ERISA11

It is not clear to me whether DFVCP becomes unavailable for all years once a DOL notice is received for any year. The FAQs provide that the DFVCP filing must be made "prior to the date on which the administrator is notified in writing by the Department of Labor (Department) of a failure to file a timely annual report under Title I of the Employee Retirement Security Act of 1974 (ERISA)." But does that mean notice of a failure for one year would preclude a DFVCP filing for another year for which notice of a failure to file has not been received? Has anyone had any experience with this issue?

Thank you for your thoughts on this.

Notwithstanding the general rule that you can't terminate a SIMPLE and replace it with a 401(k) plan mid-year, if the employer has become ineligible to maintain a SIMPLE and is beyond the grace period and they correct under VCP by stopping any further contributions in the middle of this year, can they start a 401(k) plan for the rest of this year? Or do they have to wait to start the 401(k) until next year? It seems that, given that they can't continue the SIMPLE for the rest of this year, they should be able to start the 401(k) plan, but EPCRS says that a SIMPLE plan that is corrected for an employer eligibility failure through VCP "is treated as subject to all the requirements and provisions of ... 408(p)," which could mean having another qualified plan is prohibited for the rest of the year. A TPA is suggesting that the employer would need to wait until the next year, so I was curious what others on this forum thought about this.

Thanks for your responses. It is appreciated.

This may be a dumb question, but does the grace period for SIMPLE employer eligibility apply if an eligible employer started a plan mid-year but then employed over 100 employees with compensation over $5,000 later that same year? For example, the employer had fewer than 100 employees with compensation exceeding $5,000 in 2014, started a SIMPLE in the middle of 2015 (eligible for 2015 based on prior year employee numbers), and by the end of 2015, had over 100 employees with compensation over $5,000. The employer would be ineligible to maintain a SIMPLE for 2016 in the absence of the grace period. Does the grace period not apply because the plan was maintained by an "eligible employer" for less than a 12 months (due to the mid-year start date)? The statute says, with regard to the grace period -- "An eligible employer who establishes and maintains a plan under this subsection for 1 or more years and who fails to be an eligible employer for any subsequent year shall be treated as an eligible employer for the 2 years following the last year the employer was an eligible employer." So in other words, my question is does the requirement to have maintained the plan as an eligible employer for 1 or more years mean that the employer must have maintained the plan as an eligible employer for at least 12 full months, or is it possible that this one-year requirement really refers to more of a "plan year" concept such that maintaining the plan as an eligible employer for a short plan year (as a result of establishing a plan mid-year) would qualify as maintaining it as an eligible employer for "1 year"? Has anyone ever run into this?

For the A-org test, if the purported FSO is an LLC that has elected to be taxed as a corporation and that is not a professional service corporation (or a professional service LLC), would it fail to be an FSO as a "corporation" that is not a professional service corporation since it is being treated as a corporation for tax purposes? Or would it have to actually be incorporated under state law (and not just treated as a corporation for tax purposes) to be considered a corporation for purposes of this rule?

Thank you both for your responses on this. I really appreciate it. Tom, it is my understanding from your post, that you agree that there is no time limit on when the repayments can be made after a deemed distribution, correct?

This may be a dumb question, but I can't find a definitive answer on this in primary sources. If a loan has been treated as a deemed distribution (because of missed payments) and the 1099-R issued, can the participant make repayments on the loan beyond the 5-year maximum repayment period? It seems to me that this would be fine because the consequence of violating the maximum repayment period requirement is a deemed distribution, which has already occurred. So, after the deemed distribution, repayments beyond the 5-year period have no consequence. Does that seem right? The only example given in the regulations involves repayments within the 5-year period, so it doesn't really address this question. Any thoughts are appreciated.

Thank you for responding. I appreciate the feedback.

I am trying to figure out whether the 4979 excise tax on excess contributions applies only for one year or whether it applies for each subsequent year until the ADP failure is corrected. I have looked at the statute and the regulations, but they don't make this clear. While there is lots of commentary out there about the 6% excise tax on IRA excess contributions applying every year until correction, I can't find anything suggesting that this would be the case for the 4979 excise tax. I'm beginning to think that means the 4979 excise tax applies only for one year. Does anyone have any thoughts on that or know where there may be more guidance on this? Thanks in advance!

Thank you everyone for the helpful responses. I appreciate them.

Would a plan that does not otherwise allow loans be able to accept loan rollovers in connection with an acquisition (assuming the accepting plan's rollover language does not prohibit a rollover in the form of a loan and assuming that all those with rolled over loans are non-highly compensated)? On the one hand, it seems that allowing a loan rollover is distinct from allowing the issuance of an original loan under the plan. But I am wondering if it runs afoul of the prohibited transaction exemption for loans, which requires that loans be made available to all participants on a reasonably equivalent basis. Is anyone aware of any authority or guidance on this issue or have any experience or thoughts on it?

Many thanks for the response. Very helpful.

Who is considered an "interested person" for purposes of the VFCP notice under PTE 2002-51 (as amended in 2006)? Has anyone taken the position that (or asked the DOL whether) it is limited to only those participants and beneficiaries affected by the failure, or must the notice be given to all participants/beneficiaries in the plan (like the determination letter NIP)? I could not find any guidance on this, so just wondering about other practitioner's thoughts/experiences.

Plan A is merging in to Plan B. Plan A allows for the direct rollover of loan notes to qualified plans that agree to accept them. Plan B does not. Would this right to directly roll over a loan note be a 411(d)(6) protected benefit? The regulations provide that a plan may be amended to eliminate or change a provision for loans, but does that exception extend to this type of provision that might also be characterized as an in-kind distribution provision? Has anyone dealt with this before? Any thoughts would be appreciated.