Larry Starr

I should point out that there are differences of opinion; you know mine. I should note that Derrin does not agree; he believes that the Schedule C can be treated as earned ratably over the year. The fact of the matter is that there are no regs or cites that specifies either position as the correct one, but of course mine is the correct one!? The argument about estimated quarterly payments doesn't hold up for me; the government wants it's money during the year, based on an ESTIMATE of what might be the total income for the year, and there are lots of rules if you are off substantially with regard to underpayment. But the key is the it is ESTIMATED taxes, which is not based on ACTUAL earnings, so I don't think that argument is on point.

BLUSH!

Just fix the plan number on the document now. As it's an AA, an amendment would be appropriate. Nothing else needs to be done since the more important thing is that the 5500s appear to have had the correct number.

Yes, but discrimination testing must still be done and that employee who terminated in June may be entitled to a contribution depending on the circumstances.

Always nice to have complete information at the beginning to answer questions appropriately. Anyway, go back and review my prior answers: nothing changes. And yes, you will have to do non-discrim testing if you change the termination date to end of year.

Luke, no we are not saying the same thing. Half of zero is zero. At June 30 the earnings for a SE individual is ZERO; he or she hasn't earned ANYTHIING! 100% of the money is earned on the last day of the year.

I have railed against the use of TPA to describe what we do since time immemorial. I have lost that argument, but I still don't refer to ourselves as a TPA and I correct anyone who uses that term with us. We use the phrase "retirement plan service provider" or just plain "service provider". Because, I ain't a THIRD PARTY anything! We're a FIRST PARTY with our clients. I ask clients if they would refer to their atty or acct as a "third party atty or acct". Same thing with us. We represent the client directly, not as a third party. The phrase TPA came from the health insurance industry where there really is a "party of the third part" which is different than the party of the first part (the client) and the party of the second part (the insurance company) who then go out and hire a true THIRD PARTY to do some work on their behalf. What a mistake our industry has made and continues to make.

Assuming facts not in evidence. He never said that there were any employees other than the sole prop.

I don't believe that is possible. Legally, there is NO COMP through 6/30. A sole prop is considered as earning 100% of his comp on the last day of his taxable year (12/31 almost always). A simple new amendment that both rescinds the prior termination date and adds a new one of 12/31 would take care of the problem quite easily.

Mistake was to terminate plan as of 6/30. As others noted, that means he has ZERO compensation for the short plan year. Consider rescinding the termination and re-terminating as of 12/31 if getting a contribution for this year is important enough to the parties.

I agree; our withholding account is money that already belongs to the gov and not the plan, but every once in a while, as you note "when all else fails", I'm not against doing it this way. It sits in that account for all of about 5 minutes.

What issue? For us? It's an administrative process; nothing fiduciary about it. We are just facilitating the check, just as the bank would do if they weren't so f'in stupid!

What you are being told is simply not true nor legal. You may need professional assistance as I even question whether the original determination of two accounts not being eligible for distribution to an alternate payee, but it is possible. You can try taking this on yourself, at least at first, by contacting the plan and telling them they are wrong, that a QDRO does NOT "age out" and they need to check with their own ERISA advisors before you go ahead and contact the Department of Labor on them. That might cause them to get some assistance from someone who knows what they are talking about. Good luck.

I would pretty much always expect that result, but it is up to the new owners of B as to whether they want to do so or not. They have options, including just counting service with A for eligibility and not vesting. But it is their decision; I'm not sure the "shame on you" is automatically deserved because there are situations where it would specifically not be desired by the sponsor for whatever their reasons might be.

Sale proceeds are NOT earned income. No, you can't count THAT money as compensation. But they can PAY compensation to them for 2020 that would count.

I'm not sure I agree (nice way to say I don't agree ?). If the spinoff occurs, say, Feb 1 but you want the new plan to be effective for the entire year (beginning 1/1 of that year), I think I would make it effective 1/1. The spinoff can "transfer" even after the new plan is set up; I don't see it as having to be coincident. I certainly would not make it effective 1/1/12 (or was that a typo?).

