John Feldt ERPA CPC QPA

When going with either: "we've always done it that way" or "everybody else does it that way" - just keep in mind the possible fallout if you actually file it when it is not complete and then discovered later by the DOL. That small DFVC filing fee can be attractive as an option, but it's only an option if you have not already filed.

Also, there is no 10% penalty tax for payment before 59.5 under a 457(b) plan. So if you do terminate employment and withdraw the funds taxable before age 59.5 (or 55), you won't be hit with a 10% penalty tax.

Have you received a letter from the DOL asking about the missing auditor's report? If you have, it generally has about 30 days or so to respond with the auditor's report. If you can't meet that deadline, good luck reversing any DOL penalties. They don't work the same way the IRS does in that regard. In some cases in might be better to not file at all and go under the inexpensive DFVC program. IF the IRS contacts you before that time, you can provide reasonable cause and still use DFVC. If you already filed without the audit report, you cannot use DFVC.

My understanding is that the signature is only needed for the Plan Administrator to file the Form 5500 according a short reading through ERISA and the regulations. But, the 5500 and EFAST instructions (DOL has authority here) seem to state or at least imply that they want both signatures if the Employer and the Plan Administrator are different. My recommendation is to have both sign when the PA and ER are not the same entity, but I am interested in hearing anyone else's conclusions on this.

https://www.irs.gov/retirement-plans/simple-ira-plan-fix-it-guide-your-business-sponsors-another-qualified-plan

Is this what you're looking for (below), or are you looking for the definition of "employer" that includes all of the members of the controlled group/affiliated service group of employers? Treasury Regulation Section 1.401(k)-4 SIMPLE 401(k) plan requirements. (a) General rule. A cash or deferred arrangement satisfies the SIMPLE 401(k) plan provision of section 401(k)(11) for a plan year if the arrangement satisfies the requirements of paragraphs (b) through (i) of this section for that year. © Exclusive plan - (1) General rule. The SIMPLE 401(k) plan must be the exclusive plan for each SIMPLE 401(k) plan participant for the plan year. This requirement is satisfied if there are no contributions made, or benefits accrued, for services during the plan year on behalf of any SIMPLE 401(k) plan participant under any other qualified plan maintained by the employer. Other qualified plan for purposes of this section means any plan, contract, pension, or trust described in section 219(g)(5)(A) or (B). (2) Special rule. A SIMPLE 401(k) plan will not be treated as failing the requirements of this paragraph © merely because any SIMPLE 401(k) plan participant receives an allocation of forfeitures under another plan of the employer.

No, the accountant must have some other agenda, or mistakenly thinks the rate of return on the 401(k) accounts has some impact on the DB plan.

SIMPLE plans have an "exclusive plan" requirement. As I understand it, you can only have one SIMPLE and all members of the controlled group must be covered by that one plan.

Will the new plan be applying any of the prior service for purposes of benefits? If so, then perhaps you have a violation of Treasury Regulation 1.401(a)(4)-5.

If it was truly a certain only option, no life, is the calculation of such option subject to 417(e)?

After-tax contributions are not deferrals, so I believe their existence eliminates the top-heavy exemption.

Top heavy minimums. If it's a DB/DC combo with the TH minimum handled in the DC plan, then 5% of full plan year compensation is what you'll need to check for those non-key EEs participating in both plans.

And it must be the exclusive plan for the group

Sometimes you just get lucky like that!

Based on the requirements under IRC 416(g)(4)(H), I would conclude that the prevailing wage contributions would cause the plan to lose any top-heavy exemption it would otherwise normally have as a safe harbor plan. However, suppose the plan is safe harbor using the 3% nonelective, and it provides that the prevailing wage contributions are contributed as QNECs that offset the safe harbor. And further assume that no one receives any prevailing wage contribution exceeding 3% of compensation. -- I have not looked into this, but perhaps there you could try to argue that you end up with a plan that consists solely of deferrals and safe harbor -- I am not sure about this argument however.

