jashendorf

Luke Bailey, if his corporation is an S corp, then (d)(13) doesn't apply. If it's not (which is probably the case), then the stock has to be qualified employer securities in order for it to apply, and that means that the corporation he established with the $300K rolled over to the plan has to be the plan sponsor. Theoretically possible, but not very likely.

Even if you managed to have unrelated employers "adopt" a single 125 plan, it wouldn't work. The 125 plan is the "payroll" side of things -- not the benefits. The underlying benefits are not the 125 plan -- they are separate plans that are being offered as benefits that may be elected pursuant to the cafeteria plan. (Most are welfare benefits, but not all of them.) Those underlying plans may or may not be permitted to be offered by unrelated employers, and that has nothing to do with the 125 plan. The only connection to the 125 plan is that the employer's employees are given the ability to opt in/out of that benefit (which could include a MEWA in which the employer participates, or even a Taft-Hartley welfare plan for which the employee is eligible). But, it goes without saying that you cannot have, e.g., A's employees being given the option to participate in B's plans (which is what you'd have if A and B were actually "sharing" a 125 plan). Some providers say that they are using a single plan, but what they're actually doing is just using a "prototype" document (for lack of a better term), so everyone has an identical 125 plan document (except for filled-in blanks) but everyone has a separate plan.

Unless and until there is some reason for it to change, the responsibility (and liability) is all on the Plan Administrator. If the Administrator hires someone (like a TPA) to execute its responsibility, the Admin. had better make sure that the party being hired is willing to act as a fiduciary -- because it could very well be one. The thing that I see more and more often is TPA contracts providing for services that are clearly fiduciary services, but that provide that "under no circumstances shall [TPA] be considered to be a plan fiduciary" blah, blah, blah, as if such a disclaimer would mean something against anyone but whoever signed the contract. Anyway, my point is that a TPA can and should do what it is hired to do, but it should also make sure that it can pay the price, so to speak. If it's going to perform fiduciary functions, it should be ready to step up; otherwise it shouldn't agree to perform them. If it believes that it can do whatever it wants, and simply say that it isn't a fiduciary, then have at it and best of luck. But, it should act according to its contractual commitment, and it should agree in its contract to do only those things for which it is willing/able to take responsibility.

If it helps (though it sounds like it probably won't), you could explain to her that as of 1/1 the 2019 RMD amount from the 401(k) plan isn't an "eligible rollover distribution", so even if you were to do that as an "accommodation", it would be an excess contribution to the IRA, and would cost her $$$. If you put it in terms of money out of her pocket, maybe she'd appreciate it (since she seems so set on the charitable contribution idea.

If D is not a d, then S owns 100% of the benefit. If he wants to give half of it to D, he can certainly do so, but the PA still has to report 100% of the taxable distribution to S. So allowing S to "assign" the benefit is not the end of it.

My guess here is that this situation is FUBAAR. (that's "almost all repair") First, as Bird already said, hopefully the partnership has no employees, other than the 2 (3?) partners. If it does, just give up now. Second, for some reason that I can't fathom -- and I've been doing this a long time -- you were told to have the partnership set up two separate plans. That's the best possible interpretation of your OP. (Your reference to "plan 001" and "plan 002" is only possible -- and only makes sense -- in the case of two separate plans.) Maybe the broker wanted to charge duplicate fees so he "sold" you two plans; I don't know. But there certainly is no advantage to you. The alternative is that you were told to set up one plan horribly incorrectly. Third, unless you guys are in your 50's, you were sold a bill of goods with the "solo 401(k)." It does absolutely nothing for you, except create extra expenses (assuming that someone is going to charge you for unnecessary testing, reports, etc.). If you had employees, it could be a different story, but if you had employees, what you tried to do wouldn't work anyway for a number of reasons. As is, it gives you no additional contributions, no additional benefits of any kind. In fact, in many respects, you're worse off to the extent that you have money subject to 401(k) -- which would be approximately 1/3 of your account. Finally, what you should have been told to do -- and if there is any way to do so, you should amend your plans to do this -- is get rid of the 401(k) features, and make them discretionary profit-sharing plans. Each of you can still get up to the maximum $56K (or whatever the limit goes to), or nothing at all, or anything in between. The amounts are decided by the partnership. (If you both will want the same things under your plans, you should also merge the plans into one -- it's a lot easier, so long as you don't have to play with different contribution amounts for the two of you.) Just one person's opinion . . .

Am I missing something? Did the OP give any information about the specific terms of the Plan? Not that it really matters, because Mrs. OP doesn't qualify anyway, but I'm curious.

