Kevin C

Question 37 at the 2012 ASPPA Annual Conference DC Q&A session dealt with a mid-year amendment to make eligibility less restrictive. The IRS answer that it could be done as long as there was no effect on already eligible employees. The IRS representative did not explain what that meant. You are wanting to go the other direction, which would probably negatively affect some already eligible employees. That IRS comment, although informal, indicates that at least some at the IRS might not look favorably on your amendment. At the very least, I would be concerned about 411(d)(6) issues if the amendment made some who were already eligible for the 2014 SH contribution no longer eligible for it. 1.411(d)-4 Q&A 1(d)(8). As for mention of an amendment changing language in the SH notice, there is no written guidance saying that is the standard for judging mid-year amendments to SH plans. That idea comes from ASPPA. There is a lot of disagreement on this topic and unfortunately, it doesn't look like things will get any better any time soon. I'm firmly in the camp that the mid-year amendment restriction is what the regulations say it is. To some here, that makes me overly aggressive on mid-year amendments. That being said,I don't think I would be comfortable recommending the amendment you want to do. I would suggest it be done at the beginning of next year. You'll have to decide for yourself.

If you want to worry about government promoted competition, you are looking at the wrong proposal. Look at the USA Retirement Funds Act proposal. http://www.help.senate.gov/newsroom/press/release/?id=841825d1-509e-4934-9d7e-968d0853b795&groups=Chair That's just one of the proposals they have been looking at for several years. The following link is for a GAO report is from 2009. Page 74 pdf (page 69 of the report) the pdf has the summary of the proposals they studied. http://www.gao.gov/assets/300/294311.pdf

You'll want to read GCM 39310. You'll also need to know if she was paid her vested balance before the plan terminated.

Aggregated for testing purposes sounds like permissive aggregation under 1.410(b)-7(d). If that is what was done, where do you see a requirement that they adopt each others' plans? Before you file under VCP, make sure you really need to.

NO As for Plan Compensation, if you think there is a requirement that plan compensation start with Section 415 compensation, please give us a cite.

1.415©-2 defines Section 415 compensation. In (b), there is a list of items that are included. As ETK mentions, severance pay isn't payment for services actually rendered, so I don't see it being counted as Section 415© compensation regardless of when it is paid. Plan Compensation is another issue. You are not required to use Section 415 compensation or even a compensation definition that satisfies Section 414(s) to determine benefits. See 1.414(s)-1(a)(2).

FWIW, Question 29 of the DC Q&A session at the 2011 ASPPA annual conference mentioned determining otherwise excludable when recognizing prior service.

The only restriction our VS document has regarding limitations of loan availability to specific sources is that the source limitation must apply consistently to all participants. On another note, do any of the plans that limit in-service distributions to non-Roth accounts allow in-Plan Roth conversions? I'm wondering if there would be 411(d)(6) issues with a plan that removed the availability of in-service distributions for part of someone's account because of a conversion of amounts not currently available for distribution. None of our clients had any interest in Roth conversions, so we don't have any plans that allow them.

Are the non-shareholder physicians who normally work 40+ hours/week salaried? I'm wondering if an exclusion of hourly paid non-shareholder physicians would accomplish what the client wants?

I'm not following why the exclusion your client wants wouldn't be considered as an exclusion primarily based on service. Non-shareholder physicians who regularly work at least 40 hours/week would be eligible. Non-shareholder physicians who regularly work less than 40 hours/week would be excluded. The only difference between the two groups is their hours/week. To me, that sounds like employees being excluded based on service.

Are they going to file under Cycle E for this cycle? In Rev. Proc. 2012-50, it says the election to delay to Cycle E is made by filing for a determination letter under Cycle E timing. To me, that reads as requiring a determination letter submission if you want to delay restatement until cycle E.

I was referring to a non-amender VCP filing under EPCRS. I think the VCP filing would be very helpful in making sure the assets can be rolled over. But, if the plan was disqualified, wouldn't the assets be taxable when the plan was disqualified? I would think the plan would be disqualified when they became a late amender, not now.

The former sole shareholder was responsible for the plan 10 years ago and I don't see that changing because he disolved the corporation and failed to fulfill his fiduciary obligation to terminate the plan at that time. If the remaining participants were former employees and the former sole shareholder died or disappeared, then I think you would have an orphaned plan. Even if they did the paperwork 10 years ago (or in 2008) to terminate the plan, they did not terminate within a reasonable period of time. The document needs to be updated under EPCRS. Then, the plan can terminate. If the document update is done using a pre-approved document, I probably wouldn't file for a determination letter on the termination. Others might suggest that you file for a determination letter.

