Kevin C

I have some concerns about the annual part of the fee to pay for part of the audit. How was the amount determined? Does the auditor charge that amount extra per loan? Or, did the employer decide on the amount? Timing is another issue. I take out a loan this year and pay the annual fee. The audit isn't done until next year, but I paid the fee this year. My gut feeling is that would be a problem.

The investment change won't trigger a blackout since it is permanent. But, you will still have a blackout if distributions or loans are temporarily unavailable for more than 3 business days during the change.

A study to help the sponsor decide how much of the excess to transfer sounds like a settlor activity to me. The expenses to implement their decision sounds like administrative expenses. You probably have already seen this, but the DOL has a good discussion of Settlor vs. Plan Expenses on their website. http://www.dol.gov/ebsa/regs/AOs/settlor_guidance.html

No, you can not have a limit that only applies to catch-up eligible participants.

If you are referring to the PS contribution provisions here, they can change this. They can't change any provisions that satisfy the requirements of 1.401(k)-3 and 1.401(m)-3 and remain SH, but that shouldn't affect the PS contribution.

I don't see any way you can make salary deferral contributions now for 2010. Deferrals come out of your pay, so they can't be made retroactively. The IRS and DOL publications on SIMPLE IRA's say that employee deferrals must be deposited within 30 days after the end of the month that the amount deferred would otherwise have been receivable as cash. So, the deadline to deposit amounts that were actually deferred in December 2010 is 1/30. The accountant may be referring to funding a regular contributory IRA for 2010. He is not required to use EPCRS. It is a voluntary program. Other correction methods may be ok, but if you follow EPCRS, you know the IRS will accept the correction. It looks to me that a SIMPLE can only use SCP (Self Correction Program) for insignificant operational failures. Insignificant vs significant is addressed in Rev. Proc. 2005-50, Section 8. Some of the factors to consider are in 8.02. It sounds like they improperly excluded most of the eligible NHCE employees for multiple years, so I think that would be considered a significant failure. http://www.irs.gov/irb/2008-35_IRB/ar10.html The correction method should be for the employer to contribute half of the missed deferrals plus all of the missed match, plus lost income. Under EPCRS, they have to correct the errors for all years, even if they happened in closed tax years. The timing of it will be up to the employer since they are the ones who have to make the corrections. Normally corrections are made in a timely manner when a failure is discovered because it can get much more expensive if the government comes calling before the correction is at least substantially completed. You might tell them a friend of yours told you it is too late for you to defer for 2010 and it would create problems for your employer if you tried. You don't want to cause problems, so you will start deferring for 2011. Then, I would see what they do. Hopefully, they will go ahead and fix it. Keep us updated.

There is a discussion in the preamble to the final 401(k)/401(m) regulations about why catch-up contributions can not be excluded from receiving a safe harbor match. But this example matches deferrals up to 8% of compensation, so it doesn't sound like a safe harbor match. I don't remember anything like that for a regular match. Our VS document allows catch-ups to not be matched, but only for a non-safe harbor match. I agree the problem here is the payroll by payroll match with no true-up. I also agree a true-up is the best practice. Without the true-up, timing of the deferrals can have a negative impact on the match received. There is one other plan provision you should check into. Are there any special rules on the catch-up contribution? The plan could apply the catch-up limit on a pro-rata basis each pay period. If it does, that might take care of this issue.

I think what it is saying is that if you file for a determination letter and you disclose, in writing, all of the qualification failures in the initial filing (or at least before the agent realizes there are problems) then you can still be eligible for VCP. But, looking at it another way, if the agent thinks there is an undisclosed possible qualification error, you lose the ability to file under VCP for the disclosed failures. I still think the best option is to file under VCP first and then file for the determination letter a few days later.

Yes.

You will need to submit a completed Appendix F and Schedule 1 and/or Schedule 2 as applicable. You do not complete Appendix C. The description of the failure, the proposed correction method and the description of the change in procedures are part of the schedule(s). The IRS has pdf files for Appendix F and the schedules that you can fill out. You can't save changes using adobe reader, so I don't consider that very useful. The agent on the filing I just finished wanted me to redo the filing using these .pdf files because she didn't like the way it looked when I copied and pasted them from their website into word. http://www.irs.gov/pub/irs-tege/vc_appendix_f.pdf http://www.irs.gov/pub/irs-tege/vc_appendix_f_schedule_1.pdf http://www.irs.gov/pub/irs-tege/vc_appendix_f_schedule_2.pdf The links to these are on http://www.irs.gov/retirement/article/0,,id=205524,00.html in the Relief for Nonamender Failures under VCP section.

Only if you need to show they qualify for the 6 year pre-approved document cycle as an intended adopter under Rev. Proc. 2007-44, Section 17.04. A prior adopter, new adopter or the adopter of a replacement plan as those terms are defined in Section 17 are eligible for the 6 year cycle without signing Form 8905.