Sounds like the judge was blindsided by the attorneys who did not explain that this is NOT an ERISA plan and therefore is NOT subject to the QDRO rules. Many government plans have their own equivalent to a QDRO and do require a court order. Has anyone checked with the plan to see if they have any alternative means of splitting up the benefit in the event of a marriage dissolution? That language you quoted is pretty dire; sounds like they just don't give a rats patoot about the issue. If not, then the property settlement needs to be re-looked at to see how else the judge's intent can be met. The

Because it is a big, international bank. The bigger they are the stupider they always are! Don't bother arguing; find a different bank. A small regional bank or a credit union is your best bet.

You say you will spinoff/restate, but I don't think that is right. You will spinoff and ESTABLISH a new plan, not restate it; Plan X continues in existence with no need for restatement due to the spinoff (obviously, the appropriate spinoff language needs to be adopted). If the plan sponsor of the plan was A and that tax ID number was used to identify the plan 001, then I would set up the new plan for B as 001 (assuming that employer with that tax ID never had a plan identified with its own EIN) and it would be the first 5500 for that plan. Line 4 would be left blank.

I agree with other answers as to the acceptability of a release: You cannot mandate a "release". You can mandate the appropriate forms (waiver of annuity, for example, if it is a normal form of J&S as are all our plans), but beyond that, you cannot interfere with the participant's ERISA rights to a payment upon meeting the plan provisions for a distribution. I get similar queries on QDROs I draft where the lawyer wants to put in signature lines for the participant and the alternate payee. I do so if they insist (it is THEIR document that I prepare for the lawyer since we are now talking about state domestic law and since I am not an atty, I insist on preparing the document only for the attorney and it is technically their work product), but always point out that it is the JUDGE that needs to sign the order; the parties don't need to "agree" to it and sometimes one or the other DOESN'T agree to what the judge ordered and if a signature is required and they don't want to sign???????

We are just finishing a termination of a plan that should have been completed a number of years ago but the platform (Voya) did not deal with the plan sponsor appropriately and a whole bunch of people with relatively small amounts never responded. We were brought in to see if we could fix it. We did. This might help your situation: the platform was instructed by the sponsor to sell all of the assets and provide a check to the trustee for the full amount. The trustee gets the check made out to the trustee, endorses it over to us, we deposit it in our account and then send a check for that amount to the IRA custodian for rollovers with a spreadsheet for all the participant info and the final 5500 can now be done. Check is made out to us because otherwise there is the difficulty of how the trustee checks the check made out to her to be converted into a check made out to the IRA rollover company. We are preparing all the 1099Rs. Perhaps you can do the same thing to get the platform out of the situation.

Of course the acct wants that (as stated in the original posting). I'm just pointing out how WE might give him the allocation breakdown, and then I don't care what he does (but I think my allocation makes more sense than the 180/280 allocation because I can't justify that at all). But if the IRS should ever challenge (have you EVER seen such a challenge? I have not ever), at least we told him that something else might be appropriate. FWIW.

There are other possibilities, including an IRA rollover. I would get the distribution forms to the beneficiary. He fills out the forms and tells us what to do and where to send the check. For example, he could have the check for the lump sum (minus any withholding) go to his home where his spouse lives and she could deposit the check into his account (or their account). Not our problem so long as the appropriate documents are properly executed. If he wants it into his prison account, he would have to provide that information in the distribution forms.

While I agree with you as to splitting it, we don't have guidance that says what you must do. Why have you allocated the larger portion to the smaller overall income? I think you can easily justify 180/680 (assuming net Sched C was $500k) and 500/680 as the ratios. Though, the accountant can pretty much do what he wants, because I think it fair to say that I have never seen an IRS auditor give a damn about how the allocation among the two entities is done because they tend to look at HOW MUCH was deducted in total, never looking at the math of the allocation. I think you can also justify a 50/50 split of the $280k comp. In other words, not worth fighting the accountant; it is his/her/their call, not ours.

Correct. They don't lose their ERISA rights just because they happen to be a serial murderer!