Kevin C

I disagree. The definition is pretty clear about which IRS groups' activities are included in "under examination" and what activities constitute being "under examination" What you have described is not included in the definition. But, the current audit could lead to them being "under examination". Look at it from the other direction. Suppose you wait and the tax group finds something of interest dealing with the plan and decides to refer the case to Employee Plans. When they are told they will be referred to EP, they are "under examination" and anything significant the IRS finds gets fixed under Audit Cap. Do you think an EP audit won't notice that the plan wasn't amended for EGTRRA?

The two EPCRS Rev. Procs. cited cover a lot of different situations. The "pre-approved" correction method under EPCRS can vary significantly depending on the specific facts of the situation. For example, the correction for a 2 month exclusion is significantly different than the correction for a 2 year exclusion. I'll also point out that you are not required to use one of the correction methods from the Rev. Procs. Depending on the situation, other correction methods may be appropriate, but would need to be justified if the government looks at the plan.

With a VCP filing, the IRS only looks at the items submitted. They do not look for and do not ask about other items. The compliance letter (Form 14568, Section VII) says: "This compliance statement considers only the acceptability of the correction method(s) and the revision(s) of administrative procedures described in the submission and does not express an opinion as to the accuracy or acceptability of any calculations or other materials submitted with the submission. The reliance provided by this compliance statement is limited to the specific failures and years specified and does not provide reliance for any other failure or year. " So, you should not interpret the IRS not asking about something not in the filing to mean that it is ok. The current non-amender schedule (Form 14568-B, Section IV) tells you to enclose the corrective amendments, the document in effect prior to the failure and the most recent determination letter (if applicable)

The EPCRS provisions on overpayments were modified by Rev. Proc. 2015-27. Here is a page with a description and a link to the new Rev. Proc. http://www.irs.gov/Retirement-Plans/New-Rev-Proc-Updates-EPCRS

I can't help with the scrivener's error, either. But, before you go that route, I would look to see how likely the compensation definition is to pass 414(s). Maybe you'll get lucky and it won't pass.

I don't see a clarifying amendment working in this situation. The SH Compensation definition is one of the plan provisions that satisfies a rule in 1.401(k)-3, so it can't be amended during the year. Even if it could, everyone has already earned the right to the 2015 SH match, so retroactively reducing it would violate 411(d)(6). The way I see it, your options are to make the change effective 1/1/2016 or to approach it as a scrivener's error.

I agree with you that it can't be done in a single plan. For cites, start with 1.403(b)-5(a)(1)(iii) which says the match must satisfy 401(m). Then, 1.401(m)-3© says the SHM must satisfy 1.401(k)-3©. That has the rule you are thinking about. It would also violate the match restrictions in 1.401(m)-3(d)(4) since some of the NHCEs eligible to defer would not receive the match. A side note, if the 3 divisions excluded from the match are separate 501©(3) entities or are geographically distinct units that qualify for the special rules for universal availability in 1.403(b)-5(b)(3), they could have been excluded from deferrals or excluded from the plan entirely. I think they are sunk for 2015, but IF they qualify for this exception, they may want to look at two separate plans for 2016, one covering the three divisions they want to get the match and the other to cover the three divisions they want to only be eligible to defer. Coverage for the match could be an issue, but they have to worry about that now.

You referred to the amendment in the past tense, so I assume it has already been adopted. The wording of the amendment will determine if the person is still an active participant as of 1/1/2015. Participation is not a protected benefit but the conditions for receiving a contribution are protected after those conditions have been met 1.411(d)-3 Q&A 1(d). So, unless the plan has a last day requirement, you may have a problem using another amendment to prevent him from getting a 2015 contribution. If I read your situation correctly, the amendment, instead of increasing allocations for current NHCE participants, makes a short service ineligible employee a participant who receives an allocation. Does anyone know if the IRS would consider this similar enough to the situation in their short service memo to be a concern?

The rules that allow a beneficiary to roll over a distribution are different depending on whether you are the surviving spouse or not. A surviving spouse has more options. The IRS model tax notice has a pretty good description of the choices available for each.

1.416-1, T6 describes the required aggregation group. T-6 Q. What is a required aggregate group? I don't see any clarification of what it means to participate, but I would expect it to include being a participant with a balance. So, for answers to your questions, I'd say 1 is yes and 2 is yes. 3 is maybe because you haven't mentioned 410(b) and 401(a)(4) testing. If for the year starting after the transfer, Plan 1 isn't needed to show that the other plans pass 410(b) and 401(a)(4), then I think 3 would be yes. If Plan 1 is needed for testing the other plans, or if the transfer occurs during that year, then 3 would be no. I think a similar situation to your question 4 was addressed in informal guidance at one of the ASPPA annual conferences. It will take some digging to find it, unless someone else remembers when it was discussed.

