Artie M

Where the company is going to amend vesting to accelerate everything to 100%, the vesting should be able to be amended either prospectively or retroactively. Most of the issues regarding amending vesting come up when vesting is simply changed (e.g., 6-year graded to 3-year cliff, then have to give the better of to certain folks). But these issues do not come up when you accelerate to full vesting. Of course, this is assuming there aren't any shenanigans like firing all the NHCEs and then vesting all the retained HCEs. Just my thoughts so DO NOT take my ramblings as advice.

Peter, I agreed with your response. The OP asks about "Sch C #5 date of correction"....

As far as when corrected I agree with the posters. However, from your facts a more basic question ... why do you have to complete Schedule C line 5? Maybe I am missing something but I thought you only completed line 5 when there are multiple disqualified persons involved. Here, it seems that only the company is involved so only Schedule C lines 1-4 should be completed. Just my thoughts so DO NOT construe my ramblings as advice

The regulations simply state: "on or before the later of: (1) The date which is 90 days after the employee becomes a participant . . . ." I am not aware of any relevant guidance that states a "no earlier than" date. The key phrase in the reg is "on or before". So, any time earlier than the date the employee becomes a participant technically fits within the literal words of the regulations; however, there is probably a strong likelihood the DOL would consider providing an SPD a year prior to the date the employee becomes a participant as unreasonable. I could see a DOL agent arguing that the period for giving the SPD commences on the date the employee becomes a participant (key term here is "after") and ends on the 90th date after that. However, I could see another DOL saying that a period of 30-60 days prior notice would not be unreasonable (see, e.g., the blackout notice rules). As noted by someone above, prior notice and information should be helpful to a participant. It seems like giving the SPD say within 30 days prior to becoming eligible should be useful and reasonable and shouldn't be challenged by the DOL ... especially, if you can show that it was actually given to the employee at that time, that the employee was informed of the importance of the SPD and that they become eligible to participate within 30 days. If you give it early (i.e., 30 days prior to eligibility), when the employee actually becomes eligible my thoughts would be to have company send them a communication stating they were previously provided an SPD upon hire (i.e., within 30 days) and that if they need another one it can be accessed at intranet site address or call HR. Note... these are just my thoughts so DO NOT construe these ramblings as advice.

For income tax purposes, the amounts paid to the beneficiaries would be reported on a 1099-Misc using the beneficiaries' tax information and listing it as other income issued to beneficiary (I think Box 3 but confirm). But a W-2 may also need to be issued depending on when the amounts are paid. If the amounts are paid in the employee's year of death, a W-2 needs to be issued using the employee's SSN to report the FICA due. Since not income to the employee don't fill out Box 1, but you need to fill out Box 3-6 for FICA and Medicare wage and tax informaiton. If the amounts are paid in year following the year of the employee's death, the W-2 is not required. This is my recollection but I have some notes indicating the authorities as Rev. Ruls 71-146, 86-109 and, if I read my writing correctly, 64-150... so confirm.

Not saying it is right or wrong (since no guidance) but one of our clients used "Defined contribution plan adopted by multiple employers with common ownership" while another simply used "Defined contribution plan adopted by multiple employers"

Right, expanding on MoJo’s response… Unless the Plan administrator can determine the amount of the benefit that is to be paid by the Plan to an alternate payee under the terms of the order, the Plan administrator will not determine that the order meets the requirements of a QDRO under federal law. ERISA and the Code require that a QDRO that it “clearly specifies… the amount or percentage of the participants to be paid by the plan to each such alternate payee, or the manner in which such amount or percentage is to be determined.” Simply providing a method of determining the amount or percentage of the assigned amount is not sufficient if the Plan administrator cannot apply the method (e.g., because missing information). In such a case, the order must be reformed. It seems like the parties are trying to focus on assigning a portion of the plan or IRA account balance that accrued after their marriage was entered into. Many QDROs use language relating to the “marital portion,” “marital fraction” or “coverture fraction”, which all relate to benefit accruals during the marriage; however, most of the QDROs that use this type of language relate to assignments under defined benefit plan (i.e., the traditional pension type plans). This concept generally has little added benefit when used in relation to defined contribution plans (e.g., 401(k)s) or IRAs. It is likely the order at hand is trying to split the “marital portion” 50/50 between the parties—but that is not required. If the information regarding what amount accrued after the marriage was entered into cannot be found, it would be easier for the parties to determine the current account balance and determine how much of it should go to the alternate payee and how much should be retained by the participant. That is, as MoJo states, they should “otherwise agree on a dollar amount for the split.” Also, the split is not required to be 50/50. For instance, the order could simply state that 25% of the account balance on some specific date is to be assigned to the alternate payee and the participant would retain the remaining 75%, or even vice a versa depending on the other elements of the property settlement. Or, perhaps the order could state that the alternate payee is to receive $x of the account balance as of some specific date and the remainder is to be retained by the participant (in a dollar split order you just want to make sure that the account balance has $x in it as of the date specified). The order can (and likely should) just state the split in clear and easy terms. One more item for the parties to pound out.

