Luke Bailey

Peter, I think you're right. Glad you pointed that out. There is no equivalent in Section 402 (or 403(b), for that matter) to the once-per-year rule that applies to IRAs under 408(d)(3)(B), which by its reference to 403(d)(3)(A)(i) (and not to all of403(d)(3)(A)) limits the application of the rule to only those situations where an individual both received an amount from an IRA and rolled it over to an IRA. This interpretation is confirmed by IRS Announcement 2014-32 which includes the statement: "The one-rollover-per-year limitation also does not apply to a rollover to or from a qualified plan (and such a rollover is disregarded in applying the one-rollover-per-year limitation to other rollovers), nor does it apply to trustee-to-trustee transfers." In other words, the one rollover per year rule only applies where there is an IRA on both the "out of" and "into" ends of the rollover.

There was no objective definition of retirement, separation from service, or termination of employment before 409A. Seems to me you've found a valid issue to be concerned with FAQ. The actual answer for your situation will depend on all the facts and circumstances.

12 months from the date of the prior rollover; not based on taxable/calendar year. See IRC sec. 408(d)(3)(B).

I think there's confusion here between the statutory correction period of one year to avoid the excise tax (that has expired) and the 2-year (now 3-year) SCP correction period, which actually would not apply here anyway since it is certainly an insiginificant amount. But you are under EPCRS because went past the 1 year.

You're on the right track, MS. See Treas. Reg. 1.457-5(b). Also, see Section 3.4 of the model 457(b) plan language that IRS provided in Rev. Proc. 2004-56, which would require the participant in question to provide the administrator of Plan B with information regarding the individual's participation in Plan A: 3.4 Special Rules . For purposes of this Section 3, the following rules shall apply: (a) Participant Covered By More Than One Eligible Plan. If the Participant is or has been a participant in one or more other eligible plans within the meaning of section 457(b) of the Code, then this Plan and all such other plans shall be considered as one plan for purposes of applying the foregoing limitations of this Section 3. For this purpose, the Administrator shall take into account any other such eligible plan maintained by the Employer and shall also take into account any other such eligible plan for which the Administrator receives from the Participant sufficient information concerning his or her participation in such other plan. (b) Pre-Participation Years. In applying Section 3.3, a year shall be taken into account only if (i) the Participant was eligible to participate in the Plan during all or a portion of the year and (ii) Compensation deferred, if any, under the Plan during the year was subject to the Basic Annual Limitation described in Section 3.1 or any other plan ceiling required by section 457(b) of the Code.

bzorc, I still agree with all prior answers (which only pointed out problems, not a way forward, unfortunately), but would point out that you can probably find a boutique IRA custodian that would take the rollovers. Of course this assumes that the employee has elected to take an in-kind distribution instead of cash.

You've got a single 415 limit between the 403(b) and the k plan if the Dr. "controls" the "practice" he is starting. 1.415(f)-1(f)(2), as you have already discovered in your research, AlbanyConsultant. Splitting a nonexistent hair, AlbanyConsultant. See 1.415(a)-1(b)(3). Basic rule of Federal income tax: "Read, and keep reading."

A lot of issues here. Does not appear there is a controlled group between B and C, although would need more facts to confirm, ditto for affiliated service group. Some potential for affiliated service group, but that is a very fact-intensive analysis. Whether there is a controlled or affiliated service group obviously goes to the testing issues. If most of B's employees go to C, you may well have a partial termination, if any portion of the B 401(k) is unvested.

I strongly second Dare Johnson's suggestion for pooled investments when markets volatile (really, always, because you never know when they'll become volatile). You want to have frequent valuations (quarterly, monthly), and pay out based on the next valuation date following the receipt of the completed distribution request. If you want to pay out a percentage in the meantime, you can do that. More need for that if you're using less frequent valuation dates. You still need to reserve the right to do special valuation dates if there is a large market swing. And it all needs to be put into your plan document and communicated in an SPD or SMM.

Self-directed brokerage is generally a type of 404(c). If you remove the explicit claim to 404(c) from the document, the plan fiduciaries would in theory be responsible for the results of the participants' choices. A judge with common sense (or anyone with common sense) might not see it that way, but why take out the 404(c) language?

Unless the stock is publicly traded, there is no 404(c) protection. Fiduciary duties include liquidity. Also, I concur with Bill's comment as to potential securities law issue.

TPApril, under Rev. 89-87 a plan that the employer resolves to terminate will not be treated as terminated, but rather frozen, unless all of its assets are distributed as soon as administratively feasible, which is generally considered to be one year. So basically, you have a year. The plan would need to be up to date for all applicable law changes as of the stated date of termination, however.

I think a lot of non-ERISA retirement plans never realize that they are not subject to ERISA. I have often wondered why I have never seen a case (maybe there have been some) where, e.g., partners at a small law firm, got into a dispute about the plan, e.g. its investments, and were forced to litigate under state law. I'm sure that would get some press because would be of great interest to community, but it does not seem to happen. Needless to say, there has not been much development in state trust law for employee benefit plans since 1974. I think I've seen some pre-approved plans that actually state the rule that the plan will not be subject to ERISA if it meets the exception, but I'm not sure, and I don't think I've ever seen one that follows on from that and says that if the exception does not apply, the 404(c) and other ERISA rules in the plan may not apply. I also don't think there is much guidance on what happens where a plan comes in and out of the definition of an employee-less plan. Once it falls out of the definition, is it always subject to ERISA, even after the account for the non-owner has been fully distributed?

