Belgarath

Thanks.

This is a case where the regs seem clear, (to me) but third party write-ups seem less clear, and I'd like to confirm that I'm not missing anything. This is an S-CORP leveraged ESOP, and the employer also sponsors a 401(k). So you have the general 404(a)(3) limit of 25% of comp. The increased deduction limit under 404(a)(9) specifically does not apply, as per paragraph (C) of 404(a)(9). Some of the write-ups appear to say that you could deduct up to 25% of eligible compensation on principal repayments of an exempt loan in the same year you take a deduction under 404(a)(3) for contributions to the non-ESOP 401(k), as long as you comply with 415. Am I missing something?

Why not submit as an anonymous VCP filing with what you propose? If it works, great. If it doesn't, you aren't any worse off than before?

Yes, I think the one that we see most commonly (at least I do) is the ability to remove installment payment options in a profit sharing plan, as long as a lump-sum option is available. I can't recall with certainty, but I believe it was EGTRRA that changed the law to allow this. But as Mike says, you couldn't use this to eliminate the in-service withdrawal option altogether for accrued benefits.

Have they not already deferred for 2018, and therefore subject to TH anyway? Or have they not yet deferred anything?

Thanks for the input.

This kind of stuff used to happen eons ago when there were more pooled plans, but I haven't seen it in a long time. Pooled account. Plan apparently didn't have a checking account. Check for (x) sent to the Trustee, for a distribution to a terminated participant. Trustee deposited it into the EMPLOYER checking account and simultaneously wrote a check to the terminated participant for the appropriate amount, and submitted the 20% withholding to the IRS. Yeah, it's a PT, but what is the penalty? There is zero loss or gain to any party involved, and no "amount involved" if one were to try to pay a 15% excise tax anyway. What do folks do with this on a practical level, rather than a theoretical level? Or is there an exemption for this that I'm missing?

From my less than exhaustive research on this, it appears that it is required for a stand-alone HRA. If the HRA is integrated with the medical plan, then it is possible to have the health plan SBC cover the HRA as well, but if it doesn't, the HRA will need an SBC. And the SBC requirement doesn't extend to stand-alone "excepted benefits" plans such as dental or vision plans, and many FSA's (if they are HIPAA "excepted benefits"). Any disagreement? Any other comments welcome as always! Thanks.

Probably with the insurance company/agent. If it is a group annuity, they might issue the participant a "certificate" or something. Individual annuity policies can be assigned to the individual. If the participant wants it, possible the company will issue an individual annuity policy as an IRA rollover/transfer instead of distributing cash. A lot has probably changed since I flushed all this insurance stuff from my memory banks.

Hmmm - thanks Tom. I've always suspected you might be the missing link, and now it is confirmed.

This is just a general "design" question In the limited number of ESOP documents I've ever perused, they seem to generally provide for a 5-year distribution period for funds attributable to company stock. (longer for very large distributions) Several have also required a 5-year break in service prior to the payout even beginning. Is the purpose of this to protect/cushion the employer/plan from big swings in stock prices - so there isn't a major cash flow problem due to a high payout, or is it due to other considerations? I assume that if a sponsor CHOOSES to provide for immediate lump-sum, they could do that, even if potentially might be unwise/risky? Any thoughts on this in general? Also got a question from a CPA on a plan we don't handle - if you have a 5 year payout on a person who has reached NRD, (assume it is over the $5,000 mark) and the person doesn't fill out the distribution paperwork for the first installment, can the second installment be "forced" including the first missed installment? General question, as I don't have a document to look at anyway... Thanks.

No. But I'm curious as to why it matters? 415(e) was repealed last century.

First, this is a memo, right? Not official guidance? It is interesting that this refers to the Employer providing the TRUSTEE with this written instruction. In many pre-approved documents, the plan specifies that the EMPLOYER (if OTHER THAN THE ADMINISTRATOR) must provide the ADMINISTRATOR with written notification of the contribution to be allocated, blah, blah, blah... In many small plans, the Administrator IS the Employer. This would appear to negate the requirement. Under the "duties of the Administrator" it is far less black and white. Ours, for example, doesn't hit it head on, but the closest clause is: to compute, certify, and direct the Trustee (or insurer) with respect to the amount and the kind of the benefits to which any Participant shall be entitled hereunder... Question - has anyone ever had the IRS address this specific question? Seems to me like virtually any "written notification" that actually gives a breakdown (i.e. the valuation report or whatever) should be sufficient. Maybe I'm way off base, but I can't see getting too worked up over this. In my prior life a zillion years ago, (probably in response to the memo) we used to do a specimen corporate resolution specifying the allocation to each classification/group (this was before everyone in their own group) but it has been many years since I've seen that done routinely.

