Kevin C

I think it is interesting that a Senator thinks people would be better off under a plan that isn't subject to the rules and participant protections that he and his cohorts have required the rest of us to comply with. As much as I dislike some of those rules, I understand that they were implemented to prevent real and perceived abuses by plan sponsors. Those rules also increase the cost of operating a DC plan. I also wonder what protections participants have under the federal thrift plan. One of my aunts worked for a large local city in the late 80's and contributed to their DC plan. When she left, they sent her a letter saying that if she did not take a complete distribution within 2 years, her entire balance, including her deferrals, would be forfeited. At the time, I asked an ERISA attorney I knew about it and he said a governmental plan could do that.

With it being deposited in 2013, not being salary deferrals and not being a receivable for 2012, it's an employer contribution for 2013. There is a prefunding prohibition for matching contributions, too, so you'll have to look at the deposit timing to see if it can be used towards the 2013 match, if they made one. If the timing doesn't work out so that you can consider it part of the 2013 match, it would end up being a 2013 profit sharing contribution.

In most cases, the prohibition on prefunding deferrals in 1.401(k)-1(a)(iii) will prevent you from holding the duplicate deposit to use towards the next payroll. I agree it's a silly rule, but it is in the regulations. This is one of the situations that makes you miss the pre-2006 rules. Unfortunately, you are beyond the one year period that the January 2013 extra deposit can be returned to the employer as a mistake of fact (if the plan allows it), so that isn't an option.

With a match intended to satisfy the ACP safe harbor rules being under discussion, I'll point out that the ACP safe harbor regs say you are not allowed to amend mid-year to change the match formula, which is one of the provisions that satisfies the rules of 1.401(m)-3. I read the OP as saying the amendment has not been done. Hopefully, that is the case. I also agree that adding a last day requirement for the match true-up violates the ACP safe harbor rules.

The plan design you are asking about is mentioned in the safe harbor regs.

Is it addressed in the plan document? Our VS document has the following in a paragraph titled Identification of Beneficiaries: "If a distribution is to be made to a minor or incompetent Beneficiary, payments may be made to the person’s legal guardian, conservator recognized under state law, or custodian in accordance with the Uniform Gifts to Minors Act or similar law as permitted under the laws of the state where the Beneficiary resides."

I don't know how it is in other states, but in Texas, you can't unintentionally become common law married. Once "proved", a common law marriage is as valid as any other marriage. The following is from a state web site:

1.401(a)(4)-5(a) has the rules for determining if the timing of an amendment is discriminatory. Establishment of a new plan is considered an amendment under these rules. It's a facts and circumstances determination. If the plan in question is set up so that only HCE's enter early and the NHCE's have to wait, I think you have a problem.

First, a nit-picky correction. The 2013 deferrals after 2/28/13 become catch-up when his year to date 2013 deferrals reach 19,250, not at 12/31/13. At that point, he has deferred 17,500 plus 1750 of catch-up (from 2/28/13). His remaining deferrals for the 2013 calendar year are catch-up. As you note, $1750 of his deferrals are reclassified as catch-up at 2/28/13 and do not count towards the 17,500 limit for 2013. $23,000 evenly for the year is $1,916.67 per month. You didn't specify how often he is paid and I'm assuming monthly so I can work through some numbers. The $3,833.32 he defers from 1/1/13-2/28/13 ends up being $1,750 of catch-up and $2083.32 of regular deferrals. The next $15,416.68 (17,500 - 2083.32) he defers starting 3/1/13 is regular deferrals. The last $3,750 he defers for 2013 is reclassified as catch-up due to the 402(g) limit. So, for 3/1-12/31/13 he has $15,416.68 of regular deferrals and $3,750 of catch-up. He defers $4,500 from 1/1/14-2/28/14, which is regular deferrals for the ADP test. That makes $19,916.68 (15,416.68 + 4500) counted in the 2/28/14 ADP test. If your numbers are different, it will be his 3/1/13-12/31/13 deferrals - 3750 + 4500 counted in the 2/28/14 ADP test. When you get to the refund for the 2/28/14 ADP test, the regs say the refund is reclassified as catch-up up to the extent of his unused 2014 plan catch-up limit. At 2/28/14 prior to the ADP test, he hasn't used any of his catch-up limit. The fiscal year examples in the regs all have the participant deferring more in the calendar year of the PYE (in your case 1/1-2/28) than the ADP triggered catch-up, but I don't see anything that says the reclassification of the refund works any different if they don't. If you go by the letter of the regs, the first $5,500 of his refund is reclassified as catch-up and he has used up his plan catch-up limit for 2014. So, everything he defers from 3/1/14-12/31/14 counts in the 2/28/15 ADP test. The last question is can he still defer $23,000 for 2014? I think he can because his individual catch-up is determined without regard to the plan determined catch-up. Others may disagree.

Congratulations and many thanks Dave. The same goes for the moderators and users who help keep this site great.

I would also suggest contacting ASPPA's Gvt Affairs Committee about it. They have been working with the IRS on it, but the issues seem to keep evolving.

http://benefitslink.com/boards/index.php?/topic/55361-missed-the-120-day-window/ Here is a recent discussion.

We've only done a couple of VCP submissions for loan issues. Neither one had any problems getting approved. They did check to make sure payments started on the new amortization schedule, but approval came shortly thereafter. One of those filings included two loans for owners.

