Kevin C

If you are using prior year testing and there were no NHCE's in 2011, the plan automatically passes ADP for 2012. The same rule is in 1.401(m)-2 for ACP. Having a discretionary match available to NHCE's in the prior year, but not contributing a match is a different situation. In that case, your prior year NHCE ACP would be 0%. That is one reason why prior year testing doesn't work well with discretionary matches.

The quoted comment is part of the answer to the question about adding a previously excluded group mid-year. Until the IRS representative at least has a chance to explain at the conference what the comment means, isn't it a little early to start spinning it to use to with another situation? I want to hear what (if anything) they say first. The biggest surprise for me was question 41. I would not have predicted that the IRS would indicate a do-over is possible shortly after amending a SH plan mid-year to suspend a SH contribution. The answer applies to both a SHNEC and a SH Match. Given that the proposed regs require a substantial business hardship to suspend the 3% SHNEC mid-year, I wonder how many times this will come up with a 3% SH plan. Even with a SH match, I doubt this situation will come up often. Regardless, this year's annual conference should put an end to the claims that the IRS is clearly saying at all conferences that the ONLY mid-year amendments allowed for SH plans are to add Roth and modify hardships. ASPPA didn't get their requested all inclusive allowed amendment list, but I see this Q&A handout as welcome news.

I just downloaded the updated DC Q&A handout for the 2012 ASPPA annual conference. Questions 36-41 address mid-year amendments to SH plans. I don't want to completely spoil the surprise, but we will get some additional informal guidance this year. The questions deal with: 36. timing of amendments to create a short plan year 37. amending mid-year to add a previously excluded group 38. amending mid-year to change TPA and investment alternatives 39. -11(g) amendment to correct a 410(b) failure 40. amending to change Trustees mid-year 41. amending to void a mid-year amendment eliminating the SH provisions

The plan document should have the answer. It was an LRM requirement for prototypes, so the details could be slightly different from plan to plan. Looking at our prototype base document, it reads as being based on the number of eligible NHCE's in the "Plan". The definition of "Plan" refers to the entire plan with no mention of disaggregation. If this plan was in our prototype, I would say the number of groups is based on 3 NHCE's. But, we restated all of our DC plans using VS documents, so we haven't had to deal with this issue.

There's one small problem with that. He didn't exceed 402(g). Look at 402(g)(1)© quoted above. The 402(g) limit is determined without regard to the plan's determination of catch-ups under 414(v). If you are looking at the 402(g) regs, take note that they were not updated for EGTRRA (Public Law 107 - 16), so they do not reflect catch-ups.

Here is the thread on the situation I was referring to. http://benefitslink.com/boards/index.php?showtopic=48300 In retrospect, one thing I missed back then was the lanuage of 402(g). One issue I struggled with then was did he really get to defer $22,000 for that calendar year? Based on the language in 402(g), I think the answer is yes, he could defer $22,000. Then, the plan tries to use 1.414(v)-1 to determine catch-ups and it gets a little weird. If you go by a literal reading of the regulations, it looks like he should not be allowed to defer the full $22,000. The IRS has an example in the 414(v) regs where a similar problem would come up and they reclassify some deferrals as catch-up to make the rules work. The problem is that the example has the person deferring each month. It's not clear how their example applies with a once a year deferral like we had.

If you look solely at 1.414(v)-1, I agree that is what those regulations say. After having this issue come up and trying to figure out what our valuation software was doing with the participant, I'm not so sure any more. When you take into account 402(g), that interpretation of 1.414(v)-1 has some problems. The amount the participant can defer for a tax year is determined without regard to treatment of the deferrals as catch-up by the plan or plans. So, what happens when the participant defers the full amount allowed under 402(g), but because of the timing of those deferrals, the rules in 1.414(v)-1 break down and make it look like the participant exceeded 402(g), when he did not? No, I don't have a good answer for that.