Internal Revenue Code Section 416(g)(4)(H): (H) Cash or deferred arrangements using alternative methods of meeting nondiscrimination requirements The term “top-heavy plan” shall not include a plan which consists solely of— (i) a cash or deferred arrangement which meets the requirements of section 401(k)(12) or 401(k)(13), and (ii) matching contributions with respect to which the requirements of section 401(m)(11) or 401(m)(12) are met. Employee after-tax contributions do not meet any of sections 401(k)(12), 401(k)(13), 401(m)(11), or 401(m)(12). Therefore, if employee after-tax contributions have been made for the plan year, then the requirement to consist "solely of" contributions that meet these sections, as noted in the Code, has not been met and the plan is not exempt from top-heavy. Meaning, an after-tax employee contribution appears to "kick them out of top heavy minimum exempt status". See also Revenue Ruling 2004-13, although it has no after-tax examples. https://www.irs.gov/irb/2004-07_IRB/ar11.html

auto enroll starts at 6% and IRS response was "Probably not, as not all NHCE might be able to participate at that rate" Really? Are you kidding me?

You can run an ACP test using all the match combined with the after-tax, or, you can ACP test just the matching that exceeds 4% of pay with all of the after-tax.

If in doubt, perhaps put in a enough dollars to remove your doubts. Give it to non-keys only, make sure the document allows the allocation.

Yes. Under a VCP application a negotiated amount was maybe a third of the usual 1-1 contribution. Some fairly extreme circumstances applied, including the employer's financial state at the time, which had to be proven with the reviewer.

You could look through Derrin's posts on this website under the Message Board Q&A Columns under Who's the Employer? Especially, Q&A 16, 21, 40, 102, 108, 216, and 276.

A DB plan currently passes 401(a)(26) easily (they're not top-heavy). The plan just now was frozen to new entrants and will freeze accruals for HCEs only. Thus it will only continue accruals only for the NHCEs that entered before the close date. It intends to stay closed and to not allow accruals for HCEs (including stopping accruals when a NHCE becomes an HCE later on). In many years, the number of non-excludable employees will dip below the 40%/50 EE threshold under 401(a)(26). The plan is not aggregated with any other plan for any purpose. Under the current rules, is there an exception for passing 401(a)(26) if the plan only has benefit accruals for NHCEs? What about the proposed rules? 401(a)(26)(B)(ii) has this: If employees described in section 410(b)(4)(B) are covered under a plan which meets the requirements of subparagraph (A) separately with respect to such employees, such employees may be excluded from consideration in determining whether any plan of the employer meets such requirements if (I) the benefits for such employees are provided under the same plan as benefits for other employees, (II) the benefits provided to such employees are not greater than comparable benefits provided to other employees under the plan, and (III) no highly compensated employee (within the meaning of section 414(q)) is included in the group of such employees for more than 1 year. and 1.401(a)(26)-1(b) has: (1) Plans that do not benefit any highly compensated employees. A plan, other than a frozen defined benefit plan as defined in § 1.401(a)(26)-2(b), satisfies section 401(a)(26) for a plan year if the plan is not a top-heavy plan under section 416 and the plan meets the following requirements: (i) The plan benefits no highly compensated employee or highly compensated former employee of the employer; and (ii) The plan is not aggregated with any other plan of the employer to enable the other plan to satisfy section 401(a)(4) or 410(b). The plan may, however, be aggregated with the employer's other plans for purposes of the average benefit percentage test in section 410(b)(2)(A)(ii).

Agree. The 4th employee is fully vested due to having reached normal retirement age, thus your 3rd vested employee.

Correct, but there is one additional exception that might be useful here. If, in addition to the allocation of deferrals and safe harbor, there is an allocation toward an additional match - and that match is not a safe harbor match but meets the requirements to be ACP-free, then you are still exempt from top heavy. For example, an additional like this would be ACP-free: a fixed-required additional match that is uniform, its match rate does not climb as deferral rates increase, ignores deferrals over 6% of pay, and has no allocation conditions. This match can have a vesting schedule. Another example, a discretionary additional that is uniform, its match rate does not climb as deferral rates increase, ignores deferrals over 6% of pay, has no allocation conditions, and overall is not more than 4% of compensation. This match can have a vesting schedule.

See Rev. Rul. 2006-38. It looks to me that the 15% excise tax is determined by using the reasonable interest rate on the date of the failure and the reasonable interest rate in effect as of the first day of the plan year for each year thereafter, but it's base on simple interest, not the form of compound interest that the DOL calculator uses. This of course is not very practical to actually compute it this way, so I would think that probably 99.999% of all Form 5330 applications simply use the missed earnings amounts that were calculated for the actual correction, using those amounts and multiplying by the 15% excise tax rate for each year until fully corrected.