Luke Bailey

You don't have to form one, you ARE a multiple employer plan based on your facts. If the administrative savings are worth it, you can operate as such, but will need to apply ERISA's and the Code's various rules applicable to multiple employer plans.

khn, if it is paid by the plan, the plan is the client and the amount of the expense would come within the ambit of the plan administrator's fiduciary responsibility. If it is paid by the plan sponsor, not the plan, then depending on the subject of the advice or other legal service, it may still be for the plan, but in such a case only the quality of the service, not its cost, would be a fiduciary responsibility. Because of the lack of transparency regarding legal fees and, arguably, comparability, it will be very difficult to benchmark. I think most sponsors pay plan-related legal fees as an employer expense partly for this reason.

Note (and this may or may not be covered in Jim Holland's article) that there is also an issue about the way it is calculated. There is some guidance (I think a TAM, maybe) that arguably is a strict reading of the statute, but is surprisingly punitive and makes you wonder whether it is what Congress really had in mind.

PensionPro, DB? DC? Nondeductible because of 404, 415?

FYI, last week Congress repealed the "parking tax" for tax-exempt and state university/college employers, effective back to 1/1/2017 (so as if never applied, except for all the spilt ink). No change for taxable. Section 302 of the Further Consolidated Appropriations Act, 2020, H.R. 1865. Page 1769 of the 1770 page bill accessed through this link. SEC. 302. REPEAL OF INCREASE IN UNRELATED BUSINESS 12 TAXABLE INCOME FOR CERTAIN FRINGE BEN13 EFIT EXPENSES. 14 (a) IN GENERAL.—Section 512(a) is amended by strik15 ing paragraph (7). 16 (b) EFFECTIVE DATE.—The amendment made by this 17 section shall take effect as if included in the amendments 18 made by section 13703 of Public Law 115–97.

Spoken like a true Quadro Pro.

VeryOldMan, my comment went to the "not all are audited" part of John Feldt's statement. The experience I had was with a small plan, and it led me to suspect that there may at least in some cases be a gap between the draconian nature of the minimum funding excise tax provision and the IRS's zeal to enforce, e.g. in the case of a small plan termination where issues of financial fairness/solvency can be raised. The correspondence from Service Center was pretty prompt, however. Of course, in an appropriate situation the "non-EPCRS" employee plans closing group could be approached. They have authority to waive excise taxes, although they are typically loath to do so.

We have had experience consistent with your understanding, John Feldt.

52626, EPCRS has allowed correction by plan amendment for eligibility overinclusion for a while. See pages 116-117 of Rev. Proc. 2019-19.

I think that in some states there are nonprofits that advocate for folks with disabilities, but not sure.

If the SPD is incomprehensible to the child's employees because the SPD says that the covered employees are the employees of the parent, it's a problem. However, if the disclosure of relationship is good and a child employee reading it would have an understanding of his/her benefits, I think it should be OK. ERISA and DOL, not code, applies here, and I think assuming the content is good it is furnished by sponsor, through parent as agent. This is aside from controlled group issue that treats as a single employer. So bottom line, I would ask whether the SPD is misleading to any group, and if it is, fix that.

LAHartline, you have a right to see an SPD that for the LTD. It may be included in an SPD that covers other benefits, such as life and health, if they are combined in a single plan. Beyond that, you may need to hire a lawyer or some other sort of representative (e.g., disability advocate?) who understands the system to help you.

tghooper, NUA is a tax rule under Code sec. 402(e)(4) that the participant should generally have the choice to apply. It is disclosed in the IRS model rollover notice, although probably is disclosed also in most ESOP SPDs. Are you saying the plan did not report the amount to the participant?

Linda, I think you're right. For some reason I had missed that justanotheradmin said that the withdrawing employer was coming out of a controlled group. I was thinking of this like a MEP. Thanks for pointing this out for justanotheradmin.

OK. I could be wrong, but I think under current law and regs you are stuck (i.e., can't distribute) unless you go through the steps of a spinoff termination. If you don't go that route, then hopefully the plan has language that would treat an employee's termination of employment with the former sponsor as a distributable event even after it's withdrawn.

