Belgarath

Thanks, I'll try it out next time I do a search.

ESOP - I think you are talking about the special treatment under f(3), and I'm talking about f(2)? So let's say the fully deductible payments of interest and principal is 700,000. This is the level annual payment that was established when the ESOP was started. But due to stock price appreciation, the shares released have a value of 800,000. For 415 purposes only, as I read the regulation I referenced in the original post, 700,000 is the amount that is allocated amongst the participants, not the 800,000 actual value of the stock. Agree/disagree?Aare you saying that f(2) doesn't apply to an S-corporation ESOP?

I'm looking at an S-corp ESOP and a 401(k) - two separate plans, handled by two separate TPA's. The ESOP TPA is saying that there's a 415 violation, and refunds of "X" must be made. I think it is partially true, but I want to make sure I'm not all wet. The allocations under the ESOP, for 415 purposes, are showing as (pick a number - say $800,000) but the repayment of principal and interest on the loan, which is the total contribution, is, say, $700,000. As I read 1.415(c)-1(f)(2), for 415 purposes only, the allocations under the ESOP should be based on the $700,000, not the $800,000. This would reduce, but not eliminate, the 415 violations. As an aside, share prices are higher than before, so can't use the special exception for using devalued shares. Am I missing anything on this?

I prefer the opposite approach, "Once I thought I was wrong, but I was mistaken." No, wait a minute, that's my wife...

And I'm happy to report that the "right click open in new window" approach works perfectly! Wish I hadn't waited so long to ask...thanks again!!

Thanks all. I'll experiment. Mr. Bagwell, we have Internet Explorer as well.

Well put. So if you are a halfwit to start with, and you are half out of your mind, that makes you a quarter-wit, which is the technical term for politician. I wouldn't admit it if I were you... Thanks for the response, it is helpful.

This subject always gives me fits. Suppose a plan is utilizing a basic safe harbor match, and in addition wants to provide a discretionary 100% match on deferrals in excess of 5% up to no more than 8%. So 8% deferral gets you a 7% match. Since deferrals in excess of 6% are being matched, it blows the ACP safe harbor. But do you have to test the ENTIRE match for ACP, or just the match in excess of 4%? I've heard and read different opinions, and it seems that 1.401(m)-2(a)(5)(iv) allows you to choose? The subject ain't as clear as I would like. Would be interested in any opinions. Thanks. (P.S. - this is actually a 403(b) plan, but I put this question in the 401(k) forum, since this is where it always seems to come up)

When I do a search, it comes up with a bunch of results. So I click on one of those results, and read it. When I'm done, how do I get back to the search results? When I hit the "back" button it takes me all the way back to the Forum, and I have to re-enter the search parameter. I'm sure there is a simpler way! Thanks.

Can you rely on the "separate accounting" clause in 1.401(a)-20, Q&A-4? Q-4: What rules apply to a participant who elects a life annuity option under a defined contribution plan not subject to section 412? A-4: If a participant elects at any time (irrespective of the applicable election period defined in section 417(a)(6)) a life annuity option under a defined contribution plan not subject to section 412, the survivor annuity requirements of sections 401(a)(11) and 417 will always thereafter apply to all of the participant's benefits under such plan unless there is a separate accounting of the account balance subject to the election. A plan may allow a participant to elect an annuity option prior to the applicable election period described in section 417(a)(6). If a participant elects an annuity option, the plan must satisfy the applicable written explanation, consent, election, and withdrawal rules of section 417, including waiver of the QJSA within 90 days of the annuity starting date. If a participant selecting such an option dies, the surviving spouse must be able to receive the QPSA benefit described in section 417(c)(2) which is a life annuity, the actuarial equivalent of which is not less than 50 percent of the nonforfeitable account balance (adjusted for loans as described in Q&A 24(d) of this section). The remaining account balance may be paid to a designated nonspouse beneficiary.

Ah - then I go back to my first post. NOOOOO - IMHO it shouldn't be allowed. Only allowable if you do an interim valuation.

Now I'm confused. Why will it significantly affect the assets of the other participants? If the total assets are now $420,000 and his share is 44% (or 184,800) and he receives a distribution of $184,800, how does this diminish the value of the accounts of the other participants? Their accounts should still hold the same number of shares as on 12/31/17, (albeit that they are currently worth much less per share) and when 12/31/2018 rolls around, their share value should be the same as whether this distribution took place or not. It'll be up or down depending upon the total performance for the year. Maybe I'm just missing something.

I respectfully disagree if I'm understanding what you are saying - the fact that the plan PERMITS it doesn't necessarily mean it is ok. IMHO, it would be a gross breach of Fiduciary duty to allow full distribution of a 12/31/17 account value if there has been a big loss in a pooled account plan. To illustrate by way of an absurd example, suppose 12/31/17 total plan assets are 1 million. The share attributable to the owner/Highly Comp/probably Fiduciary is $400,000. Current total asset value due to big losses is $420,000. Do you think it is ok to give the Honcho a $400,000 distribution? I don't.

