Luke Bailey

pjb1835, of course I don't know your detailed facts, haven't reviewed your plan or acquisition documents, etc., and therefore cannot address your specific situation, but speaking generally, if one company buys stock in second company in a way that takes that second company out of a controlled group relationship that it previously had with a third company, the employees of the second company are no longer employed by the controlled group employer that maintained the plan. Thus, under Treas. reg. 1.401(k)-1(d)(2), there should be a controlled group. But check carefully the plan's definition of employer, eligible employees, etc. You may need, for example, to have corporate resolutions of the second company specifically stating that it will cease to sponsor the plan once leaves controlled group.

Belgarath, I don't know if I can find guidance (hope there's none to the contrary!), but that is the way I have usually done it, i.e. included the 125 "plan" (which is really a tax gimmick, not a plan), the 129 benefit, etc., in one plan document. I have always thought that the DOL would just consider that the non-ERISA benefits as notionally not part of the ERISA plan required to be reported on 5500. You could insert verbiage to that effect in the document if you think would help. Never had any pushback on this approach from DOL or auditors, but maybe others have had different experience and we'll hear from them.

Stash 026, 1.72(p)-1, note that Q&A-19(b)(1) is also applicable, because even if the new loan would be adequately secured, e.g. with payroll withholding, the defaulted "deemed distributed" loan is treated as outstanding for purposes of the $50,000 loan limit, as well as an plan limit on number of loans, as pointed out by justanotheradmin.

Zoey, I think probably the rule you're looking for is Treas. reg. 1.415(c)-2(g)(8), dealing with back pay awarded by administrative agency or court. The way I would interpret the rule I think what you describe your client as having done seems correct. Making a contribution based on the penalty amount would seem to violate 415 because the penalty would not be comp under this reg. But I would need to review the settlement docs, the plan, etc. etc. to really say anything definitively.

Kevin C, I agree with your point, but under 6.06(4)(b) you still have to make a good faith attempt to get the participant to repay. But it's definitely an option.

Peter, this is a new feature of EPCRS under Rev. Proc. 2019-19 and the IRS has not provided a lot of detail, other than to say that the amendment cannot reduce any benefit, right or feature (which the one in your hypothetical would not), and must satisfy the requirements of 410(b), 401(a)(4), 411(d)(6), etc. Addressing your hypothetical, of course, if they did a one-off amendment for one individual and he/she was an HCE, it would violate 401(a)(4). In theory if the participant in question is non-highly compensated, it seems to me that you might be able to do just a one-off for the one individual, but I'd really have to give that more thought before pulling the trigger on it for a client. If they just permanently removed it for everyone, it would seem more clearly to fit the guidelines in 2019-19.

Each set of facts is unique, but it is not unheard of, and not inconsistent with the guidance that Fiduciary Guidance Counsel cites above, for a plan sponsor who has received such a small check, after confirming that it cannot reasonably determine the identity of the participant or participants whose investments in the particular mutual fund or funds 15 years ago gave rise to the payment, to use the amount to pay plan expenses (assuming that plan has language permitting this), which benefits all current plan participants. You might, however, want to first assure yourself that this is the only check that will be received with respect to this fund family. Most likely, the settlement authority issuing the check knows only that the plan had an amount invested in the mutual funds in question, under the plan's EIN, and does not have the identities of the individual participants within the plan whose funds were invested in the offending funds.

