Kevin C

You are overlooking one small detail. The EPCRS section you cite referencing forfeitures being used in a correction does not mention QNEC's. It says "corrective allocations" and not all "corrective allocations" are QNEC's. I don't see anything in EPCRS that specifically says forfeitures can be used to reduce a corrective QNEC. But, I think it implies that you can. If you look at Appendix A, .05(1), corrective allocations of employer contributions (other than match) are not QNEC's. They go on to describe corrective allocations of missed deferrals as a QNEC, which I understand. Then, they describe a corrective allocation of a missed match as a QNEC, which is just plain stupid. The idea of a correction is to restore the plan to where it should have been, which should include the vested balances. I hope the IRS doesn't really want a corrective match to go in a 100% vested QNEC account. But, that's probably a question we are better off not asking. I don't expect the new EPCRS Rev. Proc. to clarify this. Of course, that is IF it ever gets released. The main reason for the update was to add plan document corrections for 403(b)'s.

Isn't the purpose of an interpleader to protect the Plan Administrator from possible fallout from the decision about who is entitled to receive the benefit? It seems unlikely a participant could be charged for something the Plan Administrator decides to do for its own benefit.

It was addressed at the Annual Conference Q&A session. The IRS did not change their position. The only saving grace I see is that they are saying while forfeitures can not be used to reduce an ADP SH contribution, they can be used to reduce an ACP SH contribution. That should give us a way to avoid having the forfeitures blow up the top-heavy exemption for SH plans. If the IRS position doesn't change before then, with the next restatement, every SH plan will need to have a discretionary ACP SH match. It was pointed out during the Q&A session that is it possible to have forfeitures from a SH contribution account and even a deferral account of a missing participant. The IRS would not answer when asked if forfeitures of amounts that were 100% vested when deposited could be used to reduce ADP SH contributions. There was enough uproar over this at the conference, that I don't think we've heard the last of it. I think the IRS will claim this is consistent with their EPCRS guidance because of the caveat "if the plan permits their use to reduce employer contributions". They will say that with ADP SH contributions, the plan can not provide that forfeitures reduce employer contributions. Of course, they rarely let logic stand in their way when they prepare their guidance.

What are the eligibility requirements and entry date for the plan? Are there mid-year entrants who are not allowed to defer until the following January 1?

I don't see how "this section" here could mean anything other than 1.401(k)-3. I've always thought this was pretty clear that it prohibits a mid-year amendment of any provision that satisfies a requirement of 1.401(k)-3. If the plan is also ACP SH, the same prohibition applies to mid-year amendment of provisions that satisfy a requirement of 1.401(m)-3. If the provision in question does not satisfy a requirement of either of those sections, I don't see anything in the 401(k) regs that prevents you from amending it mid-year. Of course, there may be other issues, for example 411(d)(6), that might prevent a mid year amendment. That's my $.02.

I was at the Q&A session yesterday. This question came up and the IRS representatives said they were not going to provide any additional guidance on the issue. I think the regs are pretty clear on what kinds of amendments can not be made to a SH plan mid-year. Obviously, others disagree. Like it or not, the regs are the clearest guidance we are going to get.

It's still the same. The revised EPCRS Rev. Proc. still has not been released. The EP Phone Forum on EPCRS in August 2011 said the following: That quote is copied from the transcript. http://www.irs.gov/pub/irs-tege/epcrs_phon..._transcript.pdf

I think you will have to count all of the comp anyway. As shared employees, you do have to count all the hours. Normally, a plan will only count compensation with the employer(s) who adopted the plan. With a controlled group and shared employees, I think you will have a 414(s) problem if you don't count all of the compensation. It won't be a 414(s) safe harbor definition since you would be excluding some of the compensation with the "employer" in a manner not specified as a 414(s) safe harbor. You will fail the ratio test since only NHCE's have the exclusion. The SH contribution is required to use a 414(s) compliant comp definition, so I don't think you can be SH if Company B comp is excluded.

Tom's quote looks like it is from:

The first step is to see what the plan says. Our VS document allows you to have the regular match apply to either only pre-tax deferrals or to only Roth deferrals. I wouldn't want to use that type of provision, but it is possible. (It does say this provision can not be used for the SH match.) Assuming the Roth amendment in question says all deferrals are matched, the participant who defers 3% pre-tax and 3% Roth is deferring 6% of compensation and would receive the same match that he would if he deferred 6% of comp pre-tax. Matching contributions can not have Roth treatment, so I can't think of any reason to track match attributable to the Roth deferrals separately.

