Kevin C

Does your plan document address it? Our current VS document automatically switches the SH compensation definition to 415(c) comp if the definition used doesn't satisfy 414(s). If you need to amend, it will need to change to something that satisfies 414(s) and doesn't reduce anyone's safe harbor contribution. I think the consistency rule in 1.414(s)-1(b)(2) prevents you from excluding an item of compensation for some employees, but not others.

It doesn't look like anyone else is going to answer, so I'll give it a try. The 404(a)(5) annual participant fee disclosure is an ERISA requirement, so I'm not surprised it isn't addressed in the IRS EPCRS program. I don't see it listed as one of the issues that can be corrected under the DOL Voluntary Fiduciary Correction Program (VFCP). A late notice is considered a fiduciary breach, but there doesn't seem to be anything listing a specific penalty. I don't think there is anything the client can do except to send the notices out asap.

Church (and governmental) plans are subject to the pre-ERISA vesting rules [see 1.411(a)-1(c)(2)]. Back in my early days, I worked on a benefit claim for a DB participant who terminated prior to ERISA. The Plan's vesting schedule at the time the person terminated was cliff vesting at age 65 and 35 years of service. It was an interesting history lesson that made an impression.

When a funding deficiency is reported on the 5500 filing, does the IRS send out a notice of deficiency that would trigger the 100% tax under 4971(b)?

While it might be possible for the workers to be common law employees of the PEO, I've never seen it. Our clients that use a PEO still have sufficient control over the employees that they aren't even close to not being the client's common law employees. The employees being paid under a leased arrangement has no effect on the common law employee determination (Notice 84-11 Q&A 3). IF they were to actually be common law employees of the PEO, their service with company A is counted in determining if they are leased employees (Notice 84-11 Q&A 8).

If this drags on very long, the participant is likely to contact the DOL. If/when that happens, they will get a phone call from a DOL Investigator asking why the participant hasn't been paid. Where it goes from there depends on the facts and the Trustee's actions. If the Trustee continues to refuse to pay someone who is eligible for a distribution, I would expect it to result in a DOL investigation.

The IRS put an end to this practice in 2003. See Rev. Proc. 2002-21. They gave PEOs until the end of the 2003 year to either terminate their plans or convert them into multiple employer plans. That doesn't necessarily mean they all did so. We had a client looking at a PEO about 10 years ago that was still running their PEO plan as a single employer plan. https://www.irs.gov/pub/irs-drop/rp-02-21.pdf

Provided the plan document allows it, yes. In the section on 415 limits, our VS document says that if the plan is eligible for SCP, the employer may use reasonable correction methods to correct excess annual additions to the extent allowed under EPCRS. The correction you want to use starts in the middle of 6.06(2).

I would expect in most cases that the distributing plan doesn't have sufficient information to determine how much of the distribution is taxable. The non-taxable amount is the lesser of 1) the amount designated by the plan as a housing allowance or 2) the amount the minister can justify as a housing allowance. The instructions for 2a and 2b say what to do if the taxable amount can not be determined.

While we are waiting for the dust to settle, I'll add a new element to the discussion. We have all been assuming that the temporary workers under discussion are not common law employees of the recipient. While that may be the case, it is something that needs to be considered before you get to the leased employee rules. I wouldn't be surprised if a "test drive" of a potential employee included sufficient control to be considered a common law employee of the recipient. Being leased doesn't automatically mean you are not a common law employee.

It sounds like they need to get higher up the food chain at TIAA. Keeping the different matches separate is needed for more than just hardship distributions. What if they decide to add an in-service distribution provision down the road?

Cite is 1.411(d)-4 Q&A 2 (e).

While it's not your exact situation, I think FAB 2006-01 has helpful information in the section titled Plan Fiduciary -- Allocation among participants and beneficiaries. In the last paragraph of the section, it says that if the amount received is less than the cost of allocating and distributing to participants, the trustee can refuse to accept the payment. If that isn't the case, the section describes options for allocating the amounts to participants and allows some flexibility if amounts for some participants are de minimis. https://www.dol.gov/agencies/ebsa/employers-and-advisers/guidance/field-assistance-bulletins/2006-01 The plan exists as long as there are plan assets, so the PT rules still apply.

