Larry Starr

1) This is consistent; all my plans simply say that the ee will pay whatever premium is then being charged (rather than a certain dollar amount); that way, as it changes, it is automatically OK no matter when that happens. 2) Are you sure it doesn't allow? Look at the participant election form (that is where our language is; it's in the election by the participant). If the plan DOESN'T allow, I think you do have a problem, and a bad drafter of plan language. Frankly, there is no reason for such a problem since it would happen all the time. For that reason, I wonder if you plan doesn't actually already deal with it. I hope it does.

Absolutely.

And as you know, if an employer is "playing games" by terminating employees the day before they become vested on the old 10 year schedule (I terminated from CIGNA after 9 1/2 years on a 10 year schedule!), that was actionable under ERISA for interfering with participant ERISA rights. Doesn't sound like this issue raises to that level, FWIW, but yes, it is something that could be a DOL issue if it was abusive.

I"ll try just one last time. 1) The "hassle" is a non-issue. It is just one more piece of paper in the distribution forms that requires signature. No one seems to have a problem getting a notary (and in fact, I do it for free if they want to come into the office). 2) Ask your business owner multi-married client how he feels about his plan being set up to disinherit his children from his prior marriage. If you don't think that bothers lots of folks in that situation who happen to be the boss, you are just missing the boat.

"Wot a country" (LS for Yakov Smirnoff)

Yes, the important comment. We are arguing how many angels can fit on the head of a pin, and the truth is it doesn't matter what you say as to that question. All it does is turn on a switch somewhere in the DOL computer records and NO ONE REALLY CARES if you got it wrong! What's the penalty? NOTHING. Bottom line: don't worry; be happy!

And if the employee is an at will employee (as almost all are) and he says "I quit as of 12/31" but his last day of scheduled employment is 12/30, then the employer has every right to say "Sorry buddy: if your last day of work is 12/30, then that is your termination date". It is not up to the employee to decide when his employment status will change; that is an employer determination. Now, it is certainly true that the employer COULD continue the employment relationship through 12/31 if they desired to. But that is the employer's call. If the employee wants to make sure he is employed on 12/31, then he better work on 1/2 (or whatever day) and then quit! Larry.

In all the years I handled the ASPAA Q&As with IRS, that answer never was given and, based on my knowledge of those folks, never would be given. Count the hours; if they have 1000 before the amendment (whatever date), it's a 411(d)(6) protected benefit and you have to preserve it.

Save your thanks; it has been long established that purely cosmetic surgery is NOT a deductible medical expense but a personal expense and as such, would NOT meet the criteria for a hardship withdrawal. That's why nose jobs always fix a "deviated septum". MAGIC! Now it's deductible! The original question is not clear; what is going on? If it truly is "preventative", then it may very well be allowed. Removal of a breast that is not cancerous but where the individual is shown to have a significant chance of breast cancer would be acceptable. FWIW.

The questioner clearly states that they filed form 5500-EZ. I will take him at his word. Now, they will file 5500-SF for better tracking (we adopted that process 100 years ago! :-) ). Therefore, I believe NJ Mike has given the answer; it is a first return. The 5500-SF with the one participant box checked is NOT a 5500-EZ; it is an alternative provided, and it is the first time the 5500-SF is being filed and the system needs to know that so it is not looking for prior records of this plan. Don't check the box only if you like correspondence from the IRS!!!!

Because he was both a union and non-union employee in the same year. The non-union is entitled to the minimum.

I am surprised that no one asked the author of the original question what the plan says are the ENTRY DATES. Whenever explaining when someone gets into a plan, I point out there are two rules. The first is meeting the 1000 hours to "become eligible to enter"), but the second is then actually entering the plan based on the defined entry dates. Now, I am willing to bet that the quoted eligibility language is NOT from the plan document but from the SPD. Plan documents are not written with provisions that start with "You will be eligible...". So, I'm quite confident we don't yet know what the plan document says and all the answers above are not on point. It is possible that the plan in question actually provides language that is unclear, but we don't know that. And, we don't know the entry dates. If the author of the question wants to provide the actual plan language for meeting eligibility and the actual plan language for entry, then I'm going to bet the correct answer will simply reveal itself.

You are correct; it is a rare client who ever has a loss, but it happens. If it is a client where that is a possibility, we suggest they wait until December to make their deferral with the hope that they know that they will show a profit. And if they don't, then the contribution was a mistake of fact and can be withdrawn under those rules.

I don't understand your last sentence (which is not what the questioner was questioning, but deserves a comment). If your employment is TERMINATED on 12/29/17, you are NOT employed on the last day of the year (for a calendar year plan), even if 12/29 was the last business day of the year. The EMPLOYMENT RELATIONSHIP does not exist on 12/31, and that is the key. In the original question, the employment relationship existed on 12/31 (his last day of work), so he is entitled to a contribution, and the software is wrong. Some software (the smart ones) allow the user to set a switch so that the software is not making the decision, but the answer is clear regardless of the software.

