John Feldt ERPA CPC QPA

The agents I've spoken with have all indicated they really mean "Determination" letter. To them, that does not mean an opinion letter (for the prototype) or an advisory letter (for the volume submitter document) - they are not D letters for purposes of the Form 5310. Based on that, if this plan only has opinion letters and/or advisory letters, then you'd answer "No" for 3©.

If there are still assets in the plan as of the disclosure deadline (e.g. Aug 30), then the disclosure seems to be needed. If it's all paid out, then the annual notice, which discloses the possible future fees, should not be needed.

Have these citations been pointed out to the reviewer? If not, that should be the next step. A couple years ago I heard from one source that the headers in the regulation that all say "pension plan" are meaningless (as they are only headers), which means some folks might try to interpret this to make it apply to non-pension plans as well. The expert source only said this as a means to remind us to expect some inconsistencies in the understanding of this Normal Retirement Age regulation.

I would assume the plan sponsor is already expecting this possibility based on last years' conversations with their administrative firm, where that TPA told them that the plan is near and/or at least approaching top heavy status. Probably options were discussed last year on how to avoid the situation and maybe even the safe harbor top-heavy exemption was discussed. If that did not occur, as we saw with a local TPA shop in our area, then consider their approach: they suggested to the client, in writing, that they should adopt a safe harbor match retroactively to the beginning of the plan year and backdate the amendment. In other words, they suggested that the client commit tax fraud (backdating) to avoid the contribution. They no longer work with that TPA firm, but it was eye opening to see such a suggestion provided in writing - amazing!

I believe that ETK's comment is technically correct, but I think a 457(b) plan could adopt language that mirrors the usual QDRO rules. That could make administration a bit easier perhaps. Otherwise, the state rules regarding the division of marital assets would have to be applied, which depending on the state, could invoke the QDRO rules anyway, I suppose.

Restating a prototype, as ScottR suggests, leaves less "open" language on the table. "Open" for the IRS to scrutinize should the plan be audited later. The opinion letter associated with the EGTRRA prototype now covers the good-faith amendments for EGTRRA (2002), the 401(a)(9) regulations, the mandatory rollover rules from 2005, the PFEA language, and the Final 415 regulations. Certainly not required, but the plan does have some small extra assurances that way.

In example 9.21.3 of Derrin's "Who's the Employer" book, 6th edition, he has a note about this. He says DOMA defines marriage, but he mentions that an adoption of a minor child by a same gender couple can create the same attribution results as would occur for opposite-gender married couples. this is because the parent-child relationship is determined under state law. So the state rules would determine attribution if kids are involved, but DOMA determines attribution at the marriage level.

Is the formula zero, or was the plan frozen? If frozen, wouldn't that mean no new entrants, so the owner is the only one in the plan still?

Exactly. There are a lot providers that have pre-approved (6-year cycle) documents available with aged-based, age/service-based, or age/service/comp based allocation methods. I would think the employer could adopt one such document now and stay in the 6-year cycle.

Does Larry Deutsch have something like that?

The 415 limit is 2012, but what about the 401(a)(17) limit?

I am not an ERISA attorney, so this post is just FWIW. From my experience, it depends on the solution desired to "fix" the problem. In some of cases, the correction proposed was quite different than any suggestions found in Rev. Proc. 2008-80, and because of this, we recommended that no fix be done until the IRS agrees. In one situation, regarding what actuarial equivalence to truly use for valuing some very old underpaid amounts, the IRS agreed with the proposed solution without modification (it took some convincing, but they agreed). In another case, an ADP test failure was fixed with a much smaller QNEC than what an employer can normally get by with, but in this case the IRS would only agree if some additional interest was added for missed earnings. In that case, a fix being done early would have only caused additional work to fully fix it later. If you aren't trying to create a solution that is outside the box as far as Rev. Proc. 2008-50 is concerned, then fixing it before the approval is granted probably carries very little risk, especially if you've thought through how every aspect of the plan might be affected by the error, and it's covered under 2008-50. However, sometimes it is not possible or not feasible to truly place the plan back into the position that it would be in today if no error had occurred. You may need to be creative it those cases. That's when I would suggest that the correction be placed on hold until the IRS finds their "approved" stamp.

