Luke Bailey

You have to pay more for that one.

KevinMc, see if you can find a definition of "entry date."

I vote it's a cutback. If anyone says no, I will check the reg.

FPGuy, both the 409A regs and the proposed regs for 457(f) use the term "materially greater." 409A regs leave to facts and circumstances, whereas 457(f) proposed have the 125% rule, and state in preamble that this does not imply that 125% is the right number for 409A.

kgr12, I agree with your analysis of the hypothetical.

Of course, the plan could just provide for immediate distribution to AP. That would get my vote.

Jakyasar, not sure exactly what you are asking, but assuming the plan and limitation years were the same, and will stay that way, you will have a short limitation year and will need to prorate (1/12th) the 415 limit. See Treas. reg. 1.415(j)-1(d)(2).

What you all said, and also (a) it's very unusual for someone other than an officer of plan sponsor to have the delegated authority, (b) it's very unlikely there is a formal delegation of authority (boilerplate board resolutions will probably authorize "any officer" to execute amendment, not any plan fiduciary), (c) whoever is proposing this is probably just "making it up."

AKconsult, do you agree that this is indirect compensation required to be disclosed under the 408(b)(2) regs? Do you think it makes sense for a plan fiduciary to agree to a fee deal in which the fees paid to the TPA cannot be reasonably estimated in advance and have only a known downside, not upside, and plan does not share in upside? I agree that fees paid by the mutual fund company out of its revenue are not a plan asset, and therefore agree that there is no per se PT as long as the TPA is not a fiduciary (which I assume it has concluded it is not), but from an overall fiduciary perspective we all know that the shareholder servicing and related fees offered to be rebated by the fund company can be paid back into the plan to the extent they are not scooped up by the TPA.

fmsinc, you argue the point well, but (a) the repeated use of the phrase "with respect to" would give me pause, i.e., quite arguably the AP's interest in the plan, whether separate interest or not, is "with respect to" the employee, because derived from it, and (b) one would think that by this time there would be a case permitting it, if it could be done. But who knows. I can only say, I remain skeptical.

I have never seen a plan that permitted an alternate payee to alienate his/her interest, and I think that the same policy reasons why the law does not permit alienation by the participant would apply. Note also that based on the wording of IRC sec. 401(a)(13), I don't think that the premise of your query is correct, fmsinc. It states that "benefits provided under the plan" may not be alienated, without specifically tying that requirement to the term "participant." The language of the reg is the same. See 1.401(a)-13(b)(1). Of course, one would also expect that the benefits of a beneficiary of a deceased participant would also be subject to the anti-alienation rule.

AJ North, I don't think so. The amendment you describe is clearly permitted under Rev. Proc. 2016-16, and illustrated in Section E of that Rev. Proc., Example 3. There is no mention of having to provide earnings for the period that the higher match walks back, and that would be incredibly complicated. Maybe someone will chime in saying they heard the IRS say something different at a conference, but I doubt it. That would be supplementing what would be a very significant omission from Rev. Proc. 2016-16.

DDB BN, your plan documents must provide for this and all of the other points above are correct, but sometimes these work out to be great investments for the participant business owners (and sometimes not).

Agree completely with QDROphile. The provisions allowing revocable assignment are in 1.401(a)-13(d) and (e). Of course, the lender could and should take into account that this is an income source for you when considering your ability to repay the loan.

I believe the reference is to the 5th Circuit case, the decision in which should come any day now. However, because the unconstitutionality argument is based on the repeal of the individual mandate tax as part of TCJA, and the repeal was not effective until 1/1/2019, the complete unconstitutionality of the ACA (if that's what the 5th Circuit holds, and there are a lot of other ways it could come out) will not reach back earlier than that. In any event, a decision by the 5th Circuit that the ACA is now wholly unconstitutional would be appealed to the Supremes and a 5th Circuit judgment of unconstitutionality would be stayed during the appeal. I should add that the IRS isn't any better at getting blood from a turnip than anyone else. If all else fails for your client, jireh87, and you get the assessment, you can always try to negotiate over ability to pay. If an ALE neither provided coverage nor reported, then you face both the ESRP and 6721 and 6722 penalties. You might get the penalties mitigated. I suspect the only way to reduce the ESRP is based on ability to pay.

....And you probably would not like the result, so in that case make sure you understand the consequences of coverage.

