Cardscrazy

My TPA had us do a blended cost basis per share so no admin headache dealing with multiple cost basis. Are you an S Corp? If so, don’t forget about the S Corp basis adjustment!

Maybe adding to tell HR that you want it all returned -a mistake of fact, that you didn’t want to participate in the first place. I think a refund can be done. If they refuse then tell them you want this to be considered formally as a claim for benefits which according to your summary plan description forces the plan sponsor to do certain things like formally document the reasons, showing you where in the plan it says they can’t do what you ask. And that response is the final word; they are the final authority, unless you want to sue over this. But you at least got it documented. good luck!

sorry, and thank you. Yes this is a calendar year plan year with it's federal tax return extended to October 15. It's the testing that bothers me. Our TPA said that any contribution made late would require another round of testing. I'm going to offer the company payday matching, eliminating the last day rule, or quarterly matching with last day of quarter requirement. I don't believe paying late in the year, even if allowed, is really a good option. Thank you for your responses!

Hello, I typically do the annual match calculation and lump sum contribution for my company in late January in the year following the plan year, but the company has a lot of expenditures in Q1. They have asked if the match could be paid later in the year like, for example June 30. I offered April 1, but they declined that date as it's too close to Q1. They countered with April 30 or later, like June 30. I believe a match paid after April 15 would mess up compliance testing, am I right? Especially 415 testing, which is an issue for my company as we do after-tax voluntary contributions/Roth conversions. I will offer to do quarterly matches with a last day of the quarter requirement. Right now we have a last day of the year rule. By going quarterly it will increase costs, but spread out the payments like they want. What does the community think? Is a match payment after April 15 not a feasible idea? Besides 415 testing, what other tests are impacted so I can defend my position? Thank you!

Dobber, I'm kind of with Dare Johnson on this one (except that ESOP stock has no holding period requirement to get LTCG) and I was not aware you could split NUA as it was my thought that every share of stock had a cost basis that was inexorably linked to each share. If you could please share your PLR references, that would be helpful. As to your specific question rollover vs. transfer which should happen first, I'd say it would not matter what goes first if you can split the NUA like you say.

Well it's natural to have expenses associated with the ESOP portion in the 401(k) plan e.g., independent audit fees, trustee fees, third party administrators, and maybe investment advisor fees. There's probably a requirement that all expenses are ratably allocated based on assets, resulting in the need to sell ESOP shares to pay them. Since everyone is 100% vested there are no forfeitures to use sell to pay expenses. Since the ESOP is within the 401(k) it must be that your company refuses to pay those expenses themselves, which they could. There should be information in your summary plan description. There should be some transparency, including an annual fee notice that provides fee information. Find out who is on the company benefits committee and ask them.

If you second anyone to a related entity 1) pursuant to a secondment agreement with such foreign entity and 2) pursuant to a secondment letter/expat agreement with your employee, you can keep the individual on the US payroll, while the related foreign entity reimburses the US entity for employment costs. While on US payroll they can continue 401(k) benefits and deferrals as they have US source income. I would suppose this applies to a non-resident who is on US payroll but I've only had US or dual citizenship employees go to the UK. Secondment keeps the employee off the foreign payroll for the country they work and reside in, which would normally be required of anyone working and residing there. You should seek out a US tax law firm to assist you. There is no requirement I'm aware of that they have to come back and work a day in the US to maintain their US source income status. Coming back would seem counter to the secondment agreement terms. Like what was said, a US DC plan typically excludes non-residents with no US source income, but here the employee would remain on the US payroll while seconded. If your secondment fails a challenge then all bets are off.

The employees of the PEO are terminating employment there and are experiencing a distributable event as a result. Ask employees of Company B to rollover into Company A's plan.

I give them a copy of the determination letter. I didn't bother to explain why the determination letter is so old since then I'd have to explain that the IRS doesn't give out determination letters anymore. They didn't ask about that, so maybe like Bird said, they're just checking a box. I've attached a redacted copy of my standard letter. Anybody want to help me write a better letter? Expl ESOP to 401k Verification Letter_Redacted.pdf

I don't know if reference to IRC 163 does anything because a participant loan is not allowed for a "substantial improvement" so why would IRC 163 support or not support a participant loan for a construction. The loan rules stand on their own I think. Therefore, with those rules being vague, the acquisition of and construction of a primary residence (both resulting in primary home acquisitions and mortgages) are rather similar with the end result being a dwelling to live in that they didn't have before so I'd believe you should be able to make an administrative interpretation and document it as such and allow the loan for the construction, as long as you confirm that they did ultimately live in the house.

well, isn't their choice either default/payoff/rollover. How much time do they need to think? Everyone always rolls over if they can. It's done as fast as the TPA can do it and I've seen it done pretty fast, like in time for next payroll. I think that the amount of time before a default occurs under the old plan following termination, say 60-days, is sufficient to bring the old loans over and gives you legal leeway on timing. I'm a plan sponsor (not in payroll), so TPAs typically mostly handle this for me.

The old loan plan has to allow a rollout of a loan (usually after amendment at termination to allow a loan to be rolled out for a business event, like a merger, or sale) and the new plan has to allow a roll-in of loans (also typically for a business event). The former employee of one plan becomes an employee in the new company immediately (even if not allowed to participate in the new 401(k) plan) and the loan can be transferred almost immediately from trustee to trustee even before employee's first contribution to the new plan. Once the loan is moved over loan payments can resume via payroll even if not contributing normally. I think that if the two 401(k) plans will eventually merge then new payroll keeper can withhold and submit loan payments to the old 401(k) which it assumes control of if such old 401(k) is not terminated at closing. That's a high level view, I admit.

Ha! Well you could consider hiring your own ERISA lawyer. They'll be more diplomatic than me. Generally, your participant is afraid of being what, double taxed? The plan is required to issue a 1099-R. My gut tells me the plan should never have filed the 1042. Retirement plans probably do not have to issue 1042 forms. As far as the threat, well what's the damage? What's the legal fix? What's the alternative? What is your participant concerned about? There is nothing to fear that an amended 1099-R or canceled 1042 or a letter from the plan sponsor can't fix and so there is no legal action here to worry about until something happens. If the IRS has any issue, they'll write a letter. Then you'll take action to help. Promise to help if it comes to that. Meanwhile, you can take this back and forth with this participant as a formal request for benefits and take it through the plan's claims process which will give you a 90 to 180 day cooling off period. Just reply in a letter that you are taking his concerns to be a request for benefits under the plan. The timing starts from when this participant first approached you with his concern. Any corrections will be done according to the terms of the plan. Locate the portion of the plan that relates to claims for benefits and plagiarize from that. Send him a copy of the SPD with reference to the page where claims begins. You do not have to feel bullied!

I have not had this experience. But I generally don’t let participants tell me tax law. Especially related to ESOPS or 1099-Rs. I would say to this participant that i filed according to the way I read the rules. I may be in error, but if you can bring in the assessment letter from the IRS that double taxes you or causes any other issue for you we would be happy to amend the 1099-R. You will never hear from this person again.

Thank you CuseFan!