Kevin C

1) Yes. 2) Appendix C Schedule 1. You would use Schedule 2 if a late amendment was adopted after the end of the cycle that included the due date for the amendment. The end of that cycle is the end of your extended remedial amendment period. The $375 fee applies if you can file only using Schedule 1.

If the plan uses compensation from date of entry, you'll also want to be careful with the mid-year entrants. Their TH minimum is 3% of full year comp.

The Participant did not exceed the 415 dollar limit, he exceeded the 415 100% of pay limit. Given the serious nature of the examples of egregious failures, I doubt a failure caused by an incorrect estimate of compensation would cause this to be considered egregious. There may still be a problem with eligibility for SCP. Rev. Proc. 2013-12 added a clarification to Section 4.04. To me, it isn't clear cut whether SCP would apply. I would present the options and let the client decide between SCP and VCP.

Not all states automatically assume the first marriage is the valid one. Here is a link to a decision regarding Douglas, Ann and Rita from Example 2. Starting at the bottom of page 6 is a discussion of the differences between Michigan and Ohio law. http://www.ca6.uscourts.gov/opinions.pdf/06a0181p-06.pdf Here is an passage from page 8. Rita is wife #2 and Ann is wife #1.

Yes, it's 72 hours for the 3 year cycle, but no less than 16 in any full year. At least 2 of the 16+ each year must be ethics hours. The hours are pro-rated if your initial enrollment cycle is less than three full years. http://www.irs.gov/Tax-Professionals/Enrolled-Retirement-Plan-Agent-Frequently-Asked-Questions#ce

Here is the consumer assistance page from the DOL /EBSA website. They have a toll free number, an e-mail link and a link to find and contact your local office. They can be slow, but they do check into participant complaints. My advice is to contact them (from home) with the information you've provided. http://www.dol.gov/ebsa/contactEBSA/consumerassistance.html

We've had a few clients with multiple owners split their businesses. One of the "new" businesses generally adopts the old plan as a successor sponsor. I can't recall a instance where the plan was terminated under that situation. The biggest advantage is that it is much less work (i.e. much less expensive) to have them adopt an existing plan than it is to terminate one and then install a new plan. When a client sells their business, it is more common to terminate the old plan and start a new one. Although sometimes the new owner will adopt the old plan as a successor sponsor.

I thought following the terms of the plan document was the "conservative" option. Ignoring the document language and following the article's advice could be viewed as an operational failure. To me, it's very similar to the other situation Austin referenced. The IRS is now saying forfeitures can't be used for SH contributions, but there are many documents that say forfeitures reduce the SH contribution. Isn't this kind of problem one of the reasons documents are submitted for opinion or determination letters? If "affected employees" is defined, I can't find it.

The Rev. Ruling itself has a pretty good description of what the Code and Regs say. Our VS documents mirror the code language saying that affected participants become 100% vested. I can't think of any scenario where a termination not initiated by the employer would be someone affected by the partial plan termination. Given the choice between following the language in our IRS approved document or following the article advice, I think I'll pick the document.

There can still be criminal charges even if the amounts are repaid with lost income. Our client repaid everything and the DOL is still calling it embezzlement. It might have gone easier on him if he had come to us for help before the DOL got involved, but maybe not. I'm sure he has spent a sizable amount on attorney fees over this, not to mention the excise taxes and our fees. Not reporting the PT on the 5500 makes it worse and can get the form preparer involved. Did I mention that he didn't hire us until after the DOL came to visit?

I have. We picked up a client a few years ago in a similar situation after the DOL came to visit. We worked out a correction and had it approved by the DOL. About 6-8 months after everything had been repaid, there was a criminal investigation and grand jury. He was offered basically deferred adjudication and his attorney was trying to get the matter closed without it. Many months go by and it seemed the attorney was successful. Then, a new prosecutor was assigned and is seeking criminal charges again. The Forms 5500 are one of the issues involved. The prior TPA prepared Forms 5500 showing no PT and the client signed them and filed them. Apparently, the prior TPA is being considered a co-conspirator. My suggestion is to correct the PT ASAP and pay the excise taxes. Report it properly on the Forms 5500 for all affected years. Then, tell the client to hope it doesn't become a criminal matter. And, charge by the hour!

If by "has acquired" you mean a stock purchase that has already happened, 1.401(k)-1(d)(4)(i) will likely prevent termination of Plan B from being a distributable event. A merger is probably the best option. Moving the assets of Plan B to Plan A will require maintaining protected features of Plan B for the transferred funds. The participants don't get a choice about where their balances go. Don't forget the blackout notice. If you were referring to an asset purchase, we will need more information.

The examples in §2520.104-46 determine the necessary bond amount for a year by referring to the market value of non-qualifying assets as of the end of the prior year. The paragraph above the examples has the rule for determining the bond amount.

Another issue that goes with setting in-service eligiblity is vesting. When a partially vested participant receives a distribution, the plan document will tell you what formula is used to determine the remaining vested balance in future years. It's loads of fun when that formula gives you a negative vested balance. Yes, I've had that happen. Our document has a provision that allows you to restrict in-service distributions to accounts that are fully vested. I use that now when I do an amendment to add in-service distributions. If that isn't available, a participation requirement can be used to make sure most are 100% vested by the time they are eligible for an in-service.

SCP is available to correct significant operational failures for a limited time period. You should still be within the correction period under Rev. Proc. 2013-12, Section 9.02 to fix the SHNEC. The corrective contribution counts against the 415 limit for the year being corrected (Section 6.02(4)(b)), but the normal deduction rules apply. I don't know if you would be able to do the same with the 2011 PS contribution. I would start with Rev. Proc. 2013-12 to see if it has anything that helps you.

