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Failure to amend for PPA


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14 replies to this topic

#1 Gudgergirl

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Posted 11 March 2010 - 01:17 PM

I have a profit-sharing plan that, let's say, "slipped through the cracks" about 3 or 4 years ago. It was not timely amended for the final 415 regs nor for PPA. This was discovered in January 2010 (past the PPA amendment deadline). I prepared an amendment, had it signed and prepared a Streamlined VCP submission, filled out the Appendix F. Schedule 1 and checked the box stating the plan was not timely amended for the final 415 regs. The next box states "Other (i.e., any other interim amendment that complies with the requirements in Rev. Proc. 2007-44 or its successors). Please list:" I checked this box as well and wrote "PPA."

I took a look at Rev Proc 2007-44 and am wondering whether the PPA amendment is an "interim" amendment which I can correct under streamlined VCP.

Does anyone have an opinion as to whether you can correct an untimely amended PPA amendment using streamlined VCP?

#2 Guest_named_Sieve_*

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Posted 11 March 2010 - 02:22 PM

Yes. I beleive PPA is an interim amendment for which you can utilize Appendix F & Schedule 1 of EPCRS.

#3 anygig

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Posted 02 July 2010 - 01:44 PM

What fee? Is it the $375 or 1/2 the regular VCP fee?

#4 Guest_named_Sieve_*

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Posted 02 July 2010 - 01:52 PM

As an interim amendment, the fee is a straight $375: " . . . the compliance fee for a submission that contains only a failure to adopt timely interim amendments or amendments required to implement optional law changes, as described in section 6.05(3)(a), is $375." (EPCRS Section 12.03.)

#5 Someguy

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Posted 24 July 2010 - 06:59 PM

If you only wrote "PPA" in the "other" section you will be contacted by the IRS to provide the particular code sections and/or regulations that the plan failured to amend for. I wouldn't recommend doing this unless you don't mind it taking an extra couple of months to get the submission back.

#6 Gudgergirl

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Posted 11 August 2010 - 12:49 PM

If you only wrote "PPA" in the "other" section you will be contacted by the IRS to provide the particular code sections and/or regulations that the plan failured to amend for. I wouldn't recommend doing this unless you don't mind it taking an extra couple of months to get the submission back.


If only you had posted sooner! For that is exactly what happened today.

#7 KJohnson

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Posted 11 August 2010 - 03:27 PM

What about the section of 6.05(3)(a) pasted below for a volume submitter or prototype. 415 and PPA for a calendar year plan would have had to be adopted prior to the deadline for restating for EGTRRA 4/30/2010. What is the "first on cycle year " for such a plan. Obviously this rule makes sense for a IDP so if 415 would have been required in your cumulative list for your filing and you past your cycle you can't call it an interim amendment any more. But a pre-approved plan would have only been considered for the 2004 cumulative list if it had been filed which doesn't include PPA or 415. Does that mean that for pre-approved plans you can still consider 415 and PPA interim amendment until they open up pre-approved plans for the next round of determination letter filings?



The provisions of this section 6.05(3)(a) are applicable only if the VCP application setting forth the interim or optional law change failure is submitted, or the Audit CAP correction is made, prior to the plan’s first on-cycle year following the date by which the amendment for the interim or optional
law change should have been adopted pursuant to section 5.05 of Rev. Proc. 2007-44.


#8 Someguy

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Posted 28 August 2010 - 12:33 PM

What about the section of 6.05(3)(a) pasted below for a volume submitter or prototype. 415 and PPA for a calendar year plan would have had to be adopted prior to the deadline for restating for EGTRRA 4/30/2010. What is the "first on cycle year " for such a plan. Obviously this rule makes sense for a IDP so if 415 would have been required in your cumulative list for your filing and you past your cycle you can't call it an interim amendment any more. But a pre-approved plan would have only been considered for the 2004 cumulative list if it had been filed which doesn't include PPA or 415. Does that mean that for pre-approved plans you can still consider 415 and PPA interim amendment until they open up pre-approved plans for the next round of determination letter filings?



The provisions of this section 6.05(3)(a) are applicable only if the VCP application setting forth the interim or optional law change failure is submitted, or the Audit CAP correction is made, prior to the plan’s first on-cycle year following the date by which the amendment for the interim or optional
law change should have been adopted pursuant to section 5.05 of Rev. Proc. 2007-44.