Again, it is NOT the J&S provisions that we want (we would prefer they go away); it is the MANDATORY 100% death benefit to the current spouse rather than only 50% that is the problem. See my other response on this issue.

You miss the point; we would be happy to do away with the J&S requirements IF such an action did not also require that the spouse be the beneficiary for 100% of the death benefit. THAT is the problem, and we see it as a bigger problem than the J&S waiver. Having done this for over 30 years (and all the year since REA when this was imposed), I can only say that getting the spousal consent on the waiver has been a non-issue. Try talking to your multi-married clients and informing them that they have disinherited their children from 50% of their retirement benefit (when they could have avoided that) and see the reaction. It has been (as expected) startling over the years.

You've got to be kidding! Allowing for a simple beneficiary designation that allows 50% (instead of 100%) to go to the current wife and the other 50% to go to anyone you want is way simpler than getting a QDRO, not to mention the expense and hassle.

Your statement of facts is very confusing, but your last paragraph asks a simple question. No, a shareholder does NOT have any special rules for deferrals. Deferrals come from W-2 income and must come out of checks issued during the calendar year to count for that calendar year. In addition, your statement about sole prop having until the due date of their return to make their deferral is factually incorrect. While they have a little more flexibility, it is very limited. The deferral election must be actively made prior to the year end and the contribution must be made at the earliest date where it is determined what the earned income is. If the accountant gets all the work done by January 15 for the prior year and the election was made for $18k, that money better be in long before the end of January. We simply have all our self-employed (sole props and partners) put their full deferral in by 12/31s so as not to have to deal with this slippery slope and having it challenged by IRS 2 or 3 years after all the annual plan admin is done. Just think of the complexities of having to fix it retroactively because the IRS doesn't allow a contribution of a prior year deferral on the extended due date of the return of 10/15!

Every one of our DC plans (EVERY ONE) provides the J&S as a normal form. In 35 years, we have had 2 people actually purchase an annuity (with thousands of lump sum distributions with proper waivers). The bigger problem with DC plans that allow lump sums with no annuity is the requirement that he spouse be the beneficiary for 100% of the account. That means that the plan is being designed to specifically disinherit children of a prior marriage! When we point that out to new clients where that is an issue, they are often quite angry at their prior plan designer who never discussed that issue with them. Second marriages for high income business owners seem more often to be the rule today than the exception! Atleast the J^&S option allows for 50% to go to other beneficiaries than the third trophy wife! (politically incorrect statement acknowledged). Just, FWIW.

Long ago the IRS changed its rules and allowed the recovery of cost basis even if the contract was transferred out. I would certainly include the cumulative PS58 in the cost basis; unlikely it would ever be challenged. "Sometimes it is better to ask for forgiveness than permission!" Yes, I was the author if the Life Insurance Answer Book, now long out of print.

I have never seen a plan that would exclude this individual based on a last day employment provision. He IS employed on the last day. I'm guess you can write a provision that would exclude some allocations if he is a union employee on the last day, but you still would have to provide top heavy, safe harbor, gateway, and would have to prove it to be nondiscriminatory for participation because you don't get a free pass on those kinds of things for the period of time when he was NOT a union employee. Of course, unless you are rewriting plan language, I am going to bet that our plan will not exclude him for allocations based on his income while not a union employee because it will treat him as employed on the last day (just, employed as a union employee). FWIW.

I agree with the illustrious (you should see him in person!) Mr. Preston. BUT, as an aside, I wonder about a dentist plan that is using a safe harbor match, since we have many dental office plans and every one of them is top heavy. That means, a 3% top heavy minimum is required, and a 3% nonelective safe harbor contribution usually is much more economically effective for the practice than a match plan. Is this plan not top heavy? Just curious..... We have always told clients that top heavy status is good! "If the plan isn't top heavy, it wasn't designed right!". They, of course, tend to be general tested in most circumstances, but even if the demographics are bad, a design based safe harbor plan (max integration) with a 3% nonelective works very well in most circumstances. All, just FWIW. Larry.

I don't believe it is a Federal crime. It is a fiduciary breach. Failure to have a bond is a breach of ERISA’s fiduciary rules. As with all other fiduciary violations, a fiduciary is liable for losses to the plan resulting from the breach, i.e., the failure to have a bond. The consequences of failing to have a bond will vary from having to obtain a bond to a court order to pay the plan for losses resulting from failing to have a bond.

How are the government payments made? Does the individual get a W-2 from the government for those amounts? A 1099? I would also want to review the actual contract with the government (or if no contract, the terms of the program which are most likely in writing). There may be very clear language in there as to whether the provider is considered an employee of your client even for the hours worked but paid for the government. For example, for those hours, does your client cover the Workers Comp (are very telling fact)? I'm willing to bet that the employee's hours (at a minimum) count, and probably the compensation as well. Let us know if you can get any specifics from the government contract/program that would clarify.

Fully agree with QDROphile. I have never seen or writen a QDRO where the division of property is ever contingent on future marital status of the alternate payee. Sorry; best of luck.