austin3515

Plan A, an audited plan, invests all of it's money in the Fidelity ABC Fund. The Plan is a pooled account so there is no recordkeeper to provide the disclosures. Fidelity ABC Fund in turn pays a management fee to FMR (Fidelity's investment management arm) of $15,000. Am I required to report FMR as a service provider on Schedule C and report the $15,000 of management expenses? Fidelity is not going to be sending a Schedule C report to the Plan - the investment is taking place through either a brokerage account or a custodial/trust account. As such I cannot imagine this would qualify as eligible indirect compensation. OR would existing laws that talk about sending prospectuses automatically satisfy the Eligible Indirect Compensation disclosures?

See EPCRS Section 6.07. (EPCRS is in Revenue Procedure 2013-12).

Employees have no responsibility whatsoever. ECPRS is definitely an option. You can either reamortize the loan over remaining 5 year period, or make a lump-sum payment to catch-up on the missed payments, or a combination of the two. I have see employers provide interest free loans and the like to make the participant whole. So for example, the lump-sum payment could be "loaned to the employee" from the employer. That way, their loan deductions for the participant loan would not be changed and would be repaid on-time. Then the employee loan could have it's own terms. Perhaps they just provide the employee with a bonus to fund the missed loan payments, grossed up for withholdings, etc. and send that in. Regardless of which strategy is selected and how you choose to make the employees whole (the latter of which is not a factor with EPCRS), you would need to submit to the IRS under VCP to "undo" the default.

Does it end up being passed the last day of the quarter following the quarter in which the last payment was made? (assuming that is the Plan's grace period). The one that is outside the 5 year time period is definitely defaulted, there are no options to correct that under EPCRS. I would suggest making the participant whole through a bonus.

8 quarterly payments?

You've omitted a crucial detail - how long has it been since the participants last made a loan payment?

yes, still within 5 year period.

I have always been of the opinion that the IRS's approach to this has been (to their credit), if you have the wherewithal to come in and admit you have sinned and are willing to pay the fees, that they will more or less "rubber stamp" your correction methods, especially if they are the sanctioned correction methods. So I have a client (business owner) who during a transition from one vendor to another did not re-establish her loan payments. We just took over as TPA and discovered the error. Obviously, one of the principals for correction is that it has to be Employer Error. Have people had good luck with submitting these corrections? I know the hurdle is higher than it is with respect to employees. Again I come back to the fact that my employer just wants to do the right thing. Would you do an anonymous VCP in this scenario considering the tax implications if it is denied?

You know something, this was one of those times for me, when I read the regs and thought, wow, this actually makes sense! Thanks mastiff!

Not sure if this was intentional, but your link is to this very thread

Interesting question from a college. They have some employees who might take one or two classes a semester. Our Corbel 403b document says: © Student Employees. If the Employer elects in its Adoption Agreement to exclude Student Employees, the exclusion applies to students performing services described in Code §3121(b)(10). §3121(b)(10) says: (10) service performed in the employ of— (A) a school, college, or university, or (B) doesn’t apply if such service is performed by a student who is enrolled and regularly attending classes at such school, college, or university; Would it be unreasonable to have a policy that those taking one or two classes a semester do not regularly attend? It just seems like such a common situation that someone must have come up with a workaround!

Amen

yes, my post could have been more clear on that point. Just ED's. It occurred to me that why I am so surprised by this fact is because the darn thing is referred to as "UNIVERSAL availability." Talk about a misnomer. It should have been called "galaxy cluster" availability.

I spoke with Corbel and they said the only nondiscrimination/coverage requirements that apply to 403b is universal availability, and that is applied to each entity separately. So you can have all your HCE;s in entity 1 covered by a 403b and all your NHCE's in entity 2 with no 403b and that would not be a problem. Of course I assume each entity has to employ it's own true employees so I'm sure if this outcome was arbitrary each individual entity would be jeopardizing its TE status. In other words your entity structure presumably has to be tied to operations.

The 2nd entity is a subsidiary.

So someone just blew my mind. Is it true that if 2 501c3's are under common control (in fact in my case, it's a parent subsidiary situation) that you do not have to have both organizations covered by the plan? In other words, universal availability applies only to each entity completely independently? Would just regular coverage apply, or does that even apply?

I went back and look at the original language provided and it does not reference Nonelective Account - it just the "Account" - which of course makes sense because match counts towards the THM. Are you referencing PT language? IT's the VS that we think this applies to ("we" because I don't think I am the only one).

I'm surprised because I honestly felt it was a good interpretation of their document which was also supported by the regs shown above. But are you suggesting that perhaps you were not clear about referencing the VS as opposed to the PT?

Interesting to hear you say that, as we have often theorized that almost all DOL "whatever you call thems" originated with a participant complaint. In my opinion though, it just seems like it would make more sense to walk in the door as their "friend" and then only "attack" after you've proven they're a crook. I know depositing 401k timely is a big deal, but I don't think depositing 401k haphazardly (i.e., once every month and a half) throughout the year warrants a federal "investigation" (certainly not based solely on the phone call of a disgruntled employee). Interest, penalties, etc., etc., all fair game, but all of that could result from an "audit." Now let me beat you to your response - I'm not defending the person who deposits 401k once every month and half, it's wrong. It's just a matter of degree, assuming we all agree that "pulling a Madoff" on plan assets would be 12 on a scale of 10. With that as the benchmark I rather think my scenario is a 2 or a 3 at the most. That's just my 2 cents

Corbel's definition clearly leaves the door open: (l) Disaggregation and otherwise excludable employees. Notwithstanding anything in this Section to the contrary, the provisions of this Section and Section 12.7 may be applied separately (or will be applied separately to the extent required by Regulations) to each "plan" within the meaning of Regulation Section 1.401(m)-5. Furthermore, the provisions of Code Section 401(m)(5)© may be used to exclude from consideration all Nonhighly Compensated Employees who have not satisfied the minimum age and service requirements of Code Section 410(a)(1)(A). For purposes of applying this provision, the Administrator may use any effective date of participation that is permitted under Code Section 410(a) provided such date is applied on a consistent and uniform basis to all Participants.

I would think the document would have to be worded in such a way that you have the flexibility. The document certainly could indicate use of plan entry dates.

401kAZ, I've often wondered why the DOL chose the "Investigator/Investigation" terminology as opposed to "auditor/audit" which employers are much more comfortable with. After all, investigations tend to take place after some suspected wrongdoing (at least that's how it works on Law and Order ) . I understand that approach for those employers/fiduciaries who have abused their role as fiduciaries (e.g., not sending in 401k for a prolonged period), but why not "open an investigation" after wrongdoing is uncovered during an audit? I think at the end of the day the DOL "investigations" are very comparable to an IRS audit, and my experiences with the DOL auditors has been very agreeable, so from my perspective it is an "investigation" in name only - functionally it is really an audit. But it does certainly start off as more of a confrontation. I've had clients ask me if they need an attorney to represent them, which of course they do not (assuming normal circumstances). I'd be curious to hear your perspective.

Did you read all of the posts above Lou S.? We all would have said the same thing before the post started. I don't think it as simple as you suggest.

But it's not an irrevocable election, it is a mandatory employee contribution. I think there is a difference, don't you?

I looked at my PT from Corbel as well and in our prototype the key definitely gets the 3% THM from Er Contributions. I suppose it's a question of whether or not that approach is mandatory, and it seems to me anyway that is not (of course it's mandatory to do what the document says). I agree it, must be a VS document, or maybe it's the PPD version of the prototype (as opposed to the Corbel version). What a great discussion.