Geeze, you had to ruin my Friday afternoon by bringing up that letter? (Where is that head banging smiley face when I need it?) ASPPA actually recommends changing the standard for prohibited mid-year amendments to amendments that would affect wording in the safe harbor notice. And all this time I thought they were working FOR us. If you make it to section IV, you will see them asking the IRS to confirm that amending to change the employer's address or phone number or to replace a Trustee are not prohibited mid-year. After speaker comments at the 2012 annual conference that it was ridiculous to think anyone with ASPPA ever said you couldn't change an address, phone number or Trustee mid-year, I thought that issue was laid to rest. Those of us who were around when safe harbor 401(k) first became an option should remember that at one point the IRS actually made rule changes with the stated goal of making it easier for employers to adopt and administer safe harbor 401(k)s and to ecourage them to adopt these plans. I'm referring in particular to Notice 2000-3. Those changes were incorporated into the final regs. How in the world did we get from that to having ASPPA asking the IRS to impose a huge disadvantage on SH plans? (Rant mode off)

Provisions that might have an effect on participants' decisions to defer is an impossible standard to determine. I recently came across a discussion in the EOB that I think applies here. The discussion is regarding the Gold memos dealing with abusive 401(a)(4) designs. Sal questions whether the IRS has exceeded its authority on the issue and points out that even under their regulatory authority, the Administrative Procedures Act requires proposed regulations and a public comment period before rule changes can be made. The regulations 1.401(k)-3 and 1.401(m)-3 are very clear about the types of amendments that can not be made to safe harbor plans mid-year. If the IRS wants change that to prohibit virtually all amendments to SH plans, there are rules and procedures for them to follow when making changes.

We had this come up last year and decided to reduce the earned income by the partner's employer contribution. Section 401©(2)(A) defines earned income and includes in (v) that it is determined "with regard to the deductions allowed by section 404 to the taxpayer" . The contribution, provided it is timely deposited, is allowed to be deducted under section 404. In our case, under 404(a)(6), the employer contribution was considered under Section 404 to have been deposited on the last day of the prior tax year. Since 401©(2)(A)(v) says "allowed by" and not "deducted under", we felt that reducing earned income by the partner's employer contributions allocated for the plan year was appropriate.

From your description, it sounds like an operational failure to me, not a document failure. Rev. Proc. 2013-12, Section 4.05(1) looks like what you want to do. If you are concerned about the IRS approving the correction you want, a John Doe filing might be the way to go.

It isn't really the successor plan rules that would prevent you from terminating the existing plan. The issue is whether or not the employer sponsors and alternative defined contribution plan under 1.401(k)-1(d)(4)(i). Technically, that doesn't prevent you from terminating, it just prevents you from distributing to active participants due to a plan termination. I'd have to look, but didn't the IRS position on PEO plans change in about 2003?

I don't think your situation fits under the DOL orphaned plans program. If it did, I think their first action would be to find the former sole shareholder of the plan sponsor which disolved several years ago and pursuade him/her to fuflill his/her fiduciary obligation to the plan and terminate it. Also, with the sole participant being the former sole shareholder, do you really have an ERISA covered plan? It sounds like you have some issues to correct under EPCRS before the plan terminates.

1.401(a)(9)-5 has the DC RMD rules. The DB rules are in 1.401(a)(9)-6 Start with Q&A 6.

As ERISA mentions, depending on the circumstances, 30 days advanced notice may be required for mid-year terminations under 1.401(k)-3(e)(4). But, that only applies to a mid-year termination. You are not required to provide advanced notice for a termination at year end.

I agree it's stretching things for the IRS to claim that in-plan Roth rollovers affect plan provisions that satisfy the rules of section 1.401(k)-3. If you try hard enough, you might get there by saying that since the safe harbor contributions are either QNECs or QMACs, the plan provisions listing the distribution restrictions on the safe harbor accounts could be provisions that satisfy the rule in 1.401(k)-3 that the safe harbor contributions be QNECs or QMACs. I certainly would not interpret that Q&A as saying there is a draconian near total prohibition of mid-year amendments to safe harbor plans. I feel that if the IRS really wanted a total prohibition of mid-year amendments to safe harbor plans, the 401(k)/401(m) regs would have said so. I don't think it will surprise anyone that I agree with Austin.

Sounds like a QACA to me. Look at 1.401(k)-3(j) and (k).

The IRS regulations' less than 20 hour per week exclusion for 403(b) plans isn't compatible with ERISA eligibility rules. With the current regulations, when you reach the point that ERISA forces you to allow someone to defer who could be excluded under the regulations <20 hour per week provision, then the all-or-nothing rule in 1.403(b)-5(b)(4)(i) forces you to stop using the <20 hour per week exclusion. This would be someone who previously completed a year of service and then drops below 1,000 hours in a later year. The regulations say they would be excluded starting the following year, until they have another year during which they are credited with 1,000 hours. ERISA prevents you from doing that. It is still possible for a deferral only 403(b) for a non-Church and non-governmental non-profit to not be ERISA covered. (QDRO was faster with the link) K2, if they don't have a plan document post 2009, the reduced fee for EPCRS filing expires at 12/31/2013.

What's the match formula? For example, if the match is 100% on deferrals not in excess of 6%, I don't think I would be comfortable trying to argue that using a missed deferral of 3% is reasonable for the lone NHCE who was improperly excluded.