Before you go very far down the VCP route, I would check the plan document for provisions dealing with transfers. In our VS document, there is a section dealing specifically with transfers and a paragraph in the Trustee duties sections that provides for transfers to another qualifed plan upon written instructions from the Plan Administrator. Then, I would check with the attorney who wrote the document to see if the transfers made are allowed by the plan provisions. If there are other new firm employees with balances in the old plan, you may want to look into spinning off their portion of the old plan and merging it into new plan.

If the document says you have to be eligible to defer to receive the SH, I think that answers your question. When you are looking at 1.401(k)-3, are you also considering the definitions of "eligible employee" and "eligible NHCE" in 1.401(k)-6?

I found this old thread while searching and stumbled on the Opinion letter mentioned. If anyone needs it, it is DOL Advisory Opinion 85-32A. http://www.erisaadvisoryopinions.com/inclu...1985/85-32A.php

Anyone have a problem with the late payments on this 5 year note causing the repayment period to extend beyond 5 years? If all he did is restart payments after missing 4, I'm not convinced he corrected all of the problems within the initial cure period, since at that point, the loan is not going to be paid off within the original 5 year period. The only way I see rolling cure periods working is if you can get past the end of each prior cure period without the loan going into default. The approach we take is to either have the participant make up the missed payments or reamortize the loan within the cure period.

Mike, we read 1.401(k)-3(e) the same. It's 1.401(k)-3(d) that we interpret differently. I see 1.401(k)-3(d) as requirements that the SH notice must meet. In it, I see rules that the SH notice must satisfy. However, what I don't see in -3(d) are any rules that plan provisions must meet. You cited 1.401(k)-3(d)(2)(ii)(B). For clarity, I'll include the paragraph heading: I've tried every way I can think of to interpret that, but I can't come up with a single thing in it that places any limitation on, or affects in any way, the profit sharing contribution provisions. As for problems with the content requirements of the SH notice, the IRS has already addressed an extreme example of that at conferences and on their website. If the failure to provide a SH notice does not cause the plan to fail to satisfy the SH rules, I don't see how a minor change in content would cause a problem. Besides, the SH notices the document system we use generates do not list the allocation method or even eligibility requirements for the PS contribution. It mentions the existence of the PS contribuiton and refers participants to the SPD for additional information. So, in our case, the change in the PS contribuiton allocation under discussion would not change a single word on the SH notice. http://www.irs.gov/Retirement-Plans/Fixing...(k)-Plan-Notice That I can understand. I also understand that the IRS comments I've heard at conferences would not change your opinion. Like many things in this business, it's a judgement call that may or may not be challenged by the IRS. Had that kind of opinion been expressed at the beginning of this thread, it would have been a short discussion. My rant was directed at the claims here and in other threads that the IRS has repeatedly and clearly said at conferences over the last few years that the only mid-year amendments allowed for SH plans are the 4 specifically mentioned in the published guidance.

Mike, I'm not sure I follow you. The issue here is: What has the IRS been saying at conferences about mid-year SH plan amendments? I've been hearing, and the recording of the 2011 ASPPA annual conference Q&A session has the IRS representative saying they have issued guidance on mid-year amendments in the regulations and in Announcement 2007-59 and they do not plan on issuing any more guidance. 1.401(k)-3(e)(1) has the amendment restrictions and it clearly addresses which amendments are prohibited. The Announcement addresses two amendments the IRS was repeatedly asked about that, to me, are clearly allowed by the regulations. Others are saying that the IRS has clearly stated, specifically at the 2011 annual conference and repeatedly at all conferences for several years that NO amendments are allowed mid-year for SH plans other than those addressed in Announcement 2007-59 (Roth and Hardship changes) or the regulations (mid-year suspension of the SH contribution and mid-year amendment to the 3% SH following a conditional notice). There is a big difference between what I've been hearing the IRS say at conferences and what others say they have been hearing. I transcribed the IRS comments at the 2011 annual conference from the recording and it backs what I heard. I have asked those who believe the IRS is saying something else to document what was actually said and when. The only specific example I was given is a quote from a web article that says the claimed IRS statement was made at the 2011 ASPPA annual conference Q&A session. The recording shows otherwise. Still others are saying the mid-year amendment prohibition should be based on the information required to be in the SH notice. To me, that is basically the same as saying that no amendment at all can be made mid-year. The content requirement for the SH notice is extensive, so it would be a challenge to find a plan provision that doesn't affect something on the notice, especially if the SPD is referenced in the SH notice. There was also a brief discussion at the 2011 ASPPA annual conference about WHY the mid-year amendment prohibition is in the SH regulations. The reason why was followed by a reminder that there is guidance on mid-year amendments and they are sticking with the current guidance. My opinion is that some in this industry have taken the IRS explanation for WHY certain mid-year SH plan amendments are prohibited and expanded it into a supposed prohibition of basically all mid-year amendments to SH plans. I'm reminded of the $150,000 401(a)(17) limit fiasco from Q&A sessions in the 90's, but this one seems much, much worse.

