FORMER ESQ.

That was an important detail you left out. As Bill Presson stated, you will likely have to do what the QDRO says.

1. What does plan document say about who has the power to terminate the plan? Is it the full board? Is it someone else like VP of Finance, etc... Many times, proposed termination resolutions may not be effective if the wrong people signed the resolutions. So one would argue that the initial set of resolutions had no effect. 2. If the proper authority signed, and not too much time has passed from the effective date of the resolution, I usually don't see a problem in a rescinding resolution. I don't think the IRS or DOL are going to complain that the client changed its mind and decided to continue the plan unless there was some sort of evil or discriminatory intent behind it. 3. As far as the pre 59.5 distribution to a NHCE, I doubt again that this has an impact on the corporate resolution to rescind. Of course, now you are going to have to explain this change of heart by the plan sponsor to the NHCE and ask for the money back because of an operational failure-- plan overpayment.

Nothing directly on point in the 1.401(a)(4)-11 Regs, but I think there is enough language in 1.401(a)(4)-11(c) to argue that the vesting schedule for the pre-merger account balances does not need to be compared for BRF purposes to the vesting schedule for post merger matching and profit sharing contributions.

Sorry, did not see that you are 61 years old. Just make sure your plan allows for installments.

To add to the above (and state the obvious), make sure that your 401(k) plan allows for installment payments that you describe and that you are eligible to begin receiving distributions from the plan.

But was it technically contributed to the Trust pursuant to the terms of the plan document? If yes, then it is plan assets, whether or not it has been reported in the trust accounting reports. To me, everything else is a distinction without a difference.

Luke, are you asking whether or not the participant (who is not in default on a loan) elect to "distribute" his loan balance in 2020 to take advantage of the favorable COVID tax treatment? If so, I think the answer is no. I do not see how anything in the statute or IRS guidance supports that position. What is your take?

That is my understanding. If the plan allows for a loan offset and the participant terminates on or before 12/30/2020, the participant could claim the loan offset distribution as a COVID. Again, this is my understanding. The "deemed" distribution would not otherwise be a distributable event. Not a distribution of the loan, but a distribution of the portion of the account balance equal to the loan balance, which distribution would be on account of a COVID event, followed by immediate repayment of the loan balance.

Wife's 50% interest in Company 1 is attributed to Husband, so that Husband is deemed to own 100% of Company 1. The exception to spousal attribution would not apply here because Husband is a shareholder in Company 1. This is a classic brother-sister controlled group. The presence or absence of the minor child does not make a difference.

ERISA requires plan assets to be held in trust. Good faith efforts to create a trust-like structure temporarily will not cut it.

401(k) Steve, there are several issues here. As MWeddell states, you will need to look at the terms of the plan document. In particular, does the plan document require a last day of plan year service requirement for receiving the match? In addition, as MWeddell points out, unless you can find a permissible disaggregation scenario (i.e., QSLOBs), the matching portion of all the plans in this controlled group will have to be aggregated for purposes of passing 410(b) coverage testing (with this LLC's participants showing as not benefiting), and for 401(a)(4) testing for contributions (in this case, the 401(m) test.) MWeddell, question for you: Is BRF testing really needed under these facts? In essence, the BRF test would go back to 410(b) ratio test for current availability of a BRF, and then a nebulas effective availability test, which seems to go back to some version of 410(b) testing. If you pass the 410(b) ratio test for coverage, you will likely pass the BRF testing under 401(a)(4).

It sounds like your client, the purchasing entity, is purchasing certain assets (division) of an unrelated company. The good news in an asset deal is that your client can pick and chose which assets/liabilities it wants. If you have serious concerns about the seller's operational compliance with the terms of its 401(k) plan, the easiest answer is to have your client not assume the plan and its potential liabilities. The employees that are transferring over along with the sale of assets may enroll in your 401(k) plan. The seller can chose what it wants to do with its own 401(k) plan.

Exactly! My gut feeling tells me that there is more going on here. My first question to the OP would be WHY is this executive relinquishing the deferred comp?

You are going to inherit the "other people's problems" in a stock sale whether you terminate the plan pre-merger or not. That is why I asked. You can always quantify the risk in dollars and it brings down the purchase price or you may have a hold back provision in merger agreement. Either way, agree with JackS that due diligence is required.

SEM, your question is not clear. You have a purchasing entity (which I understand), but what exactly are they buying? Another company's stock, another company's assets or part of the assets (such as a division)?

