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LANDO

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Everything posted by LANDO

  1. LANDO
    Ahhhh...you have the patients of Job Austin! That certainly seems like a reasonable interpretation, and I see now how you conclude the regs support mid-year amendments of safe-harbor plan to create short plan years. Rarely can I get sponsors to engage legal counsel even for larger plans. Generally we end up providing our opinion with the caveat that they should engage legal/ERISA counsel on these less than crystal clear issues. Thanks again.
  2. LANDO
    Now that I'm reading 3(e)(3)(ii) I'm more confused. Is that saying you can have back to back short plan years as long and the requirements of 1.401(k)-3 are met for each 12 month period following a short plan year, or are you saying the parenthetical is referring to amending for a short plan year prior to the short plan year?
  3. LANDO
    I'm a little iffy on that part. Just because the amendment is allowed under the regulations, I'm not sure that means it could be made as a mid-year amendment to a safe harbor plan? Seems like that's a pretty dramatic change to the nature of the safe harbor, as in, it could impact someone's ability to take advantage of the matching safe harbor for the short plan year. Like, sponsor gives only 30 days notice that they are going to run this short plan year. Hmmmm...I like the answer tho, and may have to roll with it. Thanks for your insights.
  4. LANDO
    Just a follow up question...couldn't an amendment to create a short plan year be considered a prohibited mid-year amendment.
  5. LANDO
    That is a sweet idea Austin. Thanks. At least that gives me an alternative to share with them.
  6. LANDO
    I'm sure the answer is out here somewhere, but I'm in sort of a hurry. Sponsor acquired another organization in a 410(b)(6)© transaction. The acquired company has a Safe Harbor Plan (QACA), and the sponsor has a regular safe harbor match plan. Is there anyway these plans can be merged mid-year? My initial reaction is "NO" because of the mid-year amendment rules around safe harbor plans, but the sponsor pushing to merge to save administrative expenses. Obviously, they'd get the benefit of the 410 transition rules for coverage purposes. Any wiggle room here?
  7. LANDO
    I agree with ETA. We have submitted several VCPs where we have submitted proposed amendments and received compliance statements. I think you have 150 days to actually adopt the amendment after receiving the compliance statement, but don't hold me to the number of days. The point is, you submit and ask, can we adopt this even though it wasn't done in a timely fashion?, and then adopt after the fact.
  8. LANDO
    Right...well ultimately the 404a-5 disclosure is the legal plan administrators responsibility, but obviously they are most likely hiring their vendors to prepare them. We use Newkirk and they do include redemption fees and trade restrictions in the participant disclosures.
  9. LANDO
    I think it typically falls to the recordkeeper, through their agreements with the mutual fund companies, to enforce trade restrictions and redemption fees at the participant level. If the recordkeeper doesn't enforce them, how would the mutual fund companies have any idea?
  10. LANDO
    I guess I understand if you are saying the trade restriction rules changed after the disclosures for the current year were made.
  11. LANDO
    Section 2550.404a-5(d)(iv)(1) regarding investment disclosures, which is an annual requirement, requires "a description of any restriction or limitation that may be applicable to a purchase, transfer, or withdrawl of the investment in whole or in part (such as round trip, equity wash, or other restrictions)" I would think the participant would have had to receive a disclosure regarding this. Hmmm....I must be missing something here.
  12. LANDO
    Yup...XY&Z are controlled in your numerical example and per your modificiation...assuming all three shareholders still own an interest in each entity. For the effective controll part (identical ownership > 50%) you have to worry about the attribution rules under 1563, which are different than the 318 attribution rules.
  13. LANDO
    No sweat. Controlled Groups can be real tricky. If you find yourself in deep water, better to refer the sponsor to their ERISA counsel. As Mike points out, there are often things the sponsor doesn't share that can impact the determination.
  14. LANDO
    Well, then you should probably take a look at IRC 414(b) and 1563.
  15. LANDO
    Of course my answer above assumes no attribution under IRC 1563.
  16. LANDO
    I'm not exactly sure what your saying here, but in your Controlled group #1 X & Y are one CG, and C & D are another CG. Z would be unrelated to either (unless some attribution applies with respect to Shareholder 2). For the common control part of the CG test (the 80% test), the same five or fewer owners still have to have an interest in each company to be counted. In other words, the owners must be "common" to each entity to be counted in the test. So for example, the interests of shareholders 2 & 3 would not be counted for purposes of determining a CG for X & Y because they are not common owners of each entity. For the same reason A & B are not part of a CG with each other.
  17. LANDO
    Thanks for the response Belgrath. I didn't see that Sal addresses it in the EOB, but maybe I missed it. And maybe I didn't look that hard after I found your citations above as they were right on point. Actually, I think it would be pretty rare where an employer would want to disregard service with a related employer anyway. If a sponsor did want to ignore service with a related ER prior to becoming related, and assuming it's allowed: On the eligibilty side, if a sponsor wanted to delay the entry of a related employer's employees into the plan, they could just move the effective date of the participation agreement. On the Vesting side, it may be possible but could create additional recordkeeping issues, so I'd try to avoid it there as well. I think I like your answer better.