Tom, your employer was a speaker at the 2011 Annual conference, so there should be a copy of the recording available in your office. I encourage you to listen for yourself. The comments Adam Pozek claims were made at that Q&A session were not made there. I went back through that section of the recording many many times when I wrote down what the IRS representative said for another thread. One of the ASPPA panelists made a brief comment about the only amendments in the guidance being Roth and hardship modification, but from the context, it is a huge leap to take that comment as overriding the carefully worded IRS responses both before and after that comment. The mp3 file of that session is 42.8 MB, so I have no way to send it to you. http://benefitslink.com/boards/index.php?s...mp;#entry222497 I saw the ASPPA comment letter when it came out. My opinion of that letter is, to say the least, not complimentary. If the IRS was foolish enough to provide a list of permissible amendments, it would be pages long and probably still would not include all the situations where you should be able to amend. For example, they left off changes in the Employer name, address and phone number, a change in the plan name, adoption of the plan by a successor employer, providing prior service credit for a group of employees acquired in a 410(b)(6)© transaction, ... Of course, they did ask the IRS to expand the list. Then, you need to consider all of the amendments that might go on the permissible list for one situation where another set of facts might produce a result other than what they intended. After all, once it's on the list, it's allowed. I'm not a big fan of the IRS, but I don't think they are dumb enough to give ASPPA what they are requesting. As for the Sungard seminar, Announcement 2007-59 does not say that those are the only amendments that can be made mid-year. Anyone who thinks it does, please post a quote of the sentence(s) from the Announcement where they think is says that only those amendments are allowed. I feel like I am stuck in the kids game where you sit in a circle and whisper in your neighbor's ear, then see how the story evolves. I have seen repeated claims that the IRS made this supposed statement at at least 3 conferences I attended. I promise you that I listen carefully any time this subject comes up at a conference. I have never heard the IRS state what has been claimed. Each time I hear them carefully say that they have issued guidance and they will not issue additional guidance. If the IRS really said that the only amendments allowed mid-year are those specifically mentioned in the Announcement or the regs, then someone please identify one time when it was said and exactly what was said. It certainly wasn't said by the IRS at the 2011 annual conference. The Sungard seminar predated that conference, so that wasn't their supposed source. The ASPPA comment letter refers comments made at various forums over the last few years. If these claims are true, someone somewhere should be able document it. I'm still waiting.

But, we have very specific guidance already, in the regs. I copied it in a post above. Do you see a requirement in 1.401(k)-3 or 1.401(m)-3 that is satisfied by the PS contribution vesting provisions? Personally, I think the restrictions in the regulations are too broad. But I still have to admire what they came up with. It's a simple, clear and effective solution to a difficult issue. That's a rare thing in regulations.

Sorry, but I'm still in rant mode. That really isn't much different than taking the approach of no amendments allowed mid-year. There is a lengthy list of provisions that must be described in the SH notice. But a provision being described in the notice is not the same as being a provision which satisfies the rules of 1.401(k)-3 or 1.401(m)-3. The Employer name, address and phone number are required to be listed in the SH notice. To me, it's absurd to say that they are not allowed to amend the plan mid-year to reflect a change in the Employer's address or phone number. The published guidance is strict enough. I don't understand why some in this industry insist on twisting it around to make it much worse. Here is the mid-year restriction from the regs. There is no mention of provisions required to be described in the SH notice.

