Bird

Haven't looked that closely but for now am hoping the ASPPA continuing ed requirements will take care of most of it. I know there are some particular components such as ethics that have their own hours requirements so it does require more careful attention.

A couple of not-necessarily-consistent thoughts- First, the IRS is not going to come looking for your $3 just because the DOL shares information with them. Second, I would pay the money just because I know they don't want it. I would also like to be able to say to the dol later that it was paid. That said, I have no problem with Austin's position. Nothing will ever come of it. Third, I don't understand GBurns' analogies.

The instructions for 2f (corrective distributions) say "Include on this line all distributions paid during the plan year of excess deferrals..." I don't see that these pending distributions are more deserving of reporting as expenses and liabilities than, say, a distribution pending because of termination of employment, retirement, attainment of normal retirement age where a plan allows in-service distributions due to that event, other in-service distributions that might or might not occur because a participant has satisfied a condition...or for that matter, all assets of the plan, which are really just benefit liabilities. Where is the line drawn? I would put up a fight at least.

Oh, now I understand that we have switched gears from the government plan with key man insurance to a private company with insurance of an unknown nature... odds are pretty good that this is not key man insurance, just one participant (the owner) who "decided" (i.e. was sold) to buy insurance using his own account's money. It is proper that the trust be the owner and beneficiary, even if it is for the benefit of only one participant. Look at a prior year's val to see how the premium payment was treated; it was probably treated as a contribution to the owner's account - at least it should have been, so if his total contribution was 4,000, 3,000 went to the "side fund" (i.e. pooled account) and 1,000 went to insurance. Of course, there's always the possibility that it was overlooked and not included in the trust accounting at all; then you have a different mess on your hands. But it's ok to pay premiums from the plan sponsor directly to the insurance company; they are treated as contributions. I'd prefer that the trust pay the premiums, as a transfer within the trust, because if it goes from sponsor to insurance company you've locked in a minimum contribution.

We don't know if the plan is pooled or segregated accounts. If pooled, then treat the premium payment as a contribution. If segregated, then you'd have to somehow allocate a little bit of the premium to each participant as a contribution...but then, assuming the accounts are self-directed, where is the "direction" from each participant for this? It's not really practical for a self-directed plan. We also don't know if it is term or whole life. We would expense term premiums, and treat whole life premiums as purchase of an investment, as Bill suggests.

There are "amendments" and there are "amendments." This is easy, boilerplate stuff, included in the cost of running a safe harbor plan the right way, for us.

An amendment is needed, not just a notice. But it's not such a big deal, is it?

My recollection is that a profit sharing plan may buy second to die insurance with the spouse as one of the insureds. Mmm, looking at a plan document, it specifically permits insurance on the life of the participant and/or the spouse. Then it goes on to say that the limits for premiums on a policy covering the participant are 50% whole life/25% term, and then another section says that seasoned money (accumulated in the plan for 2 years, or where a participant has participated for 5 years) may be used to buy insurance on the life of the participant and/or the spouse. I think I'd see if your document is that specific and follow the terms. Maybe someone else can provide a cite...

Yeah, it's hard to say exactly what's missing, could simply be a resolution as suggested. Since you said you worked with the provider of the acquired company's 401(k), I'd go to them for help. Also, I'm wondering whether the plan was "terminated" or "merged." If it was terminated, then the participants would have had the right to take distributions from the plan, and I doubt that's what happened. It was probably a merger, and while one plan ceased to exist in its former state, that doesn't mean it was terminated. That terminology could be confusing the auditors. Finally, be aware that (if you're talking about a CPA audit as needed for the 5500), they don't seem to want to ever say "hey, we're not quite sure what's going on here, what were you trying to do?" They just say "this is the way it is" and make you figure out if they misunderstood something...and something that could be taken care of in a 5 minute phone call turns into an ordeal - more billable hours I suppose. At least, that's been my limited experience.

