PAL

We've had two of these letters as well - both for failure to file 2006 5500's for two different plans. For one plan, the final 5500 was filed in 1999 and the filing can be found out on FreeERISA. For the other, the final was filed in 2004 and I was able to confirm that EFAST has it in their computer as a final filing. It seems like even after we respond with the information we still get the same letter again. I find it very frustrating.

Yes sorry - 125 testing not 129 testing.

I am out of my element with health care stuff but am not getting much response from the vendor. If a company currently has a cafeteria plan that includes health care reimbursement accounts AND may have Health Saving Accounts added as one of the options next year, exactly what $ amounts need to be included in the Section 129 testing for the contributions and benefits testing? Everyone has an equal opportunity to elect any options under the plan and the employer contribution/employee cost would be the same for any given option. So I think they are okay with the eligibility testing. However, it's the benefit availability/utilization testing that I am confused about. Thanks. PAL

What if you can't correct by amending either because the participant is an HCE or there are other employees hired around the same time that were not given the opportunity to defer early?

As a result of PPA, distribution of excess contributions are now taxable in 2009 even if they are distributed within the first 2 ½ months of 2009. A participant had a $1,000 corrective distribution amount on which they had a loss of $100 so that the net distribution was $900. They will receive a 2009 Form 1099-R showing $900 in box 1 and in box 2a. What is the amount that they need to report as taxable for their 2009 taxes? Thanks for your assistance. PAL

As an added note, when filing the Form 5500, Schedule H item 4(a) should indicate that there were delinquent contributions and a Schedule of Delinquent Participant Contributions should be included. I also see very few using the VFCP but I know that recently, the DOL has been sending plan sponsors a letter informing them about the availability of the VFCP if the Form 5500 indicates delinquent contributions exist. What I found interesting is that while the letter appears to be informational and I don't believe it says a response is required, if you don't respond, DOL will send a follow-up letter expressing their concern that they haven't heard back from you. So, if you have a client that gets one of these letters, they should send a thanks but no thanks everything is already fixed response. PAL

I thought this address was now: 1160 W. 1200 South Street Ogden UT 84201-0018 I guess they probably get it either way but does anyone know for sure? Thanks. PAL

I have had the same experience and here are my thoughts: It was around that time that the processing of 5500's was moved from IRS to DOL and many things fell through the cracks until they developed better coordination and edit checks with EFast. In fact, I think it has just been in the past 2 years that the IRS sent out a ton of notices related to delinquent 2004 Form 5500. I'm not sure if I've ever seen a delinquency notice for anything in the 1999 - 2002 time frame but perhaps others have. In addition, you don't say what type of plan the filings are for (DB/DC/H&W). H&W plans can fall in and out of filing status and until recently there was no way to note that so you would just file one year and not the next. As a result, for a long time, I don't think that they were tracked at all. Just my thoughts - hope it helps.. PAL

Thanks for the feedback. And it is both: all of the employees terminated and then a resolution to terminate the plan was made. I actually found it quite shocking that the trustee refused to pay out the terminated employees. The initial request for distribution of the termination payments happened around June of last year. Because everyone is 100% vested, that would have resulted in a distribution of all funds and trustee refused. The (original) owner/plan sponsor then had the termination amendment done and the trustee still refused saying their policy was to require a determination letter for plan termination. He has gone around and around with this and just wants to get it closed out. Based on what I've gotten from the plan sponsor and what I'm seeing here, the plan sponsor has several things to consider: 1. There are some fairly large balances (33 employees/ 10 million in assets) in the plan and that strongly points towards getting the determination letter. The plus is that a determination letter will provide assurance that the amounts distributed are eligible rollover distributions not subject to tax. The minus is that a determination letter will take anywhere from 4 mo - 2 years and could involve a lot of work including back and forth with IRS agents that may not know what thay are looking at and that may repeatedly request copies of stuff you've already sent. 2. On the other hand, in September of last year, the assets were all liquidated and moved to a money market investment (which is probably better then if they had been left invested in mutual funds but no one knows what the future holds) so the plan sponsor has exposure related to the investments, there are all of those people, many that are still out of work and because they are terminated not distributing their balance to them is probably a violation of the terms of the plan. Does that about sum it up? Of course, this is all based on what the plan sponsor is telling me and we know how that goes... Thanks again. PAL

Thanks for the feedback. They only had a few people that were in excess of the 15%, 4 HCE's an 1 NHCE (HCE in following yr). There were many more, both HCE and NHCEs that were at the 15% max (about 20 total). So I'm back to asking if they can distribute under 2008-50?