You have asked a bar question...spot the issues. That said, your threshold issue is whether there is a controlled group. You state that "Due to attribution rules, owner owns more than 50% of each business, making it a controlled group." That is not an accurate statement. In very simple terms (perhaps oversimplified), a controlled group can exist where one entity (a parent entity), either directly or indirectly, owns at least 80% of another entity (a subsidiary entity). It also can exist when 5 or fewer individuals own at least 80% of multiple businesses (possible brothers-sisters) and the overlapping ownership interests between the entities is at least 50%. Your facts don't reach the parent controlled group standard, and, though the overlapping interest in each entity appears to be at least 50%, it is uncertain if 5 or fewer individuals own at least 80% of each business. Even if there is no controlled group under the parent/brother-sister rules, it is still possible there could be an affiliated service group, which would require the entitles to be treated as a single employer. Also, note that there is no prohibition against non-controlled groups adopting and maintaining the same plan. In such a case, the testing would be separate but the number of filings would depend: if all plan assets are available for the benefit of all employees under the plan, only a single Form 5500 needs to be filed; but if the assets attributable to separate employers are available for the benefit of only that employer’s employees, each separate participating employer may have to file a separate Form 5500. Also, there is no prohibition against controlled group members adopting different plans. Again, this is a testing issue. If each group can satisfy 410(b) coverage testing on their own, they can have separate plans even though other nondiscrimination testing must be done on a collective controlled group basis. So, conceivably, they could have separate plans with separate 5500s. Of course, if they are in a controlled group it is likely they should not have filed a 5500SF but that depends on the number of employees in the controlled group. You have not provided that information. Bottom line is you need to know whether it is actual controlled group or not

I agree with the others about a future distribution, however, it seems you are asking if his prior distribution was compliant. ("Would he have been inelgiible [sic] to take his distribution?") If the distribution was taken prior to his rehire and at a time when there was no agreement that he would be rehired, whether on an as need basis or otherwise, the prior distribution should have been permissible.

You state that "His former spouse has a QDRO to receive survivor benefits when the "participant" (husband) dies." I hate to be the bearer of potentially bad news but you may have a problem if that is what the QDRO states. If a participant and his or her spouse become divorced before the participant's annuity starting date, the divorced spouse loses all right to the federally required survivor benefit protections. If the divorced participant remarries, the participant's new spouse may acquire a right to the required survivor benefits. A QDRO, however, can change that result, especially where the annuity starting date has already occurred. If a QDRO requires that a former spouse be treated as the participant's surviving spouse for all or any part of the survivor benefits payable after the death of the participant, any subsequent spouse of the participant cannot be treated as the participant's surviving spouse. E.g., if a QDRO awards all of the survivor benefit rights to a former spouse, and the participant remarries, the participant's new spouse will not receive any survivor benefit upon the participant's death. If such a QDRO requires that a defined benefit plan subject to the QJSA and QPSA requirements, treat a former spouse of a participant as the participant's surviving spouse, the plan must pay the participant's benefit in the form of a QJSA or QPSA unless the former spouse who was named as surviving spouse in the QDRO consents to the participant's election of a different form of payment. Note that the election for the lump sum was provided with regard to the stream of payments the participant was receiving (so the form of payment and the annuity starting date was locked in). Before the divorce, the participant was to get the annuity with a survivor benefit. Immediately prior to the divorce, the ex-spouse was entitled to that survivor benefit. It was already locked in based on his election for that form of benefit. So, let's say under the QDRO she got 50% of the benefit, which meant she got 50% of the current stream of benefits being paid to them plus the survivor's benefit (payable at the participant's death) on her assigned portion of the benefit. She made a lump sum election based on her assigned portion of the benefit; that election did not affect the participant's retained portion of the benefit. Based on the language you quoted, the ex-spouse also retained the survivor benefit under the participant's retained portion of the benefit (also payable at the participant's death), and upon his death, she is to be treated as the surviving spouse. (She likely argued that all of those benefits were earned during their marriage.) By virtue of the wording of the QDRO, he was not permitted to make a new beneficiary designation with regard to that benefit (i.e., by court order she was the beneficiary). He could have made a beneficiary designation on any other benefits he may have accrued after the divorce, but not on any benefit covered by the QDRO. Just my two cents based on the limited facts. That said, you may want to consider making a formal claim for the benefits. Under ERISA, all Plans must respond to a claim for benefits by making a decision on the claim and providing a letter that includes: the reasons for the denial (which should point to documents, sections of the Plan, provisions of the QDRO, etc. supporting their reasoning), a summary of appeal rights, and timelines to make the appeal (it does not appear that the Plan has done that from your facts). There is a statutory deadline by which to make a claim following the date of death (depends on which state you are in) but many plans shorten the deadline to like a year. If a claim is not made by that deadline, it is possible a court may determine that the claim is lost (by virtue of not "exhausting all administrative remedies"). It might get the administrator's attention more if you had an attorney file the claim (but you don't have to under ERISA). Though you don't have to have an attorney, your next steps really should include getting the advice of your own personal counsel who fully understands ERISA and QDROs. (The posters above have said it but I want to reiterate -- do not rely on this post or anything else on this message board when making your decisions). Good luck.