The current EPCRS Rev. Proc. is 2019-19, not 2018-52. This is an operational error, i.e., failure to follow your plan document, as you note. Prior to Rev. Proc. 2019-19, the only way to self-correct this error would be to seek repayment. Under VCP, which required a submission to IRS, you could probably get the IRS to agree to just let it go this one time, subject to a requirement that you sharpen your administrative procedures so that it would not happen again. In VCP the IRS would probably also let you amend the plan retroactively to remove the 1-year wait for distributions, which is an unusual requirement, and one that would appear prone to error. These VCP options are still open to you. But new Rev. Proc. 2019-19, the new EPCRS guidance, now lets plan sponsors amend plans retroactively to true up the plan document to actual operations, as long as the change is what I will refer to, for lack of a better term, positive for participants in all ways. Such a retroactive amendment qualifies as self-correction (I.e., no VCP submission to IRS required) as long as it is corrected within the standard 2 plan year correction window for "significant" errors under longstanding EPCRS rules governing SCP. So you generally can self-correct the failure to follow your plan document by amending it to conform to your actions, if your actions were uniformly better for participants (larger benefits, more rights or features) than what you had in your plan document. If the change is permanent and covers all participants from and after the date of the change, you should be well within the new rule for retroactive "positive" amendments. But if you want to narrow the amendment, e.g. just have it apply for last year, you might not fit within the parameters of VCP. If you want to self-correct by plan amendment, you need to carefully review the rules with the assistance of counsel and determine whether they apply to your facts. Worst case, you make a VCP application. Or, as stated at the outset, you try to get the distribution back from the participant.

If you have a preapproved plan that has an IRS "opinion letter," and you are a word-for-word adopter of that preapproved plan, including choosing among permissible options in the adoption agreement, then you have the equivalent of an IRS determination letter. The IRS calls it "reliance" on the opinion letter. So get a copy of the opinion letter from the "sponsor." If it turns out you don't have a preapproved plan with a current opinion letter, even though it was in the form of a BPD and an AA, so that in actuality it is an individually designed plan, or even if it is a preapproved plan, but you added provisions that were not approved by IRS, then you are at a disadvantage without the individual DL. The plan might or might not be qualified depending on its provisions, and in any event without either a DL or an opinion letter, the sun is at the EP agent's back, not yours. Of course the above is only regarding the qualification in form of the plan document. The plan must also comply in operation, which is a whole other subject.

I think this is probably the same issue as for nonqualified deferred comp plans, which are also not subject to ERISA's antialienation rules. Section 414(p) of the Code and Section 206(d) of ERISA provide that QDROs are exceptions to the otherwise applicable nonassignability rules of the Code and ERISA, but then separately describe what QDROs are by reference to "plans," not "qualified retirement plans," or even "retirement plans." So a court can sign off on an order that is called a purported DRO, even though it is regarding benefits in a plan that is not required to provide for nonassignability or the QDRO exception to that nonassignability, which is basically everything other than qualified retirement plans. And because it is a DRO, if it meets the form requirements for a QDRO, it will be one. I believe that at least for nonqualified deferred comp plans it is up to the plan sponsor, in the plan document, to say what force a QDRO will have, i.e., you can say in your nonqualified plan document that you do or don't take QDROs. If you say you do, then they have all the force that ERISA gives to QDROs. If you say you don't accept QDROs, then your plan document's rejection of the applicability of QDROs preempts the state marital property rules (e.g., community property) that would otherwise give the QDRO its force, and the alternate payee may face an uphill battle unless the plan document has other, non-QDRO rules for recognizing the nonparticipant spouse's interest. I haven't studied this, but it would seem like the same principles would apply to employer life insurance constituting part of an ERISA welfare benefit plan, i.e., your plan document would be controlling, but if your plan document provides for QDROs, then something that is styled as a QDRO and meets the QDRO requirements is effective as a QDRO, even though it is against a type of plan that is not required to provide for QDROs.

Under Notice 2016-16, if it's not prohibited (i.e., if it is not one of the excluded categories of changes after the first paragraph of Section III(B), and not included in the list of prohibited changes in III(D), it's permissible. The proposed change appears to be covered by the general language of the first paragraph of Section III(B) of Notice 2016-16 as permissible. You would need to meet the notice requirements. There's also an argument that it's permissible under the regs, but that's more complicated and unnecessary given Notice 2016-16.

doombuggy, nonspouse rollovers have to be to an IRA, see IRC sec. 402(c)(11), which I suppose for this purpose would include a deemed IRA in a qualified plan under 408(q), but I think it would have to be a real 408(q) program allowing other employees to make deductible contributions, which you may or may not have. So maybe what happened is the money is still considered in an account within the plan for decedent, and was not distributed and rolled back in, but has been placed "as if" in kids' accounts for investment management. If above is the case, then the RMD's would just be same as for any DC account where death occurs after RBD.

in-house ERISA, I believe the debtor can get an exception to the automatic stay if it's Chapter 13. Have them talk to their bankruptcy counsel. But in Chapter 7, no. If the case moves quickly enough, they might get their discharge before end of cure period, but it probably will not move that quickly.

