Luke Bailey

I hope not. I agree, although they don't really spell it out in the reg. This leads to the interesting situation that many employers who may have adopted the W-2 safe harbor may actually look slightly beyond the participant's actual W-2 for the plan year as long as they adopt a consistent approach.

Good point, C.B. Zeller. Not going to take you into February or March, though, as in OP. Do you think that the 1.415(c)-2(d) safe harbors pick up the 1.415(c)-2(e)(2) timing rule?

Nate S, right, that's what I was alluding to. See Treas. Reg. 1.404(b)-1T, Q&A-2. An accrual basis taxpayer can take a deduction for an amount that would otherwise be considered "deferred compensation" under IRC sec. 404(a)(5) (and therefore only deductible in the year included in income by the employee) if all events to set the legal liability were in place as of the end of the prior taxable year and the amount is paid within 2-1/2 months after the end of the taxable year. But that only addresses the deductibility of the bonus by the employer, if an accrual basis taxpayer. Has nothing to do with when the amount is includible in income and reportable on W-2 for cash basis employee.

I'm treating your question as the hypothetical it is, to me, devoid of most context. To file a consolidated return you need a parent-sub relationship, not brother-sister controlled group. I'd have to trace through the rules, but based on controlled group (if you have) you would test deductibility under 404, limits under 415, etc. on combined basis, but these are still separate companies for tax purposes. If A contributes for B it will be treated as a payment to B and then B's making the payment for 1120 purposes. A is unlikely to get the deduction, but I defer to the hypothetical companies' CPA(s).

This is the more fashionable way to write it, but Strunk & White would go with TPA's.

The employees are cash basis taxpayers, so of course it's compensation to them only when they are actually paid. The employer may be confused by the rule that if it is an accrual basis taxpayer it can deduct for prior year as long as all events test met and actually paid by March 15 of next year (assuming employer is calendar year taxpayer).

MWeddell, I think the rationale, or perhaps "caution" is a better term, is probably that the auto enrollment elections here are not going to be a uniform percentage of each participant's compensation. This is outside the models in Rev. Rul. 2009-30 as well as inconsistent with the language of ERISA Sec. 902(f).

Note that the precise analogy to the situation in the OP would be that GM acquires Ford and you remain on Ford's payroll but are immediately eligible for the GM(now GM/Ford) plan. It is a little different. Your election with your employer (Ford) is being carried over to your employer's (Ford's) new plan.

Interesting. So it seems likely that the links you provided earlier, Brian, would be correct that would depend on when adoption occurred under state law and then would qualify.

Acquirer merges target plan into acquirer's, no problem. Acquirer buys assets and no 401(k) merger, seems no basis. Here, since a stock purchase, the target is now part of a single "employer" with the acquirer under 414(b), for purposes of Section 401 of the Code, among other provisions. The target's payroll system is probably going to still be in place for a while. I get it that (1) it is a different plan (2) as far as I know there is no specific guidance on point, and (c) it could be questioned, but not sure there is much jeopardy. Of course it's also not that hard to get new elections probably.

How would you do this? You mean like in a surrogate pregnancy? 137 does not include expenses of surrogacy. See IRC Sec. 23(d)(1) incorporated into 137 by 137(d).

RatherBeGolfing, I agree completely with Peter's thorough explanation of the concept. The plan applies Egelhoff and Kennedy, and is out of it. Peter's Circuit survey is undoubtedly correct, but I don't have as much command of that as he does. I can tell you that the cases I have reviewed where a state court did impose a constructive trust on the divorced spouse post-distribution involved an agreement as part of the divorce that the nonparticipant spouse was giving up his or her interest in the plan participant's benefit, but where there was no QDRO, since the nonparticipant spouse was giving up his or her interest. Although the beneficiary designation issue was not specifically addressed in the marital settlement, the court after the participant's death and following the distribution to the divorced spouse inferred that the parties' intent was that the divorced spouse was giving up his or her entire interest, e.g. in favor of the participant's children by an earlier marriage. The court then enforced what it saw as the parties' agreement in the marital settlement that the divorced spouse would not receive anything. In BG5150's hypothetical, I'm extrapolating, but if there were evidence that the sister and brother and the deceased had gotten together with the participant and the participant's lawyer when the will was being drafted (e.g., the unmarried participant was grievously ill in a hospice) and the parties had agreed that the brother would take the plan benefit, e.g. because the sister would get the participant's house, then it would seem to me that this could come close to the no QDRO divorce agreement cases.

