E as in ERISA

Are you trying to send a check to participant for over $1,000 without the participant signing/providing their consent on a distribution form? Only amounts $1,000 and under can now go directly to participant in cash without their consent. General rule is that participants must consent to distributions prior to retirement. Exception: 411(a)(11) allows amounts $5,000 or under to be forced out. Exception to exception: As of March 28 2005, 401(a)(31)(B) requires balances over $1000 that are forced out to be rolled over to an IRA. Check can't be cut to participant. Must be transferred to IRA provider.

Sometimes the problem with case law is you have to be willing to go all the way to court in order to get agreement with your position. If you want things to go smoothly on examination or other enforcement action, you may want to take the more conservative IRS position.

I know that those speak to the schedule not the hours. But it seems similar principles could apply.

The ERISA Outline book also has a discussion of changes in vesting in the context of the Heinz case. It says that the proposed regulations that the IRS issued after that case would allow the employees to be on the prior schedule that was better even if they don't have three years. Otherwise you have cutback under 411(d)(6). And it cites proposed regulation 1.411(d)-3(a)(3).

I agree. If you want something to go back to the client with, note that the ERISA Outline book points out that IRC 411(a)(10)(B) and ERISA 203©(1)(B) require that employees with at least three years of service be allowed to stay on the prior schedule even if you amend it back...

Sounds like your facts completely changed since you asked the question???

I assume IRS doesn't care. What is penalty for not filing? Lesser of $100 or tax? In which case bill would be $1.20. Rounded down to $1? Plus pennies in interest. No down side to delaying?

Did you check your plan document? Plans will frequently specify an earlier due date for the notification such as March 1 in order to avoid this problem (assuming that the excess occurred based on contributions to more than one employer).

My understanding is that they have no plans to update in the near future.

Yes. But it can be difficult to do administratively. There can be time lag between last payroll deduction payment to old plan and transfer into new plan. Especially with new company. Old plan could end up offsetting in the meanwhile.

You may be aware of this already. But FUTA is paid solely by the employer. And I believe that the base is really low. The first several thousand dollars of compensation? So the employees are either way over or if they make below the base they're not likely to be deferring. So if you don't get an answer, it may be that it's usually not worth someone looking for the answer.

Is the sponsor a corporation? A corporation can't really sign. It takes action through the Board of Directors. So if you have a timely corporate resolution authorizing the adoption of the plan, the IRS may accept that as a timely "signature." I have even seen the IRS suggest that solution for plan amendments. But there should be evidence that the board was looking at the document when it adopted that resolution. Not just authority to adopt a plan in a generic sense. The fact that there was no follow through of having a person actually sign the document doesn't have to hurt you.

As Bird alluded to, the issue with the restoration by the employer is that it might be a contribution. And that may be allowed. But it has all the attendant issues of a contribution. Discrimination testing, 415, etc. So if an HC has a large balance in the GIC and gets a large restoration payment, you might fail discriminaition. I think that this was a good article by Reish that was previously posted on this site: http://www.reish.com/practice_areas/EmpBen.../doanddonts.cfm

This is the only purpose for which I've seen the Schedule P used: to determine who signs the consent to keep open the statute. I don't know that it has to be the same trustee that signed the Schedule P if there are multiple trustees and only one Schedule P. But it can make it easier.

The trust is one of the three "taxpayers" subject to audit by the IRS -- and subject to payment of additional taxes if the plan is found to be disqualified upon audit. The trust would have to pay taxes on the earnings (the employer on unvested contributions; the employees on vested contributions). I agree the trust doesn't file a 990. The trust files the Schedule P with the 5500 in lieu of a 990 or 1041 or other filing. The Schedule P runs the statute of limitations for the trust. The trustee -- not the employer -- is the party signing that filing. The IRS will be on the employer's premises during the audit -- and negotiating with the employer. The employer will be contacting the trustee to try and get them to sign the consents to keep the statute open while the audit and related negotiations continue -- so that the IRS doesn't simply make an assessment and force them into an appeal situation.... Obstinance on the part of the trustee during this process can be a real concern.

Clients often have the original but have a hard time figuring out how to find it...and their experience seems to tell them that the accountants records are much more organized...because as we now all know they shred all the extraneous info...

In an IRS audit, it is generally going to look to the party signing the Schedule P to be the party to sign the consents to keep the statute of limitations open for the trust (which you would generally do in order to keep negotiations with the IRS open temporarily instead of having an assessment and then having to move to appeals). This can be a problem if the original signer is now hesitant to sign an IRS consent for you. Multiple Schedule Ps might provide more possible signers of the consent.

If the accountant "determined the annual contribution...but did nothing else" why do you think that the accountant has ownership of the payroll records or other participant records??!?!? Is it just that no one else has done a good job of maintaining that info -- and you think that at one time the accountant had access to that info and might have kept better records than others? Often clients go back to their accountants and ask the accountants for data that the client should have -- and expect the accountant to spend several hours retrieving it -- for free. Any data that the accountant has is likely in several different years worth of files and will take some time for someone to identify which files and where they are and then have it hauled from some remote location and have someone retrieve it and copy it.... And the client could probably do exactly the same -- only it would be even more difficult -- because their records are probably more extensive and not as organized -- so they are trying to go the easy way...

http://www.irs.gov/pub/irs-drop/n-05-95.pdf Part IV

I thought that the most flippant comment to date was "tell employee nothing can be done now because year is closed and employee was not harmed because he recieved 4k as wages."

I think it's essentially a PT but the only thing that is done about it is that the fiduciary continue to try and collect it. I think it used to be reportable on an audit chedule as a non-exempt transaction. But I don't think that's done anymore.

What if the employer put no one's money in and just said "who cares?" Nothing irritates the IRS more than for the employer to have a lackadaisical attitude toward the plan. It will probably require some correction to show that it does take the plan seriously. But there's probably a cutoff somewhere -- the IRS just hasn't defined it -- probably is a case by case situation depending on how well the plan is administered in general. On an informal basis, the IRS would probably tell you to decide what you think is fair, document why you believe that is the right answer, and keep a file of that in case you're ever audited. And then do a much better job in the future...

You mean church plans are exempt?

It is not a combined limit -- you get it once for the deferral and once for the match (under the NQ plan).

But how would you get two 415 limits in that case with no compensation from #1 in 2004? I'm assuming you've had some situation where you think that applies, but can't think of it off the top of my head?