Mike Preston

The portion of the current payment stream that is directed to the ex-spouse can be enough to make the ex-spouse whole if it is the sum of the expected payment during the life of the participant plus a monthly amount sufficient to purchase a life insurance policy on the life of the participant with the proceeds intended to provide a lifetime annuity to the ex-spouse. A judge could easily order this if it is determined that the ex-spouse bears no responsibility under state law.

My comment is silent on the issue you attribute to it. It goes to the nature of loans. They are considered new "transactions" each year so the new Plan Sponsor doesn't need to find that past decisions were imprudent to repudiate them going forward.

Me, too!

Loans are ongoing transactions, so yes, whoever is the Plan Sponsor (at whatever time) has an exposure.

Which is to say, they don't. I'd ask the actuary that said you could use a set forward to provide a cite. My guess is that the software allows a set forward "just in case" the regs are changed to so allow someday.

I'm confused. You say it is a "non-safe harbor" match. How is that related to the topic being discussed?

.02: I guess you are entitled to your opinion. It is so difficult to argue, point by point, with posts when the language used doesn't communicate precisely. Care to re-word the last two lines of your first paragraph? As far as your second paragraph, I think I'll pass on commenting other than to say that "spirit of the law" is pretty hard to pin down so I'm glad you have convinced yourself as to what that is.

Tom, I don't see what you are talking about. The wording of #7 is precisely what it should be to mimic the reg.

I don't have access to the FtWilliam write up that you quoted. I hope nobody reads that write-up too closely because the references to rate groups are misguided. Instead, those references should be to allocation (or benefit) formulas. But as a warning that things are potentially changing I guess it serves its purpose and doesn't need to dot every i and cross every t.

It sounds like an "insignificant" operational error and therefore correctable under SCP. Make it so. Have the plan sponsor make the plan whole. It isn't worth investigating who might be held accountable and to the extent the participant receives a windfall, so be it. As part of the SCP correction the Plan Administrator should tighten their procedures to preclude the financial institution from making distributions without appropriate written authorization. Authorization should require the blessing of their TPA (you?).

Something doesn't add up. No Trustee refuses to follow the instructions of a Plan Administrator. No Plan Administrator authorizes funds to be paid to non-terminated participants. No Trustee pays monies to somebody without instructions from the Plan Administrator. You aren't telling us something.

I couldn't find the text of your post in any link.

1. Yes 2. Yes, if document is properly drafted. What does your document say? 3. Nothing, they are not entitled to a top-heavy minimum. Of course, your document can't say something different. Does it?

Tom, where did you get that write-up? Before I comment on it publicly, I'd like to know.

Why not a regular lump sum that is then rolled?

If the averaging period encompassed 2016 or later last year it would have used the 2015 TWB for those years. If the averaging period encompasses 2016 or later this year it will use the 2016 TWB. Those are identical.

Based on what I'e seen, the IRS is still taking a strange view of how 412(d)(2) amendments are supposed to work.

I see, you were answering my query, not responding to the original assertion. I looked it up and my query should have been answered as follows: 1) There is no minimum threshold for direct ownership. So, A is considered to own the 2% that A actually owns of the parent. 2) There is an implication that parent directly owns some portion of sub (otherwise it shouldn't be described as parent-sub). Perhaps parent owns 94% of sub and person B owns the other 6%, directly. 3) If so, then anybody who owns 5% or more of parent (which neither A nor B does) would be considered to own their pro-rata share of parent's ownership in B. None of that matters in this case. Sorry for the misdirect.

Its more than, not just, 5%. Really.

Separately. Person A is a 1% owner and person B is a 5% owner. And, yes, person A is considered to own its share of the subsidiary as long as there isn't a minimum threshold for attribution. If there is, I'm sure someone will mention it.

Nothing takes two minutes.

You are correct, they can't.

I can't imagine the IRS would complain about a taxpayer self-imposing the nuclear option. But you don't get to pick and choose which portions you get to impose. It is all or nothing. So, I think contacting a tax lawyer or an ERISA lawyer would be mandatory in such a case. And Bird, let me nitpick a bit. I agree with what you said but I'd substitute "new EIN for the **TRUST**" for "new EIN for the plan". The SS-4 is filled out slightly differently when the EIN being requested is for the **PLAN**.

There is no question about what the correct thing to do is: a trust account with a separate TIN (Trust Identification Number) With that said, I run across a gazillion plans established just as you described: an account set up at a random financial institution under the auspices of the Employer's EIN. In addition, I run into even worse: an account set up at a random financial institution under the auspices of the Plan Sposnor's SSN! I think the IRS takes a pragmatic approach to these things. As long as all the taxable reporting is done and as long as the accounts are treated properly (no comingling of personal assets, 1099's are issued when appropriate, withholding done properly) I have never seen the IRS make a big deal out of this issue. So, while I agree with those who have told you that, technically, the account as established is just another bank account of the employer and the IRS *CAN* take the position that contributions weren't really contributions and rollovers were something else entirely (what? hard to say, but certainly not entitled to favorable tax treatment) I've seen far too many of these mislabled accounts survive audits at all levels to be like Chicken Little when I see it. I try to get the financial institution to substitute a TIN (which I generally need to apply for on behalf of the client) which they frequently will refuse to do, instead insisting on closing the account and establishing a new account, but strangely some will just substitute the TIN and life goes on. The alternatives that the client faces are typically beyond their comprehension. If the account is just another account of the employer it means that the plan and plan sponsor suffer catastrophic consequences and they just can't believe that all their deductions are lost, both at the personal level (think 401(k) and rollovers that weren't) and the Plan Sponsor level (think deductions that all go away). Another alternative is to claim some sort of failure and try to fix it under EPCRS. I've never had a client opt for this. And finally, the one that always seems to win the day: change the accounts to a valid TIN either by substitution by the financial institution or setting up a new account, and rely on either winning the audit lottery or counting on being able to argue out of it should it become necessary. There is another option that I won't allow which is to leave things as they are "because my broker said this is fine". Those folks are just not ever going to be my clients. The reason that so many have gotten away with it for so long with so few consequences is that a Plan Sponsor is free to invest funds with a discretionary financial institution which processes all transactions under a TIN that belongs, not to the Plan Sponsor, but to the financial institution. This goes back to my point that as long as 1099's are properly issued (which virtually guarantees that the tax system doesn't suffer a loss) the IRS will not dig any deeper. I'm sure others will add their own experiences. In your specific case there may be enough on the line to convince the Plan Sponsor that formal correction is desirable. Your case highlights the trust account vs. employer account issue rather starkly. And it makes one wonder what might be different if this Plan Sponsor had done it right from the beginning: - would the financial institution have declined to open the account had they known that it was supposed to be a qualified plan account? - would the financial institution have opened the account, but insisted on a completely different protocol and different forms signed and attested to? - would the folks who sold them the real estate have refused to sell to a qualified plan? [There are investment rules I have no knowledge of personally but I know there are different reporting requirements under certain circumstances.] If so, is the Plan Sponsor now on the hook for misleading them in some way? Good luck and let us know what happens.

The midpoint is always used for rate group testing. The SH is used for 410(b) coverage testing. If 410(b) is less than SH but equal or greater than non-safe harbor then facts and circumstances.