I said "quantified" which is different than "qualified". The term "allocation" as being used by the OP seems to mean "allocation" for disclosure purposes to participants. That is my interpretation. Otherwise, the OP does not make any sense.

There is quite a bit in your question above. But, let's start with the income taxation of NSOs. I assume that the exercise price of the NSO is not less than the FMV (as defined in the 1.409(A) Treasury Regulations) of the underlying stock on the date the NSO is granted (i.e., it is not a discounted option) so that we are not dealing with potential 409(A) issues. If the option itself (not the underlying stock) is not readily tradable on the market (which is almost always the case with compensatory options), the individual granted the option is taxed at the time the NSO is exercised, not date of grant. Options typically have a vesting schedule, and the individual has to wait for the option to vest before he/she can exercise the option. The amount subject to tax is the difference between the value of the underlying stock on the date of exercise minus the exercise price. This is ordinary income for the tax year in which the NSO is exercised and is reported as such in box 12 of the W-2. In some cases (if the option plan document or agreement allow) the individual may chose to "early exercise" an NSO--that is exercise the NSO even though it has not vested--by timely filing an 83(b) election. Without getting into the details of the 83(b) election, suffice it to say that if the election is properly made, the difference between the value of the underlying stock at the time of the 83(b) election is made (i.e., at the time of "early exercise") minus the exercise price is ordinary income in the tax year the 83(b) election is made. For 415 compensation definition purposes, it is important to differentiate between the "early" exercise of an NSO and the regular or "non-early exercise" (i.e., exercise after vesting--the first scenario I described above). 1. The W-2 and the 3401(a) require you to include in compensation the amount of ordinary income at time of exercise of the NSO (early or non-early). 2. The 415 simplified compensation safer harbor definition excludes the ordinary income from the exercise of NSO (early and non-early). 3. The current includable compensation safe harbor definition excludes the ordinary income from the non-early exercise of an NSO, but it does include income from the early exercise (from the 83(b) election).

On the disclosure issue you Bird, I may be misunderstanding SSRR's question. But, I think SSRR is saying that the PS account balances (taking into account the floor-offset) are quantified internally at the time participant account balance statements go out and are reflected in that one total number.

COBRA requires a loss of coverage on account of a qualifying event. The qualifying event is the termination of employment (you said former employees). That by itself does not trigger COBRA unless there is a loss of coverage. The loss of coverage will occur on the effective date of the plan amendment, and that will trigger COBRA.

Yes. That would be the correct conclusion.

Jakyasar and Lou, I have a question: One scenario is that the plan document has a PS feature but no PS contributions have in fact been made. In such a scenario, pre 2020 service could not be excluded for vesting. Suppose, however, that the plan document does not allow for a PS contribution, and therefore is now amended to provide for a PS feature effective for 2020. Why would this not be a separate plan? The 414(l)-1 regs define "plan" for 401(a) purposes. Basically, under the 414(l) Regs. a single plan is one in which all plan assets are available to pay benefits to employees covered under the plan. However, more than 1 plan exists if a portion of the plan's assets cannot be used to pay some of the benefits. Basically, separate asset pools are separate plans. The PS plan would be a separate plan. Why cannot service before plan adoption be excluded? Keep in mind that the 401(k) or 401(m) portions are not predecessor plans--they are existing plans.

My initial reaction is that a SH plan may use a different definition of compensation for deferrals versus matches. Of course, any SH compensation definition must satisfy 414(s) definition of compensation: Either (i) one of the four definitions under the 415 Treasury Regulations; (ii) one of the four definitions under the 415 Regs as modified under the 414(s) Regulations or (iii) any "reasonable definition of compensation" test under 1.414(s)-1(d). Your definition of compensation above would have to meet prong (iii)--it does not satisfy any of the safe harbor definitions under (i) or (ii). I cannot recall if there has been any IRS guidance on this issue.

You probably have to do something like this. Best to get appropriate counsel involved.

Bad idea. Please get the client to involve an attorney with experience dealing with the Office of Foreign Asset Control. Plenty of white collar criminal lawyers in D.C. have OFAC experience. I can assure you that your client would much rather deal with the legal hassle of these participants than OFAC.

If each of the plans independently passes 410(b) on the basis of all employees in the controlled group, then non-discrimination testing is done independently. Keep in mind that 401(k), 401(m), and non-elective contributions are each deemed a separate "plan" for 410(b) testing. If the 410(b) testing cannot be passed as described above, then the issues become complicated.