Message Boards Digest

November 6, 2017

Here are the most recently added topics on the BenefitsLink Message Boards:

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WhatsESUP created a topic in Employee Stock Ownership Plans (ESOPs)

ESOP NUA Tax rules

To take advantage of the Net Unrealized Appreciation (NUA) tax rules for shares distributed from an ESOP, the IRS requires a Lump Sum distribution from all of the employer's qualified plans of the same type (that is, all pension plans, all profit-sharing plans, or all stock bonus plans). If the employer has a 401k plan and a separate ESOP, do employees have to take a Lump Sum distribution of both the 401k and the ESOP to take advantage of the NUA? I've read different opinions on this.
Number of replies posted  3 replies      Number of times viewed  70 views      Add Reply
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dottie created a topic in Retirement Plans in General

Family Attribution in Potential Controlled Group Situation

I am not an expert in the controlled group world and would appreciate any input on whether this scenario falls under a brother-sister controlled group. [1] Company A -- sole proprietor -- Dave 100%; [2] Company B -- S-Corp -- Dave is an employee -- Dad owns 100%; [3] Company C -- Dave owns 15%, Dad owns 50% and various family members own 35%. None of the companies are related or have any business relations with each other. Because the family attribution rules apply, I am not sure if Company A and Company B constitute a controlled group.
Number of replies posted  2 replies      Number of times viewed  71 views      Add Reply
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spiritrider created a topic in 401(k) Plans

Can an Employer Pre-Fund Employer Contributions?

Another wonderful one-participant 401k situation, only this time aided and abetted by a CPA. An S-Corp individual's CPA advised them to make a $10K employer contribution in January (like an IRA). This was on anticipated net business income (excluding wages and payroll taxes) of $40K. I don't know where the CPA expected the $10K for the employer contribution to come from. When it became apparent that there would only be $30K in net business income, the CPA advised the individual to pay himself another $10K in wages. I have a hunch that there was no actual payroll just the filing of the appropriate Form 940/941 and their payments. I believe if the individual properly loaned the $20K to the S-Corp. This would provide the $20K in basis to actually deduct the loss on the individuals Form 1040. Although, I have a hunch based on the overall fact pattern that similar to payroll situation, the $10K in employer contributions were not routed through the S-Corp's accounts and came from personal funds. So back to the original question, would it be proper to make the entire year's employer contributions, before any compensation that contribution was based on, had been received. What corrective action would/could be taken at this point in time. What would be the consequences, except for a well deserved smack upside the head of the CPA.
Number of replies posted  3 replies      Number of times viewed  63 views      Add Reply
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austin3515 created a topic in Form 5500

Duplicate 5500 Filings; How to Pull Off the DOL Web Site?

New client for us. We've discovered there are three versions of a 2015 Form 5500 that were filed, none filed as being an amended return. They all have different ackID's and are all listed. Anyone know how to delete those? I'm considering amending all 3 filings that are out there. The previous provider included auditor information other than the financial statements, which I would prefer to pull off the DOL's site.
Number of replies posted  1 reply      Number of times viewed  35 views      Add Reply
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AndrewZ created a topic in 401(k) Plans

QNEC partially used in ADP test; split for general test?

When QNECs are used in the ADP test, I understand they must pass 401(a)(4) general testing both alone, and combined with profit sharing (and apparently 410(b) is tested only with them combined). If you have QNECs allocated that exceed the amount used in the ADP test, do those amounts need to then be carved out and combined with profit sharing for separate 401(a)(4) test (that excludes ADP-tested contributions)? For example, for a Prevailing Wage plan with the P-W contributions classified as QNECs, the amounts exceeding the 10% "disproportionate amount" P-W limit (or the amount needed to make the ADP test pass, if less)? This would be the preferable option, as we are allocating profit sharing to maximize HCEs, so need allocations to NHCEs in the test. (Assume the plan is using current-year ADP testing, and document seem to have no language addressing this situation, other than P-W contributions up to 10% "can be" used in the ADP test.) It seems pretty obvious that you would test the "excess" P-W QNECs combined with profit sharing, but this is a rather unusual situation and I'd like to confirm.
Number of replies posted  1 reply      Number of times viewed  19 views      Add Reply
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Santo Gold created a topic in Cross-Tested Plans

Gateway Contribution = 3% SH + 2% PS. Does PS have to be 100% vested?

We have a cross-tested safe harbor plan (3% SH). We want the owner to receive 15% of pay total ER contribution (3% SH + 12% PS) and everyone else to receive 5% (3% SH + 2% PS). Does the PS portion of the contribution have to be 100% vested?
Number of replies posted  1 reply      Number of times viewed  35 views      Add Reply
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dan.jock created a topic in Defined Benefit Plans, Including Cash Balance

Partner Becomes Independent Contractor; Consider Partnership as Predecessor Employer?

Former partner (or employee for that matter) in a firm now is an independent consultant for the same organization and receives a 1099. He wants to start a DB plan and deduct away his 1099 income. Can he consider the prior firm a predecessor employer and use that compensation in his 3-year average? In describing imputed comp, 414(s) says "prior employer comp for an employer...maintaining the plan" So this is obviously a reg that is addressing a more traditional migration of employment from one company to another. I think my client needs to start fresh like a new sole prop but I'm hanging this out there for any creative ideas.
Number of replies posted  2 replies      Number of times viewed  22 views      Add Reply
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Belgarath created a topic in Employee Stock Ownership Plans (ESOPs)

ESOP: Partially owned C-corp being sold

Let me state at the outset that ERISA counsel will be involved. I'm curious as to thoughts on the following from those who deal with ESOPS. C-corp is partially owned (about 24%) by an ESOP (no outstanding loan). Owners have an idea that they want to sell their remaining stock to the ESOP, which will own 100% now, and a new unrelated buyer will then purchase 100% of the corporation from the ESOP. Apparently they envision this being sort of one immediate transaction such that the ESOP will not need to borrow any funds to purchase their stock. They are also, by the way, current participants in the ESOP. First, is such a transaction possible/reasonable? I'd typically expect that the ESOP would actually have to borrow the funds, then pay off the lender as soon as the shares are sold to the new buyer and the ESOP is now all cash. But maybe what they envision is a common transaction -- sort of "circular" for lack of a better term? Also, even assuming such a transaction is otherwise viable, how the heck could you ALLOCATE that much money? It doesn't seem reasonable that this could all be simply classified as "gain." Also, (not being an ESOP expert, by any stretch!) I have a faint memory that IF a Section 1042 "rollover" is contemplated, that the selling shareholders (who are also participants) cannot receive any allocation attributable to the employer securities that were just sold to the ESOP? That this would be "double dipping" -- and that therefore all such sale proceeds could only be allocated to OTHER participants? Any other special pitfalls, or thoughts about this?
Number of replies posted  0 replies      Number of times viewed  19 views      Add Reply
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Chippy created a topic in 401(k) Plans

Law Firm SponsorsTwo Plans; OK to Add Non-Elective Safe Harbor to Plan for Partners and Staff?

A law firm sponsors two plans, one for the Associate attorneys (deferrals only), the other for Partners and Staff (deferrals and new compability profit-sharing contribution). The plans always have passed coverage testing. Can the Partners and Staff plan add a non-elective safe harbor?
Number of replies posted  1 reply      Number of times viewed  23 views      Add Reply, Inc.
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