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I'm a little confused - you say that the plan was operated according to its terms, so there's no operational failure. Yet it sounds like the plan was NOT operated according to its terms, (even though it was more generous) according to your first paragraphs. Based on what you've presented, I'd say that there is an operational error, so the full range of allowable corrections under EPCRS should be available to you, as appropriate under the specific circumstances. One question - sometimes plans contain a clause in the contribution section to the effect that contributions to union employees will be made under the terms if the current CBA - so were some of these changes already automatically included?

Also the 3% SHNE generally provides a better base if the sponsor is making additional profit sharing contributions. We are just scratching the surface here.

A worldwife pandemic! Everyone got married, it was a disaster! Don't tell my wife I said this please!

The addition of the design-based safe harbors (3% NE or SH match) for the most part, in my opinion, rendered the QNEC and QMAC obsolete. There are many advantages to the SHNE or SHM compared to their "ancestors" and as Bird chirped, we're just scratching the difference.

Hopefully not a Freudian slip... I also would like to think there would be some leniency if there is SOME evidence of a reasonable attempt at compliance. It's already becoming difficult to remember how crazy things were, and the pace/confusion of all the changes. We are plodding ahead with our CARES amendments right now - no intention of waiting!

With the 3% SHNEC, you lock in your cost in advance. With the others, your contribution is dependent on what the NHCs contribute.

You'll probably need to check the definitions/thresholds in the specific state statute creating the program, which can be tied to things like the number of employees reported to the state's employment agencies, etc.

I agree that ADPSH contributions are preferable to relying on QNECs and QMACs, but I hesitate to say that the latter are obsolete. While not every plan product will necessarily contain a preapproved option for making non-corrective QNECs and QMACs, there's nothing to preclude a document architect from presenting drafters with such sources that can be funded ahead of time, i.e., regardless of the outcome of an ADP test. For example, some plans allow prevailing wage contributions to be treated as QNECs, which would allow such contributions to either be used to help pass an ADP test or be used as an offset to an ADPSH nonelective contribution. Such a plan might prefer having an ADP test rather than an ADPSH obligation. In addition, there might be a use for treating ADPSH contributions as a QNEC or QMAC for a plan year that the employer discontinues its ADPSH. There was a time when any ADPSH contributions that had already made for such a year could be automatically treated as being a QNEC or QMAC for that purpose. However, now that plans with QACAs can have deferred vesting on the QACA contribution, employers may be unable to use such contributions to help pass the ADP test unless an amendment is adopted to fully vest the QACA source, i.e., turning the deferred-vesting QACA contribution into a QNEC or QMAC. The biggest problem I see with QMACs and QNECs (and occasionally non-QACA ADPSH contributions) is with people thinking that full vesting is sufficient for calling a contribution a QNEC or a QMAC. I don't know why, but I see many instances of people forgetting about the distribution restrictions that are required for all these contributions. I like the idea of having a plan product that gives me a QNEC or QMAC source that has all the requirements built-in, if only to facilitate quick amendments with reliance when the facts and circumstances change.

It is my understanding that a PEP can not use a Form 5500-SF, but a "Closed MEP" (all firms have a "common nexus") can use the SF if under 100/120 lives rule. PEPs must use the "Full 5500" regardless of participant count, but may be exempt from the Accountant's Opinion based upon the count of covered employees (see Pmacduff Post). For Business Code I would suggest that you use the Code for the primary sponsoring entity of the program.

And HCEs get the 3% Non-Elective Safe HArbor not just NHCEs assuming the plan has not excluded the HCEs which sometimes it does with class-allocated plans (allows owner family members for example to be excluded from an employer contribution to help with testing.)

I would view the changes agreed to between the employer and the union in the CBA to be proposals to amend the plan. Since this would be an optional or voluntary amendment to the plan, the IRS guidance on optional plan amendments not necessarily required by plan qualifications generally requires such amendments to be adopted by the end of the plan year in which they are to have been made effective. Accordingly, I would view this as a plan document failure which can be corrected via EPCRS. It would be helpful to know in what year the changes discussed in the CBA to be able to determine whether the change could be implemented via self-correction. If it is within 3 years of when the changes were agreed upon, then the plan could be self-corrected and thus, retroactively amended under the latest iteration of EPCRS.

That should be the first check. Concerning operational failure or not, it may be that the plan was followed but the CBA was not - although I think a union rep would have been all over that. If plan contribution language is flexible then maybe the only issue is vesting and maybe no one has been directly impacted yet, hence so material conflict between operation and CBA. The 2018 thread Lois provided has a lot of positions/arguments/disagreements but no true consensus, although I think most thought the plan document must govern. If you have nothing else to do this afternoon you can read it but otherwise let's cut to the chase - if the plan does not currently have language that incorporates for CBA then get it amended ASAP to comply with CBA.

