Larry Starr

We will have to disagree. You cannot compare the car case to a minor legally working (with the appropriate government blessing). That is a big difference. The very fact that they are selling their services for compensation is a contract in itself. The employee (minor or not) who is eligible for a 401(k) (very rare in itself for a minor) can do all the things appropriate as an employee (s/he has been given permission) and that includes signing up for the 401(k). The minor will not be able to repudiate it on the basis that they are under age to make a binding contract; that right was given to them when they received their working papers.

Short answer: Disadvantage? No.

1) No way that 3 sentence paragraph is a domestic relations ORDER (DRO). An order is an order of the court; I would suggest that doesn't rise to an order of the court. You have not yet received a DRO to determine if it is a QDRO, and clearly this is not. 2) More important, it doesn't matter if is it a DRO; it clearly is NOT a QDRO, and that's what matters. A DRO and a QDRO are two different animals (A DRO can be a QDRO, but as we all know, it often is not and has to be perfected). Here is the language from our QDRO Procedures: Procedure prior to receipt of order: The Plan will apply the following procedure prior to the Plan's receipt of a Domestic Relations Order. 1. Suspension of Participant distributions or loans. If the Administrator is on notice (verbal or written) regarding a pending domestic relations action (e.g., a divorce) and has a reasonable belief the Participant's account may become subject to a QDRO, the Administrator may suspend processing the Participant's distribution or loan requests pending resolution. 2. Removing hold on the account. After placing a hold on the account, the Administrator should notify the Participant of the hold on the account. In order to remove the hold, the Administrator should request the Participant to provide written confirmation that a court will not issue a QDRO with respect to the account; such as a property settlement agreement awarding the entire account to the Participant. So, we have an OPTION to suspend processing, but are not required to do so. We also have the option to suspend processing and if it is not resolved in some short period of time (say 60 days), we can lift the hold and do the distribution. So you can (hopefully) do the same (assuming your QDRO procedure would allow); tell the parties that what you have been given so far does not meet the requirements of a QDRO and they have XX days to get the order to you, and if not received in that time, the hold will be lifted and distribution made to the participant.

I don't think the letter from the lawyer has any meaning other than it might be a good suggestion. The girlfriend has no authority until the plan determines (probably with the results of the court case) who the rightful beneficiary is. Now, having said that, might it be a good idea to move into a QDIA? Probably, but I'll let other who have more involvement with those animals comment on that. And, now you have an example of how identity theft is going to be a major issue for all these platforms where access to both the funds and beneficiary issues is done on line with no human intervention.

Perfect; all the more reason to get a US person as a replacement trustee.

No. There are special rules for children of the owners in most states working for their parents. It can get complicated and may be dependent (or may not be) upon the form of the business and who owns it. But in any case, if they are employed, they are employed for plan purposes, whether they have the appropriate working papers or not. If they meet the eligibility requirements, they are in.

These are all questions that should be answered by whoever is administering your plan for you. The ADP test is not the easiest thing in the world for a non-pension person to understand. But yes, it is a test that compares the deferrals made (on average) by the HCEs for the year to the deferrals made (on average) by the NHCEs for the year. And yes, the HCEs for a given year are determined (under one rule) by the compensation earned in the prior year. If it is high enough in the prior year, they are an HCE for the current year. The other criteria is ownership, which can also make someone and HCE and that is actually regardless of how high their income actually is. What you need to do is ask your administration folks for an actual copy of the ADP test; it will show you who is in the test for both HCEs and NHCEs and the allocations to each that are being tested and the math that shows the results and why you did, or (in this case) did not pass. That test printout is something that they should absolutely be able to give you; we all do that test for our clients and our software spits out the results with all the necessary info to show the failure and, often, what the correction is that is required to make it pass. To answer all the questions you posed requires a detailed tutorial on this issue, and that would be both long and complicated and really unnecessary. You need to know only why YOU didn't pass (unless you are deciding to go into the plan administration business, in which case you will need a few years of study under someone who already knows all the rules!). Best of luck.

Once the working papers are issued, then as long as the employer complies with the rules that apply (limited total hours, limits on school day hours, limits on certain types of duties, etc) the employer no longer needs any approval of the minor's parents.