It's a judgment call on whether a multiple year failure is insignificant and can be corrected under SCP or significant, which means VCP. Here is a previous discussion. http://benefitslink.com/boards/index.php?showtopic=47539

We always disclose new or higher fees before they take effect. The main reason we do it that way is to try to reduce participant complaints. If the fee is reduced, we make the change and update the disclosure shortly afterward.

Your answer should be addressed in the Plan's Roth provisions. Our VS document has several options for the source ordering for distributions, including letting the participant choose.

Was the contribution already allocated before the partners' earned income numbers changed? If so, you may be able to look at it as the contribution was originally allocated using incorrect compensation information and correct the allocation under EPCRS by allocating additional amounts to those who were shorted because of the incorrect compensation information. The extra amounts would be deductible in 2011, not 2010, but would be treated as a 2010 annual addition.

Depending on the amounts and timing, treating the excess as prefunded may just be creating another problem. Deferrals and match can not be pre-funded, see 1.401(k)-1(a)(2)(iii)© and 1.401(m)-1(a)(2(iii)(A). If the excess amount is small and the correction is made with the next deposit, it will probably work as you suggest. It also helps if the employer pays in arrears. But, it doesn't work in all situations.

Some documents specify a contribution deadline. If not, the timing for the employer contributions to be treated as annual additions gives you a deadline.

In all fairness, there are some DOL investigators that would do it this way. For the aggressive investigators, I agree that reason usually doesn't work. Using their own guidance against them doesn't always work, either. We have one client that finally told the investigator their deposits were not late and they were not going to agree that they were late. They also told him they would be glad to see him in court if he wanted to pursue it that far. He backed down, then audited their ESOP, looking for more "late" deposits. The ESOP had no employee contributions or loans and the 5500 filing clearly reflected that. But, he still asked for information about the timing of deposits of deferrals and loan payments in the ESOP.

There isn't much consistency in what we are seeing from the DOL on the timing issue. It is up to the individual investigator to set the standard used to judge the plan. Some are reasonable, but I had one tell me that if it wasn't mailed on the pay date, she considered it late. I think some of the more aggressive ones look at it as the penalties are small, so most people will just pay it rather than fighting it.

I had some success prior to the safe harbor being issued. If you want to argue with them about what the standard was at that time, you will find some useful information in the preamble to the final regs. I gave the investigator selected pages with the passages that supported our position highlighted. http://www.dol.gov/ebsa/regs/fedreg/final/96_19791.pdf Search for the word "monthly". You will find some interesting sections referring to monthly deposits. If the deposits were mailed in, you will also want to look at footnote 6. The investigators we've dealt with wanted to count the date the deposit shows up on the statement as the deposit date even though the check was mailed. Footnote 6 says the DOL uses a mailbox rule if the check clears. You may get some pushback over proof of when the deposits were mailed. We've been recommending our clients keep documentation of when each deposit was mailed. That doesn't help you here, but it's something to consider going forward.

I agree with Jim. That's also what I would expect it to be unless the amendment stopping the fixed match says something different.

K2, you'll have to look to the plan document for the answer. What does the plan say?

The usual situation where this happens is with a new participant, so that is where most of the discussions focus. I don't see Rev. Proc. 2008-50 as providing different treatment based on when they became a participant. The correction is for a failure to implement an investment election on a timely basis.

I don't think the definition of compensation they want to use would be considered reasonable under 1.414(s)-1(d)(2). But, you are not required to use a 414(s) compliant definition of compensation to allocate the employer contributions [see 1.414(s)-1(a)(2)]. You can allocate based on it, but your testing would have to use a different, 414(s) compliant compensation definition.

The universal availability issue comes from the regulation 1.403(b)-5(b)(4)(i) all or nothing rule for excluding those who work under 20 hours per week. There have been several threads about this issue in the last couple of years. If your plan is ERISA covered, that only increases the risks of using the <20 hours per week exclusion. You will also need to look at how the plan document defines an hour of service.

I've only done a couple of DFVC filings, but no problems with either. I'm surprised they wouldn't jump at the chance to use DFVC considering the huge difference between the late filing penalties if the DOL figures out on their own that the filings are late and the DFVC filing fee.