After looking at Derrin's recent Q&A on MEPs and PEOs, I am curious about more details of how a 5500 would be filed now, if it was not filed a bunch as single employer plans in the past. http://benefitslink.com/modperl/qa.cgi?db=...loyer&n=321 and http://benefitslink.com/modperl/qa.cgi?db=...loyer&n=329 Suppose an employer is part of a defined contribution MEP PEO with ten or so completely unrelated other employers. Testing was always done on an employer-by-employer basis, but now the thinking is that the Form 5500 should also have been filed on an employer-by-employer basis as well (it was not filed that way in prior years). Suppose each of the unrelated employers wants to now comply with the requirement to file their own 5500. Going back to the beginning of the plan to file 5500s from decades ago seems to be imprudent from a cost standpoint, so they are considering that they'll start with their 2011 Form 5500 filing. However, what do they show for the starting assets on this 2011 Form 5500, which is now the first 5500 being filed for this employer? Would you suggest the starting assets are zero and also show a transfer in from the MEP? Plus, when the MEP files its 5500, it shows a transfer out of the same amount and identifies the plan it is transferring into? Thus, transfering out from what was misunderstood to be a single MEP into a now understood single employer plan? Since the one of the participating employers also sponsors the MEP, there will still be some participants and assets left on the 5500 for what once was considered as the main PEO. The idea here is to do what can reasonably be accomplished yet still satisfy the DOL and IRS. Any other ideas for this?

I think the regulations are very short and sweet. If I recall, it says "reserved".

Why not just attach a copy to your own agreement?

Rev. Proc. 2007-44 SECTION 8. PLAN TERMINATION The termination of a plan ends the plan’s remedial amendment period, and thus, will generally shorten the remedial amendment cycle for the plan. Accordingly, any retroactive remedial plan amendments or other required plan amendments for a terminating plan must be adopted in connection with the plan termination (that is, plan amendments required to be adopted to reflect qualification requirements that apply as of the date of termination regardless of whether such requirements are included on the most recently published Cumulative List). An application will be deemed to be filed in connection with plan termination if it is filed no later than the later of (i) one year from the effective date of the termination, or (ii) one year from the date on which the action terminating the plan is adopted. However, in no event can the application be filed later than twelve months from the date of distribution of substantially all plan assets in connection with the termination of the plan. See section 14 with respect to the Service’s review of an application for a determination letter with respect to a terminating plan. How do you interpret the bold section above in context with the prior sentence? Would an application done now be rejected, or because the assets were paid out less than 12 months ago, would it be okay to submit?

We had outlined everything in our initial plan termination correspondence, describing the issues that get left open without applying for a determination letter upon plan termination, and we explained the only way to ensure those items aren't open for later scrutiny upon audit is to apply for a determination letter, etc. That never really sunk in for the owner until he recently talked to a retired colleague and found out what had happened with their plan. After that, he had trouble forgetting that conversation and he got worried any time he did anything with his rollover IRA. Thus the call back. Personally, it does not appear that his plan has any terrible issues like the one he described from his colleague, but now I am curious about this "is 12 months later too late to file" question. My recollection is that a 5310 application can be filed no later than one year after the effective date of the plan termination. I'm looking into Rev Proc 2007-44 to see if that changes anything.

The date of plan termination was established for a small qualified plan in May of 2011 and all benefits were officially paid out in July of 2011. It's a DB plan on a prototype but not subject to PBGC coverage. The plan was effective in 1999. The plan sponsor comes back now and says, I know I told you in writing that I don't want to spend the money to submit to the IRS, but could we go ahead and submit now anyway? Would the IRS actually accept a 5310 more than 12 months after the official DOPT?

Ask SunGard, they can explain. Here's what I think the answer is, but I may be wrong. I think the main difference in the PPD basic document is that it requires the fiduciary to give written instructions to the non-discretionary trustee in order for them to take action, but a discretionary trustee does not need such written instruction. If you have a small business where the owner is also the trustee, then naming them as a non-discretionary trustee requires extra paperwork, which may be a burden - they have to write themselves a note permitting their own action. FWIW.