This is always an issue with tip income. First time I saw it was in the 90's. The only time I have seen it work well was where most of the tips were on credit cards and the employer kept the credit card tips and paid those out on the paycheck. I have seen a restaurant where bulk of tips in cash tried to get the waitstaff to pay them nightly an amount of cash that with any credit card tips would get them to the amounts reported as tips by the waiter/waitress (which was usually the minimum 8%). My recollection was that this didn't work that well. I don't know of any authority that really lays out what to do here. Note this is also problematic if welfare benefits are provided and paid through a 125 plan.

None of us here are going to advise you what to do--so nothing said here is advice. But I can tell you that if it was me I would tell the plan that I'm not paying it back because its gone. Then, I'm probably going to get an attorney to look at the QDRO. I would go to the attorney who originally drafted it. That attorney may have some skin in the game if it was not properly drafted. (Of course, that attorney may not want to talk to you for the same reason). Someone should look at it because obviously there is ambiguity in the language ... if lucky there could be language that favorably resolves the issue, e.g., provides that the moneys should be segregated or put in a separate account, then gains and losses should be payable. Shame because if lawyers get involved, there won't be any money left for either of you. It's also likely not worth your ex getting a lawyer either. You see why I don't practice family law.

You could name them the same names but like you said seems awkward...when talking about them you would need to add the word trust to the one that is the trust so that everyone knows which one you are referring to. We tend to name them ABC 401(k) Plan and ABC 401(k) Trust, omitting the word "Plan" in the name of the trust.

Not my field either but i think IRCA and general employment law prohibit discrimination based on citizenship and immigration status. Like everyone else is saying seek appropriate counsel

Quoted from Fall 2009 Employee Plan News https://www.irs.gov/pub/irs-tege/fall09.pdf Compensation limits vs. elective deferrals/§415 limits Confusion may arise on how to reconcile the limits under §401(a)(17), §415(c) and §402(g) when an employee’s annual compensation exceeds the current §401(a)(17) limit. For example, can a 40-year-old employee earning $30,000 per month (annual compensation of $360,000) who elects to defer a flat dollar amount of $1,375 per month ($16,500 for the year) in 2009 to his or her 401(k) plan continue to make elective deferrals after September, at which time his or her yearto-date compensation exceeds $245,000? The answer is yes, because the plan is not required to determine a participant’s §401(a)(17) compensation based on the earliest payments of compensation during a year. Unless the plan’s terms provide otherwise, the $16,500 §402(g) elective deferral limit is applied uniformly to the $245,000 §401(a)(17) compensation that the employee receives throughout the year, regardless of whether deferrals are expressed as a dollar amount or a percentage of compensation in the employee’s salary reduction agreement.

Agree with Former Esq. Also, with the asset sale, the employees who leave the seller and are hired by the purchaser would, absent other facts, have a severance from employment with the seller and, as such, would have a distribution right. They could elect a distribution and roll the distribution into the purchaser's plan without risk of the purchaser's plan being tainted by the sins of the seller, if any. The seller and purchaser could agree to permit loans to be rolled over also, if plans permit (could amend plans to permit if desired/necessary).

I do not keep statistics on this but some of my clients use this method, against my advice. I am not sure what you are asking in your final question as I don't think the client's methods can vary from the recordkeeper (TPA). I know that many TPAs want to use the method outlined in the IRM as administratively it is much more convenient (and some try to force its use). We let the clients know that even if a plan sponsor decides to use the IRM method, the IRS reserves the right to ask for the hardship source docs. The information letter on which the IRM is based notes that the auditor should only ask for the source documents in 2 circumstances, but those circumstances are not included in the IRM and even if they were they are only guidance to an auditor. If audited and the participant doesn't have the source documents or cannot find them, seems like the employer may have to go into Audit CAP (luckily none of my clients have had this issue under audit). Convenience = increased audit risk.

Hate to beat a dead horse but I don't see it as easily as you guys do. Treas. Reg. s 1.415(c)-2(e)(3)(iv): "if they are paid after severance from employment with the employer maintaining the plan," The IRM conveniently omits that phrase. That highlighted language means (to me at least) that severance paid any time after severance from employment is not included in 415 comp even if it’s paid within the time period in (e)(3)(i) [2½ months/end of LY]. Otherwise, why is the underlined language in the Regulations?

Thanks for the link but I guess I am just dense. I don't see the authority for your statement. s 31.3401(a)-1(b)(4) states severance is in wages. (this reg also updated in 2007). Looking for the statement that says don't ever include severance in the 415 W-2 safe harbor definition.

The use of a January date in your example does give one pause.... I agree that if your plan provides that comp is based on the default rule in 415, severance should not be included whether it was paid pre- or post-termination of employment as that comp definition includes only amounts received for services actually rendered. (I didn't use quote marks as I have not busted out the books but I think that is right). This rule would not apply to NQDC, so timing seems relevant. However, I am not certain about your blanket statement that severance is never included when using the W-2 6041 definitions. I believe severance and NQDC are includible in W-2 compensation and are reportable, including for purposes of the 415 safe-harbor definitions. Can you provide authority for your blanket statement?