Kevin C

The next paragraph of the regs defines otherwise identical single-sum distribution. The term covers more than just timing and eligibility conditions to receive the form of payment. An entire balance lump sum distribution option will work as long as it satisfies the rules. A partial lump sum provision looks like it would work, too, as long as they have the choice to receive the entire balance if they want it. The reg says that the otherwise identical distribution form is a single-sum distribution.

If there is going to be a policy change, I would prefer the original new policy, with the clarification that government documents are not considered articles. But, I'm not as optimistic as others seem to be that the individual causing the problem will follow the rules. Dave, It's your forum. Whatever you decide is OK with me.

If an otherwise identical lump sum is available, you can eliminate the installments.

The Form 5305-SIMPLE instructions says providing employees a copy of the form satisfies the summary requirement. The SPD GMK was referring to is something required for the qualified plans that most of us on the forum work on. One reason employers use a SIMPLE instead of a 401(k) or other qualified plan is that with a SIMPLE, they don't need to hire someone like us. I am surprised the IRS didn't include ERISA rights language as part of the summary requirement. At this point, I would give your employer a couple of more weeks and see if he corrects things on his own.

Hmmm, our VS document has the same kind of provision. It also has a place in the safe harbor section to elect to have the safe harbor contribution offset the PS contribution if the SH is not allocated to all eligible participants. Our pre-approved VS document clearly allows a non elective prevailing wage contribution to reduce the amount allocated as a SH match. I don't understand how that can be done and still satisfy the match SH requirement of allocating a QMAC of at least the basic SH match. But, it must be ok since it was approved by the IRS. We don't have any prevailing wage plans, so I've never looked at this before. In your case, I'm thinking you would not be able to make this change mid year. While it wouldn't really affect the amount of SH contribution each person receives, it does affect where it is allocated. It seems to me that it would be similar to a provision saying that the SH contribution is allocated in another plan. My thought is that it would be considered part of the SH contribution provisions which satisfy the regs, so you couldn't change it mid-year. If the SH match reduced the prevailing wage contribution, I would probably feel different about a mid-year change. Anyone else have an opinion?

You probably won't get a definite answer. It will depend on how you interpret the available guidance. The only thing on topic I can point you to is in the Regs. The same language is in 1.401(m)-3. The question is, are any of the provisions you need to change considered provisions that satisfy 1.401(k)-3 or 1.401(m)-3? If the answer is yes, then you can't amend mid-year. But, sometimes that isn't an easy question to answer. If it isn't clear, the conservative approach would be to have the amendment effective at the first of next year. I do have a question about the direction of the offset. Does the SH contribution reduce the prevailing wage PS contribution? Or, does the prevailing wage PS contribution reduce the SH contribution?

The ADP safe harbor regs are in 1.401(k)-3. The amendment timing rules are in (e), the Plan Year Requirement section. The QACA rules are in (j). The ACP safe harbor regs are in 1.401(m)-3. The amendment timing rules are in (f).

This discussion reminded me of an article I read recently. Fiduciary Status for Referrals http://www.reish.com/publications/article_...m?ARTICLEID=996

ASPPA ASAP 11-08 says the IRS has decided to refund the PTIN filing fee in certain situations. The referenced IRS web page is http://www.irs.gov/taxpros/article/0,,id=230145,00.html

It sounds like you have given him everything he needs to correct it properly. Hopefully, he will do the right thing. Give him some time and see what he does. If he doesn't fully correct and you want to pursue it further, you can contact a DOL EBSA benefit advisor. You can find contact information for the regional EBSA offices on the DOL website.

Definitely use the DOL's DFVC Program. It's $750 for a small plan or $2,000 for a large plan.

I would also be concerned that the arrangement might cause the PSP to be considered a CODA since it is not a one-time irrevocable election 1.401(k)-1(a)(3)(v).

We use ASC's documents. Their document system works really well. You also get a timely response when you have questions or issues with the system or the document.

The document system we use generates an amendment with the changed sections of the adoption agreement and a new employer signature page. Both are signed by the employer. The signature page has a section where you indicate why the page is being signed; adoption of a new plan, restatement of an existing plan or amendment of an existing plan. The signature page also has a line where you list the sections being changed by the amendment. Except for the additional information about the amendment, it's the same as the signature page signed to adopt the EGTRRA restatement.

A lot of this has been discussed before with no clear resolution. Here is one of those discussions. http://benefitslink.com/boards/index.php?showtopic=46028

You are misquoting the Rev. Proc. The exception to full correction is for distribution of small correction amounts, not for the allocation of corrective amounts. If you would otherwise allocate a small amount to a terminated participant with no balance in the plan and the costs of making the distribution are more than the less than $75 correction, then you don't have to allocate a correction to that person. If the person being corrected already has a balance, the additional cost for distributing the correction would be negligible since they would be getting paid anyway.

Isn't there a reasonable compensation issue there? I also wonder if there would be a consistency issue with the company tax return. They would be treating the person as not being an employee when determining FICA, but treating them as an employee for determining the plan deduction. I'm not an accounting person, but it doesn't seem right that you could do that.

Our most recent DOL audit started in October 2010 with phone calls followed by a faxed list. If you want to make sure everything is as it seems, you can look up the DOL regional office phone number on their website and call the agent using that number.

If the establishment of an alternative defined contribution plan made the participant ineligible for the distribution under 1.401(k)-1(d)(4), I think the amount paid to the participant would be considered an "overpayment" under Rev. Proc. 2008-50. The correction for overpayments is in If the entire distribution was rolled over into an IRA and no funds have been withdrawn from or added to the IRA, I think you could argue that transferring the IRA back to the PS plan is an appropriate correction.

What do you have for the prior years?

I may not understand the question, but it sounds like you have an Operational Failure with the employer contributions because the terms of the plan were not followed. I don't see why it would matter that the plan was not required to have those provisions. Whether you can correct under SCP or have to use VCP is another issue.

We've had this come up several times. I've always considered it addressed by the plan's definition of hour of service. Our plans have always said something like this: If they work and don't get paid, no hours credit. That makes it pretty hard to get credited with the 1,000 hours usually needed to become a participant.

I would do the correction in a 403(b) the same way you would for a 401(k) even though the 403(b) deferrals are not subject to ADP testing.

Austin, you are describing a situation where a blackout is being created. I don't understand any advantage to doing it that way. Why would you need to liquidate the investments while the plan is still self directed? Why not let the participants self direct up to a day or two before the change date and have the Trustees make the investment changes immediately after the plan becomes Trustee directed? The last daily valuation sets the beginning balance for the now Trustee directed plan, so distributions and loans are possible without delay.

Changing a participant directed plan into a Trustee directed plan is a permanent suspension of the participants' ability to direct investments, not a temporary one. And, once it is in effect, self direction is no longer available under the terms of the plan. I guess they could create a blackout before the plan becomes Trustee directed, if they wanted to, but why would you do that? As I mentioned before, you still have to be careful about loans and distributions.