Leaderboard

Scenario 1 - you can correct the document restatement failures through EPCRS with a VCP filing and the late 5500s through the IRS late filer program for 5500-EZs. The Brokerage issue is probably tougher to correct but could likely be done as part of the VCP filing correcting the document failures and working with Pershing to re-register the accounts properly. Scenario 2 - I'm not sure as you have no Plan adopted. Perhaps someone else can chime in on that one. I feel like this has been addressed before in other threads so maybe a search of this website?

If they are members of controlled group they would simply be employees for coverage testing. Whether or not they are eligible would be determined by the Plan Document. Has that Controlled Employer adopted the Plan?

As I understand the Plan in scenario has a document, it's just treated as individually designed and you can't rely on the opinion letter. So they are simply a non-amender.

I am a CPA and I think the other CPA is wrong. The Code Section the other CPA is referencing means that an accrual based taxpayer (the company) cannot deduct accrued items payable to a cash basis taxpayer (the owner) if they are related as this would result in deferring taxes to a future year. Retirement plan contributions are one of the few deductions that even a cash-basis taxpayer can accrue and deduct. Usually the issue with S-corps and cash balance plans is the owner might not have tax basis to take an accrued contribution so they wind up with a suspended loss until the following year.

Agree with Lou, you cannot statutorily exclude from coverage and nondiscrimination testing but whether they must be covered/benefit depends on the terms of the plan with respect to their employer, which you said did not adopt and is not automatically covered.

Pay him the difference with interest and move on? Not sure if that's the right answer but it seems reasonable given the small size of the data error than is now being corrected.

The Plan Doc should address unknown, unreachable, incompetent situations, usually they are able to forfeit the monies with the understanding that they are refundable to the participant/beneficiary if or when resolved. A corporate resolution documenting the action, and the actions to be taken upon restitution (assumed earnings, etc.) will suffice. Most likely it was an overfunded safe harbor match, mutual fund's fee redemption, class action settlement payment, or trailing dividends from a closed fund that the prior RK didn't track to a current investment.

We have a client in Houston with apparently several immigrants who were sold bogus ss no’s. The record keeper Fidelity notified us and we had to correct the record. Not as unusual as it should be today

Really? Who would ever think that is a good idea...other than the salesperson? Why would a plan sponsor want to burden themselves with this? Why not just pay a lump sum and if the person really wants a variable annuity, they can buy one outside the plan.