Kirk Maldonado

One sleeper issue here is compliance with the COBRA rules. That is often overlooked in the strike/lockout situation. (I realize that this isn't a qualification issue, but it is something you might want to point out to your client.)

Hire a competent ESOP attorney.

Absent legislation that specific changes the result, I don't think that Revenue Rulings are automatically repealed. I'm not arguing that the old Revenue Ruling is good policy; I'm just pointing out an issue. I think that people are foolish to believe that if a lower level employee at the IRS does not object to (or even catch) some objectionable language in a plan document, that automatically signifies that the entire IRS has rejected all of the existing precedent on a point. That is nothing more than wishful thinking. I only feel comfortable if the policy change is embedded in an important document that has been reviewed at senior levels of the IRS and Treasury, such as a regulation or at least a revenue ruling. Even a private letter ruling isn't sufficient authority in my book; there are plenty of erroneous PLRs out there. I'm not saying that the person that received the ruling can't rely on it; I'm just saying that others can't rely upon it.

I concur wholeheartedly in Keith's advice.

Dick Wickersham was my Branch Chief when I joined the IRS right out of law school 25 years ago. I want to caveat my remarks with the fact that I have considered him a friend for all of these years. Having reported directly to him for more than three years, I can tell you that the IRS losing him is a much bigger loss than most people can imagine. Dick was one of the original drafters of ERISA, as were Ira Cohen and Bill Lieber (deceased). Furthermore, he was directly and indirectly involved in innumerable regulations projects, legislative drafting sessions, etc. since then. He was without a doubt one of the most knowledgeable persons in the country about issues regarding tax-qualified retirement plans. He was clearly the most authoritative about the IRS perspective on those matters. Dick spent an immense amount of time over the years speaking at conferences with practitioners. There is no one now at a senior level at the IRS that has the instititional knowledge that Dick possessed. He will be sorely missed.

Rev. Rul. 68-651, 1968-2 C.B. 167 Sec. 401 IRS Headnote The qualified status of an employees' profit-sharing plan will be adversely affected if it is amended to permit employees to make voluntary contributions prior to the time they become eligible to share in the employer's contributions. Full Text Rev. Rul. 68-651 Advice has been requested whether the qualified status of an employees' profit-sharing plan is adversely affected by an amendment to the plan permitting certain employees to make voluntary contributions in the manner described below. A corporation established a profit-sharing plan and trust that was held to qualify under section 401(a) of the Internal Revenue Code of 1954. All employees were eligible to participate in the plan upon completion of three years of service. Voluntary employee contributions of up to ten percent of compensation were also permitted under the plan. Distributions from the trust were to be made in cash. The plan was amended to provide that any employee who had completed six months of service may make voluntary contributions to the plan in the same manner as the plan participants. However, such an employee remains ineligible to share in the employer's contributions until he has conpleted three years of continuous service. A plan will qualify under section 401(a) of the Code if it is a pension, profit-sharing, or stock bonus plan that meets all the applicable requirements of that section. Section 1.401-1(b)(1)(ii) of the Income Tax Regulations provides that a profit-sharing plan is a plan established and maintained by an employer to provide for the participation in his profits by his employees or their beneficiaries. The plan must provide a definite predetermined formula for allocating the contributions made to the plan among the participants and for distributing the funds accumulated under the plan. In this case the amended plan permits employees with less than three years of service to make contributions thereunder but does not provide for the requisite participation by those employees in the employer's profits. Instead, the plan is now a mere savings plan with respect to those employees. A pension plan can meet the requirements of section 401(a) of the Code even if only employee contributions are made thereunder. See Rev. Rul. 66-205, C.B. 1966-2, 119. However, a profit-sharing plan cannot meet the requirements of section 401(a) if only employee contributions are made thereunder. See section 1.401-1(b)( 1)(ii) of the regulations requiring that a profit-sharing plan be a plan for the participation by the employees in the employer's profits. Accordingly, the qualification of this plan is adversely affected by the amendment permitting employees to make voluntary contributions prior to the time they become entitled to participate in the employer's profits. Furthermore, since neither contributions nor benefits under the plan are definitely determinable and since distributions from the trust are to be in cash, this plan also does not satisfy the definitions of a pension plan or a stock bonus plan. See section 1.401-1(b)(1)(i) and (iii) of the regulations.

The IRS has ruled that a plan cannot permit employees to make contributions prior to the date on which they are eligible to share in employer contributions. Whether this same result would apply in the case of a former employee, I don't know.

Changing the length of the option period under a Section 423 plan does not require shareholder approval.

Pensions in Paradise: Thanks for posting that material. Where did you find it?

But I think that Archimage had a good point, in that whether an enity is an S corporation or a C corporation is irrelevant for the controlled group rules.

I disagree with AJK0020. A lot of the postings lately relate to HIPAA, and that topic may not be of interest to a lot of the readers.

You have limited protection in the case of California.

My recollection, dating back almost 20 years ago, was that the DOL cut the employer some slack on this issue. Did you look at the regulations?

When I prepared my posting, I was focusing on individually-designed plans.

annieap1: I thought that is the purpose of the trust agreement. Also, I've never seen an institutional trustee that would sign a plan document. Frankly, if they were willing to sign it, I wouldn't want them as the trustee.

ljr: Whether the estate can repay the loan depends on the terms of the loan. The estate has no independent right to be able to repay the loan if the loan documents would preclude it.

That change may hurt plan participation, which may affect the ADP test results.

Go to your Control Panel, Board Settings, and select Daylight Savings Time. (I might be slightly off on the titles, but you can figure it out.)

You might want to look at GCM 39616 and PLR 8702063.

There was a Revenue Ruling addressing this exact situation that was issued in the late 1960s. I seem to recall it required that the employees' hours be split between the different professionals.

Appleby: 1. Given the breadth of possible topics that could be presented to a tax advisor (e.g., international issues, estate planning, sales and use taxes, etc.) a more charitable way of rephrasing what you should have said is that the person needs to consult with a tax advisor who understands retirement plans. 2. If the IRA custodian is presented with a legal opinion from reputable ERISA counsel, I would be willing to bet that they will not challenge it. Even if the IRA custodian brings in its own counsel in that situation, in virtually all cases counsel to the IRA custodian will defer to a legal opinion issued by a competent ERISA counsel.

My experience has been that the IRS is very accomdating if you voluntarily approach them on a missed filing and offer some type of plausible explanation. However, if they catch you, then they aren't quite so accomodating.

My experience has been the same as Fredman.

Harwood: Whether or not true-ups are mandatory depends on the terms of the plan.

Blinky: Actually, it was alien creatures after they abducted (and later returned) me.