My practical answer: the minor had to sign a whole bunch of forms to get employed; I guarantee they were not signed by the parent. In my plans, I would want the eligible employee's signature on the deferral form. That is an enforceable right under the plan and under ERISA law and I'm not sure the plan has to even be concerned about the fact that the employee is a minor. If the employee does not agree to the deferral, I would instruct our clients not to do it. If only the parent consents to it, I would instruct our clients not to do it. If only the employee minor consents to it, I would instruct our client to honor that deferral election. And to complete the loop, if neither of them consents, well then........ ?

So, it's not "up to the employer" as to which comp to use; it's up to the employer to DESIGN THE PLAN to designate which comp to use. I know that's what you meant, right?

I believe California has provided that one of the options on the birth certificate (along with about 10 others!) is "Senior". Would qualify for discounts from day one!

In this situation: mandatory withholding if the RMDs could have been smaller? I have to say my answer is "who cares". No one is going to challenge them on the RMD (that's the way it was reported on the 1099R, right?). Taxes have been paid. Want to take less in the future, fine. Use the longer life expectancy. Want to continue using the shorter life expectancy (if that works for them), fine. Life is too short; eat dessert first! Larry.

Bill meant to say YES, it is legal. It is indeed the employer's decision. We routinely set up PW/Davis Bacon plans and specifically lower the cash wages because it also saves a ton of money for the employer, especially in workers comp costs, which then makes the employer more competitive on bidding which then makes it likely there will be more work for his employees. The employee may not like that his W-2 part of the prevailing wage job has gone down, but his only remedy is to quit. This is 100% under the control of the employer and, as much as you may not like it, the employee has zero say in the matter.

OK: See notice 2000-3, Q 11. Copied below (see material made bold and italic): Q-11. Can a CODA that is added to an existing profit-sharing plan for the first time during a plan year use a 401(k) safe harbor method for that plan year? A-11. Generally, the safe harbor requirements must be satisfied for the entire plan year (see sections V.A. and VI.A. of Notice 98–52). In addition, except in the case of a newly established plan, the plan year must be 12 months long (see section X of Notice 98–52). Notwithstanding these requirements, however, in the case of a CODA that is added to an existing profit-sharing, stock bonus, or pre-ERISA money purchase pension plan for the first time during a plan year, the requirements of section V of Notice 98–52 will be treated as being satisfied for the entire plan year and the CODA will not be treated as failing to satisfy the requirements of section X of Notice 98–52, provided (1) the plan is not a successor plan (within the meaning of Notice 98–1), (2) the CODA is made effective no later than 3 months prior to the end of the plan year, and (3) the requirements of Notice 98–52 are otherwise satisfied for the entire period from the effective date of the CODA to the end of the plan year. Thus, an existing calendar-year profit-sharing plan that does not contain a CODA may be amended as late as October 1 to add a CODA that uses a 401(k) safe harbor method for that plan year. A similar rule applies for purposes of section VI of Notice 98–52 in the case of the addition of matching contributions for the first time to an existing defined contribution plan at the same time as the adoption of the CODA.

OK; I found the reference in the EOB. It is OPTIONAL to limit comp to only the period of deferrals. I read it quick but I think this is the issue. Particularly, see 5.c. below. Here is the text: 5.a. Compensation may be limited to period of eligibility. If an employee becomes eligible as of a date other than the first day of the plan year, the plan is able to limit compensation to the period of eligibility to calculate the amount of matching contributions or nonelective contributions required under the prescribed formula. See Treas. Reg. §1.401(k)-3(b)(2) and Notice 98-52. This rule is not mandatory. The plan may instead take into account compensation for the entire plan year even though the employee is only eligible for part of that year. The plan document will control. 5.a.1) Example - safe harbor matching contributions. Claudia becomes an eligible employee in her employer's 401(k) plan on July 1. The plan year ends December 31 and the plan is designed to be a 401(k)(12) safe harbor plan. The plan provides for the safe harbor matching contribution, using the basic formula described in 1.a.1) above. Susan's compensation from July 1 to December 31 is $18,000. The plan may provide that Susan's matching contribution is based on $18,000 of compensation, rather than on her compensation for the entire plan year. This would mean a match of 100% on the first $540 deferred (i.e., 3% x $18,000), plus a match of 50% on the next $360 deferred (i.e., 2% x $18,000). So, if Susan defers $900, her match would equal $720. ➤ Comparison to full plan year approach. Compare this to the match Susan would receive if her entire year’s compensation were taken into account. Suppose that Susan deferred $900, but the plan counted her entire year’s compensation under the matching formula, and her compensation for the entire plan year is $36,000. Now $900 would be less than 3% of her compensation (i.e., 3% x $36,000 is $1,080), so Susan’s match would be $900 under the basic formula. 5.b. Example - safe harbor nonelective contribution. Suppose the plan satisfies the 401(k)(12) safe harbor on the basis of the nonelective contribution requirement. If the plan limits compensation to the period of eligibility, Susan's nonelective contribution would equal $540 (i.e., 3% x $18,000), rather than 3% of her entire year's compensation. 5.c. New plan. The same rules would apply to a new plan, where the employees are eligible to defer under the 401(k) arrangement for less than 12 months in the first plan year. QACA safe harbor. Guidance issued under the QACA safe harbor provides the same rule for a new plan established after December 31, 2007, that is designed to use that alternative safe harbor rule and is in effect for less than 12 months in the first plan year. See Treas. Reg. §1.401(k)-3(a)(2). 5.c.1) Example. A new 401(k) plan is effective July 1. The plan year ends December 31, so the first plan year is a 6-month period that begins on the July 1 effective and ends on December 31. The plan is designed as a 401(k)(12) safe harbor plan. Since employees are eligible to defer under the 401(k) arrangement for only six months in the first plan year, the ADP safe harbor contribution may be calculated by taking into account compensation for only that six-month period.