My understanding is the same as Lou S.'s.

So all six kids are employees of same company and they rolled their distributions back to the employer plan?

Caliben, I would tread carefully with this one and advise that employer hire a Nebraska ERISA lawyer. If the plan is self-insured, ERISA would preempt state law, but depending on how the plan document reads, the determination of whether the marriage is in existence could depend on state law, since marriage is a state law status. The provision of Nebraska law quoted above seems to say that the marriage may still be in effect for six months. Again, you need to check with a Nebraska ERISA lawyer.

PFranckOwiak, especially if the amount is large, I would tell the administrator/executor your preliminary conclusion per the above and give them a little time to either accept it, or push back. If, for example, the child is the sole (i.e., 100%) beneficiary of the estate, there might be a way to concluded that the child was really the distribute. There are some private letter rulings in this area that should be reviewed. Also, if the child is not the sole beneficiary, others might be willing to disclaim their interest. It could be complicated.

My bankruptcy knowledge from law school is somewhat rusty and I can't respond to the issue regarding automatic stay (I suspect justanotheradmin is correct on that), but I would point out that as a secured creditor, the plan is in a special position, so I don't think the bankruptcy judge could reduce the amount the participant owes or extend the payment schedule, even aside from the problems that would pose under other federal law, namely Section 72(p) and ERISA.

I agree with all of the above, but think technically it depends on the cure period under your loan policy. Delaying the deemed distribution date (which I think Rev. Proc. 2019-19 views as the default date for the "defaulted loan") until the end of the quarter following the quarter of first missed payment is permissive under Treas. reg. sec. 1.72(p), Q&A-10. Assuming your loan policy does include the grace period (and I don't recall seeing any that did not), the loan is not a "defaulted loan" until the expiration of the quarter following quarter of missed payment, so you can catch up the payments and it's not even a "correction" for purposes of EPCRS because no rule of Code or regs has yet been violated.

Dpwct, you need 80% for a brother-sister controlled group, so would seem that you can't get ther even if proxy caused attribution.

shadowgun1102, that's the only "fix" I can think of. Maybe also pray that the discontinued funds didn't outperform the replacements significantly.

KimberlyC, just out of curiosity, why are you doing it this way? There was apparently nothing legally binding before the executive died. The company can just establish a death benefit only plan for the surviving spouse. The tax consequences should be the same as under what you are describing, but with a post-mortem DBO plan you would not need to rely on substance over form to get you out of 409A, although I agree with jpod that what you propose does not seem to implicate 409A. BTW, pay as much as you can in year following year of death to avoid FICA under 3121(a)(14).

I will second Lou S. No age limit for in-plan Roth rollovers.

Pammie57, it sounds like when the first company acquired the second, it acquired 100% of the ownership interests? Please confirm. And during 2018 the workforce of the acquired company remained, by and large, employees of the acquired company, which kept its separate EIN? And now that the acquired company has been sold again, it took all of its employees, by and large, when it went over to the new acquirer, i.e., the third company? Finally, the acquirer/third company has not adopted the plan, or at least did not do so in 2018, right? Subject especially to your response regarding last question, I think you had a single employer plan, because it sounds like the plan was maintained during 2018 by a parent-subsidiary controlled group. But again, the detailed facts are crucial.

J Simmons, as explained across several answers above, I would be confident that if you carefully review the plan provisions and maybe the beneficiary designation form, they will say that the spouse (i.e., #2) is the beneficiary for all of the account. The only other option is that the plan had a J&S and a QPSA for at least 50% of account, and that is almost never the case. Of course, if spouse 1 or the children have a QDRO, that should trump.