Kevin C

We terminated a small DB plan last year. An annuity was purchased covering 4 retired participants for a total of $152,000. The oldest retiree was born in 1927. We received quotes from Met Life, United of Omaha and Principal. We used an annuity search firm to get the quotes. The only problem we've had getting quotes was one plan with a participant who elected a deferred annuity. A couple of the companies refused to give a quote because of the deferred annuity.

You'll need to give more information before anyone can help. Who did the IRA buy the stock from? Is the C Corp publicly traded? How was the purchase price determined? Other questions may come up, but that should be enough to get a discussion started.

It's not just you and Dave is working on it.

A blackout seems unlikely, but if there is one, the usual 30 day advanced notice requirement would apply. The ESOP freeze likely affects information in the SPD, so an SMM or a new SPD may need to be sent to participants no later than 210 days after the close of the plan year of the change. I can't think of anything else that might require a notice. Of course, they may have other reasons for wanting to notify participants about what is going to happen.

With no money purchase component, why do you think ERISA 204(h) applies?

Does the ESOP have a money purchase component? If it does: Large Plan or Small Plan? Multiemployer plan? Is the amendment in connection with an acquisition or disposition?

Any chance the special rules in 1.403(b)-5(b)(3) might help?. The universal availability rules can be applied separately if more than one 501©(3) entity is included in the plan. You can also apply it separately to geographically distinct units. I don't see anything in 403(b)(12)(A) or 1.403(b)-5 that lets you treat collectively bargained employees differently for the < 20 hour per week exclusion. Your two plan idea should work if the union plan is a 401(k). The regs say that if any employee who could be excluded under the <20 hours exclusion has the right to make 403(b) deferrals, then no employees can be excluded under the <20 hours exclusion. If the union plan is a 401(k), then none of the <20 hours union employees would be eligible to make 403(b) deferrals. If the union plan is a 403(b), I read it as saying you can't exclude those <20 hours in the non-union plan. It would probably be easier to just let everyone participate.

The hardship distribution can be corrected with an amendment using SCP under Rev. Proc. 2013-12, section 4.05(2), which refers you to section 2.07 of Appendix B. If you are going to correct the overpayment under SCP, it can't be done with an amendment. To change the vesting schedule, you would need a VCP filing.

I was surprised to see it, too. But, it is in both the EGTRRA and PPA documents. It's not hidden either. There is a note in the adoption agreement under that option that describes in great detail how the provision works.

It depends on what the document says. There are two different ways the conditional 3% SH can be done. If the document requires an amendment to implement the 3% SH under a conditional notice, then no amendment means no SH contribution. If the plan is worded like one of the options in our VS document where the 3% SH is made only as authorized under a supplemental notice, delivery, or not, of the notice determines whether the plan is 3% SH. If your document language is like the latter, it should have something like this: If it doesn't have similar language saying the notice controls whether or not the 3% SH is provided, then I think they would need to amend to be 3% SH.

What does the plan say? If it says the 3% SH contribution will be made, it's required for 2015. If it says the 3% SH contribution will only be made if the proper notices are provided, the 3% SH isn't required unless they send the notices. Our VS document has choices in the adoption agreement for both options.

Is the new language in the Your Rights to Additional Information section? Or, somewhere else? 2520.104b-10(d)(3) lists non-exempt transactions with parties-in-interest as one of the items to be listed in that section of the SAR if it is included in the annual report.

Tom, I agree with you about not "correcting" for 2015 unless it is really needed. As for prefunding, I don't agree. The rule is: I'll note that the employee contribution mentioned in the cite is after-tax contributions, not deferrals. I still don't understand where you are going with your thought about pre-funding. The corrective amendment makes affected employees participants retroactively, which means they are retroactively improperly excluded from participation. There will not be any actual deferrals deposited for them for the period from the retroactive entry date to the date of the amendment since they were not allowed to participate during that period and nothing was withheld from their paychecks. That improper exclusion needs to be corrected, which normally happens under EPCRS. The cite above does say the match can not be deposited before the deferral election has been made. There is a similar rule for deferrals. That may be why EPCRS calls the corrective deposit a QNEC. If EPCRS didn't have a way around the regs requirement that the deferral and match deposits don't precede the deferral election you would never be able to correct the improper exclusion of a participant from a 401(k) plan. Am I missing something?

Zorro, I don't think the ASPPA Q&A sessions are available freely on-line. Your best bet will be to find someone you know who attended the 2012 conference. Tom, I don't follow you. We were discussing retroactively adding people to a plan to pass 410(b). How would the pre-funding restriction on matching contributions apply to that?

The only reason I can think of for trying to have a restatement be effective 6/15 is to have a plan change be effective on that date. That can usually be accomplished with a special effective date for the relevant provision, so I would not have the entire restatement be effective 6/15. With the plan leaving them 7/1, I agree it makes no sense to sign the prior TPA's restatement. As mentioned, If the restatement has been completed, they may be obligated to pay for it, but that should't affect whether or not they sign it. However, if the prior TPA already received payment from the plan for the restatement, or if they are going to bill it to the plan before the funds leave, I think there would be an issue if the plan paid for an unneeded, never signed restatement. For me, the way to fix that would be for the employer to pay the prior TPA's restatement fee, even if it needs to do so by reimbursing the plan.