I know this topic has been out here before but I wanted to get everyone's current thoughts... A compnay that sponsored a small 401(k) plan (30 participants) was puchased in an asset acquisition. All employees were terminated on the date of acquisition. When the (prior) owner authorized that the assets be distributed to the terminated employees, the bank trustee refused and said it was their internal policy to require a determination letter on the termination. The owner states that the plan does not have any compliance issue: 401(k) and 5% employer contribution for all, deposits made timely, plan document updated correctly (including amendments to terminate plan and distribute assets), 5500's filed properly, all annual testing done as required. Since the company no longer exists there is little desire to go through the added expense of a determination letter and the participants all want their money since they are now unemployed. The owner is considering setting-up a new trust account, transferring the money and making the payments himself (including doing the tax withholding and 1099). The current trustee is fine with this. The question is what are the draw backs in not getting a determination letter? Are you at higher risk of IRS audit? How would the IRS even know that you terminated the plan without getting a determination letter since I don't see that question on the 5500 anymore? Finally, what is the trun around time for getting a determination letter? Thanks in advance for your thoughts on this. PAL

So, if I have an employer that did not put the true-up portion of their 2007 safe-harbor match in until today (the regular match went in each pay period but they had some data issues when resolving the true-up amounts), I'm not totally clear on what the issue's are. Can someone help?

A co-worker and I were discussing how to help a client in getting a delinquent 5500 filed. It is the final filing due for a plan that was merged after acquisition and apperantly everyone forgot about that final 5500 (oops!). I like the DFVCP approach because it is a fixed fee but my co-worker thought that doing a reasonable cause letter might work. I haven't done one of those in a long time and was wondering what type of experience people are having if they take that route. Is all forgiven and any penalties waived?

I don't know. Would you agree then that, a least for the people who were at 15% and didn't get to elect more, there could be an issue? Do you see any way that this could be distributed as an excess amount that is taxable in the year distributed?

Sorry, I know this was discussed in Aug - Sept (http://benefitslink.com/boards/index.php?showtopic=39608&hl=excess+amounts) but I want to discuss a little further since I've now run into the same thing. Several participants have made deferrals that are under the 402(g) limit but greater then the 15% plan limit. None are eligible for CUC. The previous discussion talked about retroactively amending the plan for the higher deferral % using VCP. But, if you do that, does it present you with an even greater compliance issue in relationship to those 300 other participants who were not given the opportunity to participate at a higher %? Under 2008-50, section 6.06, can the amount be refunded and treated as taxable in the year of distribution? Thanks. PAL

I recently spoke with someone who is dealing with an ESOP plan document that has not been updated since 1995. Surely there must be some amendments that have been required since that time (and no, the plan is not terminated although I don't know if there are current allocations). I am familar with the IRS cummulative list but this goes back so far and sometimes there are exceptions for what ESOP's must do, does anyone know where I can find a good list for ESOP amendments only?

Thanks - that's what i'll use. My company has a Fedex account so that's how they get sent!

Thanks but I'm looking for a street address to use with Fed-x. I previously used 1973 N. Rulon White Blve, Ogden UT 84404 but I like to confirm this address and last year E-Fast help desk told me to send them to 1160 W. 1200 South Street, Ogden UT 84201-0018.

Does anyone know the correct overnight mail address to use for filing extensions? Thanks.

When is a H&W plan with less then 100 participants required to file a Form 5500? I understand that if the less than 100 participant plan is fully insured or pays benefits out of the assets of the employer (or a combination of both), then a 5500 would not be required. However, I'm a little confused as to when a plan is considered unfunded. The instructions say an unfunded welfare benefit plan has its benefits paid as needed directly from the general assets of the employer or employee organization that sponsors the plan. But then go on to say that plans that are NOT unfunded include those plans that received employee contributions during the plan year and/or used a trust or separately maintained fund to hold plan assets or act as a conduit for the transfer of plan assets during the year. There does appear to be an exception where a welfare plan with employee contributions that is associated with a cafeteria plan may be treated as unfunded if it meets certain requirements. However, what if the plan does not have a 129 plan? Also what about HSA's? Would either of these two things change the plan to being "funded" and therefore require a Form 5500? PAL

I would report as a D under the old plan and as a C under the new plan. The C code is for: Code C — Use this code for a participant previously reported under another plan number who will now be receiving his/her future benefit from the plan reported on this schedule. Also complete boxes (b), ©, (i), and (j). PAL

Will do - Thanks!

I would use the enrollment/entry dates available under the plan. In the case above, I would include anyone age 21 or older with a year of service as of the last enrollment date (10/15?). If the plan has a year of service requirement, I would agree that it is unlikely that there should be any carve-outs. From the IRS website - see page 6, last sentence in first paragraph on right column: http://www.irs.gov/pub/irs-pdf/p6393.pdf PAL

I've had them replace one 5500 with another where then same EIN was inadvertantly used twice.

Is there anything you can point me to regarding the (lack of) deduction for these amounts? Thanks.