Kevin C

I'm curious about why you would be using an anonymous filing for a non-amender. I've done several non-amender vcp filings and have not had any issues over the amendments. I have had them request that the filing be redone in a certain way and I've had disagreements with them over what the filing fee is. But, I haven't had any experiences that ever made me doubt that the filing would be approved.

I wonder if showing them the definition of "overpayment" from the rev.proc. would have helped to convince them that BG had the right cite?

How does the document define the Limitation Year? Our 403(b) document's default provision for the Limitation Year is the 12 month period ending on the last day of the plan year when there is a short initial Plan Year. Here is a prior discussion: http://benefitslink.com/boards/index.php?/topic/53219-short-initial-year-limitations/?hl=%2Blimitation+%2Byear#entry231012

FWIW, I submitted this question for the "Ask the Experts" session at the ASPPA Annual Conference last week. I was surprised when it was the first question addressed. Sal said they are eligible for the TH minimum using full year 415(c ) compensation. I didn't completely follow his brief explanation, but he was clear that he thought a non-key participant who was eligible to defer for part of the plan year and who is employed on the last day of the year should receive the TH minimum. He asked the panel if they agreed and they did. Another panelist pointed out that the regulations do not say you must be a participant on the last day of the year.

I think they have it right. It is a failure to properly implement the participants' deferral elections. Would the frequency and timing of the bonus and commission payments allow it to fit under the rules for a brief exclusion? That's probably a stretch, but it's worth looking at.

Unfortunately, it is going to get worse and not better. ASPPA released a new comment letter to the IRS today. A link to the letter is below. I haven't been able to decide which letter is worse, this one or their previous one. The new one looks like it was written as two separate letters by people with completely opposite opinions, then combined into a single letter. In one place, it has a detailed description of the 1.401(k)-3(e)(1) prohibition on mid-year amendments to plan provisions that satisfy the rules of 1.401(k)-3 and points out this means the regulations contemplate mid-year amendments to non-safe harbor provisions. Then, in another part it says that the published guidance prohibits virtually all mid-year amendments of any kind to safe harbor plans. That last part is a new one on me because they have been claiming the supposed near total prohibition comes from consistent informal IRS comments at conferences. Of course, they have claimed repeatedly that it was said by the IRS at the 2011 annual conference and it was not. Then, they go on to recommend that the standard for allowable mid-year amendments be amendments that would not change language in the safe harbor notice. The content requirement for the notice covers many plan provisions that do not have to satisfy requirements of 1.401(k)-3 or 1.401(m)-3, so I don't see this request as being much different than saying no amendments at all. They do request a few exceptions, including mid-year amendments that do not affect the operation of the plan such as address and phone number changes. After the statements at the 2012 annual conference that they never said amendments like address and phone number changes couldn't be made, I find it surprising they would now ask the IRS to say they can be done. And, yes, they ask again for a list of allowable amendments. It would be a heck of a lot better for all of us if they would ask the IRS to confirm what kinds of amendments are prohibited. http://www.asppa.org/Document-Vault/PDFs/GAC/2013/101713comm.aspx

We have a few clients that notify us in advance, but most don't think about telling us until after it's a done deal. Unfortunately, you can't help him until you know what kind of transaction it was. Good luck and let us know when you find out.

Even if it does, I don't see it changing anything. At the 2012 Annual Conference, the IRS finally budged off of their "we've given published guidance in the Regulations and the Announcement and we are not going to do anything else" position and agreed to bless some examples of amendments that are not considered prohibited amendments in the published guidance. They even said one particular kind of mid-year do-over amendment could be done when I think a literal interpretation of the published guidance would prohibit it. ASPPA speakers also said that their previous stance was being misinterpreted because they never meant you couldn't amend for things like Trustee changes and address changes, etc. But, we are still getting people claiming there is an absolute prohibition of amendments to safe harbor plans mid-year, except for the 4 exceptions listed in the published guidance. To me, the regulations clearly state what plan provisions are not allowed to be amended mid-year. It probably takes a few times through it to digest it, but it's there in 1.401(k)-3(e)(1) and 1.401(m)-3(f)(1).

