jlea

From a fiduciary perspective, why would you want to permit rollovers from an IRA to a 403(b) plan subject to ERISA?

Has anyone filed Form 8928 yet? Any practical experience with the level of review, etc.?

Sorry -- there were no responses other than yours, but I would still really appreciate anyone sharing their experience with these filings.

Anyone have practical experience regarding filing Form 8928 and specifically, for instance: -- whether the IRS challenged the filing's characterizations (i.e., failure due to reasonable cause and not willful neglect, etc.) -- whether the filing of Form 8928 triggered an audit

JJRetirement, did you find anything on this?

The DOL has an online calculator for use with its correction program. It makes use of IRS underpayment rates.

Yes, important distinction and one I didn't amplify. My discussion with the DOL agent was in context of rank and file NHCE and, again, was corrected in accordance with EPCRS.

Yes, I'd begin by correcting in accordance with EPCRS. Hopefully you'll be able to correct under SCP and avoid the VCP fee. As for the PT issue, I have had informal discussions with a DOL agent who, while noting that it might technically qualify as a PT, agreed that correction in accordance with EPCRS returns the qualified plan to the position it would have been in had the error not occurred. She stated then that it would be a nonissue for the DOL.

Yes, and if an employer tries to terminate its SIMPLE IRA sometime other than at the conclusion of a calendar year, it results in an operational error that must be corrected. EPCRS applies to SIMPLE IRAs as well (at least the IRA charges lower VCP fees for them).

Yes, and don't forget timeliness on our wish list . . .

Based on the WRERA language and the guidance out so far, it seems the issue falls to each plan whether to offer everyone a choice regarding their otherwise RMD for 09 or to set a default rule, which is communicated to Ps and Bs, and act in accordance with the default except to the extent that someone requests otherwise. The amendment deadline is not until 2011. I'm anticipating, though, this decision will be made in the short term and the amendment will reflect the choice made. Would you agree?

Plan improperly distributes $150 of employer contribution as part of an in-service withdrawal. Discovered three years later. Participant is currently employed and remains a Participant in the Plan. Unfortunately, the amount at issue is over the de minimis threshold. Of course, Rev. Proc. 08-50 would say take reasonable steps to have the overpmt (adjusted for interest) returned to the Plan, notify the P that it was not eligible for favorable tax treatment, and, to the extent that there is a shortfall b/w what is returned and the amount necessary to make whole the Plan, the ER contributes the difference. My question: If the Plan notifies the P that the amount wasn't eligible for favorable tax treatment, can the ER just go ahead and make the contribution? ER doesn't want to request the overpayment if necessary.

You can also take a look at Section G (particularly Q&A G-1) in Notice 98-4. It specifically addresses the required notice prior to the annual election period in advance of a Simple IRA's Plan Year. I believe the termination notice requirement is the corollary to the otherwise applicable annual notice. http://www.irs.gov/pub/irs-irbs/irb98-02.pdf Of course, you would also need to comply with any notice provisions in the Simple IRA's Plan document and SPD.

The plan sponsor is saying that salary deferrals and matching contributions must be made on all comp earned through 12/31. They point to Publication 560 as support for the idea that contributions must be made to the end of the calendar year (they interpret this as literally through 12/31). The employer's last 2008 pay period ends on 12/21. Comp earned after that date will not be paid until 2009 (and consequently will be on the 09 W-2). I would like to find support for the proposition that because the employer operates on a cash basis, it is sufficient to end salary deferrals and matching contributions on comp earned through 12/21. Anyone encountered this or analytically similar situations?

Client terminating Simple IRA Plan at year end. Prototype sponsor says elective deferrals and matching contributions need to run through 12/31. Pay period ends 12/21. Client's accountant is saying that compensation earned after 12/21 will not be included in 2008 W-2, instead included in 2009 W-2. Prototype sponsor says Publication 560 addresses. I've read that publication, Notice 98-4, Form 5305, and Section 408(p). Of course, there are references to the Simple IRA running on the "calendar year" and termination at the end of the "calendar year." Nothing conclusively states that means all calculations running through 12/31 itself. Anyone encountered?

Plus, the interim nonamender process has been made streamlined and cheap ($375 is coming to mind). I got a compliance statement back this summer within 6 weeks from the time it left my desk.