Just to make sure I understand the question: We have a brand new plan established for an existing employer. It is a 401(k) safe harbor with a non-elective 3%. The plan is established 9/1/19. Are you suggesting that the 3% is only applicable to 9/1 - 12/31 compensation, even though the plan is using full calendar year comp for everything else?

Never more than twice a day! ?

Amazing what a quick google search can do for one.... Take a look at this: https://www.irs.gov/appeals/post-appeals-mediation There's a whole bunch of additional links/reference provided. Here's some of the introductory material for those who just want a quick overview: Post-Appeals Mediation lets you and your Appeals Officer or Settlement Officer resolve disputes while your case is still under Appeals' consideration. Once your PAM application is accepted, the goal is resolution within 60-90 days. With PAM, a trained mediator from the IRS Office of Appeals is assigned to help you and your Appeals Officer or Settlement Officer reach an agreement on the disputed issue(s). PAM does not create any special authority for settlement by Appeals. You retain full control over every decision you make during the PAM process. No one can impose a decision on either you or Appeals. The Appeals mediator is specifically trained in mediation techniques and is independent of the Appeals employee with whom you have been working. In annual customer satisfaction surveys conducted by a non-government company, taxpayers like you have consistently given the independence and impartiality of the Appeals mediator the highest rating of all survey questions. Refer to the Appeals Mediation Programs page to learn more about now mediation works and the role of the Appeals mediator. The benefits of settlement over litigation include: Speed. Cost. Flexibility. Control. Reduced Risk. For your case to be considered for PAM, you must first work cooperatively and try to resolve all issues with the Appeals Officer or Settlement Officer before seeking the services of an Appeals mediator.

It's ok; your last response gave me a chuckle, and that's always worthwhile! Thanks.

Referring to the statute of limitations with regard to IRS being able to attack the plan; if you don't file, they are not limited in the time they have to go back and find problems. Does that help?

I always assume there will be other employer contributions; we actually have ZERO plans that are just deferral and match plans so I just don't usually think of it. But yes, since those plans are not required to provide TH minimum, that would work as well.

Yeah, I see the problem. Go to the bank and open a SIMPLE IRA money market fund. Transfer to the brokerage firm as a direct transfer at some near point in time.

FWIW, we don't care. We ALWAYS file a 5500. If you don't file a 5500 for a plan that is under the $250k amount, you never start the statute of limitations running. It's a gotcha that most people don't pay attention to; we do.

I think the answer you have gotten is perfectly in line with just about what everyone said. If he doesn't want to get the QDRO done so he can save paying her taxes, then he gets the whole amount distributed. However, if he is going to give her half as the property settlement contemplated and is not trying to stiff her (which it appears is the case from what he has previously requested), he can certainly pay her the half AFTER THE TAX BITE so it doesn't cost him extra. I haven't seen that mentioned as an option, but I think it is absolutely there for him.

Um... why don't you just tell the brokerage firm to treat them as 2019 contributions and then deal with IRS when they do a correspondence "audit" on the incorrect reporting from the brokerage firm. That might be easiest. FWIW.