Leaderboard

Confirmed this can now be self corrected - The answer changed with SECURE 2.0 and Notice 2023-43. Specifically, Section 305(b) of SECURE 2.0 allows participant loan failures to be self-corrected under the rules of EPCRS section 6.07. The Notice, at Q&A 3, confirms that errors such as this can now be self-corrected, whereas before they could only be corrected under VCP.

The trustee is, or should be, the owner of the account(s), and the participant's role should be limited to directing investment transactions. Accordingly, the trustee should get, or be able to get, statements on the accounts and definitely should not have to rely on the participant(s). Since financial advisors and/or behemoths such as Fidelity have a strong presence in this end of the market, it is no surprise that the accounts are often set up incorrectly.

EBECatty, the way I read both the DOL Fact Sheet and the FAQs, any correspondence or related action by IRS is not going to disqualify you from DFVCP. Only a DOL letter will do that. So let's assume you are successful under DFVCP. You should be. The IRS "guidance" on the topic, which is just what it says on its website, would seem to say that it will probably abate penalties once you demonstrate success under DFVCP. My guess is that you would be successful here as well, but I am not aware of anything in the IRM or anywhere else that discusses this situation, and of course dealing with IRS is often a demanding process on something like this.

The plan's named Trustee has responsibility for delivering asset reporting to the Plan Administrator, the frequency can be monthly, quarterly or annually as needed by the PA (or its designated/contracted TPA) to properly administer the plan. The Trustee and Plan Administrator could, but need not, both be the Plan Sponsor. If the Plan Sponsor is neither, it still has the obligation to oversee each in fulfillment of their fiduciary duty. The consequences of lack of required financial reporting is a fiduciary lapse. Participants are not required to keep (or provide) copies of their own brokerage statements any more than they are required to keep their "regular" quarterly statements. It's a good idea but not a requirement.

Yep, same here. If I had it my way I would default everyone to $7000 with all force-outs being rollover IRAs to avoid stale checks...

Been a few years but my understanding was: no optional form of payment may be less valuable than the accrued benefit defined in the plan, and the QJSA may not be less valuable than any other available option. These comparisons are based on 417(e) assumptions if the optional form, such as lump sum, is subject to 417(e), but otherwise is based on "reasonable" assumptions -- with no explicit guidance as to what is reasonable. If that's still right then, in your situation, it should be ok if the 100% JSA is less valuable than the 50% JSA (the QJSA), so long as, under reasonable assumptions it is not less valuable than the accrued benefit stated in the plan -- typically, the amount payable as a SLA.

The plan’s fiduciaries should get the securities broker-dealer’s records at least as needed to administer the plan and its trust, and to obey ERISA § 107 and § 209 and Internal Revenue Code of 1986 § 6001. Also, a careful plan sponsor and plan administrator might edit the plan documents, trust agreement or declaration, investment-direction procedure, summary plan description, and other documents and communications so whatever account-stated, arbitration, and other provisions end or limit the broker-dealer’s responsibility to its customer also reasonably end or limit the directing participant’s (or beneficiary’s, or alternate payee’s) rights and remedies regarding the plan and the plan’s fiduciaries. Why risk even a possibility that the plan could face an obligation to a participant even arguably greater than the broker-dealer’s obligation to the plan’s trust?

Keep in mind that the LTPT rules were designed by the Legislative Branch and not by the IRS. Part of the design was to provide LTPT employees access to salary deferrals without disrupting existing rules for qualified plans. One of the features of the LTPT rules is the employees who are LTPTers are excluded from all of the testing applicable to existing qualified plans and most importantly from coverage testing. We have not yet heard from the IRS about how classification exclusions (other than bargaining and NRAs with no US income) will operate with respect to LTPT employees. It does not make sense that a classification such as job title or geographic location is overridden by LTPT as long as that classification is not discriminatory. If a plan covers employees in Oklahoma and excludes employees in Florida, why should an LTPT in Florida be allowed to defer? The fear in Congress is the potential situation in this example is where most of the Florida employees are LTPT employees and the classification provides a way of not allowing them to defer. But, Congress wants LTPT employees to be able to defer. If everyone in the classification is excluded from participation, that sets up an issue where the LTPT employees would be considered Excludable in coverage testing even if they defer, but the FT employees who are otherwise eligible for the plan except for the classification would be considered Non-Excludable, Not Benefiting. This could be an incentive to use the LTPT rules. Let's see how imaginative the IRS will be when providing guidance on this topic.

What was the liquidation date? If the timing were to work out with an extended filing due date, I would wait until the 2023 is available. If not, I don't have a great suggestion.

Agreed, but relevant to both your points, Peter, I wouldn't completely disregard the possibility that there are folks at Treasury and IRS who are embarrassed by the mistake and will work with staff on the hill to bring consistency to this provision.

When I first noticed this in reviewing the bill back in January, I figured it was a drafting error, but one that couldn't be solved administratively. That is still my view. Does anyone think it's not an error, e.g. there is some technical issue with having it apply to self-employment income. I don't see it, but maybe I've overlooked something.

Starting with the 2023 forms, only participants with an account balance are counted to determine a plan's filing status (large or small). So if they never defer, and never get any employer contributions, they won't count - but the same is true for all participants, not just LTPT.

Yup. A firm’s employee with § 3121(a) wages more than $145,000 would be § 414v)(7)-restricted to catch-up deferrals as Roth contributions while the firm’s partner with a million-dollar draw (but no wages) has her choice between Roth and non-Roth contributions. That’s how the statute reads, and the IRS confirmed it. Whether that’s fair or decent we leave to the Members of Congress.

We received a copy of the penalty notice from a client whose 8955 was FIREd on 6/26/2023. That's more than a month before the filing deadline (calendar year plan). Is this a harbinger of how the electronic 5558 filing is going to work? We just started receiving IRS letters admitting their 2021 5558 denials were incorrect, and now these 8955 letters start. Geez.