Kevin C

I would expect the proposed penalty for a late amendment discovered on audit to be at least a little more than the non-amender VCP filing fee would have been if the late amendment had been submitted without being discovered on audit. Depending on the circumstances, it could be significantly more than that.

No, your years of service match formula does not comply with the ACP safe harbor. See 1.401(m)-3(d)(4)

Are you sure about the last sentence above? Our VS document has the post 2013 in-plan conversion language in an interim amendment and the base document addendum portion says that distribution restrictions applying to the source(s) being converted continue to apply after the conversion. Also, it's not possible to allow in-service of converted deferral or safe harbor accounts prior to age 59.5 after the conversion. Could the in-service distribution provision you are referring to be the one for regular rollover accounts?

We've done it that way many times. You'll want the document to specify how it is done. Our VS document allows you to select either entry date comp or full year comp for the SH contribution. If you want the first year to be different, there is a special effective date section where you can do that.

Me too. Have done it. We've done final 5500s that way before, but not any more. The last two returns we did that way were selected by an IRS project looking at final 5500s. After dealing with IRS correspondence, we had to amend both returns. If you show year end assets and offsetting liabilities, taking the net assets to zero, you will probably get a letter from the IRS in a couple of years. I would file based on a final year ending 5/2/2016. As for a restatement being due because assets existed after 4/30/16, you should discuss that with your document provider or ERISA attorney. The EOB cites Notice 87-57 in a discussion about the remedial amendment period for a terminating plan ending when the plan terminates. You should also look at Announcement 88-8, which modifies Notice 87-57 to clarify what the termination date is. Announcement 88-8: That's a long way of saying the plan document requirements are based on the effective date of the plan termination, not when the final assets are distributed. I remember it being discussed in prior restatement cycles and have not heard that anything changed with this cycle.

Current plan document language will probably address whether you use the plan's entry date or the statutory semi-annual entry dates. Our PPA VS document says you use semi-annual entry dates. If you look at an older document, it likely won't address it. The IRS speaker's 2006 comment was basically that you had to use the plan's entry date, unless the plan language said you use something else. The ASPPA panelist's reply was that if we had known we needed to put that in our documents, it would be in there.

Peter, 1) I have sample designations that apply to all future payments, unless later rescinded. From what I've been able to find, that appears to be typical of designations from retirement plans. 2) Negotiating with the insurance company may be the stumbling point because of the relatively small size of the annuities. As for liability, that should all be on the individual minister unless there is a reason it isn't allowed for payments from the annuity. That leads back to my question. The designation sets an upper limit on the amount the minister can claim, but the minister has to be able to justify the amount actually claimed. Depending on the minister's actual expenses, the maximum amount that can be claimed could be less than the pension payment. Per Rev. Proc. 2007-3, 3.01(10), the IRS will not issue a ruling regarding whether amounts distributed to a retired minister from a pension or annuity plan should be excludable from the minister's gross income as a parsonage allowance under § 107. Are we having fun yet?

IRC 107, Rev. Ruling 75-22, Rev. Ruling 63-156 and 1.107-1. Also, from page 10 of the 2015 IRS Publication 517: There are a number of lawsuits by groups trying to get this tax break ruled unconstitutional, but we'll cross that bridge if we get to it. The immediate question is would payments from an annuity purchased by the plan be treated the same as payments from the plan?

A small non-electing Church DB has been frozen for several years. The plan will be terminated at some point, but that is still a few years off. They have a couple of ministers who will be retiring in a couple of years and are discussing designating the retired minister's monthly payments as housing allowance so they can claim it on their tax returns. That's not a problem while the plan continues, but what happens when the plan terminates? Does anyone know if monthly payments from an annuity purchased by the plan when the plan terminates would be treated the same as payments from the plan for purposes of the minister's housing allowance? I haven't been able to find anything that mentions this situation.

In this case, I'd call it helpful. This officially resolves the controversy caused by an IRS speaker's comments at the 2006 ASPPA annual conference DC Q&A session.

I think this is the more significant issue. How long have these trust assets have been unallocated? As for giving an additional contribution to select NHCEs, a new comp allocation with everyone in their own group makes that easy. But, if one requirement is that HR spends no time on this, who is going to keep track of who qualifies for the extra $?