Here we go again. ASPPA conferences are recorded. For at least the last few years, those recordings are mailed to each attendee. I have attended the ASPPA annual conference, including the DC Q&A sessions, for more years than I care to mention and have never heard an IRS representative say that the only mid-year amendments allowed for a SH plan are the two situations referenced in Announcement 2007-59 (Roth and modifying hardships). Recently, I pulled out my conference DVD from 2011 and typed up the IRS comments on the questions where some claimed this was said. Since the IRS has supposedly said this repeatedly, I challenge someone to provide either a transcript or a written Q&A response from a session where the IRS actually said what is claimed. Here is a copy of my prior post with the transcript of the IRS statements at the 2011 ASPPA annual conference: I pulled out my 2011 annual conference DVD. The SH mid-year amendment questions, 39 and 40 start at 1:18:20 on the clock. The response to the first question about changing deferral eligiblity was Ilene mentions something about her recollection being the only amendments are Roth and Hardship. I took that as a reference to the cited guidance on amendments. The next question is another mid-year question. The response is Now I'm being told the IRS said last week that the ONLY mid-year amendments allowed to safe harbor plans are adding Roth and expanding hardships to funeral expenses. I see changing from saying we are sticking with the published guidance to saying no amendments other than those addressed in Annoucement 2007-59 are allowed is a "major" change. <end of prior post> And, here is the text from Announcement 2007-59: Nothing in the Announcement says these are the only changes that can be made. It says that these two particular mid-year changes are OK. Many have asked for additional guidance. The IRS has consistently said at the conferences I've attended that they will not be issuing additional guidance.

The document provider for the document used for the restatement would be in the best position to answer your question. If that isn't an option, I would look for the document provisions about who can adopt and who can amend the document.

I'd say "No". The Plan Year requirements are in 1.401(k)-3(e). If the plan was terminating 9/30 then you have a chance to stay safe harbor under (e)(4). Otherwise, if it is a SH match, I think you fall under 1.401(k)-3(g), which requires satisfying the ADP test. The corresponding rules applying to the ACP SH are in 1.401(m)-3(f) and (h). If this is a 3% SH plan, make sure you look at the 5/18/2009 proposed regs that list the rules for suspending the 3% SH.

You can't start a PS plan prior to 2-4-13 either. The distributions from the old 401(k) plan can only be made if there is not an alternative defined contribution plan in existence between the termination date and 12 months after the final distribution.

If the company pays in arrears, it is rarely a problem. The problem rule is in the 401(k) regs where it describes the requirements for a CODA.

Will this help? http://benefitslink.com/boards/index.php?s...st&p=222497

Richard, The only times I've had an agent question the type of failure is when they are trying to claim you don't qualify for the program you want to use. Other than that, they have only been concerned about the correction method. You never know what the IRS will do. Under VCP, you can always ask. You might get to correct the way you want. I've seen a wide variation in the knowledge level of the agents processing these filings. That makes it pretty much impossible to predict what the IRS will do. BG, My opinion is that repayment with after-tax $ gives them a basis and repayment with pre-tax $ does not.

The wording could be better, but I think you have to interpret it along with the general correction principle that you put the plan back to where it would have been if the error had not occurred. So, if the Employer repays the distribution, it goes into an unallocated account for use towards employer contributions. If the Employee repays an amount that rightfully belongs to him, but was not eligible for distribution, it goes back in his account. If he is repaying an amount distributed that should not have been part of his account balance, then it goes to the unallocated account or gets reallocated to the other participants. For example, if an in-service distribution is paid from my balance when I'm not eligible to receive it and I repay the distribution, it should go back in my account. But, if my balance is $1,000, I get paid $1,200 and repay the $200, the $200 goes to the unallocated account or gets reallocated. At least, that's how I see it.