They like to live dangerously, eh? You could recommend that if they don't like your interpretation, they should try putting it in front of an ERISA attorney. Or possibly an English professor. P.S. If I didn't make it clear, I'm not casting aspersions on YOUR interpretation, but rather their reading of the language. I agree with you, and ETA put it nicely and succinctly.

Hopefully someone who actually knows something about this (and that ain't me) can help you. At this point, I'm only speculating - I'm not certain that there are any specific monetary penalties. I'm guessing that the PBGC wouldn't necessarily issue a notice of noncompliance for one participant in a situation such as you describe, but if they did, then I believe the termination would be nullified, unless the PBGC then "reconsiders" and revokes that noncompliance notice. Hopefully one of the actuaries or other DB experts can give you a good answer.

Does this help? (From 4041.31(f) (f)If no notice of noncompliance is issued. A standard termination is deemed to be valid if - (1) The plan administrator files a standard termination notice under § 4041.25 and the PBGC does not issue a notice of noncompliance pursuant to § 4041.31(a); and (2) The plan administrator files a post-distribution certification under § 4041.29 and the PBGC does not issue a notice of noncompliance pursuant to § 4041.31(b).

QDRO - let me see if I can clarify what I was trying to say. Let's say that I own 100% of A and B. I sell the assets of A, as discussed in the original post, but A still exists, since it was an asset sale. So, A and B are still a controlled group, but there are no employees of A, as they have all gone over to "C." I've been informed me above this is a normal thing to do in a corporate transaction (and it seems very reasonable). So, to now transfer plan sponsorship to "B" it really seems like just a matter of amending the plan to change the sponsoring employer - it isn't a "multiple employer" situation, as it is still a controlled group. Thoughts? Thanks again. P.S. - so, assuming "C" will not assume any of the assets in a spinoff, etc. transaction, then this is a severance of employment for the former "A" employees, a partial plan termination with 100% vesting, etc. - distributable event - all the normal stuff.

So, Corporation A and B form a controlled group. "A" is the sponsor of a plan, and "B" is a Participating Employer. For purposes of this question, let us assume that "A has an EIN of "1" and "B has an EIN of "2." We just found out that someone purchased "A" several months ago, SUPPOSEDLY in an asset purchase. The information is a bit sketchy at this point, as the new owners of the assets of "A" will apparently keep the same business name, but change the EIN to another number. I don't know enough about corporate transactions to know if this is possible - in other words, can I purchase the assets of "A" and those "assets" include the right to continue doing business under the same name, but just under another (new) EIN? If so, then it appears that "A" and "B" are now, in fact, still a controlled group, as "A" still exists under EIN #1 and the ownership technically hasn't really changed? And that the asset purchase/issue of new EIN now creates a new entity, "C" which must now choose either to adopt the assets and liabilities of the former "A" plan, or establish an entirely new plan? I'm finding this very confusing when determining how to handle the plan issues. All of the employees of "A" are now part of "C" if in fact there is a new entity "C." Whether "C" will continue with a plan is unknown. But "B" wants to continue to sponsor the plan as is, with no involvement with "A" or "C." This works fine if there is no controlled group, as if there isn't, it is just a Multiple Employer Plan at this time, and can withdraw or spinoff or whatever under normal procedures. I'd love to hear nay thoughts on this. Getting solid data from the client in this situation is like pulling hen's teeth, so I'd rather have a better understanding of the corporate issues before using the vise-grips. Thanks!

Perhaps call the DOL and ask them this question?

You are right, I shouldn't assume. On the other hand, if politicians (and I will refrain from using names lest I offend people) don't have to worry about facts, why should we... Well, thankfully we are held to a higher standard than politicians.

FWIW, I was operating on the assumption that the TPA, whoever, incorrectly calculated the 2X amount and told the employer to deposit that amount.

You are probably too young to remember the Mouseketeers, even on reruns. Just substitute TPA for MIC, then CPA for KEY, then go directly to MOUSE. Tom Poje likely has a musical number that incorporates this...

I'd be comfortable with considering this a "mistake of fact" - and allowing the return of contributions. A mathematical error is one of the situations that the IRS mentioned in a PLR from back in 1994 - let me check - 9144041. Seems to me that if the TPA, CPA, EA, MOUSE, whatever gave the employer a calculation that said "deposit x dollars for the match" and there turns out to be a slipped digit somewhere, it qualifies. I assume this is within 12 months of the error? Almost has to be - don't see how they could have deposited the 2017 match in May of 2017... Well, ok, I suppose they could have deferred the maximum by then, and deposited the match as well, but let's say it is unlikely.

Cuse - yes, there was a discussion of this issue a while back - I'm sure you could find it with a search. Suffice it to say there was disagreement on the subject, as there is here. You pays your money and you takes your chances...

30's? That's for lawn chairs and sun tan oil. (Or the rednecks just use lard)