Kevin C

Austin, Our adoption agreement format VS document has a box to check for "Roth Deferrals are not eligible for any Matching Contributions under the Plan (other than Safe Harbor Matching Contributions)." It's in the Salary Deferral section of the AA, not the section with the match provisions.

The interim amendments I've seen lately for preapproved plans allow plan sponsors to elect optional provisions, with defaults that apply if nothing is selected. The document sponsor adopts the amendment with only the defaults applying. If the plan sponsor wants to select one of the non-default optional provisions, they need to adopt the amendment themselves. Is it possible that this client needed to select a non-default optional provision in the PPA amendment adopted by the document sponsor?

I agree, there is no 30 day advanced notice requirement if the termination is in connection with a 410(b)(6)© transaction or if the sponsor incurs a substantial business hardship. As Austin notes, the requirement for 30 day advanced notice is in (g) which applies to amendments during the year. If you qualify for a final short plan year under 1.401(k)-3(e)(4)(ii), you are not amending mid-year when you terminate the plan. The preamble to the final regulations has the following:

There was an article on this topic posted in the news section today. http://us.select.mercer.com/blurb/170617/ The article includes a link to the DOL amicus brief.

I think the future earnings on the pre-amendment balance would also be protected. I thought the regs would be more clear, but the following is all I could find:

Is your employer a governmental entity or a church? Do you have a plan summary or SPD (Summary Plan Description)? If so, what does it say about the allocation of matching contributions?

The 401(k) regs say the SH non-elective contribution is a QNEC.

While the restrictions are in place, wouldn't the annual payments be considered part of a series of substantially equal periodic payments ... under 1.402©-2, Q&A 5? It looks like under © that a new determination is needed if the payments change when the restrictions no longer apply.

The Reg section you cited prevents you from allowing some of the <20 hour per week people to defer while excluding others. You have to either include all of the <20 hour per week people or exclude all of them. In most cases, I'd say the <20 hour per week exclusion is more trouble than it is worth. You lose the ability to use the exclusion if a single person who could be excluded is allowed to defer, even if it is by mistake. If the plan is ERISA covered, you can have a situation where ERISA forces you to include someone who could be excluded as <20 hours per week under the IRS Reg.

Unless Plan A was really small compared to Plan B, you will need to determine the weighted average of the 2008 NHCE ADP/ACPs. The coverage change rules under the prior year testing method are in 1.401(k)-2©(4) and 1.401(m)-2©(4).

I helped out with an ESOP that had this issue come up during their 5310 filing. The reviewing agent set the discontinuance date as the end of the plan year following the last plan year a contribution was made. A small number of participants were forfeited in one later year, but before the plan terminated. We proposed to correct the insignificant failure under SCP using the reallocation method in Rev. Proc. 2008-50. The agent initially said we could not use use the reallocation correction method and even argued this was a significant failure so we could not use SCP. After some back and forth and a threat to request a Technical Advice Memorandum if they didn't agree with our position, they finally agreed. When the determination letter arrived, it was conditioned on correcting the operational failure using the reallocation correction method as we proposed.

Yes, I agree that the additional matching contribution provision can not be effective until 1/1/2011. The limits on matching contributions for the ACP SH are in 1.401(m)-3(d)(3). I think that makes the match provisions provisions that satisfy 1.401(m)-3, so under 1.401(m)-3(f)(1), they can not be amended during the year. The only exception for mid-year amendments is if you are are using the rules in (h) for the reduction or suspension of a SH Match during the year, which is not the case here.

If the prior prototype was a GUST document, I think they will have to adopt an EGTRRA pre-approved document by 4/30/2010 unless they happen to be under IDP Cycle E. The 4/30/2010 deadline is under the 6 year cycle for pre-approved plans. But, they are not considered a "prior adopter" under Rev. Proc. 2007-44, section 17.02 unless they actually adopt an EGTRRA pre-approved document by 4/30/2010. Since they currently have a prototype, they would not qualify as a new adopter or intended adopter. So, if they do not adopt a pre-approved document by 4/31/2010, they are not eligible for the 6 year cycle. That means they are under the 5 year IDP cycle. Cycle D ended 2/1/2010, so Cycle E is the only IDP EGTRRA cycle currently open.