Circular 230 covers practice before the IRS. http://www.irs.gov/pub/irs-pdf/pcir230.pdf My experience with the DOL has been that they don't care who they deal with as long as they get the information they want.

I would file for VCP before you submit for the determination letter. When you file for a determination letter, you are considered "under examination" [Rev. Proc. 2008-50, Section 5.07(3)] and are not eligible for VCP [section 4.02]. Under Section 6.05(3), it looks like you are not required to submit for a determination letter as part of the VCP filing since only interim amendments were late. So, it would be your regular Cycle E filing. I hope you have better luck getting the $375 fee for a filing with only late interim amendments and amendments needed to implement optional law changes than I did on my last filing. The filing included only interim and optional law changes starting with the automatic rollover amendment and going forward. The agent insisted the $375 fee only applies if the remedial amendment period for the amendment has not ended. Then, she asked me if I knew what a remedial amendment period was. After some correspondence, she decided that all of the late amendments except for one due in 2007 adopting some items from the 2006 cumulative list would be covered by the $375 fee, but if we wanted the 2007 amendment included, the fee would be half of the regular VCP filing fee. She never explained why that amendment was a problem, but the two older amendments were not. When I did not agree that she was telling me the correct filing fee, she gave me three choices: 1) drop the 2007 amendment from the filing, 2) send her another $625, or 3) she would reject the filing and they would keep the filing fee. Hopefully, you won't get the same agent.

I've received several written survey requests on behalf of the IRS over the years. Usually they are about a Form 5310 filing. The last two were in 2009 from Macro International/ScanTron. They may have changed contractors and gone paperless. There are some phishing scams going around that claim to be from the IRS. If you have doubts, you can try contacting the IRS to see if it is legitimate. IRS article on scams by e-mail, mail, phone or fax. http://www.irs.gov/privacy/article/0,,id=179820,00.html

Rollover accounts can be made eligible for in-service distribution at any time. What does the plan say? Our VS document has it written into the base document that the rollover account is eligible for in-service distribution at any time. If the Plan doesn't already allow it, an amendment could allow in-service distribution of the rollover account at any time only for conversions to Roth.

Maximum eligibility requirements for a SEP are age 21 and service in at least 3 of the 5 preceding years. As you know, maximum SIMPLE eligibility requirements are earning at least $5,000 in at least two prior years and reasonably be expected to earn at least $5,000 for the year. For both, union employees can be excluded. The Employer is responsible for notifying eligible employees. Regardless of the plan type, it sounds like you have been improperly excluded. Hopefully, it was an honest mistake. My suggestion is to quietly wait and see what kind of information you get from your boss. A week or two more won't make much difference at this point. I think it's too early to start a discussion about contacting a three letter agency. Post back when you get more information, or in a couple of weeks if you don't.

Could it be a SEP instead of a SIMPLE? A 3 year eligibility requirement sounds like a SEP. If it was in place before 1997, it could be a SARSEP (salary reduction SEP). Let us know what you find out when you get the information from your employer.

Rev. Proc. 2008-50 asks for comments on your situation. That section might be helpful.

401king, I think you are right. An amendment can not reduce the vested percentage of someone who is a participant prior to the amendment.

According to the IRS's EPCRS phone forum in August, the updated Rev. Proc. is in the approval process. It will include corrections for 403(b) failures including failure to timely adopt a plan document. The discussion is on page 2 of the transcript. http://www.irs.gov/pub/irs-tege/epcrs_phon..._transcript.pdf

You might find something addressing this in the Son's PS plan document. Our VS document has a section on transfers from other plans that starts with: There is also language about protected benefits if the transfer was not initiated by the participant and other language about specific situations that might arise.

When you get that issue resolved, you should also consider talking to whoever handles your plans about why you still have two plans. The deduction limit for profit sharing plans increased to 25% of covered payroll for plan years starting in 2002. With that change, there is no need to maintain both a MP and PS plan. If your PS Plan doesn't allow 401(k) contributions, you should ask if adding that feature would benefit your situation.

The topic came up briefly in the IRS phone forum on EPCRS. It starts on page 5 of the transcript. http://www.irs.gov/pub/irs-tege/epcrs_phon..._transcript.pdf It's really a judgment call. We dealt with an agent recently who insisted if more than one factor indicated significant, then it was a significant failure. The phone forum speaker, an EP Voluntary Compliance coordinator, sounded more reasonable in his interpretation. He said you look at the total picture and one factor may offset another. Another helpful paragraph is on page 6:

Could they be saying a 401(a) plan for the match? Yes, it is possible to have the match on 403(b) deferrals go into another plan. We had a couple of clients that were set up this way pre-EGTRRA when the 415 limit was 25% of pay. For one, the 401(a) plan document was a PS volume submitter document with match and ACP language added. Another pair of plans we inherited used a money purchase document with match and ACP language added for their 401(a) plan. Both were submitted for and received GUST determination letters as minor modifiers of volume submitter documents.