Luke Bailey

Larry, it was Portman Cardin, of course. He still has his Maryland Senate seat, so I thought I'd point out the typo.

Yes. perkinsran, what C.B. Zeller is pointing out is that the 401(a)(4) test is as a BRF, so my example of passing the ratio percentage test is overkill. It would appear that the match here would satisfy current availability (1.401(a)(4)-4(b)), but whether it passes effective availability (1.401(a)(4)-4(c)) depends on facts and circumstances. Again, I would be skeptical regarding both tests, although if you pass the m test, seems like your facts and circumstances for effective availability would have to be pretty good. Presents sort of an interesting compliance issue, because you won't know until you test actual contributions whether you are passing 401(a)(4). Same for 401(m), but there is of course a correction mechanism for a 401(m) failure. I guess at least arguably you could base your BRF/401(a)(4) conclusion for the year based on ACP after distributing any excess aggregate contributions and/or making QMACs, though, so maybe OK. But even if you pass 401(m), there is no guarantee that the match was effectively available.

My understanding as well, EBECatty.

hsally, note that if the employer can be "reformed" (e.g., by following Larry' Starr's suggestion above), then the 401(k) may be better, because there may be matching contributions and the contribution limits for your own contributions are higher than for an IRA. If there is no match and the IRA limits are not too low for your savings amount, the IRA will probably be a supierior vehicle for you, because it will probably have lower fees if you go to one of the large mutual fund vendors and the account set up and contributions, as well as monitoring of investment performance and investment changes, can be handled on your phone by downloading the vendor's app.

It probably will fail both, but you won't know if it fails 401(a)(4) until you have tested the group that gets the match. If the group that contributes at least 5% and therefore gets the match passes 410(b) (for example, the percentage of NHCEs who contribute 5% is at least 70% of the percentage of HCEs who do), you would be OK for 401(a)(4). For the 401(a)(4) rules, see 1.401(m)-1(a)(ii) and 1.401(a)(4)-4(e)(3)(iii)(G).

Larry, I agree that that is a direct reading of the Code, but Treas. reg. 1.410(b)-2(f) seems intend to extend the relief to asset purchases.

sdcurt, the rule you need to be worried about is 1.409A-1(b)(5)(C), second sentence. Note that it explicitly excepts ISOs and ESPP options, so EBECatty's point is pertinent, but doesn't help if not an ISO. Uncertainty regarding whether a PowerPoint + course of dealing + emails and whatever else = a "right" may give you wiggle room for the current transaction, but certainly whatever they are doing should be informed going forward (and, depending on facts and circumstances, maybe backward) by due consideration of the rule.

1.414(v)-1(g)(3): "catch-up eligible participant" = "employee," blah blah 1.414(v)-1(g)(4): "employee" defined in 1.410(b)-9 1.410(b)-9, definition of "Employee": "...individual who performs services...who is either a common law employee...a self-employed person...treated as an employee pursuant to section 401(c)(1), or a leased employee..." (emphasis supplied).

ratherbereading, what Ellie Lowder is pointing out is that money is fungible. If she has other amounts coming to her for work she did before termination, she may be able to defer from that and replace it with the $30k severance, from which she cannot defer.

I think you can do it, if the bank is willing. You would want to have some way of dividing the assets, obviously, e.g. if they are all invested in the same way it would be proportional, similar to a master trust for separate, but related, qualified DB plans.

Good luck, M Norton.

Tot, I think there is always going to be some level uncertainty under Rollins, because it specifically avoided application of the plan asset regs and said that under the facts and circumstances there the transactions between an entity owned by the plan and a DQ'd person, even though technically not involving plan assets under the regs, was nevertheless an "indirect" PT. Rollins involved an IRA that owned some very high percentage (98%) of the equity of a corporation that was an "operating company," and transactions between that operating company and the owner of the IRA. Obviously, that is an extreme situation, because the IRA owner controlled both the IRA and the corporation. Your outside director presumably does not control the ESOP or the ESOP-owned corporation. Nevertheless, since Rollins did not provide a bright line, there has to be some risk. Presumably at a minimum the outside director should recuse him-/herself from decision, there should be an independent appraisal and search for competitive offers, etc. But you should also consider seeking an Adv. Op'n or individual exemption from DOL.

M Norton, it is a scrivener's error, but it should not be called that in the VCP request. The VCP should lay out the facts of what occurred as persuasively as possible and then request correction by a plan amendment retroactive to the inadvertent change. Again, do not call it a 'scrivener's error," though, as that seems to be a red flag for IRS.

Degrand, I am never sure what 29 CFR 2509.75-2(c) is actually saying in a particular context, but it is not inapplicable. You are saying it is inapplicable, I think, because you are relying on the plan asset rule to say that the company's assets are not assets of the ESOP, and therefore the loan and repayment of it does not involve plan assets. But the whole point of 29 CFR 2509.75-2(c) is to override the plan asset rule where 29 CFR 2509.75-2(c) applies. It is a codification of some specific instances where a Rollins-type "indirect" transaction with plan assets will be deemed to have occurred.