We have some of these and do provide a boilerplate quarterly notice. Another area where there is widespread noncompliance, no doubt. What "stuff"? If we're still talking about the diversification requirements, etc., no. We do provide the equally irritating and useless list of assets though (for non-participant directed plans).

You can't do what you can't do. I might try to get the person to sign a new form saying no deferrals, or write a note to the participant and keep it on file explaining why no deferrals will be withheld. I don't see any reason for complaining about the document - I'd rather just deal with it on this rare basis than add more words to an already bloated document.

We are using 180 days, and yes, paying additional amounts within that time frame without further papers.

Maybe someone who knows this inside and out can straighten me out, but this is what I think I know: technically, the VFCP calculator (based on federal underpayment rates) can only be used for VFCP filings. In other words, if you don't do a VFCP filing, you are supposed to calculate "the greater of" using those rates or the actual earnings the participant would have received under the plan investments. This is widely ignored, to say the least. If you don't do a VFCP filing, and you properly report the late deferrals on the 5500 as you should, then you might get correspondence about it, asking if you did a VFCP filing or whatever. If you did, then you tell them you did, if not, you can do it then. (It's kind of a pain.) I think most people are paying the excise tax and considering that to take care of it. If you get the correspondence then you say you paid a penalty and hope it goes away. I don't think that's entirely correct but I think that it is working (if your goal is to minimize grief).

I agree, no problem. It might help to think of it this way: she is getting exactly what everyone else in her group is getting as a regular non-elective profit sharing contribution. But she's also getting some extra under a different part of the document specifying top heavy minimum contributions.

There is an outside firm that processes tax returns - Vangent - under the EFAST system. I don't know about the 30% figure and whether there is/was a particular problem with EZs. I remember some glitches when they first started but not that kind of problem ratio.

J Simmons, I agree with everything you said. I don't know how the groups are set up and was just commenting that the allocation didn't necessarily have to be pro-rata across the board. It would likely not be the same as an allocation formula that used PD.

I agree with QDROphile - "forfeit" is an inappropriate term, but I wouldn't have a problem with removing those erroneous deposits from the participant accounts and "recharacterizing" them as deferral contributions as suggested. Yeah, I know that deferrals can't be deposited before they are withheld and all that, but the idea that you can't make a mistake without fixing it in a reasonable manner is a little much. Having said that, I would not return the money to the employer as desired in the original post.

Since you have a non-safe harbor allocation formula, you must general test, but you don't have to cross test (i.e. on a benefits basis in a DC plan). An allocation that is effectively pro-rata as you suggest will pass the general test on a contributions basis. (If the owners make more than the other employees you might be able to give them a little bit more and impute permitted disparity to pass the test.)

I attended a Ft William webinar on this and they cited final DOL regs on electronic filing, saying the paper option was available until EFAST2 becomes operational. regs

Thanks Sieve, for explaining the pro-rated comp. That makes sense.

K2retire, the proposed regs are effective immediately. I agree the pro-rated comp limit appears to apply to everything - testing, other allocations, etc. I guess that is "punishment" for eliminating the SH? That's an...interesting concept.

What do you think pro-rating the comp limit means? If SHNE is suspended 6 months into the year, you only get 1/2 the comp limit for the full year? I don't quite get it.

If you credit service with B that should take care of making them eligible. Just be aware that if you have, e.g., semi-annual entry dates, that they would not enter until July 1 unless you also amend the plan to have a special entry date such as 5/1. Ask the "outside person" for a cite on that "opinion."

Sieve-yes, that's correct. (But I thought the days of abated penalties for regular 5500s were over; glad to hear that you've been successful with that.)

I agree that filing a corrected return showing it as final (including financial transactions resulting in $0 net assets) should be all that is needed. Sieve, I think it is fairly common practice to file a return late*, get an IRS notice about it, and file under DFVC before the DOL sends their notice. I have a vague understanding about the different agency/department roles but not well enough to explain it. But if you get the DOL letter it is too late to use DFVC. *That is, to have an inattentive client file a return late...if it is known to be late when filed it is best to use the program up front.