The definitions of "related rollover" and "unrelated rollover" are in Based on your description, the rollovers in question are both initiated by the employees and rolled to the plan of another employer, which would make them unrelated rollovers.

Ouch! I hope they have a large balance in their corporate checking account. I don't know of any way to fix it other than amending Plan 1 to retroactively make enough excluded employees participate that you will pass coverage. I would expect the retroactive missed deferrals and match to get expensive. Does Plan 1 allow the use of average benefit testing? This sounds very similar to a plan we picked up for 2014 that was previously done by a firm in NM. If you change your situation to a single company, eliminate plan 2 and make the company about 1/3 that size, you get our client's former situation. After two years of asking the former TPA are you sure we can do this? and being told yes, they were told they had two years that needed expensive corrections.

Unless at least half of the NHCEs are receiving a 50% of pay QNEC, you won't be able to use all of a 100% of pay QNEC in the ADP test. The disproportionate QNEC rules for ADP testing are in 1.401(k)-2(a)(6)(iv) and ACP testing in 1.401(m)-2(a)(6)(v).

Is this current 100% vested set match perhaps a Safe Harbor Match? If not, most if not all pre-approved documents allow a discretionary match in addition to a fixed match. While you can change the vesting schedule for a contribution source if you follow the rules, I agree with Austin that two different vesting schedules for different pieces of the same source seems over the line. It certainly isn't an option in our VS documents, so the answer for our clients would be no.

We don't have enough information to be able to tell if it applies, but there an exception under EPCRS (as recently updated) for brief periods of exclusion. If the exclusion of the person who elected 10% fits the criteria for it, they won't have to make a QNEC deposit to correct the missed deferrals. The 10% person does need to get the match he/she would have received if the deferrals had been done correctly. With the regulations prohibition on pre-funding deferrals and match, the best course of action for the 0% person is probably to refund the erroneous deferrals and income.

Yes, although being nit-picky, after FICA, the max deferral would be $9,235.

My point was that if someone has compensation for the full year sufficient to defer the $18,000/$24,000, but doesn't have sufficient comp for the 24 pay periods to do so, you violate the following sentence in the cite: I don't see anything that gets you around this by telling them up front about the restriction.

Also, since this is a 403(b), you might have issues with universal availability if losing the ability to defer from those two pay periods means that someone doesn't have the effective opportunity to defer the max. See 1.403(b)-5(b)(2).

The timing of the SH forfeiture issue change will depend on the document language. Our PPA VS document says: As for adopting by 4/30/2016, but making it effective after 4/30/2016, I think that would take you out of the 6 year pre-approved document restatement cycle for the upcoming cycle. To qualify as a "prior adopter" for the next cycle, your pre-approved document must be both adopted and effective by 4/30/2016. From Rev. Proc. 2007-44, Section 17.02: If you have a pre-approved document, but don't meet the requirements to be a "prior adopter" for the following cycle, I don't see any way for you to qualify for the next 6 year restatement cycle under Section 17.

I don’t think Relius has access to any information that the rest of us don’t have. The premise of their statements and those of others with the same viewpoint has been that the IRS has been consistently saying this publicly for years. One Relius article says the IRS position goes back to 1999. As I’ve mentioned several times, I can’t find anyone who can point to a single time the IRS actually said this publicly. If this comes from informal discussions with the IRS, why not say so? What I think we are seeing is them trying to “read between the lines” to interpret what we have all been hearing the IRS say. As recently as December 2013, this Relius article said "The IRS, on the other hand, seemingly has interpreted this as preventing any mid-year changes to the plan unless the IRS granted an exception." That doesn’t sound like anyone from the IRS told them about the IRS’ position. The quote is from the end of the second paragraph. The reference to 1999 starts the article. http://www.relius.net/News/TechnicalUpdates.aspx?ID=1004 So, on one hand, we have a sixteen-year-old supposed IRS position that even according to Relius is not being enforced. On the other hand we have clearly written published guidance, informal guidance at conferences and some important pieces of written guidance where this supposed IRS position should have been addressed, but was not. Like so many things in this business, you have to decide which interpretation you think is correct. If you want to follow the interpretation Relius and some others, that’s your choice. But, if you want to say that following the published guidance is wrong, I’ll keep banging my head on the wall.