No, it does not say those are the only mid-year amendments that can be made. It merely says those amendments can be made mid-year. Silly me, I thought the 2012 ASPPA annual conference would change things. Here is my last rant on the subject. http://benefitslink.com/boards/index.php?/topic/53930-amendment-to-safe-harbor-plan/?p=234128 post #12 if the link doesn't take you there.

"Asset or stock purchase?" is my standard initial question when a sale or acquisition is under discussion. Since you don't know which is was, no one can tell you for certain what should have been done. If it was an asset purchase, the OP company's action of immediately stopping deferrals and loan payments was proper. The employees are no longer employed by the plan sponsor and their new employer had not adopted their prior employer's plan. If the asset purchaser later decides to adopt the other company's plan, then they start deferrals and loan payments again. We had that situation happen with a client that went bankrupt. The company that bought their assets decided a couple of months after the purchase to adopt the old plan. If it was a stock purchase, then as mentioned stopping deferrals without amending or terminating the plan is a problem. With a stock purchase, the purchaser becomes the plan sponsor unless the plan is terminated prior to the sale.

Was the acquisition a stock purchase or an asset purchase?

If your document says they must be an Eligible Employee on the last day of the plan year to receive the TH minimum and you have a determination or opinion letter, I would say that supports your position. But that is not what the regulations and our VS document say. They both say Participant and employed on the last day of the year, not Participant on the last day of the year. In the situation we are discussing, there is a big difference between the two. I'll also point out that you appear to be saying you can avoid having to contribute the TH minimum by moving all non-key employees to an ineligible classification by 12/30. I don't see it working that way.

It defines Participant the way you would expect. It also makes it clear in the Plan Compensation section that someone who moves from an eligible class to an ineligible class during the year is a participant for the portion of the year they are in the eligible class. With the top heavy minimum determined for the plan year, I don't see how you could avoid giving the TH minimum to a non-key who participated for part of the year and is employed on the last day of the plan year. If you have the online EOB, try Chapter 3B, Section IV, Part A.3.b on page 3B.60. It says that an employee excluded for the entire plan year is not a participant and is not entitled to receive a TH minimum. That assumes 410(b) doesn't force you to bring that person into the plan as part of a correction.

What does the plan say about who gets the TH minimum? I would expect it to say that any participant who is not a Key Employee and who is employed by the employer on the last day of the plan year receives the TH minimum. That's what our VS document says. I don't see any requirement in our documents that you be an eligible employee on the last day of the year. That seems to go with the regulations:

The section I quoted specifically says it includes an election to receive no benefits. The only current 401(k) plan language I've seen that allows an election to not participate provides for an election that satisfies this exception. You'll need to look at information from back when the old style election was eliminated. We didn't have any of those.

A reference in a current document to an irrevocable election to not participate will almost certainly be referring to an irrevocable election under 1.401(k)-1(a)(3)(v) because the kind of election specified in that section is deemed to not be a CODA. The way I read it, an election to not participate that does not meet these requirements is considered to be a CODA. I haven't worked through the details of that, but I would think it is something you would want to avoid. If the election was made under an old document under the old rules, I thought those were supposed to be dealt with when the rules changed.

Are you referring to an irrevocable election under 1.401(k)-1(a)(3)(v)? Or an older election?

You'll also want to look at the plan language for what happens when the plan terminates. I've seen some documents that say everyone becomes fully vested and others that say those affected become fully vested. You should also look at GCM 39310. http://www.legalbitstream.com/scripts/isyswebext.dll?op=get&uri=/isysquery/irl6139/1/doc

There are several threads with discussions on mid-year amendments to safe harbor plans. My suggestion is that you read the published guidance and the discussions here. Then, you will have to decide how you want to proceed. ASPPA's position on mid-year amendments changed somewhat at the 2012 Annual Conference. We'll see what it is now in about a month at the 2013 Annual Conference. You won't find anything in the published guidance that says you can't amend to add hardship distributions mid-year. EPCRS has a correction method for improper hardship distributions that involves a retroactive amendment. If it were me, I would correct under SCP and move on.

