Paying contribution in "kind"

[K-t-F]

A client wants to pay his contribution in "Kind"... wants to transfer stock to the plan to cover his 2004 employer contribution receivable. Is this fine? If so, what documentation needs to be in place to a future audit?

Thanks!

[rcline46]

First we need to know what kind of plan it is. If it is a pension plan (DB, MPPP, Target, CB, etc) the answer is a resounding NO - see the 'Keystone' case.

If it is a defined contribution plan (401k, psp, etc) the answer is maybe.

Why can't the 'in kind' be sold, and cash contributed? SO much easier, cleaner, safer, efficient.

[K-t-F]

I did find a post here... in it the plan was a DB plan and the answer was NO, it would have been a PT.

The plan I am concerned with is a MP... I have been trying to amend it for years to a PS... he is simply non responsive to the idea.

He is a very smart guy.... I am sure if he could liquidate he would... maybe there are fees involved or some other reasons.

To sum it all up... A 401 or a straight PS plan and it can be done? Want to know for future questions.

Thanks!

[rcline46]

The Keystone case, as I remember it, said if the contribution was required, it had to be in cash.

So.... Are Top Heavy, Safe Harbor, stated Match, or Gateway contributions 'required'? Are they 'in the nature of' a 412 contribution? I don't want to argue the case.

I would strongly recommend he get a legal opinion from an ERISA attorney, you know - the infamous written opinion that puts the attorney on the hook, to use an 'in-kind' contribution, and indemnify YOU against any adverse consequences.

[could be me maybe not]

Hey Pata:

How is the guy going to determine the fair market value if it is illiquid?

Is he going to drive this contribution, i.e. a car?

Will the contribution be hanging on a wall for enjoyment, i.e. a painting?

Will he in any other way be creating a PT? Sounds like it.

[WDIK]

wants to transfer stock to the plan

[could be me maybe not]

oh, thanks. Missed that.

Seems ok to me if it is valued at NAV.

[K-t-F]

Just found out... What the situation is is... if he liquidates the stock it is considered a "trade"... if he transferrs the stock it is not. If he makes a "trade" then i guess it will limited the number of future "trades" he can do.

I have to ask him one question... I will ask him if the stock that he is "transferring" stock in a company which he is a member of the board, a director.... if so... is that a PT? One fact to keep in mind... he is the only member of the plan, no EEs, no other participants.

Thanks!

[WDIK]

The plan I am concerned with is a MP

If it is a pension plan (DB, MPPP, Target, CB, etc) the answer is a resounding NO

[AndyH]

To sum it all up... A 401 or a straight PS plan and it can be done? Want to know for future questions.

...but then again, What Do I Know?

[WDIK]

Touché.

[K-t-F]

ok... the plan is a PS... my mistake. I guess all my badgering convinced him to change it. Soooo.... If he transferrs stock into the plan will that work out fine? and , how do we value it? end of the day NAV?

[Erik Read]

NAV on date of transfer - if he needs to know how many shares, can use prior COB NAV, round up a little, and it'll maybe give him some toward next years contribution, otherwise may have to move twice.

This - all assuming it's publically traded, and he's picking up the cost of the re-title of the shares and not the plan - right?