RatherBeGolfing

Thanks all. I have come to my senses and will move forward accordingly, along with a recommendation to amend the plan and loan policy to treat future loans as a segregated investment.

No worries I appreciate the discussion because I'm really not sure I'm looking st it the right way either. I'm leaning towards my initial view being wrong. I'm ok doing it either way, I just want to have a some backup for how I do it.

Unfortunately it is not very specific. Is it? He gets pooled earnings (including his share of the loan interest) on the amount still in the plan. If he gets earnings on the full $100k, isn't he benefiting more than everyone else? In simple numbers: $1,000,000 in the plan P takes out $50,000 $950,000 in the plan. The $950,000 has earnings of $101,000 ($1,000 loan interest) P gets a pro rata share of $101,000 based on $100,000 account balance rather than his share of the assets that are actually invested. Doesn't this mean that everyone else is getting less earnings in the plan while he has both the loan and earnings on the non-existing loan assets in the trust? Like I said, its one of those days when things are not making sense to me.

See this is why I'm questioning myself... Each time I see it clearly another issue muddies the water. #1 does not get him close to the earnings on loan. Is it harming him? Im not sure. He gets the benefit of the loan and the interest replaces what the money in the loan can't earn outside of the trust. #2 gets him the benefit of the loan and full earnings on the $100k account balance even though half of is not in the trust. The practical ramification of #1 is that the participant with the loan receives earnings on his share of the assets still in the plan, and does not get the extra benefit of replacing the earnings lost by taking the money by adding the interest payment.

I think the long week is getting to me because I keep questioning whether I'm looking at this correctly. Any input greatly appreciated Plan has pooled/trustee directed investments Participant loans are allowed loans are NOT treated as a segregated investment Im looking at the mechanics of the loan itself rather than fiduciary issues, but there is some disagreement in my office and this is one of those days where I would gladly take a coffee-IV. The way Im looking at it, it is still a participant loan secured by the participant's balance. The loan interest is credited to the plan trust as a whole rather than back to the participant account. Bud Weiser has a $100,000 account balance and borrows $50,000. for 2018, Mr Weiser has repaid $10,000, $1,000 of which was interest. Before Mr Weisers account is credited for 2018 earnings, his 12/31/2018 balance is still $100,000, $59,000 in pooled investments and $41,000 as a participant loan. The $1,000 Mr. Weiser paid as loan interest is added to the plan trust gain/loss to be allocated among pro rata for all participant ending balances Mr Weiser's share of the pro rata investment earnings is limited to the $59,000 that is part of the pooled investments The opposing view is that the trust made the $50,000 to the participant as an investment, and it did not actually come from the participants account balance. The 12/31/2018 balance for Mr. Weiser is $100,000 before it is adjusted for earnings The loan should be tracked separately from Mr. Weiser's account balance in the plan Am I crazy, or is the opposing view describing an extension of credit (secured by plan participant assets?) as a plan investment rather than a participant loan? Thanks J

Would you mind expanding on that? I agree the assets are not excludable under ERISA since it is not an employee benefit plan under ERISA. But are there not still protections as long as the plan is qualified, both federal (at least I thought so) and state. Most states have language to offer protection as long as the plan is qualified. The argument here is that the plan is not covered by ERISA, and because it is not covered by ERISA it cannot be qualified, therefore the assets have to be included in the bankruptcy.

Which trustee argument is correct? That the plans are not covered by ERISA? That the plans are not qualified because they are not covered by ERISA? That assets in a one participant plan are fair game in a bankruptcy simply because it not covered by ERISA? Im not expert when it comes to bankruptcy but my understanding was as long as the plan was otherwise qualified, the assets were still protected.

Holly is awesome, she did our first demo with them back in 08 or 09 i think. Overall FTW has always been responsive when it comes to adding features or functions.