Another useful quote from the FAB:

I think you have it right that someone doesn't want to lose face by changing their stance. But, I'm not convinced that "someone" works for the IRS.

1.415(c )-2(g)(4) has special rules for allocations to totally and permanently disabled DC participants.

It's a judgement call that needs to be made by the appropriate plan fiduciary. DOL FAB 2003-3 may help. http://www.dol.gov/ebsa/regs/fab_2003-3.html One issue we struggled with was what to do about participants who either have no balance or have a balance less than the per capita fee. The per participant portion of our administration fee counts all participants, regardless of balance. If the per participant fee is $X, is it reasonable to charge those with balances $X + $Y, so the plan will pay the entire per participant portion of the fee? The conclusion we reached was that it would not be reasonable to charge a participant more than what we charge per participant when other participants did not have a balance available to pay their fees. For our clients that have us allocate the per participant portion of our fee per capita to each participant, the client is billed the amount that can not be paid by participants' accounts. Since it is a judgement call, I'm sure other firms might do it differently.

It will depend on the company. You'll need to ask the document vendor. We use ASC documents. They sent an e-mail this week saying that the new documents will be available in their system May 1.

There is nothing wrong with a discretionary match. However, I can't imagine why anyone would announce a discretionary contribution level to participants before they were absolutely certain the contribution would be made. They may have an employee relations nightmare on their hands, but the terms of the document will determine what, if any, match the participants receive. I can also understand a plan sponsor that thinks he doesn't have to comply with the 408(b)(2) disclosure rules. Those rules deal with required disclosure by covered service providers. The plan sponsor receives those disclosures, he doesn't have to make them. Now, if you had asked him about 404a-5 disclosure and he said his participant directed plan doesn't need to comply, I would agree there is a problem.

That comment from an IRS official was during the 2006 ASPPA annual conference DC Q&A session. I don't think I will ever forget that exchange. I thought Craig Hoffman was going to have a stroke. He did make it very clear that if anyone at the IRS had ever told us that kind of document language was needed, our documents would have included it. That was after the 1/31/2006 submission deadline for the EGTRRA DC pre-approved documents. Apparently, it was addressed in the review process with at least some of the document sponsors. Our EGTRRA VS document specifies that the maximum entry dates permitted under Code §410(a)(4) are used to determine otherwise excludables. The PPA LRMs might give you some guidance on whether the IRS considers that type of language required.

This looks like it addresses your situation. Q16: May an administrator of an apprenticeship and training plan, as described in 29 CFR § 2520.104-22, or an administrator of a top hat plan, as described in 29 CFR § 2520.104-23, participate in the DFVCP?Yes. Administrators of apprenticeship and training plans and administrators of pension plans for a select group of management or highly compensated employees (top hat plans), may file the applicable notice and statement described in regulation §§ 2520.104-22 and 2520.104-23, respectively, under the DFVCP in lieu of filing any past due annual reports. By properly filing these statements as described in regulation §§ 2520.104-22 and 2520.104-23 and meeting the other applicable DFVCP requirements, administrators will be considered as having elected compliance with the exemption and/or alternative method of compliance prescribed in §§ 2520.104-22, or 2520.104-23, as appropriate, for all subsequent plan years. http://www.dol.gov/ebsa/FAQs/faq_DFVC.html

http://www.relius.net/News/TechnicalUpdates.aspx?ID=907 The article probably doesn't match your situation, but it does indicate there are situtations where the Schedule C is not required.

I agree with jpod that forfeitures should not be used to correct undeposited deferrals. 1. Use of forfeitures as deferrals would violate the prohibition of prefunding deferrals in 1.401(k)-1(a)(3)(iii)©. That prior discussion was from 2005, which is before this rule was added with the 2006 final 401(k) regulations. 2. Amounts withheld from paychecks become plan assets as soon as they can reasonably be segretated from the assets of the employer. §2510.3-102 The employer holding plan assets after that is a PT. I don't see how that PT is corrected by using existing plan assets to make the affected participant(s) whole. The PT correction is supposed to make the Plan whole and using forfeitures definitely does not do that. The lost income is also part of the PT correction, so I don't see how existing plan assets can be used to cover that either. The missed employer contributions are a different story because that is an operational failure, not a PT. Rev. Proc. 2013-12 addresses the use of forfeitures for corrections of operational failures.

I'm not convinced that 1.416-1 M 20 is saying that salary deferrals count towards the top heavy minimum for a Key Employee if Keys also receive the TH minimum. In the regs, only non-keys get the TH minimum, so I read M 20 as applying only to what the eligible non-keys are required to receive. The Keys' contributions, including deferrals, are used to determine what the TH minimum is for those non-key employees. You might want to check with Corbel. Your interpretation would meant that by extending the TH min to Keys, it would only extend the contribution to Keys who deferred less than 3%. That may not be what they intended. If the only PS contribution is the TH minimum, they may be able to get the Keys 3% of comp by just increasing the amount of the PS contribution. The results would depend on what the PS formula is, but they should be able to at least get close. Or, are they wanting to only contribute what is required?

There is no requirement to provide a top-heavy minimum benefit for key employees, unless your plan document says that key employees also receive the TH min. If your document says that, the terms of the plan will determine what the keys get.