Larry Starr

Luke, why do you think it is any different for a loan that is NOT allocated to an individual account. I would say the same results as you noted obtain in that situation.

No disagreement; just pointing out that there is at least one large example of where it was being done "my way" in the '70's.

Ignoring all of the above, you just want to know the rule, right? The rule is that you can't be a greater than 5% owner in the year your turn 70 1/2. So you would have to reduce your ownership BEFORE the year you turn 70 1/2. The first line of your second paragraph makes no sense.

1) Credit worthiness is almost irrelevant; I would suggest it DOES NOT play a factor. 2) The participant CAN stop making repayments in almost every state. It is the issue of "impermissible garnishment" which every state has severe laws regarding. So even though you can't stop him from stopping payments, now dredging up from my ancient history and research done in the late '70s, I seem to remember that you actually can make it a condition of employment that the loan has to be paid by salary reduction, which means if he revokes permission, he is also quitting his job!

Well, in the mid to late '70's, I worked for the insurance company that was the largest small plan service provider in the country; I actually set policy on many of the issues we were figuring out back then. And almost all of those plans were pooled in those days (well over 95%), and they were all handled as noted above.

Your comment in the first paragraph about him "transferring the earnings from company A to Company B needs to be challenged. That ain't legal! Since this is third hand: "I have a FRIEND.....", I wonder if you have the facts right? Company A has to file the appropriate tax return (sounds like a Schedule C) which will make the profits taxable to the 100% owner (Mr. X). If he then puts the money into Company B, that would have to be an after tax transfer (loan) to Company B from Mr. X. The whole question you are asking falls apart because your premise is wrong. How do you know (or how does your friend know) he is doing what you describe? Basically, if this is true, we need to know on what basis this is being done, but you are at least two steps removed from the situation so your knowledge is going to be limited I would assume. Yes, there are certainly controlled group issues (as Bird has noted), but I don't think this even gets that far. If she wants to put her job at risk, then she can call the DOL and complain that she isn't being covered by a retirement plan because her boss is practicing tax fraud! Probably won't go over too well with the boss.

What kind of document checklist are you talking about? Are you applying this to the volume submitter document checklist? Now I'll take a look at our checklists tomorrow to see if I can find what you are talking about (I did read all that new intro stuff when the checklists were last changed but don't remember having any issues with anything there. In any case, if I was Relius, I would make the same statement. It is NOT their REQUIRED responsibility to notify the admin firm that is doing the document of required amendments, though they routinely do so of course. But if they miss one, it is the responsibility of the admin firm to know the rules and not to rely on Relius and just be dumb. Because, of course, that is the role of most brokerage firms that do plan docs!?

Luke, I'm a little confused by how you are wording this, particularly the comment that "it makes more sense and is safe from a fiduciary perspective to say....". Here's why (referring to your numbered comments so I don't have to repeat them: (1) That is true; there is no other option. There is nothing else you could say. (2) That is NOT true; his account is in no way "diminished" because he borrowed money from the plan. If you have a bank account at the bank but then borrow money from that same bank, I think you recognize that your bank account is in no way changed. (3) Again, that is true and there is no other option. So the basic question is why do you think you need to say any of this to the participants (borrowing and non-borrowing) at all? The SPD has all the necessary information about the issues. If a plan allows loans (BTW, almost all of my plans DON'T allow loans!), it's just a normal part of the operation of the plan. We don't go out of our way to discuss any other transactions in the trust, why would we single out this one from the standpoint of how it is treated. Most participants: a) won't care, and b) won't understand!

Thank you Captain Obvious! ?

Agreed, you are reading too much into my response! ? IF I had such a situation, the answer would most likely be best for me and my clients. Does that help?

You may get an answer here, but I would be surprised. You probably should be looking elsewhere while waiting to see if you get any legitimate responses here.

Just to pile on.... Yes, I would read it to allow him to increase by any number he wants in that period. Yes, this is absurd language. Why is it in the plan? Who wrote it? Does the client even care if participants could change their elections anytime they wanted? While I would amend THIS plan to change the language, that's not really true because I would never have a plan with that language anyway. Talk to the client and ask permission to change the language and go from there.

Can a British citizen roll over her British pension money to a US 401(k) plan? (I'm hoping the answer is obvious.) It's the same question/issue.

They are entitled to much more, though not of any real value. Go back and re-read Bird's response above.

I seem to remember seeing that option in some documents years ago; it would generally be the last day of the sixth month and the last day of the 12th month, instead of the first day of the first month and the first day of the seventh month. But it is legal, just dumb; it just brings people in a day earlier than the statutory minimum. And then for testing you have a different group (potentially, but probably rarely) for the "otherwise excludable" group. I haven't seen it used in many many years. Is this from a prototype and is it a hard wired option?

Yup; went back and re-read the rules to clarify. Because she did not RETIRE, she could do the in-service withdrawal and rolllover to an IRA and not have to take an RMD. If she had RETIRED, she would have had to take the RMD even though her required beginning date is April 1 of the following year. And there is significant lack of clarity as to what "retired" means, which in some cases (but not this one I would suggest) make it less than clear as to how to apply the rules. Thanks.

As usual, not enough information provided in the original posting...... Bird is asking (as am I) WHY is there a K-1? Is it a K-1 as part of an 1120S? As noted by the others, S distributions don't count.

Why do I think that IF you take a distribution and you are past 70 1/2 but are relying on the "currently working" exemption for non owners, that YOU DO have an RMD the moment you take money out of the plan. I think it was handled correctly.

Exactly, and that means if you are PAST that date, YOU DO HAVE A PROBLEM with not following the terms of the plan document.

Looks good to me! ?

And so was I!?

An employer is not allowed to contribute to a plan for other employer's employees. The fact that he is self-employed in more than one entity doesn't matter. If he had a W-2 working for another company, you would not have the question, right? No difference just because he is a partner in multiple entities. Unless those other entities adopt the plan, the comp in those other entities does not count. I'm sure I could find a citation if I really needed to, but finding the time in December with about 20+ plans to get established by year end is not on my plate. I might find it and if I do, I will report. Maybe someone else will find that item. "I"m your pension advisor; trust me!" ?