The IRS position is that the tax treatment of distributions received in a prior tax year does not change because the retiree received and had use of the funds. Any repayments of prior distributions in the current year can and should offset any otherwise taxable distributions paid in the same tax year. Any additional amounts repaid above and beyond current year distributions (or if it was a lump sum that was paid in a prior year and no future payments are being made) may be deducted under IRC Section 165(a) as a miscellaneous expense to the extent such amount exceeds 2% of AGI. See IRS Revenue Ruling 2002-84. This is not tax advice, the parties-in-interest should consult their own respective qualified tax advisors. However, they should confirm that current year distributions will be offset by current year repayments on current year 1099Rs.

This 2018 discussion of the same question might be helpful.

87,000 new IRS agents ... (just sayin') 😀

Hi Austin - I found this with a Google search: "Annual Audit, Form 5500 Filing Requirements The DOL issued changes to Form 5500 in December 2021, including an instruction that PEPs must check the MEP box in Part A of Form 5500. Participating employers with 100 or more participants in the PEP will need to provide a qualified independent accountant’s report (often called a “plan audit”) for their portion of the PEP, which must be attached to the PEP’s Form 5500. PEPs are required to undergo an annual audit unless they satisfy the exemption rule. No annual audit is needed if each participating employer has 100 or fewer participants and there are fewer than 1,000 total participants in the plan. The new rules require PEPs to confirm compliance with the Pooled Plan Provider Registration Form (Form PR) requirements. PEPs must also provide the AckID number for its latest Form PR filing, and PEPs with more than 100 employees must file a Form 5500 (they cannot file a Form 5500-SF)." I would think if you are marking the "MEP" box then you would need to do the attachment with the Companies and contributions.

Several more articles here. One author (at Verrill Dana) does point out that the extension is a double-edged sword: "[M]ost retirement plans have been operated in accordance with some or all of the required and optional provisions of these laws since 2020. Further delay in the adoption of formal plan amendments will simply compound the opportunity for errors ... [C]onfusion and uncertainty may result if a plan sponsor maintains a retirement plan in misalignment with disclosure materials for an extended period."

IRS has been busy (if a bit disorganized): Notice 2022-53 (issued Friday 10/7) provides transition relief/extended amendment deadline for 2021 and 2022 RMDs. Notice 2022-45 (issued September 26) provides extended amendment deadline for COVID distributions/loans (CARES/CAA) Notice 2022-33 (issued August 3) provides extended amendment deadline for other CARES/SECURE/Miners Act provisions

It would - at worst you could do the amendment to suspend the match on one day and then adopt the 4% non-elective the next day - but can you really do that? Notice 2020-86 Q&A-8 says you can suspend a plan's safe harbor nonelective contributions during the year, later readopt the 4% nonelective, and still retain the safe harbor. It doesn't say anything about suspending a match and being eligible for this treatment. Given that the IRS chose to specify nonelective in this Q&A - combined with the section of 2016-16 that Belgarath referenced - it seems that you can not get this treatment with a safe harbor match.

Which even if 1, 2 and/or 3 apply and it is a CG, I believe pension legislation under consideration could change that in the future (probably only for 2 and 3 is my guess). So this could go from CG to not CG w/o anything (other than law) changing, just be aware. Also, if using a vendor's branded "solo k" product, make sure it allows for other participating employers.

You would treat it as a reduction to the value of benefits expected to be paid out. The instructions for the standard termination filing discusses the election to forgo receipt of benefits (don't call it a "waiver") for line 7 of the EA-S, under the heading of "Plan Amendments."

The problem with a SIMPLE is that it has to be the sole plan for the year by the employer, and since "employer" refers to the controlled group, they've already got one.

I live in a world where nobody has the right to do anything unless that right is bestowed upon them by law or by regulations that have the force and effect of law. A court cannot require the parties to carry life insurance to protect the children because there is no statute that says that they can do so. Nor can the court order the parties to pay for college, for the same reason, the law does not authorize it. Certainly there are situations that a right is bestowed if not prohibited, including the 10th Amendment to the Constitution - "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." But ERISA and the DoL control every breath taken by plan administrators, no? So let's assume that the Plan Documents actually do provide that a spouse's status as a beneficiary of a defined contribution plan is terminated upon her death and that we are not dealing with a divorce and a QDRO, and that the Participant neglects to submit a change of beneficiary form. Where in ERISA does is the Plan authorized to strip the decedent and her estate of her status of beneficiary when Participant later dies without having changed the beneficiary? I cannot find that in ERISA or in DoL regs. These two cases are right on point. PaineWebber v. East, 363 Md. 408, 768 A.2d 1029 (2001), and Kari E. Kennedy, Executrix v. Plan Administrator for Dupont Savings and Investment Plan, 129 S.Ct. 865, 555 U.S. 285 (2009), but maybe those plans didn't have such a clause in their plan documents, or were they prohibited from having them by ????? David