If the document contains the SH provisions, then you have an operational failure. It should be covered in Rev. Proc. 2008-50 under Self Correction of a Significant Operational Failure in Section 9. You may not be able to treat 12/31/2009 as the due date for the 2008 SH contribution. Most documents have a provision that says employer contributions are due by the due date for the tax return including extensions thereof. If your document has similar language, the due date is likely earlier than 12/31/2009.

ASPPA released ASAP 10-03 yesterday, which says the 2009 5500-EZ has not been released yet and that ..."we expect the release of the form may not come until this summer."

I can't think of anything else other than the normal testing issues you would expect with the 401(k) and employer contributions in the 403(b).

Universal availability is something you should always be concerned about with a 403(b). You can exclude from the 403(b) employees who are eligible to defer in a 401(k) of the employer [1.403(b)-5(b)(4)(ii)(B)]. What are the eligibility requirements for deferrals in the 401(k)? If it's anything other than date of hire, I think you have a problem. Have you already verified that your employer is an "eligible employer" under 1.403(b)-2(b)(8)(i)?

Was the previously adopted prototype a GUST prototype or an EGTRRA prototype? Which 5 year IDP restatement cycle are they under?

The mid-year amendment restriction you are referring to is in: The same rule is in 1.401(m)-3. I read that as saying that if a plan provision satisfies a rule in 1.401(k)-3, then you can't amend that plan provision during the year. I don't see anything in 1.401(k)-3 that refers to a profit sharing contribution, so profit sharing provisions would not be plan provisions that satisfy the rules of 1.401(k)-3. I don't see any reason why you can't add the PS contribution mid-year.

If this is a small plan, they may have a problem with the small plan audit waiver rules. The value for non-qualifying assets ususally can't be determined until well after the year end. If the total value of non-qualifying assets increases unexpectedly, you may find the bonding amount is not sufficient to use the audit waiver exemption. I'll second that getting a market value for the asset will be a pain in the ...

I'm looking at mid-90's era distribution paperwork and an SPD from one of the large actuarial firms that lists that kind of annuity option. They refer to it as a "Joint and Survivor Option". They also describe a "Joint and Contingent Option" where the annuity amount changes only on the participant's death. To make matters more interesting, it says the automatic form of payment is a "Qualified Joint and 50% Survivor Annuity", where 50% of the annuity amount is payable to the spouse upon your death for your spouse's lifetime and if your spouse dies first, your benefit does not change. To their credit, the distribution paperwork clearly describes each of the payment options and what causes the amounts to change. If my memory serves me, at a former employer we called the annuity described in the OP a Joint and Last Survivor Annuity.

We have submitted modified VS documents with what I consider to be fairly significant changes using Form 5307 and still received determination letters. One example is a money purchase plan VS document with language added to provide a match based on 403(b) deferrals. The agent on that one told me she wasn't sure it would be considered a minor modification. When I reminded her the prior restatement of the plan received a determination letter using Form 5307, she dropped the issue.

Well, we finally got our response from the IRS. They cite code sections 403(b)(1)(D), 403(b)(12)(A), 410(b)(4)(A), sections of the safe harbor provisions in Notice 89-23 and the final 403(b) regulations effective 1/1/2009. Did I mention that the years under review are 2007 and 2008? Their conclusion is that since ONE individual who worked less than 20 hours per week was allowed to participate, the plan fails to satisfy the nondiscrimination requirements of 403(b)(12)(A)(ii), so the entire plan is disqualified. I guess I should be glad they gave us plenty of time to select an attorney.

That's a scary road to start down. I don't recall seeing anything that specifically disallows asking employees to reimburse for profit sharing or matching contributions, either. I actually had a client ask if he could do that. I told him no, you can't do that. waid10, assuming the deferral elections were made timely, I think you need to follow the correction method in the Rev. Proc., which you summarize in your post #4. The timing of the election is most likely to affect your second situation. Did the employee make the deferral election for $1,000 from her final 2009 paycheck in time to have it in effect for that paycheck? Does the plan have a written policy for the timing of implementation of a deferral election? If for example, she turned in the election change on 12/30, it could be that the change wouldn't be effective until the first payroll in January.

ASPPA's code of conduct has a control of work product section that prohibits backdating or assisting with backdating. K2, the bottom line is you have to make the decision for yourself. Which ever way you decide, you will have to live with the consequences.