John Feldt ERPA CPC QPA

They could adopt an amendment now that reflects their current operation as it relates to HEART, or they can wait until the IRS truly defines an actual remedial amendment period for the 403(b) world and amend/restate by that deadline. I think it was three years ago that we were told guidance would be issued soon for this, so don't hold your breath!

Or if they are HCEs.

You're right, it was Tech Value Electronic Superstore, so "by" is more likely. To me it's a classic like The Princess Bride.

Maybe it should be "Buy" instead of "By" since he was doing a gig for a hardware store when he said that. Gotta love Mr. Rickman.

Six or seven years ago when I first started here, a very small terminated plan had been sent in for a D letter request - I worked on the response, not the submission. The IRS requested a copy of the signed 401(a)(9) amendment (I think). The plan was not on a prototype document since it was cross-tested, and back in those days volume submitter plans had to have their interim amendments signed by each plan sponsor/employer. We showed the IRS our records that we had sent a 401(a)(9) amendment for the employer to sign, but the employer could not find a signed copy (nor could we). The IRS explained they had no choice but to go to audit cap without that signed amendment, and the sanction would be $2,000. Then they explained something to me that sounded like a limited time sale opportunity where a 50% discount applied, and they only charged $1,000. Some deal. By Grabthar's hammer, what a savings.

The time and effort to file under VFCP will far exceed the $50. When you say you calculated the lost earnings - did you calculate the lost earnings based on the plan's rate (or best returning fund)? Or, did you use the DOL interest rates and their calculator? If you used the DOL rate, then you've satisfied the IRS, strangely enough. But unless you file the VFC thing with the DOL, you aren't technically eligible to use the DOL interest rate. From DOL investigations we've seen where VFCP was not filed, there have been 2 results, differing only because of the difference in the auditor (as far as we could tell): Investigation #1) Agent: You are not eligible to use the DOL rate, you must recalculate using the non-DOL interest rate (plan rate). Plan spends several hours of time to calculate and puts in an extra $67 into the plan. Case closed. Cost benefit analysis? Irrelevant. Investigation #2) Agent: You used the DOL interest rate, we're alright with that. Case closed.

Just remember, there's no such thing as a DOL "audit". These are known as DOL "investigations", a term you might associate with a crime. With the IRS, it's an "examination", a term that you might consider as uncomfortable or annoying, depending on the type of exam you're thinking about, but these exams are generally not a result of perceived criminal activity.

ERISA Section 204(h) does not apply.

If the gateway requirement is triggered, the gateway does not have a last day requirement nor a 1000 hour requirement. Does the DC plan say that it will provide the top heavy minimum and is it top heavy? If so, you may have a trigger there (look at the plan document however). Also, you may want to look at 1.401(a)(4)-9(b)(2)(v)(D)(3), which essentially allows the full DC gateway to be offset by the average equivalent normal allocation rate of all the NHCEs benefitting in the plan. If the DC plan had each person in their own rate class, and no allocation conditions, you would have more flexibility here. If the DC plan has a 3% safe harbor, that would trigger the gateway.

Since the EGTRRA restatememt window closed for DC plans, I've been surprised that we've already stumbled across 3 separate prospects that had old money purchase plans that had never been restated for TRA 86, GUST, or EGTRRA. In each case we put together TRA 86, GUST, and EGTRRA documents, plus a lengthy list of compliance (how did you operrate) questions. One compliance statement came back from its VCP submission, another is waiting for the IRS to reply, and the most recent one is answering the long list of questions now, but is expected to be submitted soon. The most recent case was when the plan sponsor asked the bank holding the plan assets to pay an age 70.5 RMD. The bank wanted a copy of something official that named the trustees so the payment could be properly authorized. The document that designated the trustee was from 1987, so the bank let them in on a little secret about keeping a document up-to-date.

Agree.

Has anyone here used the accrued-to-date testing method on a non-safe harbor 401(k) plan?

Yeah, right after I posted I reread and figured that's probably the case - sorry 'bout that!

Or prehaps your situation is fortunate that the stock was not all purchased in 2008. Assuming it has declined in value since that time. Cash earning very little may be better than an investment that is declining in value.

Unless you are in the OEE group. Those in the Otherwise Excludable Employee group are not required to get the gateway unless the benefits in the OEE group also need to be cross-tested (which is highly unlikely). Think of it as a separate plan.

Suppose a cash balance plan defined its crediting rate as the 3rd segment rate, which was added as a safe harbor rate in the hybrid plan regulations. MAP21 now adds 430(h)(2)©(iv) which modifies all 3 segment rates, as necessary, to be this new 25 year average, with the "as necessary" referring to the corridor. If the plan document's language directly referred to Internal Revenue Code Section 430(h)(2)©(iii) for the 3rd segment rate, does the presence of this new rule under ©(iv) now indirectly change the plan's crediting rate to the MAP21 rate? In order to preserve the old actual 3rd segment rate as the plan's crediting rate, would an amendment be necessary?

I would prefer to interpret that as any 12 month period, such as calendar year or plan year. However, and maybe I heard it wrong, but I thought a DOL official made some statement that it needs to be no more than 12 months after the prior disclosure. That could present issues when taking over a plan. Part of the takeover process needs to determine when the last 404(a)(5) notices were given out.

Under 1.401(a)(4)-8(b)(2)(ii)(A), the account balance includes an adjustment for amounts that were previously distributed. I understand this to include any prior distributions, including any hardship or in-service withdrawals, but what about "refunds" due to ADP/ACP testing failures in prior years? Would those be added back as well? Also, I assume the balance would/should exclude any unrelated rollovers that might have come into the plan although I don't see anything that explicitly says that. Agree?

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.