Gotcha. Makes more sense. The director is a DQ'd person under 4975(e)(2)(H), but you are saying the loan is between the bank and the ESOP-owned company, and the company's assets are not plan assets, so the transactions between the director and the company do not involve "plan assets." But take a look at 29 CFR 2509.75-2(c), 4th paragraph, and in any event tread VERY carefully. I don't have enough facts to do anything more than help you sort out the issues you talked about. Do not infer any answer to your question from my posts.

AKconsult, the "attributable to" phrase when used by the Code and regs in the context of account-based plans always means the contribution and earnings on those contributions (and earnings on the earnings on the contributions, etc.). In otherwords, the tree and all its branches and fruit.

Larry, for some reason the link to your form would not work for me. Obviously, if the beneficiary designation form says that if one of the named beneficiaries is dead at the death of the participant, that person's children will take, or the other contingents will divide his or her share, then you would follow that. I said in my response that you would follow whatever the beneficiary designation form specified. My point was that if the beneficiary designation form does not contain a statement regarding what happens if both the primary and his or her contingent are dead, then probably the share for the deceased contingent would be kicked back to the rules in the plan document specifying what happens to any portion of the account not covered by a beneficiary designation, i.e., surviving spouse, then children, then estate, or sometimes straight to estate. As I stated, the link you provided to your form does not work for me. The language you quoted from it, however, seems to address only the sharing percentages where there (a) is more than one beneficiary for a particular share, and (b) the sharing percentages of those multiple beneficiaries in the same class are not specified. That is a very different question from the OP, where the percentage for the surviving beneficiary (50%) was clear, and the issue was what happens to the other 50%.

I'm not seeing this as a plan asset issue. What you are saying is that the outside director is going to pay off the bank in exchange for the ESOP's giving him a promissory note on similar terms with a lower interest rate? Of course the transaction will involve plan assets. The loan may in principle qualify for the ESOP loan exemption of Sec. 4975(d)(3) and related ERISA section and regs. The outside director will need to recuse him- or herself from all decisionmaking regarding the loan for a variety of reasons, and other fiduciary safeguards would be required.

M Norton, I have had this case twice. One time involving 10 years, a small company, and $1 million in back contributions, the other a larger company involving about $4 million in missed contributions over a similar period. The questions you need to ask include (1) was the exclusion consistently applied across all time periods, (b) as justanotheradmin points out, does the plan pass 414(s) with the exclusion, and (3) were the employee communications such as SPDs consistent with plan language or exclusion. To make a long story short, in both cases we had a consistent practice of exclusion, we passed 414(s) for all years with the exclusion, and at least arguably the employee communications were more consistent with what the plan had done, rather than how it read. In one case I was able to convince myself and the CPA auditor who had discovered the problem that the plan language could be interpreted reasonably to support the exclusion. In the other case (which was discovered in connection with a vendor change), no such argument was possible. We filed a VCP request and were able to get some of the years (the largest) retroactively corrected by conforming plan document retroactively to the exclusion.

NW529, you summarize the facts only very briefly and may not have included all relevant, but generally, at least, your initial instinct seems correct. See IRC secs. 416(i)(1)(B) and 318(a)(1)(A)(ii) and related regulations.

Assuming this is an ERISA-covered retirement plan,. the plan fiduciary might look to state law for nonbinding instruction to help it determine what the plan language and authorized form intends, but state law is not directly applicable. It is purely a plan document and forms determination as to what the plan intended. That general principle has been the subject of a couple of U.S. Supreme Court decisions.

I agree with CuseFan that depends on way written, but not sure I agree with Larry that per-stirpes or -capita makes a difference. If the plan language, as most do, basically permits a beneficiary designation form, but doesn't say much else, and the form specifically addresses the situation described where primary is deceased and one of contingents is also deceased, that is your answer. But if the most likely interpretation pf the beneficiary designation form language is that the 50% for the dead contingent does not go to the other contingent, the plan may say something like, "anything that is not covered by the beneficiary designation form goes to spouse or issue (and should specific per stirpes or capita for issue), and if not spouse or issue, to estate." I don't think I would import state law per stirpes and per capital concepts into the interpretation of the beneficiary designation form unless the form itself asked for it.

I can't address your individual case, EM, but it seems to me that in the abstract if a participant took steps that the employer represented would ensure that his or her plan loan was paid each month, and then there was a recordkeeper change and Recordkeeper 1 or Recordkeeper 2 flubbed the handoff, then the loan may qualify to be corrected under Section 6.07(d) of Rev. Proc. 2019-19 (EPCRS). Gets technical. You may want to ask "them" to check it out. The key, again, is that this was something that, had they thought of it, they would have transferred, but they didn't through an unintended oversight or the like. Of course, "they" may resist having to deal with it.

David makes a good point, chibenefits. I have found that there is really no way to do this analysis without making a very detailed org chart. The rules for attribution of ownership interests (based on family and business relationships) are extremely complex and factual scenarios can be very detailed with ownership of some entities that may be held in trusts, family limited partnerships, and the like. If noncorporate entities are involved, you have to know both capital and profits percentages.

Lauren057, it's been a while since I had to look hard at this issue, but I think you're under 1.411(d)-4, Q&A-2(e), in which case you can do what you want, but only if you offer the surviving spouse a lump sum on the first date that he or she could otherwise receive the first of the "extended payments." Check out the reg.