But after he gets it the sister might be able to sue the brother in state court if by taking it he violated an understanding that was in place at the time of death and that could be proven to the judge or jury as a matter of fact. I said "might." It's an emerging area of law and subject to state law.

If the resolution was adopted by the employer's board of directors, they may have met on 8/25 or signed off on a unanimous consent on 8/25, in either case authorizing the amendment to be executed by a corporate officer, who may have done so on September 5th. That would be typical.

Right. This is under MAVRA, Mandatory Victims Restitution Act, but requires a Federal crime. You typically have that in a bank embezzlement, but not in many other contexts. This transaction is specifically provided for in Treas. Reg. 1.401(a)-13(e). The assignment is revocable up to the moment the funds are transferred.

I've always written provisions for auto revocation of spouse as beneficiary upon divorce to state that the entire beneficiary designation is revoked and therefore if there is no new beneficiary designation after the divorce and before the participant's death you would use the plan's default beneficiary designation provisions for when there is no beneficiary designation, rather than go to the contingent beneficiary. I agree that this provision as you have quoted it, BG5150, is susceptible of the interpretation that the divorce only revoked the designation of the divorced spouse as primary beneficiary, but before you act on that I would at least check the definition of "contingent beneficiary," which may say that this is the person who takes the primary's share if the primary predeceases the participant, which of course is not your case, BG5150.

Sabrina1, would depend on factors you have not stated. Top-hat vs. non-top-hat group is not one of the permitted classifications, but if this fell out along permitted lines, such as salaried vs. hourly, full-time vs. part-time, it might be workable. And you would need to meet the minimum class size rules as well.

The IRS doesn't seem to do much in terms of cafeteria enforcement, that's for sure. But there are a lot of issues like this, hypertechnical, with reasonable arguments on both sides, and then at some point the IRS will put out guidance or an agent will start looking at the issue, and then all of a sudden it comes under scrutiny. It happens.

It can if the two plans say so. They probably should. I have drafted plans with similar facts and circumstances in the past to provide for that. Otherwise the employee will need to manage two accounts.

If the employer wants to allow distribution based on termination of the employer's participation in the PEP, the only way to do that is to spin off the portion of the PEP that is attributable to that employer's employees into a separate plan for that employer and then immediately terminate it. That will require full vesting. The PEPs we have worked with, e.g. in acquisitions, have a package of forms that they can send the employer to accomplish that, but it administratively it is not quick in my experience because the PEP has no sense of urgency. You can just stop contributing to a PEP, but then the employees have to separate from service to get distributions and the employer has to provide the PEP with information regarding separations until the last employee who participated has separated. But if you do that, while the continued service will count towards vesting, inevitably some employees will forfeit. Where will the forfeitures go? Allocated among the remaining participants of just the adopting employer? Does the PEP plan document say that? Seems to me that the IRS could apply the rule requiring complete vesting on cessation of contributions at the adopting employer level, not the PEP level. Certainly the same policy would seem involved, i.e. the last folks left in the employer's portion of the PEP would be the owners. Are you sure the PEP document does not require full vesting even if the employer just stops contributing?

So Brian, you're saying that this satisfies 125(g)(2)(B))(i) because the employment requirement for the 125 plan is the same for both groups, i.e. date of hire, it's just that the non-officers have nothing to buy under it, assuming this is a POP and no other benefits? And what about an employee hired in November or December? Under 125(g)(2)(B)(ii) they would have to participate 1/1 of next year, right? I'm thinking MRestum has a point if I am understanding both of your answers, which are contrary to each other, right?

C.B. Zeller, because this would be "participation in the management" of H's business by W's business?

Depending on the type of services provided by W's company, couldn't this be a management services group under 414(m)(5). The statutory provision is in effect, even though regs were withdrawn. Need to consider, I think.

Ananda, assuming you don't want to buck a Revenue Ruling, I think Rev. Rul. 2019-19 settles the issue for you on whether you can cancel the uncashed check and start over. Can't. Says the individual is taxable. I think the only gray area would be if the participant had moved, not received the check, or something like that. You can argue that Rev. Rul. 2019-19 relies on traditional notions of "constructive receipt," i.e. taxpayer can't turn his/her/their back on income.

Jakyasar, maybe someone else will think differently or have more specific experience, but if the money was deposited into an account in the trust's name over which a trustee has signature authority, I would be careful. Don't know exactly what you have in mind by "redo."