Chutzpah - a child murders his parents and then throws himself on the mercy of the court because he's an orphan. Or, Congress having an ethics committee.

Thanks!

Hoo boy, this is stranger than I thought. Basic question - CAN you be covered under an HRA if you are eligible for Medicaid? Logically, it seems like the government would be delighted to have an employer plan pay expenses before the balance, if any, is billed to Medicaid, but I'm not sure of anything at this point! If we assume that you can, and it is just a situation where there is a mix-up error, etc.. For example, provider charge is $2,000. They require 50% up-front payment on everything, so participant writes them a check for $1,000. Insurance company has a $5,000 deductible, so they pay nothing. Provider then sends bill to Medicare/Medicaid, and neglects to tell them that $1,000 already paid, and Medicare/Medicaid pays the provider the full $2,000. In the meantime, the HRA mistakenly pays the provider $1,500, since the HRA doesn't pay until participant pays $500 out of pocket. Provider now has checks in hand of $1,000 from the participant, $2,000 from Medicare/Medicaid, and $1,500 from the HRA. (A great business model if you can get away with it...). Who gets money back? If you are allowed to have Medicare/Medicaid while having an HRA, it would seem that Medicare/Medicaid should be reimbursed $1,500, (cause they are a secondary payer and the HRA pays first?) and the participant should be reimbursed $1,000. This means HRA ultimately pays $1,500, Medicare/Medicaid pays $500, which is the appropriate amount for the provider to receive, and the rest is refunded appropriately. Thanks so much for bearing with me through this preposterous exercise, which is apparently based upon a true story...

Take a look at 1.403(b)-4(c)(3)(ii)(C)(1). Seems to me that this might be a "gray area." Might also depend upon the type of "nursing home" - for example, if it is just an assisted care facility as opposed to a nursing home that only handles people who need complete care, it might make a difference in the determination. A good way of saying, "I don't know." I've rarely found that catch-up provision to be worth much, or to be even reasonably workable from an administrative standpoint, due to the data requirements to make the special catch-up calculation. We have just one plan that uses it, and that was only because they insisted. We always go with just the "regular" catch-up.

Thanks Larry.

Thank you Leevena. I still don't understand, however, why the provider doesn't send back $800 to SOMEONE. The provider has received $1,600 for an $800 service. This can't be right. ??

So, if a company is owned 100% by an ESOP, is there any exception to the excluded stock rule in 1563(c)(2)(A) that would allow (or require) this company to be considered part of a controlled group? It seems like the stock is initially attributed under 414(b), but then disregarded under 1563.

Does Medicaid follow the same rules as Medicare in terms of "Secondary payer" rules? For example, if someone is under a group health plan, (more than 20 employees) also has an HRA, and is ELIGIBLE for Medicaid, and Medicaid pays a provider for something, the group health plan should pay first, then Medicaid? What happens if there is a deductible on the group health plan - let's say $1,000, and the provider charge for services is $800. The employee writes a check for $800, then is reimbursed from the HRA. Now Medicaid or Medicare pays the provider as well. Is the provider obligated to send $800 to Medicare/Medicaid, or does the provider send $800 back to the employer HRA? I really have no idea how these rules work. I believe the provider is required to bill the primary payer before billing Medicare. Then if the primary payer denies all or part of the claim, the provider bills Medicare. Can an HRA even pay you if you are covered by Medicare or Medicaid?

Might depend upon the nature of the correction. For example, without going into all the detail, under the "one to one" correction for an ADP/ACP failure, it is permissible to make a corrective contribution only to people who are employees on a date during the year of correction that is no later than the date of correction. See Rev. Proc. 2016-51, Appendix B, Section 2, .01(1)(b)(iv)(B)(1).

Would this calm your nerves? The plans are maintained simultaneously. There is no language that "pairs" them.

Very nice. Glad you got the result you wanted. I remember some cigarette add when I was a kid - can't remember the name, but the motto was, "We'd rather fight than switch." Looks like the actuaries decided they'd rather switch than fight!

Muchas gracias!