TPApril, the QDIA rules are a way for any employer that otherwise has a 404(c) plan to be protected from liability with respect to employees who fail to take any active step to manage their own accounts. If you don't have a QDIA, and the money defaults into something that is not a QDIA, e.g. a money market fund, which for argument's sake I will treat as an imprudent investment for any significant period of time, ERISA 404(c)(5) (the QDIA rule enacted in 2006) can be interpreted as implying that you cannot claim that because the employee had the ability to choose how the money would be invested, but never exercised that choice, the employee has the same responsibility for the outcome under 404(c) as if they had made an active choice. The issue of whether the failure to actively make an investment election was, in effect, a passive election by the employee, was one that employers worried about, which is why employer groups and mutual fund providers lobbied Congress to get the QDIA rule added.

Agree with Nate S. Assuming wife acknowledges ex-spouse's interest in a portion of the funds, it is probably still possible to divvy up the IRA without incurring tax under IRC sec. 408(d)(6). Division of IRA needs to be "incident" to divorce, so probably would want the divorce decree amended to specifically provide for division of IRA and would need to confirm with IRA custodian that they would treat the division as nontaxable under 408(d)(6). Of course, the overall facts and circumstances of the parties, etc., need to be considered. I am just pointing out that 408(d)(6) may be available and the parties should check it out.

Brian, what would the Frankenstein problems be? You have, say, an employer with > 100 participants and several different insurance policies, a cafeteria plan, an FSA, and a DCAP. The cafeteria plan lists all of those, because they require employee contributions. Everything is on a calendar year. You have language that says that the cafeteria plan document is the wrap document, i.e. all the benefits are under the cafeteria plan document that is a "wrap" document, and they form one plan for 5500 purposes, but you note that some benefits may not be subject to ERISA, i.e. the Section 125 mechanism itself is just a tax thing, not really a benefit, and the DCAP is not an ERISA plan. What's the problem?

Not combined for deferrals under 402(g). They can double up.

And eventually you grow your plan to a point where you can negotiate a better fee with your mutual fund platform. There are risks, however, and some buyer due dilligence on seller's plan is usually in order.

TPApril, before Obergefell, some employers had partner benefits, i.e. as a plan provision. Same or opposite sex. After Obergefell, some of those employers went back to covering only married partners. This may be part of what you are thinking of.

If the wrap plan includes a Section 125 cafeteria plan (which most do), the cafeteria plan regs are very restrictive about changing plan years. Aside from the cafeteria plan regs, I can't think immediately of any cites. I think the IRS and DOL would take the position that you are already in your plan year beginning 12/1/2021 and need to terminate the plan year before starting a new. Are you also going to change the py's of the plans that are wrapped, e.g. health, life, etc.? Have you checked with the insurers on their willingness to do that?

It's a good point, jsample, but I don't think it really changes the earlier answers. Putting aside skullduggery such as that the receptionist threatened legal action over something and this is a way to keep them quiet (which could be a prohibited transaction as a use of plan assets by a fiduciary), It's the same as if the employer amended the plan to say that the non-highly compensated employees in building A get 1% and those in building B get 2% for the year. The only discrimination that is not permitted is in favor of HCEs. If this sort of amendment occurs frequently enough, you could have an issue of whether the plan is being administered in accordance with its terms, even with an amendment, but that issue is more threatened than actually raised.

What Bird said. Subject to the complications pointed out in earlier posts, it generally can be done as Bird has stated. MrsMacias.

david rigby, your thinking is that denying the spun off employees the distribution to which they might be entitled without the spinoff could be a cutback? It's a good point, and if vesting is involved and the transaction amounts to a partial termination, the spun off employees would also be potentially losing accelerated vesting. Having said that, I don't see how the acquired and selling companies' contractual agreement in the original deal doc should have greater legitimacy than their post-deal agreement, other than, perhaps, if a partial term has now occurred, then doing the merger now without fully vesting them (which of course you could do by amendment) would seem to cure that. Interesting case.

l I don't know the answer and have never looked at this until you asked, Debb, but I think under FAB 2004-1 if you require an employee to have an HSA (which you'd have to do if you want to require them to contribute) the HSA would become subject to ERISA. Also, if not subject to ERISA, then you would not have ERISA preemption and would need to be concerned with state payroll withholding laws (which for a lot of states this would probably violate).

Assuming the plan document and applicable law permits the interim valuation, I would provide everyone with statements to let them know that their accounts had been revalued based on a special interim valuation. I would explain to them why that was permitted under the plan document, etc. There are lots of reasons for this, e.g. employees and former employees may talk to each other and you don't want them to imagine things that the two groups were treated differently. Also, the separateds above the cashout limit might not want to take distributions if they see the new values are, so you want to send everyone their statements before you process their distribution elections. Also, the continuing employees may think twice about quitting once they see their reduced balances. Always dial in the law of unintended consequences.