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Any TPA with an ERPA on staff is likely to handle VCP submissions. An ERPA can get Power of Attorney and prepare the submission on behalf of the client, as well as having direct conversations with the IRS if there are any follow-up items. I have prepared many a VCP, and I'm sure that is the case for most ERPAs reading this posting. While a plan sponsor isn't required to find someone to represent them, I have never seen a client yet who would tackle a VCP submission on their own. Although the submissions are fairly boilerplate, the attachments and the narratives and the process as a whole requires a certain level of expertise. My experience has been that recordkeepers step away from any issues that involve functions outside of recordkeeping / lower level plan administration processes if they are not a fiduciary. I can't speak to bundled arrangements where the recordkeepers serve as Trustee and handle TPA functions. Typically, a VCP submission is prepared because the client has made an error, but once in while you will see a VCP submission for a situation where the error was the TPA's. I recall our office prepared a group submission that was the result of a universal document error many years ago. This was so long ago that I don't clearly remember if it was our office or the document provider's fault, but the submission was required and it impacted all clients on that document, and I'm pretty sure we prepared the submission. When I say "we," that means I wasn't the lucky person who got to do that, so I just don't remember. Clearly the big question is about conflicts of interest, and I have never even considered it might be a possibility when preparing submissions, regardless of the reason. The focus is always to clear up a plan qualification issue.

Yes. I believe a submitter who is not the plan sponsor must be authorized to practice before IRS (but do not know this for certain). If not, they could prepare the submission for the plan sponsor to file. Good questions, never thought about it. My thoughts are about this in general, not your specific inquiries. If the practitioner was at fault and is proposing an aggressive remedy that is not a standard correction and which would limit the correction cost for which it is presumably responsible then I'd say that is a conflict and must be disclosed to the client. If the at fault practitioner is doing the correction work w/o fees to avoid incurring another professional's costs, maybe that could be a conflict. However, any instance where the correction is routine and mandated, whether completed by an at fault practitioner or not, I don't see where there would be any conflict. My general thought, if a practitioner made a mistake they need to make it right. These are my personal opinions. I have no answers or opinions on your other specific questions.

IMHO, this is the hardest thing to grasp when first dealing with DB/CB plans, however once it's clear, it's always clear. But it's then extremely important to help the client learn. And that's one of the toughest parts of client service with DB/CB plans.

Not on their statement, no. The enrolled actuary tells the plan sponsor how much to contribute. The contribution is not limited to the comp limit, it is limited by code section 404 unless the plan sponsor is tax exempt. The participant statement tells the participant the benefit they have earned based on the terms of the plan document. The assets in the plan are not equal to the value of the participant’s benefits and the contribution for the year is not required to be equal to the value of the benefits being earned for the year.

Many plans have a list of beneficiaries in none is named, such as: (i) Surviving spouse, (ii) Children in equal shares, (iii) Surviving parents in equal shares, (iv) Estate. If the plan does not such a list then the money goes to the estate of the decedent and the probate court will determine who gets it. This is not an uncommon event. It might be prudent to check and see if the employee was divorced and whether or not a QDRO was issued, or whether the Judgment of Divorce or the Judgment of Divorce incorporation a Marital Settlement Agreement exists. Under the Pension Protection Act of 2006 a post mortem QDRO can be entered. David

I have a couple of points that were not raised by the other commenters. (1) Regarding the cash-out threshold, there is a regulatory exception to that requirement in the case of the participant's death. See Reg. Section 1.411(a)-11(c)(5). One option is to have the plan force out the balance and do an automatic rollover to an IRA. (2) The SECURE 2.0 Act provides for a retirement savings lost and found. Although it is too early to tell, given the lack of regulatory guidance, it is hoped that plans will be able to pay over those amounts to help beneficiaries receive the remaining account balances. (3) There is an argument, at least on the retirement plan side, that state unclaimed property laws are preempted by ERISA. However, nothing precludes the plan from voluntarily sending money to a state unclaimed property administrator. As far as the "warehouse scenario," many states participate in websites such as unclaimed money.com, which includes bank account balances paid over pursuant to state unclaimed property laws.

We were audited by the DOL a few years ago. Our document contains the IRS contingent forfeiture language but the DOL forced us to restore ALL those forfeitures to the plan. The people we forfeited were deceased for many years, had minimal service (we had immediate entry and vesting pre-1995), had returned to their home countries after their brief employment with us, and survivors were unlocatable after contacting their places of employment, googling their obituaries, etc. So now we have these funds in our plan being slowly depleted through a quarterly administration fee--after a few decades I guess the problem will solve itself. I was advised that ERISA preempts the state escheatment laws although that would not have helped in our case. For US residents, PBI (for a fee) has a relative search. You can enter demographic data (including SSN) and a list of relatives will be provided.

ADEA?

I missed that it was $5, I thought it was $5K. I mean technically my answer is still correct, but I'm not sure I'd go through the trouble for $5.

Yes, I don't see why not if BRF satisfied.

I agree with Lou, although it always does seem like the time involved is an absurd exercise. Was there any missed match associated with the $5.00? If so, the missed match, plus earnings, should be included in the correction. Maybe the correction will turn out to be a whopping $6.00 instead! 😁 It's been years since we had a client submit a 5310 upon plan termination, even though we always notify them of the option and make it their choice. No one here laments the loss of that process...