I've been fighting with so-called "consultants" (I refuse to say "experts", even though many of them claim to be) over "solo 401(k)", and that's just the tip of the iceberg. One in particular (no names) really pisses me off. He had a customer a couple of months ago, about 40-41, comp around $225K, and the most he could afford to put away was under $40K (I don't recall exactly how much he ended up contributing, but it was even less than that). I told him that he had absolutely zero use for a 401(k) plan -- "solo" or otherwise -- and could do everything he could possibly need with a straight discretionary profit sharing plan. The only thing a 401(k) could possibly do for him would be to get him the extra $6K from the catch-up -- which he couldn't use anyway. So all that he was doing was paying extra admin fees so that someone could do unnecessary administration and recordkeeping. When he went back to the "solo 401(k)" provider, the guy hit the ceiling. Phoned me, called me every name in the book, told me I didn't know anything, I should be sued for malpractice, blah, blah, blah. And this guy is actually dealing with poor schlubs (or rich schlubs) who think they're getting something for their money. Even if he has one with earned income over $275K who does want to contribute over $55K, who can therefore get something out of a 401(k) feature, I don't know if that person is paying more for the solo(k) than he's making by being able to contribute the extra $6K. I'd like to see those numbers, but we never will.

Does the auditor say why he/she "doesn't like" the provision? I see a lot of plan provisions that I don't like, but that doesn't mean that there's anything wrong with them. My point is, maybe the auditor already knows that the plan calls for a restart. Couldn't hurt to ask.

Using the the plan money to enable the personal money to meet the minimum investment is a (c)(1)(D) violation, and so a PT. (AO 2000-10A did not have that factor in it.) If there were not a minimum investment requirement that the plan assets were needed to satisfy, and all other things being the same, then the investment itself wouldn't automatically be a PT, but could turn into one (or more), depending on future events (e.g., changes in ownership that involve sales/purchases among partners, etc.)

Sounds like they've got an issue. If it's a safe harbor plan, does it provide for additional matching contributions at all (which the "earnings" would be)? If it does, it seems unlikely that the amount = what they are doing. Any chance that they could treat the true-up as a correction of an operational error instead? Of course, they'd need to have an operational error to correct, but I guess that's my question.

Mojo - I'm not speaking of your company specifically, but more than a few companies that claim to do "nonfiduciary administration" (for lack of a better term) are, in fact, performing fiduciary functions notwithstanding what they say in their agreements. In other words, just because they say they're not fiduciaries doesn't mean that they're not fiduciaries. I'm sure that, without trying too hard, I could find a client who had to get rid of a TPA that was doing essentially what PamB describes, but under an agreement that screams "We are not a fiduciary."

Luke - the 415(h) control test replaces 80% with "more than 50%."

Well, it should address withholding, where necessary. But there are not really alternatives to be specified. The required withholding is dictated by the form (and amount) of the distribution. Beyond that, the payee may have an option, but that is the payee's option -- not the Court's option (unless the Court wants to order the payee to elect something, which it can certainly do and which is of no concern to the plan). There is another withholding-related issue, however, with the child-support QDRO. Since the AP is not the spouse, in addition to the distribution not being taxable to the AP, the AP is not considered the distributee for rollover purposes (under 402(e)(1)). That leaves the Participant as the distributee. Even though the check hasn't gone to the Participant, cash is fungible so why can't he deposit an equal amount to an IRA w/in 60 days as a rollover, and avoid tax on the QDRO distribution? In other words, why is it not an "eligible rollover distribution"? And if it is, why is it not subject to mandatory 20% withholding (which would answer part 2 of the OP's question)?

Belgarath - 1.415(a)-1(f) applies the "50% rule" for purposes of 1563(a) and the 414(c) regs (except for brother-sister determinations). So it's not limited to corporate-only parent-sub chains.

Sydney - Was your question whether you could do the conversion, or whether you could do the conversion without any tax consequences? Because you can do the conversion -- with or without other IRA money not being converted. If the "problem" is that all or a portion of the converted balance will be taxable to you. How is that different from any other Roth conversion? If you are converting pre-tax money, you will be taxable on that converted pre-tax balance. All that is different here is using the pro-rata calculation to determine the amount of the pre-tax portion of the conversion. Were the IRA custodians telling you that you could do the conversion tax-free without regard to other IRA balances? Or just that you could do the conversion (which would then be subject to "regular" tax rules)? If they told you the former, then my apologies -- I misread your question and they were obviously wrong. But I suspect that what they were telling you was the latter.