A couple of Q&A items from the 2012 ASPPA Annual Conference DC Q&A session are relevant to this discussion if it involves a SH plan. #39 - SH 401(k) fails 410(b). Question is does the -11(g) amendment to correct the 410(b) failure violate the mid-year amendment prohibition for the year the amendment is adopted? Answer is no and the IRS agreed. #37 - SH 401(k) that only covers salaried employees. Question is can they amend mid-year to make hourly employees eligible? IRS answer is yes, provided the amendment doesn't adversely affect those already eligible. I'll also point out that there are no rules in 1.401(k)-3 or 1.401(m)-3 that apply to plan eligibility requirements. The SH mid-year amendment prohibition applies to provisions that satisfy rules in those sections. So, even if it is a SH plan, you should be safe in making the amendment be effective for both 2014 and 2015. However, you may not want to have it effective for 2015 if the plan will pass 410(b) for 2015 without the amendment. Amending now to retroactively bring in previously excluded employees means that they become improperly excluded for that retroactive period. The correction for that is for the employer to make a corrective deposit. Why do a correction for 2015 unless you have to?

I think the answer is yes, the deferral deposits trigger the TH minimum. If the deferrals are considered excess deferrals, it's an easy answer. If you consider the deferrals as excess annual additions, I think you get the same answer since they would have to be allocated to the participant's account to be an annual addition under 1.415©-1(b) and you are counting contributions made for Key Employees under 1.416-1, M-7. Compensation for the Key is zero, so when you divide the contribution by zero, you get infinity, which is larger than 3%. Any other opinions?

414(a)(1) says that if an Employer maintains the plan of a predecessor employer, service with that predecessor employer is treated as service with the Employer. Several years ago, I asked one of the ERISA attorneys with our document provider if the corresponding plan provision applied when a plan was merged into the plan of an unrelated employer after an asset purchase and his answer was that yes, it applies and service under the plan that was merged in continues to count under the receiving plan. I tried looking for a cite, but it appears that the IRS has not clarified what is considered to be maintaining the plan of a predecessor employer for purposes of 414(a)(1). The term is defined for purposes of section 415 in 1.415(f)-1© as including maintaining balances of participants that were merged in from another plan. As mentioned, the terms of the plan will determine when the non-vested portion of your balance will forfeit. As a participant, you have the right to request a copy of all or any part of the document, although they can charge you a copying charge.

I can't remember if the last SS statement I received listed the employers for the earnings history. They offer an on-line statement. If it doesn't list employers, according to this, for a charge, they offer an itemized statement that includes the names and address of employers. http://www.socialsecurity.gov/forms/ssa-7050.pdf

Our VS document requires that for a new comp allocation, the Employer must designate in writing the amount of contribution for each allocation group. We prepare a contribution designation for them when the final contribution amounts are known and have them sign it. In our case, I would show her the signed contribution designation, the sections of the document that say everyone is in a separate allocation group and that the employer can set the contribution level separately for each allocation group and the 410(b) and 401(a)(4) testing showing the allocation passes. Does the plan in question specify how the contribution amount is designated? If it does, that provision may affect how you answer the agent's question. Unless you have a really poorly worded document, the employer can make the contribution for each allocation group be anything it wants it to be. Of course, they still have to pass the testing.

I would also add that there could be possible negative consequences other than monetary penalties if the incorrect information hides wrong-doing. Here is an extreme example. http://www.dol.gov/ebsa/newsroom/archives/pr113005.html

It doesn't work that way. Where do you see an ERISA requirement that someone must have an SSN to be an employee? If they meet the plan's eligibility requirements and the plan's requirements to receive contributions/benefits, they get what the plan says they get. I also wonder if Fidelity is sending a timely blackout notice to the affected individuals. I don't see an exception to the blackout rules saying that participants with SSN's that can't be verified who are restricted from taking loans and directing investments are not covered by the blackout rules. I can see an argument for delaying a distribution until it can be reported correctly, but how do you justify their other actions?

What kind of plan is it? Our VS document had grandfathered governmental plan provisions in the EGTRRA version and we have a separate approved VS document for them in the PPA version. I'm not sure how to cite this and I couldn't find it on the IRS website, but I found this in CCH Intelliconnect:

How much of a profit sharing contribution was he going to make? It may still be possible to have it be a 2014 allocation even if the 2014 return can't be extended. If it could be deducted in 2015 along with what he intends to do in 2015, it can still be allocated for 2014 as long as it is deposited within 30 days of the due date of the 2014 tax return including extensions. see 1.415©-1(b)(6)(i)(B).

I read it as applying to plans that provide for both deferrals and profit sharing contributions. I don't see it as being limited to plans that do not provide a match. I do think it would not apply if the plan only provided for deferrals and a match. Not that it affects the question, but the same language was in 2013-12, the only change was from a 2 1/2 month correction period to a 9 1/2 month correction period.