austin3515

I was grasping for straws and seeing what I could grab onto My trustee is on vacation until after 2/28 (I sent the documents a few weeks ago!!). Looks like we'll need to track him down - hopefully he's got his blackberry with him! Regarding the RAP, I studied for the ERPA, knew that was an area that to me is incomprehensible!! so studied hard, and still cant figure out how that darn thing works (But I did pass the tests...)

Tom - In my case, the Safe Harbor would be effective on the 1st day of the Plan Year (March 1st). But now I'm wonderiong if I can't still argue that I do have the remedial amendment period. Not having the Safe Harbor language is a disqualifying provision (actually, it;s the absence of a required provision, which I think is the same thing), so under the RAP, do I not have until 12/31/2010 to cure it? Or is the cited reg written so stringently as to render the RAP null and void?

Why would someone have two separate plans, for Davis Bacon, one for everyone else. -Plan is not top-heavy -Audit is not an issue (i.e., the immediate eligiblity issue)

Asked and answered From §1.401(k)-3 Safe harbor requirements (2004 final regulations): (e) Plan year requirement (1) General rule. Except as provided in this paragraph (e) or in paragraph (f) of this section, a plan will fail to satisfy the requirements of section 401(k)(12) and this section unless plan provisions that satisfy the rules of this section are adopted before the first day of the plan year and remain in effect for an entire 12-month plan year. In addition, except as provided in paragraph (g) of this section, a plan which includes provisions that satisfy the rules of this section will not satisfy the requirements of §1.401(k)-1(b) if it is amended to change such provisions for that plan year. Moreover, if, as described under paragraph (h)(4) of this section, safe harbor matching or nonelective contributions will be made to another plan for a plan year, provisions under that other plan specifying that the safe harbor contributions will be made and providing that the contributions will be QNECs or QMACs must also be adopted before the first day of that plan year.

Under the remedial amendment period rules, you have until the last day of the plan year to amend a plan for a discretionary provision that is effective during that plan year. Since I am not required to be a safe harbor plan, the amendment must be discretionary. Therefore, don't I have until February 28, 2012 to amend the plan to add safe harbor for the FEbruary 28 (29th?), 2012 Plan Year? The SH notice was sent out in min-January.

http://benefitslink.com/boards/index.php?showtopic=47988 It dawned on me that the question I posted yesterday is strikingly similar. The only difference is that in my case, we never asked for it. The fund company said they were giving it to us (they actually just sentt he check). Also, the compensation is so ridiculously small, you would think it satisfies the reasonable comp test almost by default. Anyway, thought I'd make the connection for everyone.

I guess the opther avenue is that it might violate the "reasonable compensation" exemption for service providers. What is the service for which you are obtaining this wind-fall? I'm sorry, did you say "nothing"? Perhaps that is not reasonable! Maybe that's what one of your cites was referring to, but I didn't feel like looking it up

I'm a little lesss sure of my orignal answer, but I'm going to go with "use of plan assets by a disqualified person." The TPA will be getting a benefit as a direct result of those plan assets. The fact that it is indirect would not give me much comfort.

I wouldn't try that defense in court

Service Providers are DP's.

But is the DOL likely to come hounding you over data going back 4 or 5 years that is clearly irrelevant, when you've already paid the maximum "penalty" under the DFCV.

Seems cookie cutter PT to me...

I think if, like I mentioned in my previous post, the would-be-HCE's are getting a lot more than the rank and file, then I think you could have problem. This problem might be alleviated if you can prove that the allocations provided are not discriminatory on a benefits basis somehow. But I'm also not certain that providing a schedule in the amendment necessarily works, but you're getting into a very gray area. My advice is don't proceed without the blessing of an ERISA attorney. The only thing I know for sure is that this transaction would be scrutinized if it came up under audit. You could submit the amendment for a determination letter, which might be your only good option...

Sure, if you had data going back that far...

