Mike Preston

We've previously been down the path of approving hardships for emergency medical expenses that were advanced via credit card (the IRS says you can't do it, but everybody does).

I think there are two other threads talking about the fact that hardships can't be reversed if the need evaporates after the hardship is paid. Does that bear on the issue here?

As a practical matter, I think the plan sponsor has little choice but to consider the amount deposited in excess of 42587 as a mistake in fact and return it. Of course, this is based on the plan document having mistake in fact language. The other path to go down is to see whether the accoountant has some questionable deductions in the determination of the $100,000 and see whether it might not be reasonable to increase that amount. Of course, you didn't indicate how much in excess of 42587 was deposited, so we don't know the magnitude of the problem. Yet another example of clients that contribute for themselves before the end of the year getting themselves in trouble. It seems I see it more and more frequently and the root cause seems to be a financial advisor, paid via comission, a bit too eager for the client's good to see onies deposited into the plan.

There's your $0.01.

I don't see the monsters under the bed that others are seeing. Assuming the investment advisors have a long term and successful track record, the fact that the CEO has gotten to know them well is what I would expect. How could it be any other way? Different managers have different methodologies and just because investments are primarily equity based doesn't mean that they don't employ sophisticated portfolio risk aversion techniques. I just don't see the problem with the CEO holding his ground.

Why would you say that? Wouldn't they be like any other not benefitting but not excludable employee? That is, they are included in the tests with a zero benefit.

About the only difference I noticed was the heart icon with count of "likes" replaced the text box of "x people liked". Still doesn't list the names (like facebook).

If and only if they receive $.01 or more then they must receive the gateway.

IAW RBG

My point was that if the IRS considers it a discontinuance, it does so as of the date of the last contribution. And that is a problem.

For example: I *HAVE* a client that takes a very paternal approach to all things benefit related. They have less than 20 eployees and I can count on one hand the pre-retirement terminees in the last 10 years. The company has been around for over 40 years and the plan for over 35. They started out, as you would imagine, with balance forward because what else was there, other than big hair, in the early 80's? They engaged a classic investment management firm that publishes quarterly "state of the world" investment philosphy newsletters and issues quarterly statements to the Trustee with everything one would expect of a professional investment management firm. The client is a family run business and the founder's progeny have steered the company as well and as profitably as the prior, now long since retired, generation did. The average account balance for the non-owners is north of 1/4 million. The company distills the information received from the investment advisors quarterly and lets the employees know how things are going (in good times and bad... 2008 is a distant [and bad] memory). The company benchmarks fees no less frequently than every three years and has long since reduced administrative fees to less than 10 basis points (I kid you not). The investment management firm meets frequently with the Trustees. Every once in a while somebody mentions the potential advantages of participant direction but the employees will have none of it. The company certainly doesn't need a participant directed qualified plan to attract talent, it does so quite well without it. The Trustees (who are also the owners of the company) feel that they are addressing their fiduciary responsibilities professionally and responsibly and that they owe their employees every bit of effort they put into comunicating and running the plan. In short, I think that balance forward plans are most successful when there is long term stability - and that doesn't happen very often any more so the market has turned somewhat of a deaf ear to such client's needs. Did I mention this is a 401(k)? And that it would pass the ADP test each year with plenty of room to spare (even though the design is, as you would guess, a safe-harbor). I think the real losers in participant directed plans are the participants. And I think this has come about because the true professionals in the investment management world have found it more profitable to attract non-ERISA monies and have abandoned ERISA plans for the most part. But I, too, am surprised at the statistics because I would expect plans that do not offer participant direction to be, at most, in the single digits.

I would always take the position of it being a rebuttable presumption if representing the client. But something is telling me, in the back of my mind, that there is a court case that the IRS won on just this point. Maybe somebody else can conjure it up.

Probably disqualification because the 100% vesting takes place when the contributions stopped, per the IRS.

Is a 3rd party claim possible? Consider the married participant.

Not at all. THe key is that the employer may only do things that are authorized under the CBA. If the CBA sets minimum pay levels, that's fine. If it sets minimum benefit levels that's fine. If the benefits are not subject to collective bargaining, then providing them is not fine.

I would go even further. If the DFVCP filing is fileable (sp?) before the non-5558 due date (could be the tax return due date if the plan year and fiscal year coincide) I would recommend not filing the 5500 on time and include it in the DFVCP filing. Who would want to trigger a notice from IRS (whether that trigger is a 5558 *or* a current year filing).

Every time I've run into this in the real world, it is more convenient to think of compensation in two parts for all purposes. The "non-union compensation" has always been north of the 401a17 limit so there is zero practical difference. I would consider excluding the "union compensation" from the definition of plan compensation even if that would result in lower benefits than a plan might otherwise be able to provide, because clients really like thinking of the two compensation streams as giving rise to separate "benefits". In the end, though, if restricting compensation in this manner would have a material impact on cost-effective plan design I'm sure I could muster up the courage to convince the client to drop the convenience.

Isn't it 9/30 following the end of the year following death?

See Pub. 1457 and IRC Section 7520. Fun stuff.

Please be sure to let us know, because if he says anything other than the new plan's benefits hafe to be provided through the colective bargaining process then you need to find a new lawyer!

Hie thee to a labor lawyer for a better understanding of how things work. Who said? The OP. Read it again. Camel's nose under the tent and all that jazz.

It is considered to be potentially union-busting and is therefore forbidden.

If you can negotiate it with the union, I don't see a problem. If you intend to adopt the plan outside the collective bargaining process, big problem: hie thee to a labor attorney forthwith. I have no problem with owners being part of the bargaining unit. Usually, though, their compensation is, in part, subject to the union rules and, in part, not subject. We frequently run into these situations where the owners want a qualified plan with respect to the non-union compensation and, most of the time, their labor lawyer agrees that it can be done. But nobody argues with them being valid union members and the benefits/costs that go along.

Of course, the problem with that TAM is that it is discussing an event not being discussed here: an amendment AFTER the end of the plan year. Here, we have an amendment BEFORE the end of the plan year. Further, the TAM's fact pattern includes a contribution being made to the plan before the amendment changing the formula was even executed. I certainly understand that the quoted section is merely a building block to the overall logic of the analysis. But one always wonders whether different facts would lead to different building blocks. Sorry I don't have time for a more thorough analysis. Maybe next week.

I believe that is the one! Maybe we should invite the loan poobah to weigh in. That might provide a whole new perspective.