Bill Presson

I bet JEC and FRAPlantools are the same person! What an excellent plan! 1. Make a single post on a message board. 2. Wait 13 years. 3. Answer self.

There are two things that have gotten confused since the grace period came about 6-7 years ago. Prior to that time there was a "run out" period. It was a time that allowed participants to submit reimbursement requests for expenses incurred during the earlier plan year. Sometimes it was only 30 days, but could be as long as 75 days. So for a 2012 calendar year plan, participants could submit claims until March 15, 2013. The claims had to be for expenses incurred during 2012. Then the grace period was introduced. Unfortunately the time frames for both items were often exactly the same. It was possible to add an additional time frame for an additional run out period after the grace period, but no adminstrator wanted to keep the books open that long. So a grace period (and this DOES have to be in the plan document) allows a participant to make an election for 2012 and use that money for expenses incurred from January 1, 2012 until March 15, 2013. So, the key issue is often making sure an expense in January 2013 is reimbursed from the proper account. It SHOULD be paid from any 2012 money remaining, but sometimes the accounting isn't done correctly. This is very possibly what has happened. I'm sure it is also some confusion between grace period and run out period. Hopefully, this gives you enough to go back and work through the plan years and reach the correct amount. Under no circumstances should you have amounts still sitting in prior years accounts. It should be forfeited and retained by the employer. But make sure you've accounted correctly.

We use Sharefile. Occasionally we get the calls you mention, but it gets more and more rare the longer the client is with us.

So I'm not the only one that thought this was weird! Good. I couldn't recall ever seeing or hearing about this form in 30 years of working in the retirement field. I feel a little better. If I think of doing this, I might. Otherwise, I'm not losing sleep over it.

Don't confuse initial entry with the ability to change an election. They are two different things and should be covered separately in the document.

I've asked one of the guys in our office how he learned. It was mostly self taught/trial & error, but maybe he'll have some suggestions. I do know it was mostly a report modification process like what Tom mentioned. Unfortunately, the books don't have information on the Relius tables and that's the key to learn.

We've done it this way numerous times.

If I see anything in print, I'll let you know. So far it's all been hearsay.

The biggest issue for our plans is the grace period exception. So now we're having to spend a lot of time explaining to participants why we really don't recommend doing this for 2013; too many participants might have planned for the grace period to use the rest of their money. Then we'll have to decide what to do for 2014. Also hearing about a potential legal challenge that the IRS has unilaterally created deferred compensation where they weren't allowed. For anyone making this change for 2013, how are the software changes getting done?

I haven't seen anything indicating an change in filing requirements.

Here's the notice. http://www.irs.gov/pub/irs-drop/n-13-71.pdf Why can't the Service issue anything without complicating other things? Participants can now roll over up to $500 to a new year, but the exceptions and restrictions make it almost useless.

That's the way we see it as well. Our legal counsel confirmed and a webinar by Ft William last week said the same thing.

I definitely wouldn't do it if there was any leveraging in the ESOP. But we've got a few KSOPs where the employer stock was more of a stock bonus component and it's worked pretty well.

You would still make the amendment effective 1/1/13. But you can't do it on a standardized plan and if they have a last day rule currently, it's already on a nonstandardized or VS.

I've seen this a couple of times and, frankly, it's an issue if the union plan document doesn't exclude the non union employees. We've had to get legal counsel involved in both situations. Naturally they were takeover plans.

You still have to test. I'm betting the reason is actually because it is easier on payroll to exclude those items and no one ever told them that it was a compliance issue.

ASPPA GAC just announced that the IRS has acknowledged this issue for 5558s filed close to 7/31 and the 5500 filed soon thereafter. The 5558 wasn't processed yet.

It depends on how frequently they can make deferral changes. Is it each pay period? Then your golden. Is it quarterly? Then, not so much.

Not sure this helps, but we're telling our corporate clients to go ahead and provide the notice to comply with the regulation. But rely on the recent FAQ in case they miss someone or the notice somehow doesn't 100% comply.

Plus the 401(k) deferral will allow a difference in contributions as well. All good comments above.

The biggest issue is whether the DOL would agree that it was a single plan if there wasn't a wrap doucument in existence during those years. I've heard rumors of people creating retroactive wrap documents that were accepted by the DOL but I've actually seen as many of those as I have seen Loch Ness monsters.

But a life insurance policy is not an eligible rollover distribution, correct?

Since he didn't receive a distribution of cash, only property, withholding is not required.

Other than enforcement when something shows up on audit, I'm not aware of any ongoing activity.

TPApril, I would recommend approach 3 to the client, but let them make the choice.