(4)(A) says it applies "In the case of any leased employee ..." (4)(B) says it applies "In the case of a person who is an employee of the recipient (whether by reason of this subsection or otherwise) ..." I think it is a really tortured reading of (4)(B) to say it only applies to leased employees. What's the worst case for a plan that requires a year of service for eligibility if the IRS decides we are wrong? In my case, service would be counted that could have been excluded. In your case, people would be improperly excluded from the plan and the plan would be treated as imposing a service requirement that exceeds 1 year of service under 1.410(a)-3(e)(1).

Larry, where does it say 414(n)(4)(B) only applies for leased employees? It specifically says it applies to someone who is an employee of the recipient (whether by reason of this subsection or otherwise). Note the "or otherwise". As for your example of working for the company before going to the temp agency, Notice 84-11, Q&A 8 includes the sentence "In addition, any period of service performed by the employee as a common law employee of the recipient is taken into account for purposes of determining whether the employee has performed services on a substantially full-time basis for a period of at least one year." So, the person in your example meets all the requirements for a leased employee and the "or otherwise" doesn't apply.

Leased Employee is defined in: I would consider a "test drive" of a potential employee from a temp agency to satisfy (a) and (c) of the definition. This person will never become a leased employee because of the 1 year requirement in (b). However, if this person becomes an employee, 414(n)(4)(B) quoted above says the service with the temp agency counts. If this person never becomes an employee or leased employee, the service doesn't count. As an aside, someone who satisfies (A), (B) and (C) above is treated as a leased employee of the recipient under 414(n) and would also get all of their service counted. Similar result, but not the situation here.

Retirement plan distributions to a minister can be designated as housing allowance. In the examples I've seen, the Church does a resolution that designates 100% of any distribution to a minister as housing allowance and it's up to the minister to justify the amount actually claimed as a housing allowance. If you google retired minister housing allowance, you will find lots of sites with information. From a Ministers Audit Techniques Guide on the IRS website: https://www.irs.gov/pub/irs-utl/ministers.pdf As for the RMD, the regulation cited in the OP says that determining if a distribution counts as an RMD is not affected by whether or not the amount is taxable.

The cite is The requirements listed in paragraph (3) include sections 410 and 411. Paragraph (2)(B) has the requirement of substantially full time service for at least a year. Slightly different wording on the IRS website in Publication 7003 which is used to help determine if a plan document meets the requirement of Section 414(n): https://www.irs.gov/pub/irs-pdf/p7003.pdf From page 3:

A complete discontinuance of contributions is not a partial plan termination or a plan termination. The language is essentially the same in 411(d)(3) and 1.411(d)-2(a). Both places list three separate situations where 100% vesting is required. 100% vesting is required upon a 1) plan termination, 2) partial plan termination, or 3) for a plan not subject to section 412, a complete discontinuance of contributions under the plan occurs.

The term you want to look for is discontinuance. It's defined in 1.411(d)-2(d). Here is a page on the IRS website dealing with it. https://www.irs.gov/retirement-plans/no-contributions-to-your-profit-sharing-401-k-plan-for-a-while-complete-discontinuance-of-contributions-and-what-you-need-to-know In most cases, if there hasn't been a contribution to the PS plan in 3 of the last 5 years, the IRS is going to say there has been a discontinuance, although a lack profits may affect the determination (Rev. Ruling 80-146). The timing of the discontinuance ends up being retroactive and is described in 1.411(d)-2(d)(2): So, if the plan year and employer's tax year are both calendar years and the last contribution made was for 2013, the discontinuance would occur at 12/31/14. GCM 39310 says that partially vested participants who terminate and receive a distribution of their vested balances need not be further vested if the plan terminates before they incur a break in service. Basically, everyone with a balance at 12/31/14 becomes fully vested. Since you didn't know that at the time because all of the conditions for a discontinuance hadn't happened until the due date for the 2016 contribution, there were probably some partially vested people paid based on the wrong vesting. That needs to be corrected using EPCRS. If the forfeitures are substantial, the reallocation correction method may be helpful.

