Larry Starr

My comment about finding a new place to work was a joke, and there was a smiley face at the end (which some have told me don't come through when they look at the posting, even though it was created by the system itself). I was certainly not serious about that and hope you understand. I'm glad to hear your firm sounds like it is willing to confirm what is the correct approach and open up the prior guidance that you received to make sure you are on sound footing. Good luck.

We are still very early in the process, and this is one area where additional guidance is needed on a bunch of things. The attached article (just saw today) is a pretty good discussion of what some of the issues are. Enjoy! SECURE Act leaves questions about distributions for birth, adoption _ Mercer.pdf

Huh? They gave him an election to opt out, so what did he do? Did he return the form and they neglected to follow it? Nevertheless, give the timing and the amount, I would have the employer tell him they never received his election of zero and therefore nothing will be changed.

Barring any (unusual) language, once a participant always a participant. He can continue to defer.

Let's start with giving us all the facts. The participant says he signed an election; what does the employer say? Does the employer agree that they screwed up? If it was screwed up by the employer, how long did this go on? One would question why the employee did not inform the employer following the first paycheck after the deferral election failed to be implemented. Give us the full story please.

What you can do is share all of this thread with the powers to be. If the likes of some of the participants on this board don't make them think about what they are doing, find another firm to work for! ?

PLEASE: follow Mike's advice (same as mine). Your client has a problem; you have identified it. If they don't believe you, hire an ERISA attorney who will explain why you are right. They need to change the process. I would read that language as follows: Plan year = calendar year. Participant terminates 6/15. You can pay him out on his PRIOR 12/31 balance. Once you pass the next valuation date (12/31 of the year he terminated), that account get's updated. It is exactly the way we do it, except we pay them out AFTER the year is over in which they terminate and the work is done for that year end. There are safe harbor allocations that often have to be done and can't be done until the end of the year so the payout is not known until the year end work is done. And if they go another year, it gets updated again, and again, and.... you get it!

Absolutely correct.

Nonsense. Tell him to go pound sand (nicely, if you want). If he starts talking lawyer, my answer is ALWAYS: My lawyer can beat up your lawyer! There is no lawyer who will take this case on a contingent basis, and he won't pay for a lawyer on a cash basis.

Perfectly fine. We are also fee only. We did this years ago, but have not had such an arrangement for maybe 25 or 30 years. Anyway, we had a disclosure on our invoice that said "$X of the above fee will be paid to Agent W for his/her part in servicing your plan. You signature below acknowledges this and approves the payment to Agent W". Assuming we get the client's signature, we cut a check and 1099 it to the agent.

First comment: doesn't your plan have language dealing with this. I'm out of my office for a few days, but I believe the plan language allows a forfeiture with the requirement to restore it if it is ever necessary. Second comment: does anyone think it is legal to "freeze" the accounts from gains/losses when someone terminates. Never heard of such a thing but, not being in the office, I can't research it. Certainly seem like it could be discriminatory.

I've done this many times. Once you adopt the 401(k), the SIMPLE is no longer a good plan. Stop contributions immediately. You can reverse the salary deductions and the employer will have to pay the funds to the employees. The contributions will then become voluntary contributions to an IRA for 2020. Since I assume no one is over the IRA limit yet, you don't have to worry about excess contributions to an IRA which can be fixed using the stated process for excess IRA contributions.

That is correct. Here is a slide from Derrin and Ilene's presentation the other day:

I have to admit I was not contemplating a plan with each person in their own group. I thought (without good reason) that we were talking about a plan (think PS) with a regular allocation in the plan (think, for example, super integrated) and that is what we had to use the -11g for. I probably need to go back and re-read all the responses, but what is missing from the original post is what exactly IS the current design of the allocation? Is every person in their own group?

We provide copies of EVERYTHING to the client so there is nothing they should need from us if they leave us. Therefore, when someone leaves, we send them a letter signing them off but also telling them they have everything but if they should need anything, we have a "document assembly fee" of $250. It's amazing how when you tell them it's going to cost them something, they find the missing info. But if not, we await the check BEFORE we do anything. The information we have does NOT belong the employer, in contrast to your statement. It belongs to us; we get copies of everything, but nothing we have BELONGS to the client. When we takeover a client, we copy all of their old documents and reports and return all the originals to them. You need to recognize that the information does not belong to the employer (you say that a couple of times in the posting, which is why I repeat my comment). Hope this helps.

Then refer back to my original response. The SE issue is interesting, but we don't have to delve into it in this instance.

I hear you but I'm not persuaded (yet). You start with "if one has to perform a general test", but I'm suggesting you don't have to perform a general test if the allocation meets the requirements of 401(l) (2)(A). I don't think the reg contemplates our scenario, and doesn't the law (the code) get preference over a reg? My technical argument: I don't believe the parenthetical in 1.401(l)-2(d)(4) eliminates my argument. I can argue that the -11g is part of the plan language when adopted and provides a formula for a specific combination that passes 401(l). Would you feel better if the -11g actually had explanatory language saying that it is applying a formula of 80% of TWB + 1 (or whatever)? I don't think such extra verbiage is necessary, but I can see the argument.

I think you are overthinking. All that matters is that the end result of the allocations (both the original plus the -11e amounts) is a safe harbor (integrated) allocation. The -11g is part of the allocation process/formula. There is nothing I know of that says otherwise. And yes, Pizzeria Uno is still the provider of lunch for the Relius meetings!

Might work if the specific PT falls within the guidelines. It's a relatively complicated process but if it fits it might be worth a try. Here's a link to the PTE: https://www.govinfo.gov/content/pkg/FR-1996-07-31/pdf/96-19483.pdf

They are required assuming his beneficiary will receive the proceeds (and not as key man insurance that is payable to the plan). He has years where he failed to report taxable income; if he gets caught he gets caught. There is also the minor issue of recovery of PS 58 costs at some eventual date but I will ignore that. Certainly start now, but decision has to be made about past years; but probably only for open tax years (3 years back).

And that is exactly what I would require in this situation; I might try to get the answer in my own mind, but I want the proverbial "good ERISA attorney" to put it in writing for the client! BTW, Ilene fits that description!

Well, the results are as follows: If there is a prohibited transaction in connection with an IRA account at any time during the year, the account stops being an IRA as of the first day of that year. The IRA is treated as distributing all its assets to the IRA owner at their fair market values on the first day of the year. If the total of those values is more than the basis in the IRA, the IRA owner will have a taxable gain that is included in his or her income. I believe that gives you what you are looking for, which is not what you were HOPING for!

There is no "automatic" anything. Again, IF the income is UBTI, then the rules for UBTI applies to the plan and the plan would have to file. Does that get at your question? If not, come back and be clear as to the issue.

Are you saying you have a limited partnership that is an asset of a retirement plan? I'm not sure what your question means, but if that particular investment produces UBTI (unrelated business taxable income), then the appropriate rules apply and the PLAN will have to file a taxable return (assuming the amount rises to the reportable amount). Whether there is an accredited investor who is a participant is immaterial to the determination of UBTI, so I'm not sure why you bring that up.

If the initial beneficiary is NOT an EDB (eligible designated beneficiary, such as a spouse), then the 10 years is fixed. Doesn't matter if the beneficiary dies before the end of the 10 year period; if the bene does die, the balance still needs to be paid out within the 10 year original period.