Luke Bailey

I'm pretty sure the term "related" is only used by IRS for making top-heavy determinations, as Lou S. stated. You can have "related" rollovers and unrelated, and you can also have related and unrelated plan-to-plan transfers. To be "unrelated" the movement of the account has to be both at the election of the employee and to a plan of a different employer. See Treas. Reg. 1.416-1, Q&A-T-32.

EBECatty, maybe that is right, but can you cite where in the regs it says that? I had thought the rule was different.

mariemonroe, if as Peter suggests you're talking an NQDC plan under 409A, no. See Treas. Reg. 1.409A-3(c).

I think they generally will. I have received letter rulings in connection with VEBA terminations that involved the distribution of disability annuities, for example, and the tax issues for the employees were novel so we needed the comfort of a ruling. There are a couple of "no-ruling" areas covered in Rev. Proc. 2022-1, however. These no-ruling areas do not directly involve termination, but rather amendments to VEBAs that implicate the tax benefit rule or the reversion excise tax in the case of a transfer of assets from one VEBA to another.

Peter, under 3(16), you're the plan administrator in the fiduciary, discretionary, "I take care of everything not otherwise specifically allocated out to anyone else by agreement" sense, so I would think that unless this was carved out the 3(16) fiduciary would be the person responsible for beating off the misguided bill collector.

Agree with CuseFan. It's poorly stated in the Rev. Proc., but I don't think that the "in order to reduce..." clause is intended as a helpful aside explaining why someone might want to do it, but rather an operative negative condition, i.e., you can't do it if the result is to reduce the correction percentage.

I think CuseFan is probably right. You wouldn't necessarily get it out of the statutory language, but Treas. Reg. 1.410(b)-1(f) says it does not matter whether the acquisition is a stock or assets deal. In substance, your stock deal ended up like an asset deal. It does seem messy, however, administratively, because you have to exclude the B employees through a combination of plan language (I would make sure your plan language actually describes these facts and doesn't just parrot the statute, because again I think it would be much harder to get there on just the statutory language) and tracking them in your HRIS, rather than simply excluding them based on the company they work for, which would not adopt the plan. I also infer from your description that B did not have a plan. Think how hard that would be if A had to adopt it and maintain it just for the former B employees who are now on A's payroll.

I don't know the answer, but my guess is that QDROphile is correct. But if QDROphile is correct, then excluding the case in which the estate is beneficiary, as already analyzed above, the attempted garnishment or lien is DOA. As long as the participant is drawing breath, it's defeated by ERISA's antialienation. The nanosecond following the participant's death, it's no longer the participant's property. No opportunity for a lien or garnishment to ever attach is my guess. But I've never dealt with exactly this situation, so throw it out there to see what the rest of you think.

Wacko, I think the idea is to rely in great part on the reasonable presumption that since the plan will inform the participant regarding its initial determination that the DRO is qualified, the participant will pipe up if there is a problem. In a situation where the participant is nonresponsive, the plan would probably want to take greater care than usual.

Even if the plan document does not require payroll date deposit, if you contributed on a payroll basis for everyone else and not doing so for this one participant was an error, I think you would probably owe interest (at least in the DOL's view) to correct your breach of the fiduciary duty of care.

If the plan was never qualified and the money goes back to the employer, not to a participant, you may not have terrible tax consequences.

In my experience, it's not all that rare for plans, e.g. with blue collar participants, especially if don't offer lump sum. Employees want to be able to protect their kids and significant others with death benefits in various situations. At least for kids, probably a better solution is life annuity with term certain option. It seems to me that if the plan offers non-spousal J&S annuities, at least, QDROs for that plan could also.

I assume RatherBeGolfing is addressing your Scenario2 with this comment. Would need to examine all facts and circumstances, most importantly the paperwork that was completed to open SoloK with Pershing. If a corporation and you have board resolutions or annual minutes, would be helpful. A lot of factors/risks to be weighed, including timeline and statutes of limitations on various tax liabilities.

Right. The 125 part of the plan (employees can make pre-tax contributions) is not even a welfare plan, at least not as usually structured. It's just a tax gimmick.

They would with me too, Ananda. I think your general impression and analysis are correct.

Whether plan has to file as large or small is based on # of participants at beginning of year. See 5500 instructions page 8 and 29 CFR 2520.104-41(b). So if I'm understanding your description of the facts correctly, the plan would still need an audit. However, if it was a merger, depending on the timing of the merger during the nonsurviving plan's plan year, you may be able to defer the audit and combine it with the audit of the merged plan. See 29 CFR 2520-50.