Anything. Yeah. Sit still and don't make a sound. See, it's that kind of thing that makes a colleague in the office ask if we should fear the IRS and have I read 1984. Fear could include reverential awe, so maybe scared is better, but I've not read 1984, so not sure that applies here.

What part of "must remain in place for the entire 12 month safe harbor plan year" is unclear to you soldier? Well, let's see here, uh . . . How about these? The business address is on the safe harbor notice and the plan has the company address right in the adoption agreement. So, if you have a safe harbor plan, don't amend the adoption agreement to change your business address mid-year - you can only move to a new place on the first day of the plan year (hope it's a work day). Plan name too, of course - changing that would certainly blow safe harbor status. If that plan name hadn't changed, I know my deferral elections would have been different. Or this one? A safe harbor plan has discretionary profit sharing and uses forfeitures, if any, to pay reasonable expenses first (if not paid by the employer) and then to offset employer contributions. The plan language explains that the forfeitures are only available for use in the year following the year in which the forfeitures occurred. This plan cannot be amended mid-year to use forfeitures in the current year? No cigar here? Suppose the safe harbor 401(k) plan has been allocating a discretionary profit sharing on a uniform percent of pay basis to all eligible participants each year, and they intend to continue to operate in that fashion. Can the plan be changed from "each in their own class" to "pro-rata" or vice versa (since each of these allow excatly that same uniform allocation option)? Any takers? Earnings? If you're safe harbor, can you change from a balance forward earnings allocation method to an individual-directed plan mid-year (can you move to a platform) - or must the assets transfer on the first day of the plan year (if it's a holiday, you may need to pay overtime). Actually, maybe here they should just stay balance forward to avoid the new/improved 404(a) rules. Another? Oh those pesky top paid group elections - the huge number of deferral changes that occur when the plan is amended to change that provision! Can the trustees be changed mid-year? too risky - keep the old ones in charge of the plan until the end of the year. Source to be used for cash-out forfeiture restoration, changing the legal jurisdiction from one state to another, modifications for top heavy to coordinate with the adoption of a DB plan? There's much more - shall we continue? I think the IRS said they have no plans to provide guidance on this issue, so you'll have to draw your own conclusions here - are some comments merely facetious? Or are they real? I wish I knew!

The EOB is a must, of course. I would suggest to encourage your employees to study for the ASPPA or NIPA exams to help increase their knowledge - the study manuals can be good sources for beginners. In addition, you may consider IntelliConnect, which used to be known as CCH, which was purchased by Wolters Kluwer Law & Business (they also purchased TAG, I think). In this Intelliconnect thing, depending on how much you want to pay, you can have access to ERISA law, committee reports, DOL opinions, EBSA enforcement manual, Internal Revenue Code, Treasury Regulations, pension and welfare court cases, Revenue Rulings, Revenue Procedures, etc., plus you can have access online to all of the pension answer books, some journals, pension plan guide, 5500 preparer's manual, forms and insructions.

A 100% owner of a corporation wants to take out a loan from their 401(k) plan and lists "needed to fund the business to keep operations going". After he receives the loan proceeds, he plans to immediately loan those funds to the business. Isn't this a prohibited transaction, maybe indirectly? Would it make a difference if he and his business partner were 50/50 owners both taking loans from the plan for this purpose? Suppose the loan occurred "a while" ago and now the owner(s) are going to provide loans to the business? Does the lag time change anything?

Joe already has a 401(k) plan for A. What kind of plan document is being used? Let's suppose it's a standardized document (the type of document many of us avoid). If it is a standardized plan, then the employees of all of the entire controlled group and the affiliated service group are eligible for the plan (assuming any entry requirements were met). That brings me back to K2retire's comment, "Your best option is to consult an ERISA attorney." However, if a good TPA firm is contacted and they are given the census data, the ownership and company structure information, plus a copy of the plan documents and plan amendments, plus some time to discuss things with the business owners, they should be able to get the ball rolling along. Just make sure they are consulting for you, not merely trying to make a sale. And then it may become apparent at some point, that if they find a grey area in there that still needs counsel, they would advise you of that. FWIW.

Well, it's that pesky 404(a)(7) thing, that's the deal here.