From the 2010 ERISA Outline Book, Chapter 9: 4.a. Timing of amendment to apply only in year before the individual becomes an HCE. Suppose the employee is not an HCE for the year that the accelerated eligibility is effective, but becomes an HCE in the following year. For example, suppose an employee is hired in September and the plan year is the calendar year. Also assume the normal eligibility requirements are 1 year of service and attainment of age 21. For the remainder of the year in which the employee is hired, the employee earns $195,000. Further assume that the employee is not a 5% owner for HCE purposes, so the only way this individual will be an HCE is through the compensation test under IRC §414(q). For the plan year in which the employee is hired, the employee is not an HCE because he/she does not have prior year compensation in excess of the compensation limit (i.e., his/her compensation forthe prior year is zero). If the employer amends the plan so that employees hired in September are eligible on October 1 of the same year, so that just this employee is eligible for an allocation for the plan year in which he/she is hired, is that a discriminatory amendment? Technically, nondiscrimination testing should not be a problem because the only employee benefited by this amendment for such year is an NHC. However, this employee will be an HCE for the next plan year because his/her compensation exceeds the IRC §414(q) compensation requirement for the prior plan year (i.e., the $195,000 of compensation in the year in which he/she is hired). Arguments in favor of prohibited discrimination. Although the Treasury and the IRS have not addressed this issue directly in the regulations or other guidance, it is possible that the amendment will be viewed in the context of the employee’s status in subsequent years. The argument would be that the effect of the amendment was to create an additional year of allocations for an employee who is an HCE in the plan year following the year in which the employee is hired (and probably thereafter), along the lines of a past service issue, resulting in a discriminatory timing issue with respect to the amendment. Additionally, the person who benefited from this amendment, although not an HCE for the year that his/her eligibility is accelerated, will definitely be an HCE in the next plan year since the employee’s compensation for the year in which he/she was hired is already known to be enough to make this person an HCE for that next year (unless there is a possibility that the top paid group limitation under the HCE definition might enable this person to continue his NHC status for 1 or more additional years). Arguments for a finding of no discrimination. There would be arguments on the other side, too. First, the past service issues discussed in 1. above involve a plan amendment (or the establishment of a plan) that gives credit for prior service for employees who are HCEs with respect to the years for which such prior service is granted. Accelerated eligibility provisions do not result in past service credits. Second, nondiscrimination testing is generally a year-by-year determination, and the fact that the employee becomes an HCE at a later time does not necessarily address the discriminatory effect of an amendment that benefits such person in one or more years that he or she is not an HCE. Guidelines Regarding Rollovers as Business Start-ups, In a different context, the IRS has acknowledged that this may be a difficult argument where the alleged discrimination occurs in a year when an individual does not satisfy the HCE definition. See the Memorandum from Michael Julianelle, Director, Employee Plans, SE:T:EP, IRS Employee Plans Bulletin (Special Edition: November 5, 2008), which relates to Rollovers as Business Startups, and is discussed in Section IV, Part G, of Chapter 7. Design tips. If the employer wants to accommodate a particular individual, but is uncertain of the discrimination testing implications, the employer might consider opening up the amendment to other employees hired within a specified period who will not become (or are unlikely to become) HCEs in the near future. This might necessitate make the amendment effective for more than one plan year where an employer has low hiring rates. If there is a pattern of these types of amendments, that also would dictate some additional caution with respect to the manner in which the amendment is handled, and a closer examination of the classification and number of employees who benefit from the amendment. Not a “right or feature.” In Section X of this chapter we discuss the requirement in Treas. Reg. §1.401(a)(4)-4 to provide nondiscriminatory “rights and features” under a plan. IRS representatives at the May 2007 meeting of the Taxation Section of the American Bar Association agreed that “rights and features” do not include plan design elements relating to who is included in, or excluded from, the plan. See Q&A-15 of that session. The discriminatory impact of dual eligibility is picked up by IRC §410(b) testing. Nonetheless, the issues raised above with respect to the timing of the amendment could still trigger a discrimination issue.

Profit Sharing Plan effective in 98, but never filed a 5500. Plan is now terminating. Durign the termination process, it was discovered that no 5500's were ever filed. How far back do you go? I proposed 3 years under the DFVC program (2009, 2008, 2007), plus the regular 2010 filing.

Remember an amendment that benefits only NHCE's can still be discriminatory if some of those NHCE's are reasonaby excpeted to be HCE's, and are not simply because they had no comp in the look back year. So, for example, you can't give the former owner of Y $49,000 and the people in the factory $1,000 and call it nondiscriminatory [edit: assuiming the owner will make more than 110K with Y]. There's stuff in the EOB about this that you can look up, or perhpaps someoen can post... Also, a DC contribuion formula must have a definitely determinable allocation. Sure, there are new comp plans that provide discretion, but totally arbitrary would not cut it. And finally, if Y's plan does not include a last rule, OR if some people's allocation conditions are waived, you might not be able to amend Y's plan to accomplish what you watn anyway.

