Kevin C

Since you are talking about VCP, I assume that means they did not timely issue a contingent/conditional SH notice and a follow-up notice prior to adopting the amendment? 1.401(k)-3(f).

Interesting discussion, but I don't think any cite prior to 2007 can really answer your question. If the proposed reimbursement is not considered an employer contribution, it may still be considered an annual addition under Our VS 401(k) document mentions employer reimbursement of administration fees. Of course, it was submitted to the IRS by 1/31/2006, so it does not include language for the final 415 regulations. Does anyone know if this has been addressed by the IRS in the context of the final 415 Regs?

There are not any prototype or volume submitter governmental plan documents. The IRS just started the program for them with the PPA DC documents. They are being submitted to the IRS shortly with approval expected around April 2014. I would expect most if not all of the major document providers to have governmental plans by 2014. I don't know if any of the document providers are planning on allowing interim adoption of their governmental plan documents after they are submitted to the IRS. The Sungard newsletter probably dealt with signing up to sponsor their governmental plan. We signed up with our document provider a couple of weeks ago.

With the match only applying to deferrals not in excess of 5% of compensation, I don't see how 402(g) triggered catch-up would have been matched anyway because of the SH match formula. If you go back through the prior years, the 402(g) limit has been more than 5% of maximum comp since at least 2002. 16,500 / 245,000 = 6.73%, 15,500 / 230,000 = 6.73%, ... 11,000/200,000 = 5.5%. Your plan imposed limit is 12% of comp for deferrals, so everyone can defer enough to receive the full match before they hit the limit. If the catch-ups were all triggered by 402(g) or the plan imposed limit, I don't see anything you need to correct. It would be very difficult to have a situation where catch-ups would be triggered for deferrals below 5% of compensation. Hitting 415 is the only thing I can think of that might do it. Even then, you would want to allocate the SH match first, so I doubt it would be a problem.

Can you give us more information? What is the SH match formula? Which limit triggered the catch-ups?

Unfortunately, I have. The agent handling the filing insisted the $375 fee only applies if the VCP filing is submitted before the end of the remedial amendment period. Yes, I have that in writing. She ignored me when I pointed out the cite saying VCP is not available if the remedial amendment period has not ended. This filing consisted of some interim amendments that were missed between the timely GUST and EGTRRA restatements. After much discussion, she finally informed me that one of the interim amendments in the middle time-wise was the amendment that caused them to be ineligible for the $375 filing. I wasn't comfortable removing that amendment from the filing, so she gave us two choices. Either pay up, or she would reject the filing and keep the $375. The client paid the extra $625. My suggestion is that if you meet the requirements in Rev. Proc. 2008-50 for the $375 fee, submit it using Appendix F, Schedule 1 and send $375. If the agent it is assigned to doesn't want to do it that way, he/she will contact you for more $$$. You might get lucky. But, I would advise the client, the IRS may want the higher fee. I've heard at conferences that the IRS has changed the way they interpret eligibilty for the $375 fee, but the Rev. Proc. is pretty clear when it applies. You just have to track down definitions of the various terms used. And it is still the current published EPCRS guidance.

The due date for employer contributions is in I would look to the DOL deferral deposit rules for your (2). They should be clear that they only apply to amounts withheld from employee paychecks

I have electronic access to both. The 1991 preamble says it is for final 401(a)(4) regulations effective for plan years beginning after 12/31/1991. The 1993 preamble published 9/3/1993 says it is for amendments to the 1991 final regulations initially proposed in January 1993, effective for plan years beginning on or after 1/1/1994. The only -11(g) discussion I see in the 1993 preamble deals with expanding -11(g) to benefits, rights and features issues.

Mike, thanks for the educational rant. I did some searching and found what you are describing in the preamble published 9/19/1991. It says: From a previous discussion on the subject, the 411(d)(6) requirement may limit the effectiveness of an -11(g) amendment IF your document requires the allocation to satisfy 401(a)(4). I gather that kind of provision is not normally used, but the VS document we use requires that allocations satisfy 401(a)(4).

Here is a news release where the DOL sought using an offset of a fiduciary's balance as part of the correction to restore balances. http://www.dol.gov/ebsa/newsroom/2010/10-354-ATL.html The only time I've had this come up was a case we became involved with after the DOL came calling. The proposed correction included an offset of the owner's benefit. The DOL response was basically that it could be done either with or without the offset, but they would make it more difficult and more expensive penalty-wise unless the entire amount was restored. The fiduciary restored the full amount.

Employer contributions will cause a 403(b) to fail to satify the Department of Labor's (limited employer involvement) safe harbor regulation at 29 C.F.R. § 2510.3-2(f). But, as a Church plan, I doubt you are relying on that safe harbor to be a non-ERISA plan. Of course, that assumes the plan has not made an election under IRC 410(d) to be covered by ERISA.

