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Without stating any conclusion or point of view, here’s another mode for analysis: Even if you consider the possibility that the plan’s administrator furnished proper notices to everyone eligible and not one did not opt out, the facts you describe suggest circumstances in which a prudent fiduciary might not close its eyes to the obvious, and, absent the other fiduciary’s written assurance of facts that would show no breach, might further investigate the facts. The investment adviser should want its lawyer’s advice about how to evaluate the situation to consider what to do next. With your lawyer’s advice, consider: Of the TPA and the investment adviser, is one of those companies or operations a fiduciary? If the services are provided by one company, would the law treat one operation’s knowledge as the company’s knowledge? Or if the services are provided by companies that are commonly controlled (and perhaps have some workers or executives in common), might the law impute one company’s knowledge to another? Even if the governing documents and their ERISA §§ 402-405 allocations make clear that a fiduciary has no direct responsibility for collecting contributions, every fiduciary has co-fiduciary responsibility. Even if a fiduciary does nothing to enable another fiduciary’s breach, knowledge imposes a responsibility: ERISA § 405 [29 U.S.C. § 1105] Liability for breach of co-fiduciary (a) Circumstances giving rise to liability In addition to any liability which he may have under any other provisions of this part {ERISA §§ 401-414}, a fiduciary with respect to a plan shall be liable for a breach of fiduciary responsibility of another fiduciary with respect to the same plan in the following circumstances: (3) if he has knowledge of a breach by such other fiduciary, unless he makes reasonable efforts under the circumstances to remedy the breach. Mere resignation is, at least in the Labor department’s view, not enough effort to remedy another fiduciary’s breach. Further, a fiduciary’s resignation (without other steps) might be imprudent, especially if the resignation would increase a breaching fiduciary’s control or make it likelier that no one calls attention to the breach. One unpublished trial-court decision included a finding of fact, without analysis, that a fiduciary made reasonable efforts to remedy another fiduciary’s breach by promptly filing a Federal court proceeding against the breaching fiduciaries. In the range between those points, there is no published Federal court decision that interprets in meaningful detail what steps are enough to prove an observing fiduciary used “reasonable efforts” to remedy another fiduciary’s breach. Is informing the Labor department enough? (If there is a co-fiduciary responsibility, doing nothing is not enough.) If there was a theft and it becomes detected, a plaintiff might pursue everyone that has collectible assets. Yet, many service providers dislike blowing the whistle on a client or customer. So, even if there is a co-fiduciary responsibility, the TPA and investment adviser might want their lawyer’s evaluation of the size of potential liability exposure and how probable or improbable it is that the adviser will become liable.

Even if the law firm is the sponsor it would not be exempt from PBGC coverage. Here is a quote from the PBGC Coverage page: "Lastly, to qualify for the small professional service plan exemption, the professional individual(s) must be engaged in the same professional service as the principal business of the plan sponsor. For example, consider a situation where: Company X is owned by an attorney, John Smith. Company X sponsors a defined benefit plan that has never had more than 25 participants. Company X’s primary business is the sale of insurance products. In this scenario, despite the fact that the company’s owner is an attorney (a profession that’s on the statutory list of professional individuals), Company X’s defined benefit plan would not qualify for the professional service plan coverage exception."

I'll state a position - based on Peter's excellent analysis. *IF* you are a fiduciary in any capacity, *and* you reasonably believe something is amiss, *unless* you do that which is necessary and reasonable to remedy the situation, *YOU* are liable under the application of co-fiduciary liability. Resigning is not enough. When the DOL comes a calling (and someday some participant will make the call, they will inquire of you for record, probably via a subpoena, and when they discover that you function in any capacity as a fiduciary, you have a problem. What you posted here is probably discoverable by the DOL should they investigate.... Heck, we're a "non-discretionary, directed, ministerial service provider" (say that fast three times!) and the DOL routinely is trying to hold us responsible for missing contributions....

