MSN

GMK- Do you have a list of non-conforming states?

We've opted to not take on these types of plans. We recommend that the sponsor terminate their existing plan and start up a new plan after 12 months. I would assume that you've solicited guidance from your counsel as to the potential issues with this type of plan and how to adequately insulate your firm to the extent possible. EPCRS would not be applicable if you can't find a failure and I doubt that the PLR would call out all of the possible defects under such design, so I don't think that's a great help either.

I have a client that is going to give shares of stock outright (not an option, but actual shares) to employees as a bonus. He is worried about having to include the FMV of the shares as compensation for plan purposes. Does anyone know if this type of income is includable in 415 compensation?

I've consolidated the notices to eliminate duplication and have this down to a single 5 page document in 8.5 font. If you would like a copy, email me.

I've had the same issue. I have been able to call in (with POA on file) and get the status from the IRS without issue though and have been assured that the IRS accepted the RCL. I've been told there is a 2-3 week delay after the ruling for printing/mailing the formal response, but I've got a client that had a favorable ruling 2 months ago and still no written response.

I had drafted a letter for the client to use as a response to the IRS initially. Same letter has worked for many clients over the years. This time though, it wasn't successful and the response I recieved from the IRS was baffling. I'm hearing that you think this is as obsurd a position for IRS to take as I do, but how would you recommend dealing with it? Would you file the final under the old EIN just to be done with it or continue to press the issue with a more senior person in EP?

The details of this are actually pretty simplistic. Company A was a S-Corp. Their accountant suggested they change their structure to a LLC. Their business name changed with the entity change and a change to the EIN was also necessary, per the accountant. We amended the document to reflect the new name of the sponsor/entity/ein. The plan # did not change. Ownership interests did not change. Company A still exists as a shell only.

As was I. I have subsequently called back, got a different rep, and recieved the same exact information that they originally provided me. I'm fearful that they have changed their processing, begun enforcement, and not informed the preparers.

Help! We have a client who changed their name & ein back in 2005. 5500 for 2005 properly reflected these changes in the entity control section. Client recieved notice recently from IRS proposing a $15,000 penalty for not filing a final return for the old company/ein in 2006 showing a zero balance. I called the IRS and they noted that the entity change reported on the 2005 5500 does not "close out" the reporting requirements for the original sponsor name/ein. Even though the sponsor just changed their name & ein, they are required to file a final 5500 for the former sponsor reporting transfers that never actually occurred. The rep noted that everyone does this wrong and it's not clarified on the 5500 instructions. Has anyone else run into this? I can usually press the issue with the IRS and get it dropped with a letter but that's not working in this situation. I believe I can get the proposed penalty abated, but will continue to have to respond to annual inquiries until the client actually files a final return. Any thoughts you may have on this would be most appreciated!

Some fund companies close accounts on a regular basis due to small balances/lack of activity. If you know what investment you had, you can check the prospectus or other marketing material for specific information.

It's been my experience that fund companies are generally unwilling to state that any of their funds meet the requirements of a QDIA and rather leave it to the financial adviser to determine if the fund meets those criteria. Because of this, I doubt such a list of QDIA compliant funds exists. If you find one though, I'd love to get a copy!

Only reasonable expenses can be paid from plan assets. If a plan were to charge a flat $500 per participant, would it be reasonable to charge that $500 fee to a new participant who is beginning to contribute at a rate of $50 a month? If not, that $500 can't be paid from the plan assets. Nothing that I'm aware of gives a bright line test on reasonableness, but I can see where a per capita expense allocation could be problematic. Have you checked the document to see if it stipulates how fees are to be allocated?

Each TPA should explicitly state what services they provide in their service agreement. There are obviously standard services like 5500 preparation and compliance testing that all TPAs do, but even with this there are differences between providers. Some may reconcile census data to payroll records and deposit records where some will take the data at face value. One could serve in a fiduciary role related to testing whereas others would not. I don't think you can generically say all TPAs do this set of things, because even within the "core" services, there are differentiators between providers. My $0.02.

Just curious...What is everyone doing about the new 402(f) notices? Are you taking the IRS models as is, combining them into a single document, updating the old notice with new info?

The amendments provided were just samples. If you need to amend a plan, and feel that the sample language is ambiguous or not suitable for your clients, you should draft your amendment in a manner that more clearly states the desired process. I have not read anything that would mandate how individual plan sponsors facilitate the waiver.

Is there no other classification that would create the same result? I would be very concerned about discrimination based on national origin. I would also be concerned that the sponsor may not know each employees origin and make a mistake in calculating eligibility

Joe- I was recently in the same situation. I wasn't able to find a quicker way, but I can offer that the IRS turned this around very quickly (by IRS standards). I had a CAF number about a month following the initial 2848 submittal. Mark

Assuming that the only correction is expanding coverage for a moment...what would this correction look like? I think a QNEC of 1/2 the representative deferral rate for NHCEs (who were actually offered participation) plus the match associated with 100% of the representative deferral rate for coverage. The ADP/ACP needs rerun and possible corrective action. The plan would then have over 100 participants on the first day of a couple plan years (this is not isolated to a single year) so we should file amended 5500s (with audits). All in, the cost here would be in the neighborhood of $150K, which I'm fairly confident would not get funded. I think that simply distributing HCE assets is a viable alternative under VCP. Of the 3 HCEs, only the one non-owner actually contributed. The two owners don't have contributions. I think this was a legitimate mistake, and feel this correction has a chance in a VCP application, but I haven't seen anything similar and would like to see how others on the board feel about the viability of this option. I inquired with the IRS a month ago and haven't heard back.

Based on the figures I listed in the post, yes. The census had about 1000 total employees, most of which did not meet eligibility and were excluded from the coverage test.

See the Q & A recently released, specifically B12 & B13. http://www.ftc.gov/bcp/edu/microsites/redflagsrule/faqs.shtm

Yeah, we've got that many people excluded. The plan was for a franchise with many young workers and high turnover. The plan was setup for the individuals in a management role only and should have excluded HCEs as well, but id didn't. What I'm left with is about 100 nonexcludable NHCEs that were not covered by the plan, out of 115 total NHCEs, with all 3 HCEs eligible to participate. Any ideas on how to correct? I'm thinking VCP asking that the situation be resolved by the taxable distribution of HCE accounts in current year? The client doesn't want to expand coverage to include non-management employees.

I have a plan that is not passing coverage with either the ration % or ABT. A colleague insists that you can restructure the plan into component plans to pass 410(b) testing for the 401(k) and 401(m) portions of the plan, as long as you test the plan as a whole for ADP/ACP. I don't believe this is possible. My basis for this position is Treas Reg 1.401(k)-1(b)(4) which indicates plans cannot be restructured to satisfy 401(k) testing and that the testing method used for satisfying 410(b) must be consistent with the method used to satisfy 401(k). Who's correct?

Thanks for the responses. Andy- Died in 4/16/2009, was the sole owner, val date is 1/1. Would the death benefit not be dependent on the funding? Current assets around $40K with roughly $150K due as min contribution. Forgive my ignorance on the topic...I'm a DC guy. SoCalActuary- Does any of this change your recommendation? How is an uncollectible excise tax reported? I've never had to do this before.

I don't think the study guides are a must for experienced professionals. I took both parts in Feb without a study guide and passed both.

I believe the proper answer is that the Employer should have made the plan available to the employees and would be responsible for the missed contributions. I don't believe the IRS would support the "oops, I really meant to offer this starting on_____ so I'll amend the effective date" approach if you asked the question directly. Whether that is the most practical way to approach the situation is another issue. Just my 2 cents...