Right, BG150. No, the whole point is that you distribute someone's vested balance, typically at termination, and you figure that's the last you'll see of them. If that is the last you see of them, then you're done until the time under your plan doc for forfeiture of the unvested portion of the account, and then you are really done. The point of the formula is for someone who comes back within the 5-year period during which they have the ability to essentially "reclaim" the nonvested portion and continue on with their vesting. If they leave again before being fully vested, it would be unfair to just distribute the new vested portion of the account without taking into account that they already did that once. E.g., if someone takes 40%, then 40% of 60%, then 40% of 36%, etc., pretty soon they have a 100%, even though only 40% vested.

Unless the loan is $10,000 or less, Code sec. 72(p)(2)(A)(ii) says that the loan cannot exceed 50% of vested account balance. DOL reg. sec. 1.408b-1(f)(2) just says don't exceed 50% of vested balance unless you have security other than participant's account. So you have to restrict loan to only a portion of vested amount.

Lorraine Steinberg, I think you need to do a deeper dive on the facts. If, at one extreme, the 2019 plan document says the employer will make an SHN, and no matching is permitted, or match will only be contributed at end of year, then arguably you are correcting an error by moving all the funds out of matching and in fact have to do that to keep plan qualified. On the other, more likely set of circumstances, the matching that has been contributed could be construed as discretionary payroll matching (if plan permits, and even worse if employee communications arguably said), you could have a real issue. Again, really need to analyze plan docs and employee communications to know, also internal payroll and TPA communications, e.g. were the deposits listed as SH matches, that sort of thing.

BG5150, why isn't it clear? She had $10,000 and took $1,000. The plan made 11.1% between that time and the new distribution date, so at the later date, if she had not taken the distribution, her account would be $11,111, and 50% of that would be $5,555. Meanwhile, her $1,000 has grown outside plan to $1,111. If she takes another distribution now, and assuming the 50% has note gone up), she gets $4,444.

justanotheradmin, if I were you I would citate 1.411(d)(2) and look for cases or rulings. My first guess as to the analysis of your situation here is not based on a headcount reduction, but rather that the withdrawing employer is going to have a complete cessation of contributions and therefore that withdrawing employer's (but not nonwithdrawing employer's) employees need to become fully vested. Of course, if you don't fully vest them then you would need to include provisions counting service of the withdrawing employer (which will no longer be an adopting employer) for purposes of allowing the employees of withdrawing employer to continue to vest in plan, otherwise the nonwithdrawing employer's employees would get the forfeitures, right? That would not make sense. But again, my guess would be that 1.411(d)(2) requires full vesting of the withrdrawing employer's employees.

Yeah. It's complicated.

DOL reg. sec. (i.e., 29 C.F.R.) 2520.102-3(f) tells you to use the "business address" of the plan administrator. (There may be other guidance, but I have not looked.) That probably means the place where the person who is the plan administrator (either a person id'd in plan docs or, by default, the employer if no one else id'd in docs) actually has a business address, such that (a) he or she will actually be likely to receive communications there, and (b) a summons or other order served on him/her/it there by federal court or DOL would be jurisdictionally valid. Some plan administrators will have only one such address, others , e.g. multistate businesses, will have many potential addresses.

Bird, as I think bzorc is suggesting, if you treat it as a contribution, don't you have to allocate it based on comp, subject to 401(a)(4) and in accordance with plan provisions. If you treat it as a contribution and don't do that, you're allocating it based on account size, right?

Mike, not sure, but you may be getting a little subtle on me. If it helps, I will concede that just putting the cash back into the common investment pool and spreading the pool's investment return over the gross value of all accounts, including loans, is simpler in terms of recordkeeping steps. I think it is a more complex idea to communicate to participants, however, both those who take loans and those who don't, than simply saying, "You borrow from your own account and your account owns all of the loan, for good or ill." Certainly that's a better basis for making a loan to someone who just filed for Chapter 13, which was the OP. I am old enough to remember that VisiCalc was the first spreadsheet, or close to it, but now that they teach Excel in grade school, it's going to be pretty simple to recordkeep either way. So even in a DC plan that pools everything else, I would recommend not pooling participant loans. Does that settle it?

chc93, I was trying to illustrate the effect of treating the participant loan as a segregated investment of the borrowing participant for all purposes, even in a DC plan where the rest of the investments are pooled. In such a case, the rate of return on the loan (i.e., the loan interest), whether more or less than the plan's rate of return for the same period, would be assigned to the participant. Thus, for example, if it were less over the life of the loan than the rate of return of the other plan investments, the borrowing participants, as a group, would take the hit, not the nonborrowing participants. The converse would, of course, also be true, as well as being less likely.