Notice 2016-16 allows a wider variety of mid-year amendments than the very brief description above implies. III. B also has a list of prohibited mid-year amendments. I think the IRS approach of it's allowed unless prohibited is a lot more practical than providing a list of allowed amendments as some asked them to do. For amendments that change the required safe harbor notice content, it also makes sense to provide an updated notice and the opportunity for a revised deferral election. Changes to the "required safe harbor notice content" is described in III.A by Of course, you'll want to read the entire Notice ...

Luke, I don't think we are ever going to agree on this one.

The same code and reg sections I've listed before. Under the 416 definition of "employee", H as beneficiary of W and H as participant are two different "employees". I don't see that T-24's use of the word "individual" changes that. You are still determining the accrued benefits separately for each "employee" because the top heavy determination compares the accrued benefits of the "key employees" with those of all "employees" included in the calculation [416(g)(1)(A)]. Let's change your example so that H is not a participant in the same plan. I think you would agree then, that H's benefit as beneficiary of W would no longer be counted in the top heavy calculation when you get to the determination year after the year in which W died. What do you see in the code or regs that tells you that for the top heavy determination, the death benefit moves to a different "employee" when the beneficiary is also participant in the same plan? Remember Larry's first comment on the issue? "The reg (1.416-1 T-32 ) clearly contemplates the transfer of assets that belonged to the benefit of the one making the transfer or on whose behalf the transfer is made. In this case, that person is dead; the spouse does not step into those shoes. Any other reading is tortured."

This starts with the definition of "employee" and "key employee" in 416, which says "The terms "employee" and "key employee" include their beneficiaries." Your last post starts off close. T-12 says that after the relevant period has elapsed, the "employee" who was key (in this case, W and her beneficiary) becomes former key. H is a different "employee". You are saying the death benefit now belongs to "employee" H and gets treated for top-heavy purposes based on H's status as a key employee. The last sentence of T-12, example 2 says that does not happen. Treating the death benefit as a related rollover for "employee" H also means that it is no longer being treated as a distribution per T-30 and T-32. That is contrary to T-31which says death benefits from a DC plan are treated as distributions (with no exceptions listed). This exercise hasn't been entirely academic for me. I have a client with the same situation.

I said it was going to seem strange at first. It took me a couple of days of going over it before it made sense. Remember, you asked for clarification. 416(I)(5) says that the terms "employee" and "key employee" include their beneficiaries. At death, the deceased participant's benefit now belongs to the beneficiary. Under this definition of "employee", the death benefit still belongs to the same "employee". That's why I referred to it as the "employee" made up of the deceased participant and the beneficiary. Another way to describe it is that the death benefit is always treated as belonging to the deceased participant. T-12 Example 2 tells how the death benefit is treated through the period that the distribution to the "employee" is added back in. It also tells how it is treated for later years by saying that the "employee" is a former key for 1992 and for subsequent years. In most cases with this example, the former key status of the deceased participant would be completely irrelevant because for 1992 and later years, there would be no balance in the plan and no distribution that gets added back in. The only way the comment about 1992 and later years has any effect is if the death benefit was rolled into the same plan (or another plan of the same employer) by the beneficiary. It says that for 1992 and later years, this benefit belongs to a former key (so it is excluded from the test). With your interpretation, once the amount has been rolled over to the beneficiary in the same plan, you are treating it as part of his account balance. That makes it treated based on the key/non-key status of the beneficiary. T-12 Example 2 says that doesn't happen. I'll add another piece from the regs. T-31 says "The distribution from a defined contribution plan (including the cash value of life insurance policies) of a participant's account balance on account of death will be treated as a distribution for purposes of section 416(g)(3)." Treating it as a related rollover under T-32 means you are treating it as not being a distribution. To me, all of this is saying that in the OP's case, the death benefit is excluded from the 2016 and later top heavy calculations and the fact that it was rolled over to the same plan doesn't change that.