Yes

#9 Guest_named_Sieve_*

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Posted 29 August 2010 - 09:01 PM

I don't think that is correct. The first on-year cycle after the interim 415 & PPA amendments ends on 4/30/2010 for a prototype DC plan.

#10 John Feldt ERPA CPC QPA

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Posted 30 August 2010 - 08:45 AM

But a pre-approved plan that restated for EGTRRA in June of 2008 would normally have later adopted the final 415 Regs amendment, and then in 2009 adopted the PPA amendment. Anything before 415 must now be considered as "non-amender" (F, Sch 2) problems, but I don't exactly follow how the 415 and PPA would as well - these appear as "late amendment" (F, Sch 1) problems. Please elaborate.

Edited by J4FKBC, 30 August 2010 - 08:46 AM.


#11 Guest_named_Sieve_*

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Posted 30 August 2010 - 02:42 PM

But isn't it based on the on-cycle year, rather than when the plan is actually restated or what cumulative list was used to approve the prototype? Both 415 & PPA interim amendments were due before the prototype on-cycle year (which ended 4/30/2010)--even though the plan was approved using an earlier cumulative list--and I wouldn't think that amending earlier than the end of the remedial amendment period makes a difference. (Notice that prototypes still included 415 amendments and PPA amendments in their restatements, even though not approved by the Service.)

Still, that Rev. Proc. continues to flumox me . . .!!

#12 Fielding Mellish

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Posted 07 October 2010 - 08:05 PM

Yes. I beleive PPA is an interim amendment for which you can utilize Appendix F & Schedule 1 of EPCRS.


Along these same lines, I have a defined benefit plan. That DB plan has rollover provisions in them (not sure why as I'm not sure what kind of rollovers can come out of a DB plan).

The plan year is April 1 - March 30.

I know that PPA amendments could be timely if they were signed by, in my case, March 30, 2010 (by the end of the first plan year beginning on or after January 1, 2009, which was April 1, 2009 - March 30, 2010).

In the case of this DB plan, the Roth IRA additions and non-spouse distributee provisions were missed.

Can I have the BOT sign those amendments now (October, 2010), and just submit that amendment to the streamlined VCP?

In other words, is there any authority out there, outside of Sieve's belief (which I agree with) that failure to make PPA Amendments by the end of the first plan year beginning on or after January 1, 2009 is interim/discretionary subject to streamlined VCP?

Thanks.
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#13 jpod

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Posted 15 January 2011 - 02:08 PM

A little twist on this theme. A Cycle E filer is preparing a determination letter application for Jan. 31, 2011. In the course of preparing the filing, it is discovered that plan was not timely amended for PPA. The restated plan document will be amended to reflect the PPA changes retroactive to the PPA effective date. Do you have to file a separate VCP submission to ensure yourself of the modest $375 compliance fee, or can you skip the separate VCP filing if you specifically identify the interim amendment non-amender failure in your determination letter application (i.e., in the transmittal letter)? Stated differently, if you don't undertake a separate VCP submission, are you at risk for Audit Cap treatment and a significantly greater compliance fee even though you have highlighted the failure in your determination letter application?

#14 Fielding Mellish

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Posted 17 January 2011 - 09:55 AM

A little twist on this theme. A Cycle E filer is preparing a determination letter application for Jan. 31, 2011. In the course of preparing the filing, it is discovered that plan was not timely amended for PPA. The restated plan document will be amended to reflect the PPA changes retroactive to the PPA effective date. Do you have to file a separate VCP submission to ensure yourself of the modest $375 compliance fee, or can you skip the separate VCP filing if you specifically identify the interim amendment non-amender failure in your determination letter application (i.e., in the transmittal letter)? Stated differently, if you don't undertake a separate VCP submission, are you at risk for Audit Cap treatment and a significantly greater compliance fee even though you have highlighted the failure in your determination letter application?


Don't submit the document to the determination letter people with a "failure" in it unless you concurrently send it to VCP. And, make sure you mention to both the DL people and the VCP people that you've submitted it also for VCP or DL, respectively.

See Rev. Proc. 2008-50, Section 10.06(2).