It is very odd and frustrating. The individual with whom I am working acknowledges that it has no affect upon the prototype sponsor (as they are a nondiscretionary trustee and participants direct investments) -- instead, its effect is upon the sponsoring employer. She indicated that they were told in training that none of "their" plans should be marked "yes" (and, yes, that is for INTENDING to be a 404© plan.) The contact also confirmed that the answer to this item dictates whether the 404© language appears in the SPD. (Once again, I've got to agree with Sieve that although most 401(k) plans with participant-directed investments intend to be 404© compliant, actual compliance is FAR more difficult. And the worst is that no matter what anyone thinks now, it's only going to matter once the investments have gone sour -- at which point in time, courts are much more likely to find that more should have been done to comply . . . Of course, if we go down that road, all of us will be crying into something or another.)

Sieve has addressed one of my largest concerns: the generation of the SPD. It seems to me that a primary purpose of having the AA contain this question is (a) what language goes into the SPD regarding intention to be a 404© plan and (b) potentially what types of information, etc. are provided to the participants regarding the investment options, risk and return characteristics thereof, etc., etc.

The plan COULD be 404© compliant, and we can certainly assist the client in making it so. The issue, though, is that the Adoption Agreement has a spot for whether the plan is INTENDED to comply with 404© and they want to mark it no.

Working with TPA using McKay Hochman prototype plan to help client establish a new 401(k) plan. They didn't mark plan to be a 404© plan and when I requested the change, I was told that they "never" mark the plans to be 404© plans. Anyone ever encountered?

Well, my analysis was running along the lines of Sieve's but my concern was that voiced by ERISAnut. But, IRC 408(p)(2)(D)(i) states in pertinent part: "An arrangement shall not be treated as a qualified salary reduction arrangement for any year if the employer . . . maintained a qualified plan with respect to which contributions were made, or benefits were accrued . . . " Parsing this, my argument is that the employer here did not maintain a qualified plan. As you stated, ERISAnut, a qualified plan is a plan that is qualified under IRC 401(a). Here, the employer paid contributions into a statutory arrangement whose benefits are TREATED as if they were paid out of a qualified plan. But the employer did not maintain a qualified plan. Turning to IRC 72®(1), it states in pertinent part: "[a]ny benefit provided under the [RRA] (other than a tier 1 railroad retirement benefit) shall be treated for purposes of this title as a benefit provided under an employer plan which meets the requirements of 401(a)." IRC 72®(2) goes on to address how contributions are treated. These provisions address the separate but related issue of how to handle the contributions and benefits related to railroad retirement benefits. Further, their statement that they are "treated . . . as" benefits provided under a qualified plan inherently means that they are not ACTUALLY paid into or out of a qualified plan. As with Sieve, this is my first encounter with parsing and applying RRA benefits and, particularly, their interaction with the maintenance of a Simple IRA. And, as with him, I welcome your response to my reasoning.

Client is terminating a Simple IRA plan and instituting a standardized prototype 401(k) plan. In putting together plan documents, I learned that one of the related employers that has been a co-sponsor of the Simple IRA participates in the railroad retirement plan. In its exclusive plan rule, Section 408(p) uses the term "qualified plan." What little I've learned in a quick bit of research about railroad retirement benefits is that there are two tiers of benefits: tier 1 which is a social security-like benefit and tier 2. Tier 2 is what concerns me. IRS Publication 575 states, "Treat this category of benefits . . . as an amount received from a qualified employee plan." Anyone addressed this question before or have experience with it?

And, here, the correction will be to amend the plan retroactively. Then the transaction was not impermissible. Instead, it was a permissible payment of benefits to a plan participant: hence, no PT.

What type of transaction do you believe this to be that is within the purview of the VFCP? The description of eligible transactions and corrections does not include a generic "transfer of assets." Instead, in the realm of transfer of assets, the listed transactions are sales and/or purchases of assets. Alternatively, you can correct for the payment of benefits without properly valuing the plan assets on which payment is based.

Here's how I come out on the topic. (1) No PT under IRC as rank and file EE is not a disqualified person. See IRC 4975(e)(2)(H). (2) Parsing terms of ERISA 406(a)(1)(D), impermissible payment from plan to EE may arguably constitute a "transfer to . . . party in interest[] of any assets of the plan[.]" (3) However, by correcting under EPCRS, either (a) you correct by taking reas steps to have P return overpmt plus interest (and ER makes up any shortfall), in which case plan is returned to status would have been in had the payment never occurred (which is basically the remedy sought if there was a PT) or (b) you correct by retroactive amendment, in which case the payment was not impermissible.