Kevin C

Has anyone actually received notification that a DFVC filing was approved? The only DFVC filing I've done was in late 2005. If the client received anything from the DOL, they never told me about it.

I don't think you're off your rocker. I've just never seen that kind of set-up before. I've had a few doctors tell me they don't have employees any more because they are all leased. My first question is who hires and fires them? The doctors have always answered "I do". That's the great thing about this site. I'm always learning something new.

I've never come across a situation with one of our clients where the entire office staff were not common law employees. Can you elaborate on how that works?

Maybe repaying the less than $200 distribution would make the issue go away?

If I understand the situation correctly, I think you have discrimination issues. This is a new entity with an owner and some employees. The new plan would grant prior service credit for service with an unrelated entity that only the owner worked for. So, for the first year, only the owner would participate. If nothing else, I think the timing of the amendment (or adoption of a new plan with this provision) is discriminatory. It's a facts and circumstances determination under 1.401(a)(4)-5(a). Others may disagree.

You said money purchase plan, so I think you are missing step 3) correct the funding deficiency. The VCP filing fee could be more if the IRS decides it's an egregious or intentional failure. See Rev. Proc. 2008-50, Section 12.06.

In SMMoran's situation, what protected benefit would be eliminated by removing the early retirement provision? I'm assuming this is a DC plan. Early retirement vs regular termination doesn't affect the participant's account balance, unless it affects the participant's right to receive the contribution for the year. For example, if the plan specifies early retirement as an exception to a 1,000 hour and employment on the last day of the year requirement to receive the contribution for that year. If it does, the amendment might be a problem unless the amendment is effective on the first day of the plan year and is adopted before the effective date. Vesting is not affected by the amendment because everyone would be 100% vested under the 3 year cliff vesting well before reaching age 60 and 7 years of service. Distribution timing is not affected because the plan provides for immediate distribution on termination of employment for all types of terminations, not just early retirement. If you consider distribution at early retirement as a separate optional form of payment, it can still be eliminated from a DC plan as long as an otherwise identical lump sum distribution is provided [1.411(d)-4, Q&A2(e)], which is the case here. What else is left to be protected under 411(d)(6)? If the amendment could actually affect someone, then I would agree it must be prospective only.

No, the Form 8905 needed to be signed by the end of the first 5 year cycle. That was 1/31/2007 for cycle A, through 1/31/2011 for cycle E. The other option was to adopt a pre-approved document (or one that had been submitted for approval) by the end of the first five year cycle. If they did not sign Form 8905 with a M&P sponsor or volume submitter practitioner, you will need to look at a VCP non-amender filing under Rev. Proc. 2008-50. The IRS has updated that Rev. Proc. but it has not been published yet.

If they signed a Form 8905 by 1/31/2008, they are on the 6 year prototype cycle as an intended adopter. Otherwise, they are on cycle B. It doesn't look like they qualify for the 6 year cycle as a prior adopter, new adopter or adopter of a replacement plan.

I suggest you contact the abandoned plans person at the DOL office in your region. You can find the office locations and contact info at: http://www.dol.gov/ebsa/aboutebsa/org_chart.html#section13 They should be able to help you even if the plan doesn't meet the requirements to be in the abandoned plans program. The DOL's emphasis will be on making sure the non-owner employees get what they are entitled to, so they may be able to help you cut a few corners.

From FAB 2010-1: http://www.dol.gov/ebsa/regs/fab2010-1.html

We have an on-going IRS audit on a client's 403(b). The audit started in Fall 2008. We've been responding timely to information requests, but it was taking 3-6 months each time before we heard back from the agent. Our last contact was an 8 page letter we sent in February in response to an information request. We have not heard anything since then. Do they have a limit on how long they can drag this out?

Having six years worth of corrections doesn't change the available correction methods. But, it does affect whether the failure is considered significant or insignificant. With a significant failure going back 6 years, I think you are under VCP, not SCP.

There is an article on the IRS website that looks like it says they will no longer allow Form 8821 for representation in a plan audit. The article is here. http://www.irs.gov/retirement/article/0,,id=224400,00.html

MJB, Are you referring to brokerage firms on the IRS approved non-bank trustees and custodians list? Or, something else? I'm hoping that what you are referring to might help us with an issue in a client's IRS audit.

If you aren't comfortable with amending effective 1/1/2011, you can always use the approach Lou suggests. There is nothing wrong with providing 30 days advanced notice before the amendment is effective. I just don't see anything in the Regs that requires it unless it is a mid-year change.

The plan must have proper custodial accounts. See 1.403(b)-8(d). Just because they are a mutual fund company does not mean they can hold 403(b) custodial accounts.

As long he isn't pressuring himself to loan the loan proceeds to the company, I don't see a PT, either. An example from the DOL regs may be helpful even though it isn't exactly this situation. There can be situations where the loan becomes part of a PT due to actions outside of the actual loan. From the same Reg.:

The 30 day advanced notice requirement is part of the rules for mid-year suspension or reduction of the SH match. The Sungard article also covers mid-year changes. If the amendment is done by 12/31/2010, effective 1/1/2011, it won't be a mid-year change. My opinion is that you can amend by 12/31/2010 to remove the SH match effective 1/1/2011 without having to give 30 days advanced notice. You may have some upset employees, but that is not a plan issue. My recommendation would be to do the amendment asap and to suggest that they explain to the employees why the decision was necessary.

The link above has information on the next one. I usually check the IRS website every month or so to see what the upcoming topic is.

You can get free credits from the IRS. The available credits are limited, but you can't beat the price. http://www.irs.gov/retirement/article/0,,id=218995,00.html

Any chance they are using transitional relief to treat pre 2009 individual annuity contracts or custodial accounts for terms as not being part of the plan? Or, the 80-120 rule? http://www.dol.gov/ebsa/regs/fab2009-2.html The audit requirement is discussed in the 3rd paragraph of the Background section.

The regs say prorating the catch-up limit by pay period is allowed. The only way they can refuse to allow her to contribute catch-up is if the plan doesn't allow catch-ups. That is assuming the union and 410(b)(6)© transition period exceptions don't apply to her. Otherwise, the plan fails the universal availability requirement for catch-ups.

The balance is subject to mandatory withholding if the beneficiary is the surviving spouse. Distributions to a nonspouse beneficiary are subject to voluntary withholding since mandatory withholding does not apply.

Maybe, but I think 1.401(k)-3(e)(1) and 1.401(m)-3(f)(1) prevent you from making the changes during the year. The compensation definition used for QACA deferrals and the safe harbor contribution must satisfy 414(s). If the plan satisfies 414(s) when bonuses are excluded from the compensation definition, then you can do it. But only if the amendment is in place before the beginning of the year and remains in effect, with no changes, for the entire year. If the change affects the language in the safe harbor notice, you are outside the at least 30 day deemed reasonable period for providing the notice to a calendar year plan. You may still be ok sending it now, but may need to justify that the timing is a reasonable period before the beginning of the plan year.