Degrand

I agree with Larry.

Yes. You can use the 2019 5500-SF form since the updated form is not available.

If it wasn't a plan document drafting error then it is a diversification election form drafting error.

I read the above question as suggesting that the 400K will be invested in loans. The cash and subsequent loan would be considered an asset of the company and may be part of the valuation of the company stock by the valuation firm.

That is some interesting drafting on the part of the attorney. That is some interesting drafting on the part of the attorney and not required under 409. Yes, there is a operation error. They should fix their forms asap. Without amending the ESOP, the fix would be to have the participant return the funds and then ask the participant whether he/she wants to make a diversification distribution into the 401(k). It is also interesting because most 401(k) plans allow participants to request in-service distributions of rollover funds.

The Plan document usually controls the process of a controlled group corporation participating in the plan. You should look at the plan document.

You need to read your plan document. Many ESOP plan documents do not require the consent from a participant who has reached normal retirement age. You may not be able to delay the distribution from the ESOP. However, the distribution is considered an eligible distribution and can be rolled over into an IRA or other qualified retirement plan. As long as you elect to rollover the ESOP distribution, you should be able to delay the taxes.

ESOP Guy is correct, a participant only needs to make a distribution election once to comply with the consent requirements for distributions. All distributions after the first consented distribution does not need a new consent unless the plan provides otherwise. Normally, I only see this issue with TPAs that only do the administration for a few ESOPs.

I thought the PPP loan requirements required payments to go to employees in the first eight weeks from the loan in order to forgivable. They should consider amending the plan to delete the last day rule for 2020.

Yes. From the plan's point of view, the employee has a $200 lost attributed to the over payment. If the company desires to "fix" it, they can provide him additional $200 in compensation (i.e. bonus) and minus out withholding, FICA, and all of the other deductions. It is want would have happened if the company would not have made the administrative mistake.

In general, an Excess Allocation is corrected in accordance with the Reduction of Account Balance Correction Method set forth in Rev. Proc. 2019-19. Under this method, the account balance of an employee who received an Excess Allocation is reduced by the Excess Allocation (adjusted for Earnings). The term “Earnings” refers to the adjustment of a principal amount to reflect subsequent investment gains and losses, unless otherwise provided in a specific section of Revenue Procedure 2019-19. 402(g) limits is a qualification error and not really a fiduciary error. It is interesting to think that simply the failure to correct timely is a fiduciary error. The plan can not true-up for any loses to the participant's investments. Any transfer of funds by the company of a "true up" would be treated as a contribution and not treated as a corrective contribution by the IRS. This would make any contribution to one employee (likely HCE employee) an allocation which would not likely be supported by the plan document and would likely create another qualification error. My two cents is to have the company give him a bonus.

I agree with Larry.

A qualified individual is can make the repayment contribution to an eligible retirement plan. It doesn't have to be the same plan that made the covid-19 distribution.

Your TPA will provide you the number of shares that can be diversified. The election usually use the number of shares available and not the %.

Yes. You may elect to diversify less than 25%. It is common among participants. You would be able to diversify 195 shares in year two which is over 12% of the current year two balance. Here is the math: YR Begin Shares + New Shares + Prev Divrs = Sub Total x25% -Prev Divrs =Avail for divrs Divrsfy Y/N Divrs Shares End Share Bal 1 1600 100 0 1700 425 0 425 Y 255 1445 2 1445 100 255 1800 450 255 195 3 4 5 6

What happens if the warrants are only payable in cash and stock ownership is unavailable to the hold?

It is common for ESOP companies to sell their stock for a premium. Otherwise, why would they sell if they could have obtained the same value being offered. So an ESOP obtaining a premium is almost a requirement for it to sell.

Tests are tests. I just don't see a public out cry for HCEs being able to contribution more to their 401(k) than NHCE.

It would be the Internal Revenue Service that would have to provide such relief. A few organizations have written the IRS requesting various relief which include relief from the 30 days; but none that I have seen are requesting the relief from the test.

The key to remember is the participants are only beneficial owners except in limited circumstances and don't have all of the ownership rights as a ordinary shareholder. I am not sure that the bylaws allowing for expanded voting rights would change that relationship without amending the plan document.

Any expansion of voting rights are included the ESOP plan document rather the bylaws. The reason is participants are not legally the owner of the company stock. The trustee is the legally owner. If you want to have participant vote on stock sales, it has to be in the plan document.

As a practice matter, you usually don't go through the cost of a pass-through vote without knowing that transaction will be approved. I agree with ESOP guy, you don't take into account the lost of a job because an ESOP is retirement account not a guarantee of future job.

Always provide the correct SPD when the participant requests it.

I agree with Larry

Are you worried about the failure to provide an SPD or plan document within 30 days of receiving a request from a plan participant or beneficiary can result in a penalty of up to $110 per day per participant or beneficiary for each violation? I would only request acknowledgment of receipt (or keep proof that we provided the document) if the participant requested the document. Otherwise, it is not required under the regulations.