward. I'm making no recommendation, just tossing that out there for consideration.

Thanks Tom!

Got a little more information today. It is currently an S-corp, and they are changing to an LLP mid-year. So to be more precise, it was formerly Company A, and now it will be "Wile E. Coyote LLP dba Company A" - no other changes. But a new EIN, as mentioned earlier.

Thank you. I just don't know, at this point, what the business organizations/transactions/reorganizations etc. might be. (I don't even know what type of entity the current business is!) But your response was quite helpful.