Leaderboard

As long as your contribution was in the min/max range under both and it doesn't cause any AFTAP limitation problems, I'd save the correct val to the file and provide a copy to the client but unless the IRS comes asking I'd just correct the next year 1/1 valuation and treat it as a data correction with possibly an attachment to the Sch SB to explain any issues. But I also don't see any issue that would be caused by filing an amended return. Lastly, you didn't say whether this plan covered employees or just owner and wife. If it is owner and wife only, you don't even file the SB with the 5500-EZ so you could just do an amended SB to the file in that case since the EZ itself would not change or need to be refiled as an amended return.

Personally, I wouldn't redo it. Let sleeping dogs lie. Yes, you understated the liability, but they contributed a sufficient amount to cover it either way. If someone asks you to redo it in the future, then redo it then. The beauty of the PPA funding method is everything self-corrects over time. I would suggest that you don't apply any of the excess contribution to the PFB. That way the plan is right where it should be starting in 2023 and no one can argue that your error impacted anything. Plan was appropriately funded, PFB was not impacted, no harm, no foul. I applaud your dedication to making sure the valuation is correct, but in reality, you are probably the only one who cares. Or, go ahead and redo the val and amend the SB if it helps you sleep better.

You said, "If the 2022 year is under examination". Is it actually under examination, or is this a hypothetical question? Who is complaining that the 22 val was "wrong"? For a BOY val date, this w/b perfectly acceptable. Not sure how an EOY val works with mid-year changes, so not sure if they "must" be recognized, or if it is a "may" like a BOY val. Sounds like you think it is "must". "there is a general concept that you can't file an amended 5500 that changes the specs". I don't agree with this. You are not allowed to change assumptions, but I think it is acceptable to amend a filing if you accidently used the wrong benefit formula. Why do you want to amend it? Who is making an issue of the MRC being understated? If you amend it, was the contribution sufficient to cover the increase in MRC?

Is this is a standalone plan where the plan sponsor is not part of a controlled group, and there is not a large group of employees excluded by classification? If yes, it is unusual that deferrals would fail coverage, and slightly more likely that match also would fail coverage in which case you may want to take a closer look at the test. If no, then the coverage testing starts to become orders of magnitude more complicated and you may want to engage a third party to help guide you.

I am not even going to try and answer the distribution question. That is just a classic example why these kinds of assets should never be in these kinds of plans but you know that already. Regarding the stock's value. Since this isn't an ESOP they are technically no legally required to get an appraisal. However, both the trustee and Plan Administrator as fiduciaries are REQUIRED to ascertain a fair market value of all assets in a plan ANNUALLY. And simply guessing isn't a valid method. Since the Dr is most likely the trustee that person needs to be able to document on what basis the stock was been valued every year and it sounds like they have failed at that. That is the start of the legal mess this plan is in. My advice to you is to get something in writing from the trustee directing you on what they want the value has been determined. I might even ask them to give a brief description of how they came up with that value. If they aren't willing to do that I think you should seriously ask yourself if you need this in your life. Yes, I get landing client is very hard and asking one to go away is very hard to do. This sounds like a huge mess. But picking numbers like $2/shr or $17.57/shr out of thin air is a failure on the part of the trustee to do their fiduciary duty. That is a pretty serious problem for that person if the DOL or IRS catches it.

Yes, you always have to do earnings on lost earnings, if a correction was made in part but not fully corrected until a later date (full correction meaning the contribution plus all earnings required being contributed) Just to make sure though. you state this was a missed "nonelective" contribution. Are you certain it is late? Most plans do not have a time by which nonelective contributions must be made except maybe for the timing to ensure tax deductibility or to be allocated to qualify as an annual addition.

In order to truly correct, earnings on earnings should be done. That is how I have always done corrections. The idea is to make the participant whole, so they should have earnings through the earnings deposit day.