Larry Starr

You can't fail testing if there are no HCE's. In a DC plan, with no HCEs, you could have each participant in their own group and only contribute for one person and you would be fine.

The actuary is plain wrong, and should know better. Usually it's an accountant that offers this old chestnut. And there is a rationale for it; a trust cannot exist UNTIL there is a corpus; that is true. However, there is no requirement that the retirement trust exist (or be funded) as long as the PLAN is in existence, which means the plan (and trust) has been adopted by the end of the year. It can be funded later (by the appropriate funding dates for deduction purposes). Too many of our practitioners don't understand that there are really two separate documents that make up a retirement plan; the PLAN document and the TRUST document. Most of us write a single document that includes both (usually with an article in the document that is actually the trust document. That is why the thing is signed BOTH by the employer, and the trustees separately.

The answer is you use my outline to calc self employment comp. You cannot trust the information on K-1 forms. Can someone who is reading this who I sent my compensation outline recently attach it for Jim as I am in Prague and can't access the computer that has that outline.

Let's start with: Which K-1? There are multiple K-1 forms for the various forms of business. Which one are you referring? Actually, why don't you actually tell us what the line says so we don't have to go look up what you are referring to????

Agreed.

Would anyone else like to take a shot at this one?

Not even close. The loan stands; it happened. You are stuck because those are the rules.

The employees are HIS employees. The leasing company is just a fancy payroll company. He has to include the leased employees as if they are his own, because they are!

"As posed", it was intended to be an easy one. Now, the more interesting nuance: Assume the hypothetical account is $3 million when the participant's age is 62. The amount payable at age 62 depends on the 415 $ limit. Let's say that amount is $2.8 million if the plan's NRA is 62. Contrast that against a participant with a $3 million hypothetical account at age 62 in a plan with NRA 65. Do you think a document can be drafted so that the amount distributable is $2.8 million in that second plan?

I usually stay away from the actuarial discussions and just prefer to watch our actuaries beat each other up...... but in this case, I have a question because I think (thought?) i had a clear understanding of this issue. Riddle me this: Do you hold the opinion that it is possible to draft a cash balance plan with an age 65 retirement age that is able to pay to a participant age 62 the same as if the retirement age was 62? Responses welcome.

You clearly have identified a BIG problem. The plan is not following its terms. Participants have a court enforceable right to defer a percentage. The financial advisor is risking law suits and I guarantee HIS employer would not allow him to make that decision as he is taking on a fiduciary role. And for what? I have not seen any payroll software that does not offer a choice of dollar amount or percentage; I doubt it makes any difference to the CPA, and if it does, that's the CPAs problem!

Sorry, but we'll just have to agree to disagree. State courts have only the authority provided by Federal Law (ERISA) with regard to retirement plans; period. The only authority they have is to issue a DRO which the PLAN ADMINISTRATOR determines whether or not it is qualified (not the judge!). Most of your statements (IMHIO) are incorrect. Fact: at death, the participant was NOT married. If you disagree with that, we have nothing more to discuss.

Yes. Established estate law and it carries over to hardship withdrawal definition.

First, questions like this should always start out by asking: WHY does he want to do this? We'll probably find out he thinks he's getting something by doing it this way the he won't get so the whole issue will be moot. In addition (and without doing any research) the back of my brain tells me the contribution of property is considered a sale by the individual (so he would incur capital gain treatment currently) and then a contribution of that value to the plan. And if it's not publicly traded, there are all the issues of valuation. What does he think he is getting by doing this? Why not just sell the stock and contribute the funds? Is he thinking he's putting future growth of the stock into the plan? Well, then if it's such a good investment, the plan can buy it back with the cash contributed. Is it wise? Of course not, and we all know that's the right answer. Don't do it!

We don't service one plan where the employer has two. Simple rule: have us handle both or have us handle neither. No way to do the testing if you don't have both plans.

