mwyatt

Just want to make sure that I have this straight. We have a client that ended up not depositing the minimum required contribution by the 8 1/2 month funding deadline, therefore incurring a deficiency. The tax itself is reported using Form 5330. At the time that the 5330 is ordinarily due (7 months after plan year end), we of course did not file for an extension on the 5330 as we had no expectation that we would need to file (funding deadline had not even come when the 5330 is due). Just want to make sure that i understand the logic: We filed 5330 after the triggering event occurred 8 1/2 months after PYE when the client missed the funding deadline, so off the bat the form is late. So not only owe the 10% excise tax, but also get followup late filing penalties because we didn't extend the form. Or am I missing something?

Fortunately a straight profit sharing plan so no FASB issues.

Some sort of resolution to report here: Received an e-mail back from DOL asking for me to call the central number to discuss the situation. Described to initial contact that plan year is a "52/53" week plan year ending on the last Friday of each November, that the Plan has been in existence since 1979, has received favorable determination letters since inception, and had always filed 5500 filings on the actual plan year. His response was "well that's an illegal plan year". News to me, and is all over the IRS Code and publications as OK (see Publication 538, IR Rev. Ruling 81-159). I mentioned as such, and his response was "well that's the IRS; we're the DOL" (your tax dollars at work). Fortunately was bounced higher to another person @ DOL. Her initial response was to have us file dummy 5500s showing a 365 day plan year, and then every once in a while file a short plan year to reset. Did remind her that the plan sponsor signs the 5500 under pains and perjury that the information is accurate, so that knowingly filing a 5500 showing a plan year that is wrong didn't sound like an acceptable solution to me or to the client. Long story short, she got back to me later that the X-034 error is in fact in error in this situation, and that programmers are working on it; will keep in back of my head next year when we do the 2010 e-filing. So if you have a 52/53 week year, stand your ground.

Why don't you just e-mail the PDF version of the 5500EZ, have him print, sign and send directly to the IRS, and return a copy of the signed page to you as proof of filing?

On the PBGC issue, seems reasonable to assume that eligibility for use of 5500-EZ means not subject to Title IV coverage, hence no coverage characteristic code. However, a hypothetical 50 partner law firm that inexplicably has zero employees other than partner spouses can file an EZ, but could be over the 25 participant threshold for PBGC exemption (although I'd be hard pressed to find such a partnership in the wild).

Just processed the 2009 filing (YE November 2010, not late) for a plan using electronic filing. Plan year as defined in the document ends on the last Friday of November. Plan has been filing 5500s since the 1979 year. This generated an error message since the plan year indicated on the forms isn't exactly 365 days long and we didn't check "short plan year" (which it isn't, and at some point under the calendar would have to check a box entitled "long plan year" given this logic). Anyone else run into this situation and how was it resolved? As a side note, hopefully they get this coding fixed before 2012 rolls around.

No problem; my issue is that they are defining the group F benefit before offset as... the offset.

Offset does apply to all groups A-F by reading of document, so don't think I have an issue there. My concern is that as explicitly written, group F benefit before offset is indeed the offset amount (A - A). Seems unseemly to me that could say benefiting for the NHCEs as mathematically impossible for them to ever actually receive a benefit from the DB Plan (not cash balance BTW). Given that percentage of non-zero benefits under the DB Plan is around 20% and solely consists of HCEs, that this design is right out on the edge. I'd have a hard time convincing an IRS reviewer that was in fact OK under 401(a)(26). Haven't even seen General Test results so can't comment on that portion, but 401(a)(26) seems pretty iffy.

Plan does specify that deferrals aren't taken into account for either the F formula or more importantly for the offset. My bad for not clarifying that in the post. With respect to the "meaningful" benefit, if "F" formula was specified as .5% but in practice offsets more than covered this so noone gets a benefit, then that would be OK for 401(a)(26) (i.e., could count them as participating under the DB prior to offset and that would be fine). If so, then if could possibly show that the F benefit (which is the offset amount as written) provides at least .5% for participants prior to offset, then this would be OK?

No DOL (purport to be volume submitter so not necessary). This just seems too cute to me as an out, and I'm struggling to see how one could claim any benefit under 401(a)(26) here from a common sense standpoint, since by definition no benefit is ever provided to Class F.