These employees are collectively bargained. The CBA states that 100% of the employees will participate in the plan. The only choice is between single or family coverage.

Hi Jakyasar, Denominator is at least 7 by my count (5 CB participants + 2 categorically excluded), but still more than 40% it would seem (although I am speaking only hypothetically, since have not examined plan's actual facts). To determine whether DB plan is top-heavy you look at present value of accrued benefits, which would include for frozen plan.

Jakyasar, to satisfy prior benefit structure, the plan has to have meaningful accrued benefits (you say you have, but this is a "facts and circumstances" determination with many data points, none of which you have provided) to 40% of the employer's employees and former employees. See 1.401(a)-26-3(c). You've given us the numerator (5), but not denominator. If the CB plan is top-heavy and you are not providing top-heavy minimum in it, I believe you will need to keep making top-heavy in DC.

About whether one must pay or deliver an involuntary distribution to meet § 401(a)(9): The Internal Revenue Service instructs Employee Plans examiners not to treat a plan as failing to meet § 401(a)(9) if the plan’s administrator has not found the beneficiary after a search that includes three steps the Internal Revenue Manual specifies. Internal Revenue Manual 4.71.1.4(15)(d) (Examination Objectives and Development of Issues) (Feb. 25, 2022) https://www.irs.gov/irm/part4/irm_04-071-001. That guidance tells an examiner to excuse what otherwise might be a § 401(a)(9) failure if the beneficiary is known but not found. A logical inference is that the IRS ought to excuse the absence of a § 401(a)(9) minimum distribution if the participant named no beneficiary (or all named are deceased or do not exist) and the default beneficiary is not yet known after the plan’s administrator made prudent efforts to find a person who might be the beneficiary under the plan’s default-beneficiary provision.

Um, yes, they are aware, even if they don't admit it.

You have a late deposit to the 401(k) Plan. Deposit the additional amount along with earnings to the trust. If the trust is closed, they may have to go down to a bank and open an account in the name of the Plan. I'd first ask the original custodian if they can and process the deposit and issue a residual distribution for the employee.

Transferring the balance to states unclaimed property division reminds me of the last scene in Raiders of the Lost Ark. The balance will live forever in a government warehouse never to be seen again. Unfortunately, the DOL and IRS are not on the same page with how to handle the case where a plan truly has made extraordinary efforts to find a beneficiary and the search has not been successful. The IRS says the plan can subject the balance to a "contingent forfeiture" which is kind of like a forfeiture of a nonvested amount, but the plan must retain all of the information it has about the participant (and about the search effort). If the plan gets a legitimate claim for the benefit, then the plan has to restore the account and pay the benefit. The DOL, when asked, most often rarely otherwise, says the plan cannot forfeit the balance, and the plan needs to keep searching. Some DOL investigators are not even aware of the IRS contingent forfeiture provision. The PBGC will accept balances from defined contribution plans for lost participants, but will do so only in the event of the termination of the plan and if they get all of these lost participants. The PBGC requires that the terminating plan give them cash equal to the amount of the balances and give them proof that a good-faith effort was made to locate the individuals. (Does the PBGC own the warehouse where the ark is stored?) So, where does that leave a defined contribution plan? Unless and until the agencies can agree on a common solution, the plan can consider periodically including these accounts in a search while keeping the account open (i.e., cash available) along with the search documentation until forever when the plan terminates, and at that point in time dumping this all on the PBGC. This seems ridiculous, but it pretty much covers what each agency says should be done.

FWIW, I agree with Brian Gilmore's post. I don't know about the OP's exact fact pattern and this isn't what is described there given the reference to "employee share" but I think there are some employers out there who cover 100% of premiums without giving any additional cash if an employee declines coverage, etc. I suppose in those cases there could be tax-free, employer provided coverage without a cafeteria plan and the employer might think of the "employee's share" as basically being built into their salary.

How could there be no employee choice between cash and health coverage? You would have state wage withholding problems if you forced participation in a plan with employee contributions. In other words, there always is going to be the choice between cash and the health plan, which is why you need the Section 125 cafeteria plan safe harbor from constructive receipt to facilitate pre-tax contributions. It's the only game in town. Full details: https://www.newfront.com/blog/the-section-125-safe-harbor-from-constructive-receipt Cite: Prop. Treas. Reg. §1.125-1(b)(1): (1) Cafeteria plans. Section 125 is the exclusive means by which an employer can offer employees an election between taxable and nontaxable benefits without the election itself resulting in inclusion in gross income by the employees. Slide summary: 2023 Newfront Section 125 Cafeteria Plans Guide

For the plan year 4/1/22-3/31/23, attach the Schedule A for the policy year 1/1/2022-12/31/22 For the short plan year 4/1/23-5/31/23, attach the Schedule A for the policy year that ends in the plan year. The Schedule A for the calendar year policy year, doesn't end within the short plan year. No Schedule A for that particular coverage would be attached to the short plan year filing. For the new plan year 6/1/23-7/31/24, use the Schedule A for the policy year 1/1/23-12/31/23. The Schedule A reflects the policy year. I read your message to say that you were going to ask the insurer to produce a Schedule A for the plan year even though that is not the policy year. If that is the case, I wouldn't do it!

You should report a Schedule A for each contract year ending with or within the plan year.