Kevin C

You haven't provided enough information to be able to determine if the final short year will be safe harbor. The rules for the final year are in: If the plan falls under (ii), it is safe harbor for the final year. If not, it will not be safe harbor for the final year because one of the requirements of paragraph (g) is that the plan satisfy the ADP test using the current year testing method. Is there going to be an asset or stock sale when the business is terminated?

The requirement for participant consent for distributions if the vested balance is over $5,000 is also in ERISA 203(e). The IRS cashout regs under section 411 apply to the corresponding ERISA provisions under the Reorganization Plan No. 4 of 1978. https://www.dol.gov/agencies/ebsa/laws-and-regulations/laws/executive-orders/4 Your document should also have a provision saying that the Plan Administrator has a duty to follow the plan document to the extent it is consistent with ERISA. If the plan document says to involuntarily distribute someone that the regs say must provide consent, then you follow the regs, not the document. Otherwise, you have a qualification issue and an ERISA violation.

There are also laws against discrimination based on immigration status or national origin.

The regs address the timing of the determination in: There used to be a look-back rule that determined the vested balance at the time of any prior distribution, but that was eliminated a long time ago. The preamble for the revised regs that eliminated the look-back rule has a discussion of it. https://www.federalregister.gov/documents/2000/07/19/00-18119/increase-in-cash-out-limit-under-sections-411a7-411a11-and-417e1-for-qualified-retirement-plans

Does the document address it? Our VS document includes multiple employer plan language, but it doesn't address this. I don't see anything in our reference materials on it either. I'll give it a try. The reason you have a separate ADP/ACP test for unrelated employers in the MEP is the definition of "plan" in the 401(k) regs that incorporates the mandatory disaggregation and permissive aggregation rules of 1.410(b)-7. [see 1.401(k)-4(b)(4)] . Looking at the catch-up regs, you'll see the term "applicable employer plan" throughout. It's defined in 1.414(v)-1(g)(1). In particular, the catch-up limit applies to an "applicable employer plan". I don't see anything in the catch-up regulations that incorporates 1.410(b)-7, so it appears to me that the term "applicable employer plan" is referring to the MEP plan as a whole. That would mean a single $6,500 catch-up limit for the entire MEP. If the participant were in two separate plans of unrelated employers, it's clear that the catch-up determination in one plan doesn't affect the catch-up determination in the other unrelated plan. It's a different result because there would be two unrelated applicable employer plans, not a single plan.

Salary deferrals can only be made from Section 415(c) compensation. See 1.401(k)-1(e)(8). For the self-employed, 415(c) compensation is earned income. See 1.415(c)-2(b) (2). If the client doesn't have any earned income, there can't be any deferrals.

The renewal period is April 1 - June 30. https://www.irs.gov/tax-professionals/maintain-your-enrolled-retirement-plan-agent-status As noted, the renewal is effective October 1. I haven't received a renewal card yet. But, I didn't get one for any of my other renewals.

ASC documents use the state in which the Trustee has its principal place of business, but allows the Trustee and Employer to agree to a different state law with respect to the construction, administration and enforcement of the Plan.

Section 415 can also trigger catch-ups. SEP contributions are treated as contributions to a defined contribution plan under Section 415. See 1.415(c)-1(a)(2)(ii)(A).

Update: ASPPA has contacted the IRS about this and they are looking into it. This was my fourth renewal and the first time I've received anything from the IRS about a renewal.

If you receive an e-mail from the IRS saying your renewal is late and asking for documentation of your CE credits, the IRS probably lost one of your prior renewal applications. I filed my renewal timely on 5/6/21 and received the e-mail on 5/17/21. It said my renewal was late (but didn't say which one) and requested documentation for my 2018-2020 CE credits showing the IRS program numbers. The expanded listing from your PTIN account works, but not all of my credits are listed there. A co-worker received a similar e-mail the same day from a different person at the IRS saying her 2018 renewal was late. She sent a copy of the receipt of her 2018 renewal and that took care of the problem. The IRS person told her half of the ERPA renewals didn't go through. I sent a copy of my 2018 receipt and received a response that their records indicated I didn't renew in 2015 (I did), but they have my CE credits now and I'm good through 9/30/2024. So, if you get one of these e-mails, find your receipt from the prior renewal and send that first. You may not have to send documentation of your CE credits. In my case that would have been interesting because ASPPA and NTSA didn't report my CE credits to my PTIN account and they don't send certificates with the IRS program number. I contacted ASPPA and they are working on getting documentation for me.