It might be that the commentators thus far know more about the marketplace than I do. As a technician, however, I have some observations that might potentially be useful, or perhaps they are entirely out of date. I second the motion that CuseFan has made about inquiring about "other participating employers." Allow me to provide more detail that I suspect is behind that suggestion. More than once, I have seen people mistake a contemporary "solo" plan with what used to be called a "Keogh" plan. There's a reason why document vendors have stopped referring to plan being "owner-employee" plans or "Keogh" plans, and that is because there is no longer a legal need or any legally motivated desire for having separate plans for only a certain type of business or a certain type of "employee." However, from my limited perspective, that's not to say that some vendors haven't chosen to continue using ancient (pre-EGTRRA) legal divisions for "Keogh" plans and given the product, thus designed, a new name of "solo." You could have two very different documents calling themselves "solo" plans. Until you know the nature of the vendor's solo document, i.e., the philosophy that underlies its construction, you cannot be certain whether it makes any difference whether it is a single employer plan or a MEP. Some solo plans might preclude a MEP, other solo plans might preclude additional employers even if related, and some solo plans might allow for all of those possibilities. Some solo plans might preclude having any common law employees, and some solo plans might not. That is because there does not appear to me to be any "solo" qualification rules except for the rules that the document vendor has designed into their product, and if they have done so, then you are required to abide by the document even if the document has restrictions that are quite unnecessary. It is quite possible that a vendor has continued to have restrictions that are no longer necessary. Perhaps it was deliberate. To summarize thus far, "solo" is not a term that has a definite meaning to me unless everyone is convinced that every document vendor attaches the same meaning to the word "solo." For example, the <only> difference I see in the particular solo product that I use is that the solo AA is a subset of the "regular" AA's options. There's been no deletion of any provisions regarding common law employees nor any restriction on the nature of additional participating employers. There is no difference in language between the "solo" BPD and the "non-solo" BPD. That means that nothing bad happens (under this "solo" plan) if the employer ends up hiring a common law employee or having a related or unrelated employer adopt the plan as an additional participating employer, other than the indirect costs associated with having a plan document with pre-selected AA options that cost more money (in operation) than having a more efficient plan design that is built using the "regular" AA. For example, maybe the solo plan provides only full and immediate vesting, whereas the regular AA has options for deferred vesting. Or perhaps the solo product lacks annuity options whereas the regular AA does. I made up those two examples, as I don't have the documents in front of me. I merely am illustrating that I know that the primary reason for my vendor's separate "solo" product is so that advisors can offer simpler looking documents to certain employers (or their advisors), i.e., those who don't need or don't want a zillion AA options, and consequently the advisor knows that the record keeper can make presumptions about every "solo" plan's provisions (i.e., presumptions that cannot be made about the "regular" plan's provisions from that same vendor). The advisor can then design uniform administrative procedures for all its solo plans and give such projects to staff having less expertise than the staff who administer more sophisticated plans. Perhaps an advisor limits their practice to employers that fit on a particular vendor's solo product. However, it is possible that you have a plan that is designed from the ground up to be limited to only a specific type of employer, or that prohibits having any common law employees from becoming participants. That is why I recommend that you determine exactly what "solo" means to your document vendor. (You might be able to get all the answers by examining the document's language.) As you suggest, it is conceivable that the plan is designed to accommodate only single-employer plans. If the plan does not permit a MEP, then don't forget to also consider the possibility of an affiliated service group of any type of businesses, regardless of their format or their manner of taxation. For example, even if Mom only makes and bakes the pizza using her corporation (or "company") taxed as a proprietorship and Dad delivers the pizza using his corporation (or "company") taxed as a proprietorship, then although they might not be a controlled group (due to the spousal rules), they might be an affiliated service group, especially if all of Mom's pizza gets delivered by Dad, and Dad distributes only Mom's pizzas. To summarize, maybe it does matter and maybe it doesn't matter what type of company is adopting the plan or how each entity is taxed. (It may or may not matter if there are common law employees.) Unless we agree that all document vendors mean the same thing by the word "solo," then such matters depend upon that particular document vendor's definition of "solo."