Please let me know if that helps.

Edited by Fielding Mellish, 17 January 2011 - 09:57 AM.

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#15 Trekker

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Posted 01 April 2011 - 12:08 PM

Schedule 1 has been revised to include PPA. I was told that if you don't have it with the submission, the VCP reviewer will send it to you and ask you to complete it before continuing with the review of Appendix F. I was fortunate to be on a telephone call with an agent in the VCP section who e-mailed the revised Sch. 1 to me. If I can figure out out to attach to this post.
Attached File  Appendix_F__Sch._1.pdf   63.41KB   313 downloads

Hope it goes through. If not, here is the text. There are blocks to check to the left of each item which do not show on this cut/paste version. Each item starts with either a Code Section number (like the first two items) or a capital letter (like the third item). Sorry for the bad format. I'm technically-challenged.

Plan Name: ____________________________________ EIN: ____________ Plan #: _____

LAW: Pension Protection Act of 2006

From the 2008 cumulative list: - Failure to timely adopt amendments for the following:

§ 401(a)(35) requiring that defined contribution plans provide employees with the freedom to

divest publicly traded securities. (see Notice 2009-97 for impact on applicable deadlines for

adopting amendment)

§ 401(a)(36) regarding distributions to a participant who has attained age 62 and who has not

separated from employment at the time of the distribution.

Hardship distributions from a § 401(k) plan: Permitting plan to treat a participant's beneficiary

under the plan the same as the participant's spouse or dependent in determining whether the

participant has incurred a hardship pursuant to PPA '06 § 826 (see Notice 2007-7)

Permitting reservists called to active duty to take in-service distributions from a § 401(k) plan

pursuant to § 401(k)(2)(B)(i)(V)

Providing for a qualified automatic contribution arrangement (QACA) pursuant to § 401(k)(13), §

401(m)(12); updating the top heavy provisions to reflect the provisions of § 416(g)(4)(H) which

generally provides that a plan that consists solely of a qualified automatic contribution arrangement

is not a top heavy plan

Providing for the elimination of the gap income rule for excess contributions (§ 401(k)(8)(A)(i))

and/or excess aggregate contributions (§ 401(m)(6)(A))

Permitting nontaxable distributions from a qualified plan to be directly rolled over tax free to

another qualified plan or a § 403(b) plan if the separate accounting requirements are met pursuant

to § 402©(2)(A) (see Notice 2007-7)

Permitting non-spouse beneficiaries to directly roll over distributions from a qualified plan to an

individual retirement plan pursuant to §§ 402©(11), 402(f), 417 (see Notice 2007-7)

Providing for a faster vesting schedule of employer nonelective contributions pursuant to § 411(a)

(see Notice 2007-7)

Providing that notice required to be provided under § 411(a)(11) may be provided as much as 180

days before the annuity starting date (see Notice 2007-7)

§ 411(a)(13) (added by § 701(b)(2) of PPA'06) with respect to special vesting rules for applicable

defined benefit plans, such as cash balance plans (see Notice 2007-6 for guidance regarding cash

balance and other hybrid defined benefit plans; also consider Notice 2009-97 for impact on

applicable deadlines )

§ 411(b)(5) (added by § 701(b)(2) of PPA'06) with respect to applicable defined benefit plans such

as cash balance plans, and special rules relating to age.(see Notice 2009-97 for impact on applicable

deadlines)

Providing for an eligible automatic contribution arrangement pursuant to § 414(w)

Providing for the elimination of the active participant restriction pursuant to § 415(b)(3)

Incorporating the interest rate assumptions for applying benefit limitations to lump sum

distributions pursuant to § 415(b)(2)(E)(ii) (see Final 415 regulations, which provide guidance

regarding § 415(b)(2)(E)(ii), as amended by PPA'06)

Incorporating the applicable interest rate and mortality table to be used for determining the present

value of lump sum distributions in § 417(e)(3) (see guidance for mortality table in Rev. Rul. 2007-

67; also see Notice 2008-30)

§§415(b)(2)(H) and 415(b)(10) (modified by § 906(b)(1) of PPA'06), regarding Indian Tribal

Governments

Providing for the qualified optional survivor annuity benefit pursuant to § 417 (see Notice 2008-30