Here is a previous discussion that addresses whether plan determined catch-ups can reduce the amount the participant can defer under 402(g) / 401(a)(30). http://benefitslink.com/boards/index.php?/topic/52437-catch-up-and-off-plan-years/ FWIW, I still think the catch-up eligible participant can defer $23,000 for the calendar year under 402(g) regardless of what happens with the plan determined catch-ups. A 415 violation correction can still result in part of his deferrals being refunded to correct 415 under EPCRS if the 415 excess isn't fully corrected with the plan determined catch-ups. In your case, you haven't provided enough information. What did he defer 1/1-6/30/13 and what did he defer from 7/1-12/31/13? What employer contributions were allocated on what dates? Any ADP failures? The timing of the contributions determines the date they are considered catch-ups. With a fiscal year plan and proper timing on the deferrals, it is possible to have two $5,500 plan determined catch-ups in the same calendar year. An ADP or 415 triggered catch-up is determined on the last day of the plan year, in your case 6/30/2013. 402(g) triggered catch-ups happen in the calendar year after the $17,500 limit has been reached. I've submitted calendar year and fiscal year catch-ups as a suggested topic for an ASPPA session, but apparently there is no interest. I think there is enough confusion about fiscal year catch-ups to make it a useful session.

The IRS proof of mailing rules changed in August 2011. http://benefitslink.com/boards/index.php?/topic/49629-timely-mailing-treated-as-timely-filing

I suggest you consult with an ERISA attorney before you complete the Form 5500-SF. From your questions, you appear to be looking for ways to minimize the appearance of the PT. There is a chance that trying to help your client could backfire on you. With our client who is working his way out of a similar situation, their former TPA first attempted to remake the withdrawals into a participant loan for the owner. Then, when the withdrawals exceeded $50,000, the former TPA came up with another creative way to avoid calling it a PT. The timeline from the DOL's criminal investigation says the conspiracy to hide the embezzlement, that included both the client and the former TPA, started with the attempt to turn the PTs into a participant loan. Even if they are able to convince the DOL to not press charges, I'm sure they are spending a significant amount on attorney fees. A frequent ASPPA speaker uses an appropriate phrase. Don't make the client's problem your problem. In case you are wondering, the Forms 5500-SF we prepared for our client listed the total amount withdrawn, plus accrued lost income as a PT each year through and including the year everything was repaid. The only "problem" we have with this case is the extra time we've spent. We bill by the hour for that, so I don't consider that much of a problem. You mentioned possibly treating most of the withdrawal as a distribution. Was a 2012 Form 1099-R filed reporting it?

You have to consider 415, but maybe not the way you think.

I agree, although I would change your last statement to adopted before February 1, 2014. Of course, agent reviewing the filing ultimately decides what the filing fee is. My experience under 2008-50 was that determination of the fee was not consistent between agents. (I'm trying to be nice).

You are confusing "remedial amendment period" with "remedial amendment period" as extended by Rev. Proc. 2007-44. The remedial amendment period ends on the due date for the amendment. If you don't adopt the amendment by then, it is late. The extended remedial amendment period comes from Section 5.03 of Rev. Proc. 2007-44 and is the end of the 5 or 6 year cycle the amendment due date falls in. If you timely adopt the required amendment, you have until the end of the extended remedial amendment period to correct any problems with the previously adopted amendment. 6.05(3)(a) tells you when you qualify for the $375 fee. Rev. Proc. 2008-50 had different wording for when you qualifed for the $375 filing fee. The first couple of them I filed, we were able to correct for late amendments all the way back two or three restatement periods for the $375. Then, the IRS changed their interpretation and started saying if you had a late amendment that was not adopted by the end of the cycle in which it was due, you did not qualify for the $375 fee. The updated Rev. Proc. incorporated that restriction. Schedule 1 is for the $375 filing. If you have a late amendment that has to go on Schedule 2, you will have to pay a higher fee. Clear as mud yet?