Belgarath

Jim - I don't know what you have read, and the fact that any other 401(k) plan you have seen allows catch-ups is immaterial. Most plans these days do in fact allow catch-up contributions, but the simple fact is that they are not REQUIRED to allow them. IRC 414(v) was added to the IRC by EGTRRA. It PERMITS a plan to offer catch-ups - it does not REQUIRE it. Now, IF the plan offers catch-ups, which yours does, then there are requirements that must be followed, and the folks here have already provided you with appropriate commentary on that issue, so you should be able to now discuss this with the benefits/human resources folks at your wife's employer. My experience with ADP is that their compliance knowledge/procedures is, shall we say, less than stellar, and I expect the benefits department at the employer should be able to clear this up. Good luck!

Jim - to answer your other question, yes, the plan is allowed by law to set a maximum percentage (in your case 15%, but it could be a different percentage) and a plan is not REQUIRED to allow catch-up deferrals.

Unless it was offset. Could have been...

And just for additional EOB reference, which will also give you an example, the 2017 EOB also says, in Chapter 11, page 11.687, that it should be possible for an employee to designate whether the required minimum distribution being made for a calendar year is attributable to the Roth portion or the non-Roth portion of his/her account balance.

A question came up re a post termination adoption. The plan already terminated in June (note that this is AFTER the date when pre-approved language became available). Let's further assume that the document, done in 2009 as so many were, has only had a HEART/WRERA amendment done - nothing else. Any reason not to adopt an updated document post termination, retroactive to 2010? Curious as to opinions on this.

But, do YOU know who you are? Are you actually Jason Bourne?

Thanks. It is my understanding that the 4978 10% excise tax still applies in this situation, when the ESOP immediately turns around and sells the shares - agree? I'm still trying to nail down whether any of the GAIN on the resale of the stock can be allocated to the original selling shareholders?

For the first year of a new profit sharing plan, you must test for top heavy on an accrual basis.

Thank you. I have a little more information now. The ESOP will evidently use short term promissory notes to finance the purchase of the shares from the current owners. Essentially on the same day, the new buyer will pay cash for 100% of the shares - this cash will be used by the ESOP to repay the short term promissory notes. There will be an independent Trustee for the ESOP in this transaction. As currently described, the shares will be purchased from the current owners for a certain price "X." The new buyer will purchase all shares from the ESOP (100% of the shares of the corporation) for price "Y" which will be higher than "X" so there will be "gain" to be allocated. Plan will be terminated as soon as buyer has ownership of the corporation. Are the selling shareholders allowed to receive an allocation of this gain if they are doing a Section 1042 rollover of their sale proceeds? Does any of this clarify/change/confuse anything?

Let me state at the outset that ERISA counsel will be involved. That having been said, curious as to thoughts on the following from those who deal with ESOPS. So, you have a C-corp that is partially owned (about 24%) by an ESOP (no outstanding loan). The owners have an idea that they want to sell their remaining stock to the ESOP, which will own 100% now, and a new unrelated buyer will then purchase 100% of the corporation from the ESOP. Apparently they envision this being sort of one immediate transaction such that the ESOP will not need to borrow any funds to purchase their stock. They are also, by the way, current participants in the ESOP. First, is such a transaction possible/reasonable? I'd typically expect that the ESOP would actually have to borrow the funds, then pay off the lender as soon as the shares are sold to the new buyer and the ESOP is now all cash. But maybe what they envision is a common transaction - sort of "circular" for lack of a better term? Also, even assuming such a transaction is otherwise viable, how the heck could you ALLOCATE that much money? It doesn't seem reasonable that this could all be simply classified as "gain." Also, (not being an ESOP expert, by any stretch!) I have a faint memory that IF a Section 1042 "rollover" is contemplated, that the selling shareholders (who are also participants) cannot receive any allocation attributable to the employer securities that were just sold to the ESOP? That this would be "double dipping" - and that therefore all such sale proceeds could only be allocated to OTHER participants? Any other special pitfalls, or thoughts about this?

No, the 2% PS piece does not have to be 100% vested.

Could never pass 410(b) anyway - too many Red Sox fans in the world! (And those who AREN'T Red Sox fans really want to be - they just don't dare state it publicly...)

Thanks!

I'm taking a poll here. Since 403(b) plans are not subject to the 4975 penalties, late deposits of deferrals are not subject to paying the excise tax on a form 5330. My poll question is this - when you have late deposits of deferrals on an ERISA 403(b) plan, do you: A. Do nothing. B. File under VFC, under the approach that ERISA 502(i) applies. C. Other.

Suppose you have immediate eligibility for deferrals, but are in a classification (Red Sox fans) that is excluded from receiving an employer match. The language in 1.401(m)-5 would seem to say that you are not included in the ACP test, as you are not "eligible" to receive a match. Any other opinions?

I've never seen anything on this, which probably means it is ok. I haven't done any research, but just wondered if anyone knew if there was a specific exemption? In other words, generally if a qualified plan operates an active trade or business, the income derived from that business may be subject to UBTI. What about a ROBS plan, where the plan owns the stock, or nearly all of it, in the corporation? Does UBTI generally apply, or is there a special exemption? Maybe I'm out in left field on this to start with...

If I work .6 FTE, for example, can an employer limit my HRA reimbursement to .6 of what a full-time employee would receive? P.S. - I've seen several third party sources that say you can provide different levels of HRA benefits for, say, full-time vs. part-time employees, but have not seen any citation to official guidance.

I wonder if an IRS auditor would agree that this is a valid solution? I don't know the answer to that, but perhaps they would take the approach that since the contributions were actually made while under the dictates of the IRS Model SEP, that you can't rewrite history by simply adopting a prototype SEP after the fact. I'd consider this an aggressive (albeit possibly valid) approach. Wouldn't do it myself, but then, I'm a notable coward on these things.

I got an image of strange looking (but identical in appearance) Dr. Seuss creatures playing in a field, MOOPS and MOPES. "It's pretty hard telling the MOOPS from the MOPES, but the MOOPS play with hoops and the MOPES play with ropes." Or something equally ridiculous. I think I need therapy...

Kevin - FWIW, I have always understood that to mean (and I hope I haven't understood incorrectly all these years!) that you can't restrict the right(other than as allowed as you cite) for employees who are eligible under the terms of the plan. If, for example, you exclude leased employees from any participation in the plan, are you saying that you cannot have a safe harbor plan? That doesn't seem right to me. What you can't do, except within specified limitations, is exclude from the safe harbor anyone who is eligible to make deferrals. And a properly excluded class is not eligible for deferrals. Unfortunately, I don't have time right now to search for citations to support my understanding, or worse yet, to discover I've been wrong...

Ok, thanks. I was just curious if such scrutiny was applying only to "mega" plans, or if they were also applying it to smaller plans. Suspicions confirmed!

K2 - how large are these plans in terms of app. number of participants?

A different thought - is it necessarily goodbye safe harbor? The PLAN does not restrict anything. So the operational error must be corrected, (make up deferrals and match as required under the terms of the plan and the self-correction procedure) and then exclude them prospectively as an excluded class, assuming you can pass coverage testing. I'm no lawyer, but I'm assuming the terms of the employment contract can be modified with the agreement of all parties? Looks like Jpod and I were replying at the same time...

Yup. But in the meantime...

Maybe I'm missing something, but I don't see how a non-employee spouse as you describe can be allowed to participate/roll money into the plan.