shERPA

Has there been some new guidance on this? IIRC the whole point of Notice 87-57 was that the RAP closes when the plan is terminated and it needs to be amended for any new laws and regs that are already in effect. This was restated (no pun intended) by IRS in more than one notice or Rev Proc subsequent to this. WRT DB plans not yet restated for PPA, PPA's been in effect for many years now, so restatement would be needed under the 87-57 scheme of things.

First time this came up with one of our plans BITD (maybe 20 years ago?), we checked with our attorney. She said the participant had the right to stop the loan withholding from payroll under California law governing payroll deductions. I doubt this has changed under CA law since then. Other states may differ.

Our August submission is an extremely simple document issue, but not eligible for self-correction. Not even any HCEs in the plan. But how would IRS even know this when it hasn’t been assigned after 8 months?

We submitted one last August. As of today it is still not even assigned. Anyone else seeing this?

Yup, PD won't likely do it. Tell them to compromise on a % of pay they can both live with for 2018, then sell them a 401(k)/PS for 2019.

No. SEP contribution must bear a uniform relation to compensation.

Right, this is effectively giving him a quarterly bonus, presumably grossed up for taxes, with the net amount going to the loan payoff. They can't do it as a tax-deductible contribution. Even if they can give son a plan contribution that would meet coverage and non-discrimination, a contribution is not a loan payment.

I hear you! If I was only able to bill for all the times I’ve had to say “it’s not a match”.......

OK, so there haven't been any distributions. Wasn't sure what "distribution date" you were referring to. Is the PEO plan distributing to ees? Then have to wait 12 months. Or set up new plan and transfer back from PEO. Successor plan is OK as long as restricted monies aren't distributed to current employees under 59-1/2.

Seems to me the successor plan distribution issue already exists - from adopting the PEO plan.

No. I know the IRS talks in circles sometimes, but I don't think you can apply circular reasoning to compute the correction for the missed opportunity.

How about code section 4975(c)(1)(E) and (F)?

Thanks for confirming my puzzlement. By the third revision, the gap between the benefit obligation and the assets/contribution was low enough that the auditor passed on it as not material, so the client has moved on. We will do 2019 so we'll see what comes up. Per the plan document there should not be any TH minimums in the CB as the DC plan covers 416. Of course they might have included minimum benefits in the val in error. The pay credits look sufficient to exceed 0.5% benefits, but I've not taken a calculator to them yet.

Well, sort of. The client has gone back to the current firm twice, and twice it's been revised, but they are not very good at explaining things.

Thanks. In the plan I'm looking at, the crediting rate is 3.5%, the discount rates for the ASC report are 4% pre and 5% post retirement. Plan equivalance is 5/5 and applicable table (post only). ASC benefit obligation is 10.4% greater than the total HABs. So in this case the crediting rate < discount rate. That's why I'm wondering if the assumed form of benefit is the cause.

Met with a prospect, currently have a CB plan. They also need audited financial statements so their actuarial firm provided an ASC 715 report. Question from the employer - the benefit obligation figure on the ASC 715 exceeds the CB hypothetical account balances. I suppose it is a matter of assumptions, and what is reasonable. Is this typical of what CB plan sponsors are dealing with? This is a small plan, for IRS funding the assumption is lump sum distribution of the HAB. I see ASC 715 assumption is the benefit in the form of a life annuity, which I suspect is the reason for the difference. Thanks.

Other than the aspect of going back to amend prior years' tax returns, it's basically the same as unwinding the SIMPLE contributions in a calendar year where a qualified plan is established. I think you have that covered. I've run across numerous SEPs and SIMPLEs over the years that do not meet coverage requirements. Never have I had an employer want to go back and correct prior years. Has this ever been caught on audit? Not that I've ever seen. I know we can't advise this way but the advisor or accountant sitting in the meeting usually asks the question. Then they make their choice.

Have to determine if this company and the other companies comprise either a controlled group or affiliated service group. Then apply the 415 limit appropriately based on the result of this determination.

Based on the facts, she's in. No basis at all to exclude her. If the company gave Mom a 100% of pay contribution allocation, then her presence will adversely affect the test. But she's still in.

The problem is what happens after the plan is written and the initial DL is received. Who takes responsibility that the document is up to date on a timely basis for all the various regs and legislation that comes along over the life of a plan? Yes pre-approved are the way to go. But this effectively precludes smaller plan sponsors without big legal budgets from using plan provisions that are not in pre-approved plans. For example, what if a small employer wants to have 401(h) accounts in a DB plan? Are there any pre-approved plans that include this language? If not and the plan is amended to add it, does this modification blow reliance on the opinion letter for all of the plan document?

What does the plan document say? If it is the IRS 5304 - SIMPLE form, I believe it says annual pay. So that's that. Risk? Failure to follow the terms of the plan, disallowed deductions I suppose. Or thrown into an audit CAP. Employee would have a claim for the unpaid contribution as well.

I also have a client who received this BNYM ADR postcard yesterday. Maybe others too, who just haven't contacted me.

No, full amount should be deductible. See PLASTIC ENGINEERING & MFG. CO. v. COMMISSIONER. An amortization base payment is pro-rated since it is based on a period of time, but TNC for the benefit accrued for the plan year is not pro-rated.

OK. I don't think you're missing anything. Assuming the change from partnership to LLC does not require a new EIN (I don't know about this), then as far as IRS is concerned they have a partnership continuing to file a 1065, same entity, same EIN, just a change in name. Same thing on the plan, the 5500 will still be under the same EIN, so there is no real change from the reporting side, other than the plan name, which you noted will be shown on the next 5500. What would you tell the IRS, how would you do it (no form for this) and why would they care?

If the sole prop is the only member/owner of the LLC, then it is a disregarded entity still taxed as a sole prop. To be taxed as a partnership there would have to be another member. In the first case I suppose the EIN wouldn't have to change, even though the LLC is a separate entity from the sole prop, because for federal tax purposes the LLC is ignored. So plan is still sponsored by the sole prop. If it is the latter, then I don't see how they can not get a new EIN. For federal purposes the LLC is a partnership, which is a separate entity from a sole prop. Clarification needed on what's going on.