There are really two questions here. First, is the overall fee level reasonable for the services provided? Second, is the fee allocation method reasonable? FAB 2003-3 addresses fee allocation methods. How the fee is determined can affect whether the allocation method is reasonable. Basically, it comes down to being a judgment call by a fiduciary. It says the method of allocation must have a reasonable relationship to the services furnished or available to an account. It also notes that if the fiduciary making the decision is also a participant, there may be PT issues if the benefit to the fiduciary is more than incidental. Since the fiduciaries are usually HCE's with large balances, I think your example of a $500 per capita allocation has a problem with both cautions if there are participants with small balances. Most of our clients allocate fees pro-rata based on balances. A few allocate the per participant portion of our fee to each participant and the rest of the fees pro-rata. We also have an RIA branch where the fee is based on assets, which must be allocated pro-rata to be a reasonable allocation. As for an overall level, we advise that the admin fee allocation should be kept under 1% annually, even if that means the employer needs to pay some of the fees. For brand new plans, we tell them the assets need to accumulate to a certain level before they can have the plan pay admin fees.

The effective dates for the restatements and amendments need to be consistent with what they would have been if the document had been properly maintained. EPCRS doesn't require submission for a determination letter if the correction by plan amendment is done by adopting pre-approved documents.

We have some clients that do that, too. We've insisted the fee be disclosed, usually in an SMM, before the fee gets charged directly to the participant. We decided that advance disclosure was the right thing to do and did not look at whether or not it was required. There will always be some issues that pop up. For example, what do you do with participants with small balances, especially those with balances less than the fee?

When was the December 2010 employer contribution deposited? Hopefully it was deposited in early January 2011. With monthly deposits of required contributions, we amend the plan to provide that forfeitures reduce the contribution in the year following the year of forfeiture.

I disagree. If the employer finds out that the participant was not really eligible for a hardship distribution, I think it is an overpayment that can be corrected under EPCRS. Here is a previous discussion. http://benefitslink.com/boards/index.php?showtopic=48405

The 80-120 participant rule can be used for any year that the beginning of year participant count is 80-120. It's not a one time thing.

It depends on how you interpret the phrase "safe harbor match" in 1.401(k)-3(g) and 1.401(m)-3(h). Based on the wording in the last sentence of both 1.401(k)-3(a)(3) and 1.401(m)-3(a)(3), I don't think suspending your match mid-year will be allowed. If it is a permissible reduction or suspension of safe harbor matching contributions, you will be required to satisfy ADP and ACP testing as part of the rules. If it is not a premissible reduction or suspension of safe harbor matching contributions, you will disqualify the plan with the amendment. See 1.401(k)-3(e)(1) and 1.401(m)-3(f)(1)

See post #4 above about what match to count. If the plan is not ACP SH, you can use prior year ACP testing as long as the document allows it. For your ADP testing method, I think the document saying prior year ADP testing is a problem.

That's what I thought, too. But, that's not exactly what the regulations say. From the LRMs, it appears the IRS interpretation is that SH requires current year testing. Of course, if the document says safe harbor means you must use current year testing, the document controls. The pre-approved documents we have used all say SH requires current year testing. We don't have any plans that allow old style after-tax contributions, so I haven't had to look at this before. From the 401(k) LRMs:

Interesting question. Our VS document has a note in the adoption agreement that an ACP SH plan must use current year testing. What does your plan say? The regs say that for purposes of the rules for changing the testing method, an ACP SH plan is treated as using the current year method.

Will this help?

You should read through TAM 9735001. It deals with an attempted amendment after the end of the plan year but before the due date for the employer's tax return. The conclusion is that participants' accrued benefits as of the last day of the plan year include their share of the contribution for the year allocated under the existing plan provisions. The amendment in the TAM reduced some participants' allocations and resulted in a 411(d)(6) violation.

It's $30,880. You are counting the $880 of 402(g) triggered catch-ups towards the $49,000. With 2011 limits, he has $16,500 deferrals and $6,240 ($22,740) counting towards the $49,000 415 limit. $49,000 - $22,740 = $26,260. If he gets a PS allocation of $30,880, the allocation is $4,620 ($30,880 - $26,640) above the remaining 415 limit. But, he has $4,620 ($5,500-$880) of his catch-up limit remaining. So, $880 of deferrals are catch-up triggered by 402(g) and $4,620 of his deferrals are catch-up triggered by the 415 limit. Amounts counting towards 415 are $11,880 ($17,380-$5,500) of deferrals, $6,240 of SH NEC and $30,880 of PS for a total of $49,000.

Here is the definition.