That was YOUR question? I actrually highlighjted that one and sent it around the office. For some reason I remember the cited question before I remember that one from just a few months ago... But I should say, I read your question originally to be much more geared towards bringing in an ineligible particpant, for example, someone who had not yet met the age requirement (how sly of me to want to brinhg in a 20 year old based on this!). While I definitely think it applies to my original question, could it perhaps be used to change a plan's initial eligiblity?

We all know the story... The 25 year old in a new comp (non-safe harbor) termiantes and therefore gets no profiut sharing. The whole plan desgin hinged on this one employee benefitting. May I please do a -11(g) amendment? See the Q&A below, though note that we did NOT do a projection. In the eyes of an ERISA attorney that I worked with on this issue a few years ago, he said "a projection is JUST a projection", i.e., the fact thtat one did or did not run a projection should not be a relevant factor. But I'm wondering if there is anything else out there. From an ASPPA Q&A in Sept 2004: 57. An employer with a cross tested profit sharing plan receives a contribution projection/allocation estimate approximately two months prior to its year end and approves the recommendation. After that date but before the year end, a NHCE participant quits. The plan has a last day employment provision. When the new contribution calculation is completed after year end, significant adjustments in allocations are required to pass non-discrimination tests now that the terminated employee is excluded. Can a -11(g) amendment be adopted to provide the terminated employee (who is already 100% vested) with the same contribution that he would have gotten had he not terminated, thus passing the non-discrimination tests? A: YES, so long as the -11(g) amendment is non-discriminatory and meets the meaningful benefit rule. Reg 1.401(a)(4)-11(g)(2) specifically includes the language: ... "a corrective amendment... may grant accruals or allocations to individuals who did not benefit under the plan during the plan year being corrected." Since this participant is a vested NHCE, a -11(g) amendment that adds him back and gives him an allocation that allows the non-discrimination test to pass (the amount does not have to be what he would have received if he had not terminated) would be acceptable under the regs.

Apparently, said fund company thinks we do. And I have to say, often times, participants do call us and say "where can I roll this over to" (not appreciating that we are not investment people). And who knows, I think a lot of TPA's would say "hey, you can roll it right to Fund Company!" Perhaps you would even go so far as to insert a brochure into your distribution paperwork. Are we getting any closer to a problem?

Let's say, hypothetically speaking, a fund company decides to pay a TPA a "fee" (albeit a small one) for every rollover that comes out of the Plan and into an IRA with said fund company. I don;t know, it just doesn't seem right. Smells like a PT... I shouild repeat that the fee is very very small (less than $20 or so).

Tried that already, they were no help. She suggested that perhaps I had to file my application first, but from reading by "Socre Report" and some other stuff on my web-site, I'm skeptical... They say in the licensure thing "the test measures if you ARE qualified - not HOW qualified." Which I think is ridiculous. You give a test, youi tell your score. It's not PE, it's a profession.

I certainly like you're system better, but Corbel just told that all they meant by this is that you can't scribble notes in the margins and call it an amendment... So what we are doing is OK. What provider do you use? I can;t imagine ever changing, but I'm curious to know who has the better mouse-trap? (I don;t think Corbel has that functionailyt, but I can't say for sure...)

What is meant by this sentence Taken from Rev Proc 2005-16: In addition, the employer must complete a new signature page if it modifies any prior elections or makes new elections in its adoption agreement. What's the general format for the signautre on amending a prototype? We ususally just copy and paste the applicable sections into word and check/uncheck the applicable boxes. But then, more or less, we just have the employer sign. Are we required to use the actual pre-approved signautre page which includes all of the disclosures, etc?

Interesting in that other thread that went around. I like the favorable opinion letter on the standardized document argument which rings very true to me. I also think it directly addresses my "temr with a break problem." I think gthe bottom line here is that the IRS has clearly taken the position that you should just pretend everything is OK if you can pass coverage by ignoring the SHNEC. And who am I to argue with them that something really is a problem?