CPS, I agree with justanotheradmin. My point only applies to matching QACAs.

cathyw, the basic proposition that, in the case of an equity interest (e.g., an LP interest) in a pass-through, the character of the income at the entity level, e.g. active business income, carries through to the qualified plan or IRA, even if the qualified plan or IRA owns only a small slice of the entity and has no management role in it, is based on an old Revenue Ruling, from the early 70's I think, that dealt with a plan or tax-exempt org's investment in, if memory serves me correctly, an equipment leasing partnership. If you don't have it you should be able to find it using Google or Checkpoint or whatever.

I think I agree with most of the comments above, including that this is indirect compensation that must be disclosed under the 408(b)(2) regs. Would point out further that this might very well have been a PT, subject to the BIC exemption, had the DOL's fiduciary regs stuck. Given the apparently lucrative arrangement that the TPA has with the mutual fund company, it would be conceivable that the TPA might in fact influence the plan's decision regarding which fund family to use and its retention. That would have made the TPA a fiduciary under the withdrawn regs. And then receiving compensation from the mutual fund company would have been a "double dealing" PT under 406(b)(3), again subject to the potential application of the BICE labyrinth. Of course the plan fiduciary selecting the TPA and the fund company should in theory fully understand the disclosed fees and the issues they raise. If not, this could be fertile ground for TPA and fund family competitors to go over the 5500 and point out to the plan sponsor something that it may not be aware of. (I understand, of course, that Belgarath's OP stated that the plan sponsor was fully aware of the situation and fine with it.) It is, of course, not uncommon for fee structures to become outdated as plans grow larger over time, and plans will often demand fee concession as the TPA's revenue for their plan grows.

emmetttrudy, was the plan already frozen? I think the necessity of the amendment is to freeze accruals. I'm not sure not having adopted a "termination" amendment as you put it matters, except for the accrual/204(h) issue.

cathyw, you are correct to be concerned. If both (a) the "borrower" is a pass-through, e.g. LLC or LP, and (b) the "loan" were recharacterized by IRS as in substance equity (e.g., preferred partnership interest), then sure, you would have UBTI. I don't think there's a lot on this. Lots of plans and IRA's make loans with "equity kickers." Wise to follow the "pigs get fed, hogs get slaughtered" principle. An analysis would take into account the market rate of interest, security for indebtedness, share of profits, etc.

CPS, the tradeoff is that to get the QACA 2-year vesting you have to have automatic contributions. So with conventional SH plan, SH employer contribution is fully vested, but you may have fewer participants deferring than in QACA, so over time your SH contribution cost may be lower. It's an economic trade-off, and you have to guess at employees' behavior to cost it out.

BG5150, just to be clear, you are positing a situation in which the written contract between the TPA and the plan or plan sponsor says that the TPA will (a) be due a formula-derived amount from the plan based on its assets and participants, (b) separately receive from the mutual fund company a specified portion of the underlying funds' shareholder servicing and related fees , and (c) credit the amounts under "(b)" dollar for dollar against the amounts under "(a)," but implicitly or explicitly also provides that if the "(b)" amounts are greater, that is the fee?

I interpreted the OP as saying that the TPA agreement had agreed upon fees (e.g., basis points and/or per account charge that was calculated separately from revenue sharing). There are then agreements between TPA, fund company, and plan providing that rev share will be credited against TPA's total fees owed, and source of rev share is the shareholder servicing or related fees charged by the underlying funds against NAV. Turned out, rev share exceeded the TPA's agreed upon fees. I think in that case, whether the rev share check from the mutual fund group goes to the TPA or the plan, the excess rev share (I.e., total minus TPA agreed fee with plan) is a plan asset. If the mutual fund family has an agreement to pay the TPA what is in effect a finder's or business aggregation fee, such as the 5 basis points example that several posts have raised, that is different. That amount is taken by the mutual fund company out of its revenue (what would otherwise be its profit) and spent on the TPA as a promotional expense. Of course, it should be disclosed to the plan fiduciary with authority to retain the fund family and the TPA. Of course also, if the TPA were a fiduciary it would be a "double dealing" PT under 406(b)(3) of ERISA, but the typical TPA is not going to be a fiduciary, so not a PT.

chc93, obviously I have not reviewed the contract or any other relevant documents, so I am addressing really a hypothetical posed by Belgarath. But the mutual funds doing the revenue sharing are owned by the plan, so the revenue sharing amounts belong to the plan as well, subject to the right of the TPA to take the portion of them it is owed under its contract with the plan and/or plan sponsor. If, as I think the OP stated, the amounts so shared are (a) in excess of the amount the TPA is owed under its contract, and (b) in the possession of the TPA, the TPA can write a check to the plan.