Thanks, I fixed the cite above. The regs for reducing or suspending the SH are an exception to the mid-year amendment rules. You lose the SH, but don't disqualify the plan.

We have a few clients that will become large plans if they make everyone immediately eligible. Fees based on the participant count could be another concern.

1.401(k)-3(g)(1)(ii) has the rules for a mid-year amendment that reduces safe nonelective safe harbor contributions. I read it as applying in your situation. Note that it isn't limited to just formula changes. The only way they will be able to stay safe harbor is if the amendment only applies to HCEs (Notice 2020-52). They could also be SH if they do a later amendment to retroactively reinstate the SHNEC under Notice 2020-86 Q&A 8, but that probably defeats the purpose of the amendment. Cite typo corrected

Section 415 issues may start earlier than 12/31/20. 1.415(c)-1(b)(6)(i)(B) requires employer contributions to be deposited no later than 30 days following the deduction deadline if they are going to count as annual additions for the limitation year. EPCRS has an exception to this for corrective allocations, but there would be some lost income included with the correction.

Yes and yes. The catch-up limit is applied using the participant's taxable year. 1.414(v)-1(c)(1). The date the deferrals become catch-up is determined using the timing rules in 1.414(v)-1(c)(3). The timing tells you which plan year includes the catch-ups, which don't count towards the 415 limit.

1.402(c)-2 q&a 1(b)(1). The plan is required to provide the option to elect a rollover. How do you do that if you don't send out distribution forms?

To be more precise, the safe harbor regs refer to a transaction described in Section 410(b)(6)(C). That's not the same as a transaction that qualifies for the transition rule in 410(b)(6)(C). The transactions described, disposition or acquisition, are defined in 1.410(b)-2(f) to include stock purchases. I don't see anything in the safe harbor regs that requires a change in the controlled group to have a short final safe harbor plan year.

You'll also want to look at 1.401(k)-1(e)(8) which requires that deferrals can only be made from 415(c) compensation. 1.415(c)-2 has the comp definition. 1.415(c)-2(e)(3)(iv) says severance pay is not 415(c) comp.

The cite for 30 day notice not being required in your situation is 1.401(k)-3(e)(4). Note the or between (i) and (ii). Having a 410(b)(6)(C) transaction like you do puts you under (ii). The 30 day notice is only required if you fall under (i).

By "serious problems", do you mean the DB/DC combination fails 401(a)(4) testing for 2018 without the contribution? If so, there is still time to correct the failure under SCP. As mentioned, a corrective allocation is treated as an annual addition for the year being corrected. But, the deduction rules still apply based on the timing of the deposit.

With the current rules, I don't see that working. What you describe is effectively the same situation as adding an ADP safe harbor to an existing profit sharing plan. 1.401(k)-3(e)(2) says: That's more clear than the 3 month plan year requirement.

Does the plan document require the SHNEC to be deposited each pay date? (I'll be surprised if it does.) We've had a couple of clients in a similar situation change the timing of deposits for the remaining SHNEC to give them extra time to fund it. It's an employer contribution, so they should be able to delay SHNEC deposits up to the due date for the employer's tax return, including extensions. If things continue to go south for the rest of the year, they will probably want to amend by the end of the year to remove the SHNEC effective for 2021.

The SECURE Act changed the timing requirements for retroactive adoption of the safe harbor non-elective provisions. I don't see anything in it that changed the rules for the initial plan year. So, I think the initial plan year must be at least 3 months long, unless it is a newly established employer that qualifies for a shorter initial plan year under 1.401(k)-3(e)(2). Note that the definition of "employer" used includes members of controlled groups and affiliated service groups.

ASC sent out an e-mail today that lists their projected release timing for the ESOP/KSOP document as November. From the list they provided, it looks like ESOP/KSOP will be the last one of their documents available. It also says some of their Cycle 3 401(k) documents are available now.