John Feldt ERPA CPC QPA

The IRS has not updated EPCRS for correcting a 403(b) plan for missing the 2009 deadline to have a plan document that complies with the written plan requirements that were part of the final 403(b) regulations. There is no remedial amendment period for a 403(b) plan yet - the IRS has not yet released anything in that regard either. Thus, the terms "GUST restatement" and "EGTRRA restatement" have little real meaning for a 403(b) plan. Regarding PPA, HEART, WRERA, etc. - I don't recall seeing any guidance from the IRS on the amendment deadline for a 403(b) plan (the statute has its own deadline that the IRS sometimes extends), so if you missed the statute deadline, there is no correction option under EPCRS for that either (so amend now).

Sorry, I only vaguely remember posting the original question. So, although the OP does say "cross-testing" it is really referring to the general test on a contributions basis, not on a benefits basis.

We asked SunGard, and Robert said it's a matter of interpretation as there is no guidance other than the regulation. He basically said he's never heard of this being brought up as an issue by the DOL for any of their SPDs, but there's no knowing how many of their SPDs have been reviewed by a DOL auditor.

According to a DOL auditor, a plan's SPD is deficient if it does not name the investment provider for the plan. For example, a company officer is the plan's discretionary trustee and that discretionary trustee had chosen an investment platform (example: Principal, Hancock, Nationwide, etc.) as the investment vehicle for the participants to direct the investment of their deferrals and to direct the investment of any employer contributions. The participants receive enrollment kits to direct their investments. The discretionary Trustee choses a fund lineup, but has the authority to change that and to change the investment platform, if they deem it to be necessary/prudent to do so. Assume the plan does not have a corporate trustee nor does it use a separate trust agreement. The DOL auditor says the SPD must satisfy 29 CFR 2520.102-3(q): "The identity of any funding medium used for the accumulation of assets through which benefits are provided. The summary plan description shall identify any insurance company, trust fund, or any other institution, organization, or entity which maintains a fund on behalf of the plan or through which the plan is funded or benefits are provided." The DOL auditor then says that if the SPD does not identify where the plans assets are invested, the SPD is deficient. They say: An example of the language that we would look for is, 'The trust assets are being held in a Trust Account at: Mutual Fund Company Name 123 Main St. City, State 12345 (XXX-XXX-XXXX)' " They then say that any SPD without the above language would need to be amended. Most SPDs have only the trustee name and address and phone number, nothing about the investment platform. Are the SPD's for the participant-directed 401(k) plans in this country out of compliance if they do not name the place where the assets are invested? I wouldn't think so. Comments? Suggestions on a response?

Will a component plan testing approach help?

The plan document may say something about that - I'd check there first.

The IRS has promised a correction option for the 403(b) plans that missed their document deadline, but that promise is at least a couple years old, and no such option exists yet. So don't hold your breath. It would be a good idea to have a document adopt now, but I would probably leave out any retroactive language until such time that the IRS really does allow a 403(b) document failure to go in under VCP. As for deferral only, there's a DOL FAB out there that talks about this issue. SunGard has a brief summary here: http://www.relius.net/News/TechnicalUpdates.aspx?ID=502

No. See Treasury Regulation 1.401(a)(4)-3(e)(2)(i) and (ii). I believe it says you can only use current plan year compensation if the measurement period for determining the accrual rates is the current plan year (with an exception for accumulation plans).

No document - perhaps it's a church?

And, even if the document does not have failsafe provisions, then we still don't know answer without running an average benefits percentage test for coverage.

And that satisfies the IRS. However, when the DOL investigation begins, and they have not been consistent on this, we've found that some DOL investigators will not allow the interest rate from the DOL VFCP online program to apply if the employer did not file a VFCP application. Now, suppose the calculator says the additional interest due is something like $67. How is it justifiable to spend gobs of time to prepare a VFCP application? Maybe that will protect you from paying an extra $18 of possible lost earnings if you get investigated later perhaps? How much does it cost you to prepare the VFCP filing? Does that cost justify the value of any protection you've gained by doing the filing? So here it's important to communicate to the employer how our DOL and IRS play together - explaining that the IRS is okay fine with using the DOL online calculation (see Rev Proc. 2008-50). BUT, if the employer does not file a VFCP application and later the DOL investigates, the DOL may require the employer to cough up some extra lunch money to put into the plan because the DOL agent might not accept the use of their own DOL online calculator. If the employer understands that there is a risk with no VFCP filing, and they understand the cost benefit to remove that risk, they can make an informed decision.

I think you should be able to test by imputing disparity - use 100% of the taxable wage base. This should give you the results you seek.

Is there any requirement for them to adopt by the EGTRRA restatement deadline? No. Restatements are only required in order to obtain a Determination Letter (or in the case of a pre-approved plan, to secure reliance upon an opinion letter or an advisory letter). As you've described, the language in this church's plan document and its amendments have no reliance without having ever filed a Form 5300 to apply for a D letter. If the plan were to be submitted at this time, the IRS would want all prior documents and amendments for review. As I understand it, if you applied for a D letter now and the IRS finds any problems with any recent good-faith amendments (like WRERA) which fall into the current cycle, the IRS will allow the plan to be amended retroactively, within the IRC 401(b) amendment period, in order to conform. This assumes those amendments were executed timely and in good-faith. Okay, what church would have a bad-faith amendment anyway. However, if the IRS reviewer found problems with some older plan language which was required to be in place by the end of a previous remedial amendment period, it is now too late for that language to be conformed without penalty because that remedial amendment period has expired. For example, if the plan did not timely adopt the TRA '86 language to comply with the new 415 limitations which were required back in the day shortly after I started working in this field, then the IRS would look at the chart at the end of section 14 of Revenue Procedure 2008-50 and say, "Hmmm, TRA'86, that's $20,000 please. Thank you, and have a nice day." - assuming the plan has 101 - 500 participants. Of course, that sure beats a random audit where they say much larger numbers, and then I'm not sure about the "thank you" and the "nice day" thing.

Generally, all qualified plans fall into the 5-year restatement cycle unless they meet the exception of being a pre-approved plan. Some churches actually do elect ERISA coverage under 410(d) and they can adopt a pre-approved plan and fall into to the 6-year restatement schedule. The churches that do not elect ERISA coverage under 410(d) cannot rely on any pre-approval letter from the IRS even if they adopt a pre-approved document - they are in the 5-year restatement cycle. Assuming they want to have a determination letter, non-electing church plans are subject to the 5-year restatement schedule. This applies to both DB and DC nonelecting church plans.

It's not that uncommon to see "prototype-formatted" documents for governmental plans. I think one of the frequent posters here at benefitslink mentioned to me that they had created a pre-approved document (an IRS vol sub with and it had an advisory letter) but that document also allowed certain boxes to be checked for use with governmental plan sponsors - EXCEPT the basic document also stated that making such an election meant that the plan sponsor could not rely on the IRS advisory letter. Sort of an IDP/Vol Sub hybrid document - pre-approved unless certain provisions are marked. Of course any Vol Sub document could be marked up in a way that takes it out of reliance.

My first (real job) employer had a matching contribution formula like this (back in the 80's and 90's). So, do you do a coverage test at each level to see what percent of NHCEs got a match at that level over the percentage of HCEs that got a match at that level, and then hope for 70%?

Any governmental plan in existence right now, regardless of how their document looks, is an IDP plan - there is no automatic reliance. Any governmental plan currently using a pre-approved document that has an opinion letter for a prototype or an advisory letter for a vol sub, cannot actually rely on such letter. As an aside, this also applies to any church plan that is not electing to be covered by ERISA under 410(d). The IRS will, for the first time, allow a pre-approved governmental plan defined contribution documents starting sometime in 2014 whenever the IRS releases all of the 2nd 6-year cycle (PPA restatement) pre-approval letters. No such option for non-electing church plans - all are IDPs - you can only submit a 5300 to get a D letter there.

Welcome to the 5-year restatement cycle. Yes, all 3 plans could have been restated and then submitted for a determination letter request by the 1/31/2011 deadline (that would be the recommendation). However, plans are not required to obtain determination letters, so you do not have a qualification error (unless you know your document has an error in its language). One exception, I think, if the plan had some operational error and wanted to rely on SCP, I think the plan has to have a D letter. Since you do not have a qualification error, you have nothing to correct. Instead, documents are open for scrutiny upon audit (where normally the D letter would protect the plan spnsor from such scrutiny). You should at least submit these plans during their next cycle (restate using the cumulative list that will be released in late 2014 and submit by January 31, 2016).

No. A carefully worded amendment done after the end of the plan year can target specifically any NHCE(s) to give them the amount needed for the plan to pass testing.

If the employer allocates 5% to the NHCEs who are eligible now and that allocation causes the plan fail 401(a)(4), then that's exactly one of the reasons 1.401(a)(4)-11(g) exists in the first place - to fix that failure. This does not look too aggressive to me considering the facts you've described. On the other hand, if the employer writes the plan to exclude all NHCEs from a PS plan, then after the year ends, adopts a -11(g) amendment with 20-20 hindsight to bring in only exactly the lowest cost NHCEs required in order to pass, then your on your own, I think that is too aggressive.

The IRS seems okay with this, but the DOL says you only get the "relief" to use their interest rate if you file VFCP. For a plan that owes a small amount of interest, filing a VFCP is a ridiculously expensive exercise.

http://benefitslink.com/boards/index.php?s...st&p=207952

for this particular individual, the odds were 100%

Watch out, them's big words Mr. Kit. (for those of you watching at home or getting the text only version, the previous post has "under the plan" in bold and in the largest size font available).

I think the only proof we can provide is to show when a plan is required to be restated, not the other way around. Proving the negative can be problematic since the regulations do not need to say "a plan is not required to be restated" nor do the regulations have to say "a plan is not required to be printed in black ink". Revenue Procedure 2012-6, Section 7.05 .05 Individually designed plans must be restated when they are submitted for determination letter applications. For this purpose, submission of a working copy of the plan in a restated format will suffice. Where a working copy is submitted with executed amendments integrated into the working copy, all such amendments must also be separately submitted. The Service considers a working copy as a document that incorporates all previously executed amendments into one restated document. The intended purpose of a working copy in a restated format is only for ease of review and plan administration and it is not a document that is intended to be adopted. The Service reserves the right to make a determination as to whether the working copy is in a restated format that will facilitate the review of the plan. Does this help?