Salary deferrals can not be distributed while employed prior to age 59.5 except for hardships. As pointed out, it is unlikely your other accounts would be eligible for in-service at your age. As for investment returns, the last two years have been pretty unimpressive across the board. You don't say what percentage of your balance you have in bonds. At age 30, you may want to review that decision. You hopefully have a loooooong time before retirement. Thanks to the "cowardly reaction to section 404©", you have the option of selecting the investment mix that is appropriate for you instead of being stuck with an investment mix that the Trustees think is appropriate for the plan as a whole. QDRO is referring to your plan allowing self-directed investments. You mentioned Vanguard. Their website would be a good place to check returns on mutual funds to see what a portfolio with the same stock/bond mix might have returned with them for the same time period. If you don't like what you see, it's time to review the available investment options to see if there is a mix that is more appropriate for you. Your plan may have an investment advisor available to assist participants. Good luck.

If you are talking about the age weighted formula plus the 3% SH, I think it would work as long as both formulas are available on the same basis. Under 1.401(a)(4)-2(b)(4)(vi) the sum of two formulas that would each separately be a 401(a)(4) SH allocation formula is considered SH. For the gateway, the age weighted + 3% total would have the same difference between adjoining ages as the age weighted formula by itself. You'd have to check, but I would expect it to meet the requirements for a Gradual Age or Service Schedule under 1.401(a)(4)-8(b)(1)(iv) and be exempt from the gateway. Our document allows you to offset the PS allocation, so you could set it up to give participants a total allocation of the greater of the age weighted amount or the 3% SH. That would mess up your 401(a)(4) SH allocation formula, but could still qualify as a Gradual Age or Service Schedule for the gateway exception. I'd suggest that you verify that it does. If the kids don't receive the 3% SH, I would expect it to pass 401(a)(4) testing. I think the PS would still need to go to everyone who receives the 3% SH for it to work.

Belgarath, the regs are not an easy read, but they are very clear about which mid-year amendments are prohibited. With every other issue in our field the industry approach is that something is allowed unless it is prohibited. For some reason, some people want the opposite here. Yes, the IRS has not publicly stated that amending for example, the profit sharing contribution mid-year is allowed, but they also have not said it is prohibited. I'll take Bird's statement even farther. I think the IRS would be crazy to provide a list of approved amendments. For every amendment you can think of that should be added to the list, I bet we can come up with a particular set of circumstances where that amendment should logically be prohibited. Trying to compile a list that wouldn't come back to bite them in the ___ would be impossible. Bird, I think you are mis-reading the regulations. If you look at the cite you quoted above, the mid-year amendment prohibition applies to "provisions that satisfy the rules of this section", meaning 1.401(k)-3. The same wording is in 1.401(m)-3(f)(1) referring to the rules in 1.401(m)-3. The safe harbor regulations section dealing with the SH notice, 1.401(k)-3(d), tells you which plan provisions must be described in the notice, but it doesn't have any rules that those plan provisions must satisfy. There is a thread here somewhere where this was discussed at length. I think the first time I heard anyone suggest that anything mentioned in the SH notice be the standard for which mid-year amendments are prohibited was Craig Hoffman at the 2010 annual conference when he tried unsuccessfully to convince the IRS representative that it should be the standard. I see it as an unworkable standard. Consider two identical plans. Plan A provides a bare bones SH notice that just barely satisfies the notice requirements. Plan B provides a detailed SH notice that goes beyond the minimum requirements. Under this standard, Plan A can do amendments that Plan B can't. To me, that makes no sense and would encourage a race to the bottom for SH notice content. I don't want to think about how this standard would apply if your SH notice refers to the SPD. And, what happens if they "forget" to distribute a SH notice for the year? Do they get rewarded by being able to do amendments that plans who follow the rules can't? In case anyone is wondering, I've spent a lot of time on this issue over the years.

Actually, they have said it. I've heard several IRS speakers over several years say that they have published guidance on the issue and they had no plans to issue further guidance. I interpreted their comments as "Read the Fabulous Regulations". The IRS speaker at the 2011 annual conference said this:

Austin, you and I do agree much more on this issue than we disagree. I think our main point of disagreement is whether this was caused by the IRS or by certain ASPPA speakers. The Roth and Hardship guidance WAS stating the obvious. Anyone who read the regulations should not have been surprised. My guess is that they got tired of industry groups asking them silly questions and decided to publish something so they would stop asking. Obviously, that did not work. The only thing from the IRS that says a particular amendment that looks like it should be allowed by the Regs can not be made mid-year after a certain deadline is a blurb buried in the in-plan Roth conversion guidance. My guess is someone at the IRS got carried away and decided that since SH accounts could be converted to Roth that the amendment would be changing some provision that satisfies a rule in 1.401(k)-3 or 1.401(m)-3. I think the point you mention about determination letters was from our discussion that I linked to in post #3.