Reviewing a case and ran across the following benefit formula by class: Classes A-E: specific named doctors Class F: All others Benefit Formulas purport to be unit% * Years of Participation. Formulas are Classes A-E: Various percentages (as tuned to each doctor) Class F: Actuarial Equivalent of benefit provided by 401(k) Plan with benefits offset by "actuarial equivalent of benefit provided by 401(k) Plan". So in essence benefit provided to Class F is "A" - "A", which if I remember algebra will always equal $0. 5 doctors, around 20-25 in class F. Have a hard time believing that this satisfies 401(a)(26). Any other opinions?

Does anyone have a IRS Trouble Shooter number available? In a Kafkaesque situation from hell with a bogus late filing. We sent followup letter in May (started in February) where client had paid the erroneous penalty. They just received a letter providing credit for the erroneous payment, then a second letter adding the penalty back. God help us when the IRS has to start tracking Health Care coverage in 2014.

You are referencing "over funded plan", by which I assume you are talking about comparing the present value of the maximum benefit allowed under IRC 415 v. plan assets. FT isn't relevant in this situation. Presumably in your situation death benefit is PVAB and excess assets are reallocated to participants. If you had assets in excess of the PV of 415 max benefit, then these were not allowed to be reallocated to participants (or beneficiaries) and were required to revert to the Employer. Excess tax in this situation could range from 20% to 50%, dependent on facts and circumstances. More information is needed.

Agree on not wanting to trash other companies' products, but our experience with Relius last couple of years between 1099-R and Government Forms prompted the switch. Switchover was fairly painless, and not having to install multiple service packs on individual computers several times a year was an added bonus. When coupled with the per client pricing of Web client, cost savings made it a no-brainer.

Anyone else not yet received notification? I filed end of February and nothing in the mail yet.

ASC DGEM hasn't announced yet (surprised) but 2010 5500-EZs were functional as of yesterday.

Curious as to why it took a month longer than last year to change "2009" to "2010" on the form. As far as I can tell, only change on the form. Also, look at the instructions, page 2, midway down second column: See anything contradictory there?

ASPPA notice yesterday: Given impending release (supposedly) looks like an awfully short window of time to file the 2010 using 2009. I'd wait myself.

Well, if Ogden can't handle the workload (which currently consists of 5558 filings, which they did a bang up job of processing last year), hopefully someone puts their thinking hat on and grants blanket extensions for 2010 EZ and 2009/2010 SSA filers so they don't compound their misery. Just saying...

Given the Ogden Utah's track record last summer with the handling of the 5558 filings, I can only imagine how screwed up the SSA forms are going to be. I'd suggest iron clad document retention of any future payouts that are reported on any SSA filings as one can only imagine how many subsequent payouts aren't going to be logged. Prepare your clients now for a deluge of letters 20 years down the road from paid out people "looking for their money". Any word on the 2010 5500-EZ? This is getting ridiculous.

Think the 7/30/2010 posited was for a short year, 1/1/2010-7/30/2010, hence the reference to 2010 filing.

Shouldn't have any issues at all as it doesn't appear that the IRS has been properly logging in 5558 filings anyway (given the number of bogus issues arising last year, including but not limited to second plan listed on a 5558 not being logged, whole stacks of 5558s not being recorded, etc.).

Although in our situation we were able to show 5558 showing two plans and approval letter received on first plan (but not second); hard pressed for IRS to argue we didn't file for the second plan. Did hear at the EA meeting that even the old time honored certified letter approach is pointless as it doesn't document what was actually sent in the envelope. Best solution is for IRS to get a handle on the 5558 processing; error rate last year was unacceptable.

Another possibility (and I've had this happen with a couple of clients already) is if two plans were entered on the 5558. Form instructions state to list multiple plans with common year ends on one form, rather than filing separate 5558 filings. In both cases the first listed plan received approval notice back from IRS on extension, but moot on the second plan. In both cases the second plans listed received late filing penalties for filing after July 31, 2010.

Also remember the "first 5 years" rule as to applicability; otherwise it would be impossible to set up a new plan with any past service benefit.