It depends on the document language. Our current VS document has an option on the adoption agreement where after providing a conditional notice, providing the supplemental notice triggers the 3% SHNEC contribution. I've seen other documents where an amendment is required to implement the SHNEC.

You won't find the 5500-EZ on the EFAST2 website since it's only used for single participant plans that are not covered by ERISA. You can get the current form and prior year forms on the IRS website. It looks like they have fillable pdf forms back to at least 1997. They have forms and instructions back to 1990, but some are not fillable. Are you taking into account that plans with assets less than $100,000 were not required to file 5500-EZ through 2006 and plans with assets less than $250,000 were not required to file starting in 2007? The instructions for each year will have the details.

What part of 1.401(m)-3(j) are you reading as requiring the safe harbor match to satisfy 1.401(m)-2? The only references to 1.401(m)-2 I see in that paragraph are (3) saying the early participation rules of 1.401(m)-2 don't apply to make the otherwise excludible portion of the plan SH unless it actually is SH and (6) noting the ACP test still applies with respect to after-tax employee contributions. The term employee contributions is defined in 1.401(m)-5.

As mentioned, the disproportionate match rules are part of the ACP test. You are talking about a safe harbor match. The applicable rules on the safe harbor match formula are in 1.401(k)-3© and 1.401(m)-3(d). You also left off part of the disproportionate match rule. In your example with a 200% match on deferrals not in excess of 3% of comp, as long as at least half of the eligible NHCEs who deferred receive the match, it won't be disproportionate because of (3).

I probably should have been more clear in my post #8. I don't think there is a requirement that all non-key HCE's receive the SH to be top heavy exempt. It's not mentioned in Code Section 416(g)(4)(H) or Rev. Ruling 2004-13. It was also not mentioned in the 2010 Q&A item dealing with the TH exemption for SH plans. This thread was the first time I've seen or heard anyone say there is such a requirement. There is always the chance I've overlooked something which is why I asked where this requirement can be found, if it indeed exists. We don't limit the SH to only NHCEs very often, but we have a few plans that do.

Where might we find information on this requirement that non-Key HCEs must receive the SH to be Top-Heavy exempt? My understanding of the rule is based on Rev. Ruling 2004-13, situation 4 and a similar Q&A question at the 2010 ASPPA Annual Conference (bottom of page 10 of the handout). Both specify that all eligible NHCEs in the entire plan must receive the SH to be TH exempt, but neither mentions Non-Key HCEs having to receive the SH. The Q&A response does caution that if the TH plan only provides the SH to those 21 & 1yr, all non-Keys get the TH-minimum, not just those in the otherwise excludable group.

There is one problem with that. The IRS has not made that statement at a conference. I previously challenged anyone who thinks they have to provide detail as to when and what was said by the IRS representative, but no one responded. I've seen several claims that it was said at by the IRS at the 2011 ASPPA annual conference. I was there and the IRS representatives said no such thing. I have the recording to prove it. If you do a search you should find my old post where I transcribed what the IRS actually said. Ilene Ferenczy made a brief comment that could be interpreted along those lines if you wanted to, but she is not with the IRS. Other ASPPA speakers have made that claim, but none of them are IRS officials. From other discussions with a frequent ASPPA speaker, the IRS may very well have said something along those lines in private meetings with ASPPA. But that is not what ASPPA is claiming. They are claiming the IRS has been saying that consistently at all conferences. If the IRS really said that repeatedly, it should be very simple for someone to provide a recording or transcript where the IRS actually said it. As several of us have pointed out in discussions here, a total prohibition of amendments mid-year to a safe harbor plan is absurd. Likewise, I think another claim that if it is in the safe harbor notice, it can't be changed mid-year is absurd. It has been pointed out that, among other things, they were saying that a Trustee change, plan sponsor name change, address or phone number change could not be made to the document mid-year. Now that the IRS has informally added some new situations where they are willing to say specific amendments can be done (2012 ASPPA annual conference) a couple of ASPPA speakers proclaimed that of course, when they said absolutely no mid-year amendments to SH plans, they didn't really mean you couldn't change things like Trustees or addresses and to think otherwise was being ridiculous. That ASPPA letter also says there is a lack of formal guidance. That is nonsense. There is very specific guidance in the regulations. ASPPA wants a list of all of the amendments that are allowed. What the regulations have is a list of all of the amendments that are prohibited. Except for listed exceptions, you can not amend any provision that satisfies a rule in that section of the regulations. All you have to do is go through 1.401(k)-3 and 1.401(m)-3 to see what rules apply to plan provisions and you have a list of provisions that the regs say can not be amended mid-year. Why in the world would anyone ask the IRS to make a list of every amendment that can be made? I would say what I really think about ASPPA's letter, but I was raised better than that. I'll get off the soapbox now.

The Hour of Service definition in the plan should mirror the regs.

I'll probably regret this, but what is the basis for saying an amendment prior to mid-year adoption of the 3% SHNEC prevents you from adopting SH? The mid-year amendment prohibition in the regs says: If you have not yet amended for the 3% SH as allowed by paragraph (f), how does the plan contain any provisions that satisfy the rules of 1.401(k)-3, which are the provisions you are prohibited from changing mid-year? As for the OP, I get the same answer regardless of the plan's SH status. I see nothing in either 1.401(k)-3 or 1.401(m)-3 that contains a rule that the provisions specifying the profit sharing allocation method must satisfy.

What does the plan say? Your document will define Hours of Service.