I agree with ESOP guys observation, but he is questioning whether you did it right in the first place because your question certainly leads one in that direction. Let's assume you did do it right and you are now at the point where you only have to take one RMD each year and for each year you are now taking the distribution on 4/1 (based on the prior year end balance). So far so good. He took his 2018 distribution 4/1/18. That's the only required one for the year. If the plan terminates 8/1/18 and he wants to roll over 100% of the termination payout that he gets in 2018 into an IRA, he can absolutely do that. He will then have a new balance (in the IRA) as of 12/31/18 which will be used to generate the RMD amount in 2019. Does that answer your question?

I still see a problem. A wage advance is NOT the same as a wage payment. For example, let's assume someone takes an advance on 12/31/17. But the actual payment of wages is 1/7/18. The earlier payment will not show on his W-2 for 2017. Therefore, I see no way to withhold any money for 401(k) out of the advance since that is not wages being deferred. FWIW.

Without any substantive research, I will give you my answer. The amount advanced to the driver has already been paid to him when his check is issued (which is why the net check is reduced but the gross amount it not). Therefore, it is only practical that the deferral amount be applied to the net check after the payback of the advance. If it is a dollar amount deferral and the check exceeds that amount, the full dollar amount is taken; if it is less than the deferral amount, the whole CHECK is taken and he gets a zero net check. If it is a percentage, the that percentage is applied to the net check. I don't see any other way of handling it, but perhaps others will chime in. Good luck.

How are the advances actually handled? Are they actual W-2 payments subject to withholding and SS taxes? If so, then I believe it doesn't matter that they are "advances". The deferral election that was made is applied to each actual payment to extent it can be; a percentage deferral will always work but a dollar deferral might exceed the paycheck and would therefore be limited. I don't understand how the employer is covering the "advance debt". I would think it just is an amount of dollars that is NOT paid as additional compensation, so no question about deferrals would arise because there is no actual payment. Can you explain in more detail the actual transactions involved and how they are reflected through the payroll system?

I can't get to this item currently to analyze (yes, heading off to ANOTHER boat trip next week), but I have spoken with Natalie a number of times and she welcome questions sent to her that are not adequately dealt with in the book. She often puts out the answers in her blog and eventually incorporates the material into future versions of the book. You should send her the issue; she might even reply to you (she has to me).

It is just boilerplate, produced from the data collected from the on-line 5500 forms. Makes it look like they did a ton of work for the client (FOR FREE!) but they actually did no work at all. Just one type of marketing.

Peter, I think that language would work; I think it gets around the issue of "putting it in the plan to discourage unionization". Unlike the standard "union employees not covered" language, this is conditional language and looks like it avoids the problem we identified with outright exclusion when there is no CBA in force. Thanks.

That's Starr with two "r's", but nevermind..... :-) I wish I knew exactly which analysis and position you disagreed with since, as far as I can tell, we agree on most of the items. If you are talking about putting a union exclusion in every plan, even if there is no union, then you are certainly free to do so and the IRS will most likely never bother you. That doesn't make it right. Our analysis on this issue was from 1976 or 1977 when we (at that time, Connecticut General) were setting up thousands of ERISA plans under the new law. This item was one I researched, wrote the opinion, and then it went off to corporate legal (the guys who got paid the BIG BUCKS) for review; it came back with full concurrence. One of our corporate lawyers was one of the lawyers who helped write ERISA (even his license plate said ERISA!). The requirement that to exclude union employees requires good faith bargaining should make it obvious that you can't exclude them UNLESS you have bargained in good faith, and if you don't even have a union, how can you say you have met that provision which is a REQUIREMENT to use the union exclusion? A plan with a union exclusion with a BAD FAITH negotiation (say, a corrupt union officer) is not a valid union exclusion. So, what is it that you disagree with? And, are you saying you get paid to give INAPPROPRIATE advice? Maybe I don't understand those last two sentences, but somehow I don't think that's what you mean.

What is missing in that language is the additional piece that I quoted that says it's ok to allocate the left over amount to other participants. But I think without that language it can still be done so long as there is not language that says any amount not allocated due to 415 limits goes to a suspense account to be allocated in a future year. But clearly, the language I quoted is ideal. It's the Relius document language.

They are "not allowed" to be deducted, but they ARE allowed to be allocated. The non-deductible excise tax will apply as well.