But, it you take that approach, once the plan terminates, none of the 401(a)(9) regulations would apply and there would be no RMD regardless of what happens in the rest of the 2016 calendar year. I agree there is no clear guidance. I think a more reasonable approach is to consider the regs to apply through the end of the calendar year that includes the final distribution. Then, if someone who didn't have an RMD requirement before their distribution is paid retires during the calendar year, they are treated the same way they would be if the plan continued and part of their distribution becomes their RMD. In our case, after being told he could roll over the entire distribution, the participant decided to take part of his distribution directly and roll over the remainder. The amount to be received directly is sufficient to cover a 2016 RMD if one were to apply.

That web page looks a lot like a condensed version of the 2004 Carol Gold memo on the subject. https://www.irs.gov/pub/irs-tege/directive.pdf

What does the plan say? Our VS documents allow several choices for distribution ordering between pre-tax deferral and Roth accounts for distributions from deferral accounts. One of the options is to let the participant decide.

Years ago, I had a discussion with a client's CPA about deposit timing. He told me that under the accounting method used for their tax filing, they could only deduct contributions made before the return was filed.

The 401(a)(4) regs you reference were published in 1993. Safe Harbor plans were introduced by SBJPA 96 effective for years starting in 1999. Old regulations only stay in effect to the extent they are consistent with law changes. With Rev.Proc. 2013-12 using a different correction method for SH plans than the one first included in the -11(g) regs for 401(k)s, I take that as the IRS is saying the NHCE ADP based correction is not appropriate for SH plans. That's as close as I can get to a cite. Regardless, I still don't believe that you can say no corrective deposit is needed because no NHCEs were eligible. Otherwise, we could all do SH match plans that exclude all NHCEs, then do an -11(g) amendment each year to bring some NHCEs in for only that year, but not give them anything and have a SH plan where only the owner gets contributions.

Sorry, but I don't agree that your proposed solution fits -11(g). And, if you are not making NHCE's retroactively eligible to defer and receive the match, you are not correcting the 410(b) failure. The definition of benefiting for the 401(k) and 401(m) portions of the plan in 1.410(b)-3(a)(2)(i) has nothing to do with whether or not someone defers. It's about being eligible to defer or eligible to receive a match if you defer. The QNEC doesn't make someone benefit under the 401(k) or 401(m) portion of the plan. The QNEC is part of the correction of the retroactive operational failure created by retroactively making them eligible. The plan's SH status doesn't affect the -11(g) amendment. However, it does affect the correction for the operational failure your -11(g) amendment retroactively creates. -11(g)(1) and (3) both require that the corrective amendment be effective as if it had been in place on the first day of the plan year. You are wanting to count them as benefiting for 410(b) but not treat them as being eligible for deferrals or match. Stick a fork in me, I'm done.

When you amend to make them retroactively eligible to defer to correct the 410(b) failure, they retroactively become improperly excluded because they were not allowed to defer. You were already looking at it that way or you would not have asked about a QNEC based on the NHCE ADP. But, as I said, you are looking at the wrong correction method, there is one specifically for SH match plans. If you want certainty, you can either use one of the EPCRS pre-approved correction methods, or file under VCP.

EPCRS has a correction method for safe harbor match plans that improperly exclude people. With a retroactive amendment to add NHCEs, they end up needing a deferral correction. The missed deferrals in this situation are based on the SH match formula, not what the other NHCEs do. I don't think claiming the missed deferrals were 0% will work.

You should also contact ASPPA GAC about this. Was this a 2015 filing? We had a client amend their 401(k) plan into a KSOP at 1/1/14 and change the plan name. So far, there have not been any issues with their 2014 filing.

The way I read the regs, it is a related rollover since it was rolled into a plan of the same employer.

12/31/2015 per 1.72(p)-1, Q&A 10. Or, not at all if they do a VCP filing to correct it and request that the loan not be taxable.

a 401(k) Plan is terminating at the end of this month. One non-owner employee is beyond age 70.5 but still employed. Assuming he remains employed at least until 1/1/2017, does the plan termination trigger a 2016 RMD? I'm not finding anything that says it does and I realize that a 2016 RMD would be triggered if he retires in 2016.

The applicable term for determining if a plan termination is a distributable event for a 401(k) plan is "alternative defined contribution plan". "Successor plan" deals with other rules.

First of all, I agree with Mike that you have a 410(a) problem. I'm also thinking that with the amount of the allocation being determined by whether or not service is performed beyond a certain date in the following plan year, those contributions are probably annual additions for the following plan year under 1.415©-1(b)(6)(i)(A). It's not as clear as your earlier question in another thread about requiring employment on a date after the end of the plan year to receive an allocation, but I think it's similar enough that it probably applies.