Thanks Bill. We have quite a few balance forward plans that DTS would work well for, and I like the integration with the other FTW modules like 1099 and compliance. I REALLY like that we can use the DTS user forms to autocomplete forms for different platforms like JH and American funds, because then I only have to teach someone one system in order for them to deal with distributions from multiple platforms

Which is why the "not covered by ERISA, therefore not qualified" was an amusingly lazy argument (for those of us who don't have to deal with this particular case...)

Has anyone used FT Williams Distribution Tracking Software (DTS)? It has some features that look very appealing but I'm wondering how much time you spent setting it up and if you have had success getting clients to use it to initiate and sign off on distribution and loan requests. Thanks.

Its actually not that difficult. I think people just assume it is because its the IRS

Can you point to anything that supports the deduction of a current contribution in a future year, other than a contribution in excess of the 25% limit?

Yea I usually do mine at least a month before due date as well. I know a few firms that do them in February Hectic must have been an industry trend this year. I got caught up in a merger and ended up filing extensions the week of July 31 for the first time in many years

Yes. I generally wait at least 4 weeks between the 5558 and 5500. Its just a PITA to deal with incorrect "late 5500" notices when you can just delay the filing.

They are two separate issues. There is still a loan failure because the loan payments were not made. The Employer caused the failure but could correct it under VCP. The failure to timely remit would also need to be corrected.

Or as I had to tell a client this morning: You DON'T get what you refuse to pay for...

I haven't done a paper submission in years, but I would assume they would not approve it since the instructions are clear that is has to be a person unless its government entity.

FTW has a report in the compliance module that breaks down the 5500 count. So for an SF it will tell you BY count 10, 9 already active and one 1/1 entry, and so on for each count. Its accurate about 99% of the time, but every now and then a rehire or something like that will throw it off. I had the same issue back when we used Relius. I'm not sure why they roll, other than that it may be a legacy issue. A long long time ago someone explained it to me as "IRS wants last years end count to match current years beginning count", and while that may have been true at some point, they sure want an accurate count now...

What is there to correct? Having a successor plan is not a violation in itself, it just creates a problem if you made certain distributions from the old plan that are no longer distributable due to the successor plan. Or am I missing something else?

If you use both the compliance and 5500 modules for FTW, it will also pull the 1/1 entry folks. And yes, I would add them if FTW did not do so for me.

Sure it does, the responsible party is still person even if the trustee is an entity. They need to designate someone to be the responsible party, this is the person who will receive mail and notices etc... Why EIN and SSN if you cant use an EIN? From the SS-4 instructions (emphasis mine): Lines 7a–b. Name of responsible party. Enter the full name (first name, middle initial, last name, if applicable) and SSN, ITIN, or EIN of the entity's responsible party. Responsible party defined. The “responsible party” is the person who ultimately owns or controls the entity or who exercises ultimate effective control over the entity. The person identified as the responsible party should have a level of control over, or entitlement to, the funds or assets in the entity that, as a practical matter, enables the person, directly or indirectly, to control, manage, or direct the entity and the disposition of its funds and assets. Unless the applicant is a government entity, the responsible party must be an individual (i.e., a natural person), not an entity.

Most will use the calculator either way. Sure they can. They DOL does not recognize self correction, so as far as they are concerned you have not actually corrected yet. I always recommend it, but not all clients will opt for it. As for the cost to fix vs tax and earnings argument, I look at it a little different. What you are actually correcting is the clients failure to follow the law. You shouldn't look at it as "it will cost me $500 in consulting fees for a $50 excise tax", instead, its a $550 dollar correction

Im saying that making the last payment (or payments) after the 5 years is fine as long as its within the cure period for those payments. So if you had at least 1 day left on the loan term you could say "correct by lump sum on the last day of the loan", and then make the deposit at some point during the cure period and be fine. I don't see that as an option the loan term is already over.

I agree you can't re-amortize. But if you can't re-amortize after the 5 year period has expired, why would you be able to correct with a lumpsum? I think the only payment that can be made after the maximum term of the loan is a payment that still has a cure period. I think the only options you have are 1. Deem and 1099 in the year of default (2018) 2. Deem and 1099 in the year it was discovered (2019)