  18. LANDO
    I realize this is an older post, but just in case you are referring to this post regarding what service with related employers must be counted for eligibility and vesting, which I am, I believe the citation to Treasury Regulation 1.411(a)-(b)(3)(iv)(B) above should be a reference to Treas Reg 1.411(a)-5(b)(3)(i - iv). A minor thing, but it might save you a couple of minutes of hunting. I believe Treas Reg 1.411(a)-5(b)(3)(i) says that a plan "may" disregard service for any periods during which the employer did not maintain the plan, then 1.411(a)-5(b)(3)(ii) says that a participating employer is considered to maintain the plan when the participating employer adopts the plan, and then lastly 1.411(a)-5(b)(3)(iv)(B) clarifies that service with related employers must be counted for periods during which the employers are related. Generally, I think plans recognize all service with related employers, but 1.411(a)-5(b)(3)(iv)(B) certainly implies that counting service with a related employer, prior to becoming related, is optional...at least for vesting purposes. Our PPA ASCi VS document and our EGTRRA PPD Proto do not distinguish between service prior to becoming related and otherwise, so I would count all service, unless we drafted some override into the plan. I also notice that the 410(a) regs do not contain similar language and simply reference the DOL regs under 29 CFR 2530...perhaps a different standard for participation? I would certainly welcome other thoughts or insights on this one.
  19. LANDO
    We are looking for a a participant notice preparation and fulfillment solution; ACA, QDIA, Safe Harbor, Participant Fee Disclosure. Currently our document system (ASCi - DGEMS) creates safe harbor notices, we use Newkirk for our participant fee disclosure notices, we generate ACA and QDIA notices internally, and then where a sponsor wants fulfillment services we contract with a local vendor. Yikes, that's a lot of moving parts! We have looked at Broadridge and Newkirk's combined notice and fulfillment solutions, and they appear to be viable, but I am wondering what others are doing, and if there are other vendors out there with combined notice and fulfillment services available? What's your experience, and how has it worked out?
  20. LANDO
    I don't think being a W2 employee of another organization would preclude someone from also working for their own Sole P. That seems pretty obvious, but I understand if you're saying that's not what happened here. I was simply offering a possible alternative view.
  21. LANDO
    What's to say that the business didn't start earlier (Sole Proprietorship), but was only incorporated on 12/1/2014? Is there some reason the entity could only have been a corporation? Something to do with practicing medicine perhaps?
  22. LANDO
    Tom, that registers with me. Thanks for sticking with me through this exercise, I very much appreciate that. Thanks again.
  23. LANDO
    Sorry about that Tom. I should have been clearer. Let me rephrase...based on the example I gave, the plan passes coverage using the average benefits percentage test on a benefits basis, and fails 401(a)(4). If you're saying the plan I described can be restructed into component plans, and then each component plan can pass coverage and nondiscrimination, I'm all ears, not to mention that we are a long...LONG...way from saying any plan that uses a uniform allocation formula (pro-rata or Integrated) would pass nondiscrimination testing, and the allocation safe harbors don't really get you anything. Any thoughts about my safe harbor allocation formula question?
  24. LANDO
    Bird, no sweat. Seemed like a reasonable point/question. Tom, I think this is a pretty simple example where a pro-rata allocation would pass coverage and fail non-discrimination... HCE 1 - Age 25, Comp $250,000 HCE 2 - Age 55, Comp $250,000 NHCEs 1-10, all Age 30, all Comp $50,000 5% Pro-Rata PS allocation, no other allocations. Four of the NHCE's don't meet last day requirement and don't share Plan can only pass Coverage on a benefits basis. Plan Fails non-discrimination on contributions basis (one rate group, Ratio Percentage 60%). Plan fails non-discrimination on benefits basis because there is no NHCE's in the 25 year old's rate group. Same allocation for everyone...passes coverage and fails non-discrimination. Again, a moot point since we were talking about a safe harbor allocation formula in the first point, but an interesting exercise. I think that brings me back to one of my original questions. Would the allocation formula they are proposing (a pro-rata allocation, or a two tier integrated allocation, or both) be considered a safe harbor allocation formula? I get it if you're all exhausted with this post!
  25. LANDO
    I guess that's right Tom. If they didn't benefit because of an allocation condition they'd get counted as not benefiting under the coverage test, AND they wouldn't be in the HCE's rate group...same same. That's a good point about a top heavy plan, and a point in favor of a safe harbor allocation formula...free pass. Not to get too deep in the weeds, but we're pretty far in the weeds already. What if you have 2 HCEs and only 5 or 6 NHCEs benefiting out of the 10 total NHCEs, but I'm still able to pass coverage using ABPT? Am I still always going to pass non-discrimination testing, or does that depend on the demographics? If I'm thinking about it right, I might pass coverage, but still fail nondiscrimination if I had to pass the general test.
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