Why terminate the original Plan at all? Establish two new Plans for each trustee and do two spinoffs. Then Sponsor of new Plans is new Sponsor, existing plan changes effective with the incorporation application. Simple, clean, no hoops.

I don't think so. Furthermore, I don't think that person is statutorily excludable from coverage and discrimination testing (assuming Martha is US citizen) as none of the listed exclusions apply. She simply goes from an eligible class of employee to non-eligible class of employee, and still earns vesting service for employment with XYZ UK.

Google is a wonderful thing - see forms IT-2104P, NYS-1 and NYS-45. Paychex not helpful? Shocker!

Well, I just found out the client already paid the fine. (it's not my client, but that of a colleague) But I am suggesting we file under DFVCP to avoid the DOL punishment.

Just to be clear, I did not suggest a course of action, in either (or any) direction. My only suggestion was a way to think about the problem PamR described, so one might have some background to prepare to seek a lawyer’s advice. I’m widely published for the idea that an investment adviser, if it is an ERISA plan’s fiduciary, should be mindful of its co-fiduciary responsibilities.

Wait, what date did THEY fill in as the general restatement date, then? Normally I'd be using the first of the year the plan is restated, unless I had anything that definitely was different in terms of when the plan operated that way. Most Cycle 3 Plan Overhauls (C3POs) are going to end up with a 1/1/22 effective date in my case.

"would buyback of the shares held in the plan by the plan sponsor be an option?" BZorc, be very careful of this alternative. I'm assuming the plan is a KSOP, in order to permit the fiduciaries to offer an un-diversified investment fund. Under the ESOP regulations, a purchase by the plan sponsor (a disqualified person) from the plan is required to be priced at the FMV as of the date of the transaction, not at the price determined by an annual valuation. Otherwise it is a prohibited transaction. jsample's approach of having the employer contribute cash to retire the shares upon a distribution is safe. This scenario is described in an NCEO publication on ESOPs called "Don't Do That!"

DFVCP does not relieve filing penalties under Title IV (page 2 https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/fact-sheets/dfvcp.pdf). Since you have already received a letter, I think your best option is to beg forgiveness. I had a client whose CPA did the 5500s, and missed two 5500s. He submitted them immediately in a panic before I could advise to use DFVCP. Soon came the IRS penalty letters. I drafted a letter to the IRS for him describing the error, and telling the IRS that he hired a new advisor to ensure this error does not happen again. Nine months later they waived the $120,000+ in late filing penalties. If it was not too late to file a DFVCP that would be option 1, but it is nice the IRS still is willing to waive penalties if you explain the reason for the error and the steps to ensure it won't happen again. I'd be hopeful you can get it waived, though it might not occur until 2023.

Yes, it IS possible, but per the attached, an extension either for the business or the plan (Form 5558) needed to be filed prior to the due-date. IRS announces tax relief for New York victims of remnants of Hurrican_ - www.irs.gov.pdf

If the IRS doesn't sic the DOL on the sponsor to prevent a DFVC filing at that point, it's on them....

We were asked to step into a plan where the 5500 was late and had an IRS notice "where is your 5500." We quickly filed under DFVCP, client paid the $750 and never hear anything further. It was very small, just a couple participants.

Amend the filing to reflect DFVCP?

As long as you don't have a letter from the DOL, you can still do DFVC and I would highly recommend doing it quickly.

Most of your questions seem like general legal questions but the price question. Why would the price be zero vs the appraised value?

See their release on June 9, 2021. Announcement as well as video tutorial: DC Compliance Enhancement - Non-Elective Allocation by Division

Ha, this is the "common" difference between W-2 wages and "wages for withholding purposes" under 3401, since that amount is typically not part of the 3401 definition. A quick peek over at the EOB indicates the amount is typically included in 415 compensation, if not explicitly excluded separately. But the prime consideration would be your plan's definition of Compensation.