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The match is NOT a QNEC. It stays on a vesting schedule (if there is one). The correction for deferrals is a QNEC b/c deferrals are 100% vested automatically (like the QNEC). The ER is not punished my having the match correction 100% vested, too.

Here’s the rule: https://ecfr.federalregister.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-C/part-2520/section-2520.104-46. Unless there is a reason other than that rule to audit the retirement plan’s financial statements, might the plan’s administrator revisit the prudence of its selection of the independent qualified public accountant? If not, the plan’s administrator might face a practical task of persuading the audit firm. Often, some evidence that the plan’s administrator considered a lawyer’s advice closes a point of this kind. Even if both the plan and its administrator lack its own counsel, a bank typically has counsel readily available. For example, Federal law requires a national bank that acts in a fiduciary capacity (in its business, rather than regarding employee-benefits plans for the bank’s employees) to retain “legal counsel who is readily available to advise the bank and its fiduciary officers and employees on fiduciary matters[.]” See 12 C.F.R. § 9.5(d). Some States have similar law.

I agree with you. In fact, if the bank is also Trustee, certain otherwise non-qualifying assets could be considered "held by" a regulated financial institution and you can still avoid the audit requirement. Haven't seen anything like this in a long time, but as I recall, it could apply to art, or limited partnerships, for example, but not to safe deposit box items. But I'd want to look into that aspect - it's been a long time, so don't take my word for it...

It really is. What prompts someone to make their very first post on a 4+ year old topic, and forcefully say something that isn't accurate?!

The final regulations in this area simply changed one element of the definition of QNECs and QMACs. Old definition...QNECs and QMACs had to be 100% vested when contributed. New definition...QNECs and QMACs have to be 100% vested when allocated. It is this change that now allows forfeitures (which, by definition, were not 100% vested when contributed) to be used to offset QNECs and QMACs. So, the answer to your first question is "Yes". Any QNEC, including those necessary to correct certain operational errors under EPCRS, can be offset by forfeitures. Regarding your second question I am going to assume that you are referring to the employer match that an employer must make when a participant has a lost deferral opportunity in a plan that provides for an employer match. Per the EPCRS (Rev. Proc. 2019-19) APPENDIX A section .05, these matching contributions are also made in the form of a QNEC not a QMAC. APPENDIX A section .05 also makes it clear that correcting for a missed deferral opportunity (deferral and match) occurs after other qualification requirements are met (i.e. ADP/ACP tests) and that the ADP/ACP tests may "disregard the employees who were improperly excluded." So, the answer to your second question is 1) the QNECs necessary to correct a missed deferral opportunity and the associated match are not included in either the ADP or ACP test, 2) since the corrective contributions have to be made as QNECs they must be 100% vested and cannot be subject to a vesting schedule and 3) the earnings are part of the QNECs and, therefore, the employer can use forfeitures to offset them. Michael Hatlee, QPA, QPFC

BG5150 - Thank you for your response. It is indeed true that APPENDIX A refers not to a QNEC but rather to a "corrective employer non-elective contribution" in reference to contributing the match associated with a missed deferral opportunity. I appreciate you setting me straight!! My apologies to legort69.

Section 1.401(k)-3(e)(4)(ii) A short plan year due to a 410(b)(6)(C) transaction still maintains safe harbor status.

There is a bit of a cloud hanging on all such self-employed PS allocations that are not directly done by formula, but I don't think the IRS is trying to do anything about it. As far as reducing distributions, I think it is a mathematical/accounting necessity. Partners' retirement plan contributions are taken on their own returns, so their profits are one thing and cash distributions are another - if the partnership cuts the PS checks, they need to reduce the respective partners' distributions by their share of the PS allocations.

I don't think so. Just needed to change your communications. The revised IRS rollover notice includes explanation.

Successor liability exists in theory (and often reality in the multiemployer plan context) but I have never seen it applied to a missing 5500 (or other "routine" violations in which participant assets are unaffected) in an asset transaction. The risk is very low in my opinion. Then again, filing a few late 5500s through DFVCP, either before closing or by a post-closing covenant, usually isn't overly challenging either. If the seller is continuing to employ the affected employees during the transition period, but the buyer is truly the common-law employer after closing (i.e., during the transition period), you may create an "accidental MEWA." That's its own risk analysis, although I have never encountered major problems in short-term transition periods like this. If the buyer is requesting the seller maintain coverage, the seller may want indemnity.

There is more to it, but generally a plan that doesn't benefit any HCEs is exempt from (a)(26). Also, .5% is not found in any Code or Regulation. There is nothing "official" saying it is required. The word "benefiting" is never defined in the Code. Paul Schultz released a memo to IRS field agents many many years ago stating they should challenge any "benefit" of < .5%. The theory is that anything less than a .5% DB accrual is not a material "benefit". The IRS took this position because they knew it would cost sponsor less than the cost of litigation and therefore no one would ever challenge them. Since no one has, it has become the standard definition of "benefiting". (b)Exceptions to section 401(a)(26) (1)Plans that do not benefit any highly compensated employees.— A plan, other than a frozen defined benefit plan as defined in § 1.401(a)(26)-2(b), satisfies section 401(a)(26) for a plan year if the plan is not a top-heavy plan under section 416 and the plan meets the following requirements: