John Feldt ERPA CPC QPA

I did not get to go this year :( - if i could add tears here, I would - I mean, for me it's like a disney trip to go to those sessions.

So, even though an explanation of the plan's definition of eligibility is not required as part of the safe harbor notice, a safe harbor plan cannot amend to let group of NHCEs into the plan before the beginning of the next plan year? Mid-year addition of Roth and beneficiary hardship have a green light. Mid-year change for In-Plan Roth is okay for now, but not in the future. Can the plan be amended mid-year to change the name of the plan if it's a safe harbor plan? How about the definition of "disability" - can that be changed mid-year? Can a safe harbor plan be amended mid-year to use a corporate trustee instead of individual trustees? How about an amendment mid-year to allow predecessor service for eligibility purposes? Can a SH plan be amended to change from balance forward to individual direction mid-year? Can the plan be amended mid-year to stop paying plan expenses from forfeitures to allocate instead, or to change the use of forfeitures in the next year to be in the current year? Can the SH plan be amended to allow installment payments or to remove installment payments mid-year? Can a SH plan be amended mid-year to change the one-year marriage rule to/from "not applies" from/to "applies"? Can a SH plan on a vol sub document be amended mid-year to add multiple employer language if the controlled group of employers break up mid-year? edit: typo

They are also not able to defer anymore starting 1-1-2012.

Suppose a calendar year 401(k) plan excludes non-shareholder HCEs from all contribution types. The employer does not apply the top-paid group election. Suppose an employee is hired in June of 2010 (not a shareholder) and they do not earn enough wages in 2010 to be an HCE in 2011. Suppose they enter the 401(k) plan on July 1, 2011 (after one year of service). Allocations are made to their account for 2011. Suppose they are paid enough in 2011 to be considered as an HCE in 2012. Starting January 1, 2012, they are excluded by the terms of the plan. The plan is top heavy. Are the required to receive a top heavy minimum allocation in 2012? on edit, added: Please assume this plan is not a safe harbor top heavy exempt plan.

You mean, can the employer contribute 25% of pay? You are correct that the 415 limit in play here is the 100% of pay limit. The wages, for 415 limit purposes, is something above $12,500 (since 415 does not net out FICA). Suppose his 415 wages are actually $13,110. If that's the case, the employer could contribute $610 and he's reached the 415 limit of $13,110 ($12,500 deferral plus $610 ER contrib). Then as you suggest, if he's catch-up eligible, the employer can contribute even more. The 415 limit does not include the catch-up deferrals. But, if you try making a full $5,500 into a catch-up with a $7,000 regular deferral and $6,110 an employer contribution, then you have to look out for the 404 deduction limit. 25% of overall eligible wages in the plan will limit the employer's deduction. With just one employee in the plan who makes $13,110, the employer contribution could be $3,277.50 (25% of $13,110) and the deferral of $12,500 is broken down as $9,222.50 regular deferral and $3,277.50 as catch-up, for a total allocation of $15,777.50.

1984 Social Security Taxable Wage base = $37,800 1984 415(b)(1)(A) = $90,000 (down from $136,425 in 1982) 1984 415©(1)(A) = $30,000 1984 402(g)(1) = n/a 1984 Officer comp, 416(i)(1)(A)(i) = $45,000 1987 Social Security Taxable Wage base = $43,800 1987 415(b)(1)(A) = $90,000 1987 415©(1)(A) = $30,000 1987 402(g)(1) = 7,000 1987 Officer Comp, 416(i)(1)(A)(i) = $45,000 1987 HCE, 414(q)(1)(B) and © = $75,000 and $50,000 1987 ESOP amounts, 409(o)(1)©(ii) = $500,000 and $100,000

In 1984, I think the DC dollar limit was $30,000 (down from $45,475 in 1983). In 1987, it was still $30,000 (it eventually increased in 2001 to $35,000). In 1976, the DC limit was 26,825 and it was 25,000 in 1975. However, for purposes of determining your limits under 415(e) under the transitional rule, if you contributed more than the DC maximum in 1976 and in prior years, you can ignore the amounts that were contributed in excess of the limits.

A QACA SHNEC, when contributed, might not be 100% vested (QACA allows a 2-year cliff vesting schedule). Does this mean the IRS thinks a QACA SHNEC forfeiture cannot be used to satisfy a QACA SHNEC, but instead must shift to some other type of contribution source? If so, what if there are no other contribution sources? edit: typo

Well, I'll attempt to answer my own post. I think that under the current rules (in effect today), the SPD/SMM timing applies. However, next year when the new fee disclosure rules take effect, then the disclosure must be provided before the new fee can take effect. If any others want to opine, that would be great.

Oh man, my bad. Yes, I was thinking SIMPLE IRA.

Adopting a qualified plan would invalidate the SIMPLE plan.

If you submit an application under VCP, you can propose a lot of different methods for correcting the plan. If the IRS ultimately agrees, you'll get a compliance letter that indicates they accept your method. However, under SCP, you'd be taking a risk that a later audit might find that your method is not satifactory to the auditing team. I don't think he was stating that you can always use forfeitures to fund a QNEC when correcting a plan error, but if you ask them with a VCP application, it's possible, depending on the facts and circumstances, that they may accept such a use of forfeitures.

If the SSN was stolen, not fake, and the true individual whose identity was stolen actually shows up to collect the benefits, producing the valid ID and valid Social Security card, they are not actually entitled to the benefits, are they?

The plan could adopt an amendment that says compensation (for allocation purposes) in excess of $245,000 is excluded. If it so happens that one of the employees affected by this exclusion is an NHCE (yes, that's possible), the plan would have to pass a 414(s) test, or the language could limit the exclusion so it only applies to HCEs. Generally, anything that does not favor HCEs is allowed like this (as long as it does not cut back benefits already accrued). They cannot adopt an amendment that tries to prevent the $245,000 limit from being reduced by future legislative changes. If the plan wants to adopt an amendment that integrates at a level that is lower in the future than the taxable wage base actually in effect for the year, they can do that, but the excess percent (probably now at 5.7% in your plan) would need to be reduced to a lower excess percent such as 5.4% or 4.3% etc. depending on how much below the current taxable wage base your integration level becomes. See 401(L) for details.

Submitted altogther, it should be $2,500 overall. Section 12.02 Rev. Proc. 2008-50. I don't see anything there that indicates that the fee schedule is "per failure", so one fee fixes all. Three documents to bring them all into compliance, one agent to review them, and one application fee to rule them all (and in the darkened warehouse bind them).

Yes, that is the question. Auditors generally like to reconcile the Form 1099-R's to the Form 5500 distributions.

You mean, show a distribution, and also show a rollover into the plan? I think that would be alright.

I think that's okay unless your making deferrals into a plan before the deferral option is adopted. Also, adding safe harbor to a profit sharing plan has some specific timing requirements (3 months minimum for its first year). I'm sure there's other examples like these where the last day of the year will not cut it.

How do you know that the cash balance plan satisfied 401(a)(4) without using the profit sharing balances? If that's true, okay, but it's also a rare event to have a DB/DC arrangement where the employer does not use the profit sharing to help the 401(a)(4) test for the DB plan. Just an obsevation/question. Also, how do you determine if your plan is top heavy without having the DB numbers? Are the documents coordinated so it is clear regarding which plan provides the top heavy minimum?

Well, if you click on the "more" link and read the section the IRS has for how to fix it, it's more than just suspending the contributions, unless (I'm guessing) no contributions had occurred for the overlapping year. Here's a section of the IRS text: How to Fix the Mistake: Corrective Action:If you maintain other retirement plans, cease making new contributions to the SIMPLE IRA plan. You may be able to file a VCP application requesting that contributions made for previous years in which you maintained more than one plan remain in the employees’ IRAs. Salary deferral contributions (and related earnings) should be returned to the employees. The returned amounts should be reported on Form 1099-R as a taxable distribution not eligible for rollover. Employer contributions (and related earnings) should be returned to you and reported on a Form 1099-R issued to the participant indicating the taxable amount as zero. In addition, any contributions made to the SIMPLE IRA are excess contributions subject to excise tax. For each year there are excess contributions in the SIMPLE IRA plan, you, the employer, are subject to excise tax under Code §4972, and are required to file a Form 5330 excise tax return. In addition, for each year that excess contributions are made to a participant’s SIMPLE IRA, the affected participant may be liable for excise tax under Code §4973 and may be required to file a Form 5329. The excise tax liabilities occur for each year until the excess contributions are removed from the SIMPLE IRA plan. Correction Program(s) Available: Self-Correction Program:This mistake cannot be corrected under SCP. Voluntary Correction Program:You make a VCP submission to the IRS pursuant to Rev. Proc. 2008-50 identifying the mistake. The fee for the VCP submission is $250. Audit Closing Agreement Program:If this mistake is discovered on audit, it may be corrected under Audit CAP. Correction of the plan under Audit CAP should be very similar to correction under VCP. The sanction under Audit CAP is a percentage of the maximum payment amount.

Why wait? The adoption of a qualified plan only invalidates the SIMPLE for the year. Okay, I guess that could make you wait. The fix is here (#2 in this list at this link) if it happens. See the corrective action section too, under the "more" link. It might not be all that costly, depending on the circumstances. http://www.irs.gov/retirement/article/0,,id=241051,00.html Otherwise, as mentioned, give the 60 day notice and that ends it.

I heard (second hand) that in the IRS phone forum this week, the IRS would look unfavorably upon any participant loan interest rate that is less than Prime plus 2 percent, and that they also stated that a participant loan interest rate of "Prime" is totally out of the question. Well, I thought this was a DOL matter anyway. Also, if I went to a lending institution and put my money in an account there and then asked them what interest rate they would charge me to loan my own account back to myself, wouldn't these firms just say "it's your own account, what rate do you want charge to yourself?" (after first thinking that I must be crazy). Please, tell me if there is a commercially available interest rate to compare against for that type of lending. Did anyone hear this phone forum from earlier this week, and can you confirm/deny the statement above?

Look at section 14.04 in Revenue Procedure 2008-50, if that's the only issue they find, your fee might be as low as the chart shows, but other factors also matter. Cheapest: issues fixable under SCP. Affordable (usually): issues fixed under VCP: see chart in Rev Proc. 2008-50, section 12.02. Rather costly: the only issue is a nonamender problem and IRS finds it with your D letter app: see section 14.04 in Revenue Procedure 2008-50. Ouch: issue is fixed when IRS finds it upon audit (audit cap): costly - may be higher than #3 above (field agent's choice?). EPCRS states that "the sanction under Audit CAP is a negotiated percentage of the Maximum Payment Amount." and "Sanctions will not be excessive and will bear a reasonable relationship to the nature, extent, and severity of the failures, based on the factors below." Rev Proc 2008-50 goes further to say: "Factors include: the steps taken by the Plan Sponsor to ensure that the plan had no failures; the steps taken to identify failures that may have occurred; the extent to which correction had progressed before the examination was initiated, including full correction; the number and type of employees affected by the failure; the number of nonhighly compensated employees who would be adversely affected if the plan were not treated as qualified or as satisfying the requirements of § 403(b), § 408(k) or § 408(p); whether the failure is a failure to satisfy the requirements of § 401(a)(4), § 401(a)(26), or § 410(b), either directly or through § 403(b)(12); whether the failure is solely an Employer Eligibility Failure; the period over which the failure(s) occurred (for example, the time that has elapsed since the end of the applicable remedial amendment period under § 401(b) for a Plan Document Failure); and the reason for the failure(s) (for example, data errors such as errors in transcription of data, the transposition of numbers, or minor arithmetic errors). Factors relating only to Qualified Plans also include: whether the plan is the subject of a Favorable Letter; and whether the failure(s) were discovered during the determination letter process. If one of the failures discovered during an Employee Plans examination includes the failure to amend the plan timely for relevant legislation, it is expected that the sanction will be greater than the applicable fee described in section 14.04."

I'm just glad I can talk directly to the IRS agents now, instead of trying to explain the issues to my boss, an attorney who usually has only a little involvement/knowledge of the specifics of each plan. Tests, CPE, experience, etc. - regardless of any of that, it all gets proven out where the rubber meets the road, or where the pencil meets the paper,... no - it's where the typewriter keys strike the paper? ... it's where the toner powder meets the fuser and the paper? (for those using paper), ... it's where the dots align on the screen? - (sigh) - you get the idea.

A DB plan has an optional form of payment that is a monthly installment not to exceed 20 years (or if less, the participant's life expectancy), increased by a fixed annual COLA of 4.99%. Is this in there so that the RMD from the plan can be calculated on that type of annuity or would additional plan language be needed to make the RMD be based on that optional form? Would the participant have to elect that form of payment for the RMD to be calculated under that form?