DCPensionGal, I think you are confusing DFVCP with VFCP (Voluntary Fiduciary Correction Program). Just Google(TM) "Top Hat DFVCP" and click the EBSA hit, then follow the instructions to both file (late) online and pay the $750 through the website.

I agree. The plan had to be "alive" to have amounts deferred under it, but even terminated plans need to collect contributions owed, investment income, etc. while they are winding up.

Sorry I'm coming so late to the party, so to speak, on this one. I agree with pretty much all of the comments above. Individuals who are no longer practicing with a firm or authorized to do so may, generally, receive two types of payments, return of capital, which are generally not taxable, and amounts they are owed as their share in receivables when they leave, if the partnership has a provision for the latter. The latter can be formulaic based on aggregate receivables and/or represent an interest in specific matters, e.g. contingent fees. Amounts paid to the departing partner for their share of the receivables on the books as of the date they ceased to work for the firm , which may occur over a multi-year period, are generally fully taxable as self-employment income. Furthermore, they are, generally, payment for services performed. Before the 2007 changes to the 415 regs, I thought that it was probably permissible, if the plan did not have a last day of the year rule for receiving an allocation, to make an allocation for the departing partner based on all of the self-employment income they received during the year of their departure. And even if the plan did have a last day of the plan year condition for receiving allocations, it's usually not completely clear that a departed partner is not "employed" on the last day of the year, when you look at the plan's wording of the self-employment provisions, which usually just say that partners are treated as employees and their self-employment income is treated as W-2 compensation. They are, after all, still receiving self-employment income all the way through the end of the year, and probably in future years as well. I even concluded that, as odd as this sounds, you arguably could make a contribution for a departed partner in the plan year after they had left, as long as they still had self-employment income from the partnership and the allocation was not inconsistent with the plan terms. With the 2007 changes to the 415 regs, the partner's ceasing to be actively involved in the partnership's provision of services should probably be treated as a "severance from employment" under Treas. Reg. 1.415(a)-1(f)(5) for purposes of the Treas. Reg. 1.415(c)-2(e) rules regarding post-employment compensation. However, the regs are not completely clear on this point, since they do not specifically address the special issues of self-employed individuals and merely use the term "severance from employment" and then say that when that occurs is based on "facts and circumstances." To the best of my knowledge, the issue has not been specifically addressed in any guidance interpreting the regs. Probably the best course of action is to specifically treat a departing partner as having had a "severance from employment" on the date they stopped working for the partnership, and apply the plan's rules for post-employment compensation. But the specifics of how you should address this should probably be written into the plan document, or if that is not practical, then adopted by the firm as the plan administrator as its interpretation of the plan's provisions on this point.

If the plan is a shareholder it will need to make all of the same reps and warranties as any other shareholder. These can be limited to actual knowledge, which the the plan fiduciary may or may not (but probably does) have. But mostly what the buyer wants is the selling shareholder's agreement that certain financial penalties will apply if some of the reps are untrue. Of course, in order to protect the plan's fiduciaries and potentially other parties, the plan may need its own counsel. And I am not addressing here whether, based on facts and circumstances not included in your question, kmhaab, there may be prohibited transactions possible

414(q) defines an HCE as a 5% owner. It's a status. I don't think you have to be a employed by an entity to be an HCE of it under the definition. If the services performed by B can be categorized as management services, you would have a 414(m)(5) management services group as well, apart from the HCE issue.

I agree with Bird that the IRA custodian will not want to make this determination. If the rollover form completed by the IRA owner showed it as a rollover from a 401(k) plan of pre-tax funds (i.e., not Roth), the custodian will likely have no basis to report it as other than a taxable distribution potentially subject to premature distribution tax. Also, there is no withholding on distributions from IRAs.

It should be the date that it would have been effective if adopted timely.

t.haley, can you provide a cite for this? It actually sounds like that might be the right answer. Yes, he received what appeared to be a taxable distribution when he received it, but because he is reinstated he should be made whole. Of course, unless (a) the employer gets the withholding back from IRS and (b) the employee is not able to claim the withheld amount on his 1040 (which sounds very complex administratively), the employee will be unjustly enriched.

PMZJohn, there is a transition rule where you have been using the life expectancy of the beneficiary minus 1 each and now the table has changed. Basically, you go back and start with what would have been the beneficiary's life expectancy in the first year that he or she received a distribution, using the new table, and then subtract 1 from that for every year, including the pre-2022 years. So in your example, it would be 23.1. See Treas. Reg. 1.401(a)(9)-9(f). But this only applies where you have a nonspouse beneficiary, or the surviving spouse was older than the participant. Otherwise you should be recalculating the surviving spouse's life expectancy each year. See Treas. Reg. 1.401(a)(9)-5, Q&A-5(c)(2).