Fredman

My gut feeling is that at first they'll try to adhere to the notice, but may waffle from it as time goes on. This is my gut speaking, not anyone from the DOL. Notice 2002-23 PURPOSE This notice provides administrative relief from the penalties under §§ 6652©(1), (d), (e), and 6692 of the Internal Revenue Code (the ACode@) for failure to timely comply with the annual reporting requirements under §§ 6033(a), 6057, 6058, 6047, and 6059 of the Code. This administrative relief applies to late filers who both are eligible for and satisfy the requirements of the Delinquent Filer Voluntary Compliance Program (ADFVC Program@), which is administered by the Department of Labor=s ("DOL") Pension and Welfare Benefits Administration (APWBA@). The DFVC Program was published on April 27, 1995, in the Federal Register (60 FR 20874). A modification of the DFVC Program was published on March 28, 2002. BACKGROUND Plan administrators who fail to file Form 5500 annual returns/reports on a timely basis can be subject to civil penalties under both Title I of the Employee Retirement Income Security Act of 1974 (AERISA@) and the Code. The Secretary of Labor has the authority under section 502©(2) of ERISA and 29 CFR 2575.502c-2 to assess civil penalties of up to $1,100 per day against plan administrators who fail or refuse to file complete and timely annual reports. Pursuant to 29 CFR 2560.502c-2 and 29 CFR 2570.60 et seq., PWBA maintains an administrative program for the assessment of civil penalties for noncompliance with the annual reporting requirements. Under this program, plan administrators filing late annual reports may be assessed a penalty of $50 per day for each day of noncompliance. Plan administrators who fail to file an annual report may be assessed a penalty of $300 per day, up to $30,000 per year, until a complete annual report is filed. In addition to the civil penalties that may be assessed by DOL under section 502©(2) of ERISA, the Internal Revenue Service (the "Service") may assess penalties under §§ 6652©(1), (d), (e) and 6692 of the Code for the failure to satisfy the annual reporting requirements. Section 6652©(1) generally provides that in the case of any failure to file a return under § 6033(a), the exempt organization shall pay an amount equal to $20 for each day during which the failure continues, not to exceed the maximum amount specified under the Code. Section 6652(d)(1) generally provides that in the case of any failure to file an annual registration statement under § 6057(a), the late filer shall pay, upon notice and demand, a penalty of $1 for each participant with respect to whom there is a failure to file for each day the failure continues, up to $5,000 for any plan year. Section 6652(d)(2) generally provides that in the case of any failure to file a notification of change of status, the late filer shall pay, upon notice and demand, a penalty of $1 for each day the failure continues, up to $1,000. Section 6652(e) generally provides, in part, that in the case of any failure to file a return or statement required under §§ 6058 or 6047(e), the late filer shall pay, upon notice and demand, a penalty of $25 for each day the failure continues, up to $15,000 per return or statement. Section 6692 generally provides that in the case of any failure to file a report required by ' 6059, the late filer shall pay a penalty of $1,000 for each failure. DOL ADMINISTRATIVE RELIEF FROM PENALTY In order to encourage voluntary compliance with the annual reporting requirements by late filers, DOL implemented the DFVC Program. Plan administrators who are subject to the assessment of civil penalties for failing to file a timely annual report and who are eligible for the DFVC program may pay reduced civil penalties by voluntarily complying with the terms of the DFVC Program. ADMINISTRATIVE RELIEF FROM CERTAIN INTERNAL REVENUE CODE PENALTIES FOR DFVC PROGRAM PARTICIPANTS The Service will not impose the penalties under §§ 6652©(1), (d), (e), and 6692 (as these sections relate to the filing of a Form 5500) on a person who is eligible for and satisfies the requirements of the DFVC Program with respect to the filing of a Form 5500. Once the late filer satisfies the requirements of the DFVC Program, including paying the reduced civil penalty under section 502©(2) of ERISA, the relief under this notice will apply. The late filer need not file a separate application for relief with the Service. The Service will coordinate with DOL in determining which late filers are eligible for the relief under this notice. INAPPLICABILITY OF THE ABOVE RELIEF FOR CERTAIN FILERS The relief under this notice is available only to the extent that a Form 5500 is required under Title I of ERISA. Therefore, for example, Form 5500-EZ filers and Form 5500 filers for plans without employees (as described in 29 CFR 2510.3-3(B) and ©) are not eligible for the relief in this notice. Because such plans are not subject to Title I of ERISA, they are ineligible to participate in the DFVC Program.

Retain the client....loose the boss.

Why have a match? If I understand this right, everyone will get a 5% ER contribution. Why not give everyone a 5% P/S contribution and save some admin headaches? 100% vest the first 3% and turn it into a safe harbor plan and forget about testing.

If correcting per wmyer's method, I wouldn't use a 7 as the distribution code. That labels the distribution as normal, which in my book means the participant is over age 59.5. I think an 8 (excess contributions taxable in current year) would be more suitable in this situation.

I agree with Brett's statement... "Was the loan truly to the participant or a disguised PT loan to the employer. " ...especially if the participant signs the check over to the ER. In this case, it does look like like a PT. I think though that if the participant cashes the check and hands the ER the money that it would be extremely difficult to uncover in audit. I think you might be able to argue that its still a PT, but no harm no foul. I also agree that its best to stay away from these types of transactions.

I'm not so sure this is a PT. If its done outside the plan why would it be a PT? The company is borrowing this guy some cash...maybe an advance on is salary. Instead of not receiving a paycheck for the next three months, he decides to pay back the company with a loan from the plan. Same scenerio, but the guy goes and gets a loan from a bank and pays the company back, then gets a loan from the plan to pay the bank back. I think if they allow the participant to cash the loan check and the participant hands them the cash from the loan check then its ok. Maybe the company needs to send "Brutus" to the bank with the participant to make sure they get paid, but I don't see how this could be considered a PT. Maybe I'm wacko, but if a client wants to start loaning money to people, so be it, but I'd advise that its best to leave that to a bank.

Was the bank the trustee? If so, then the number you are using probably belongs to the bank. Go to www.freeerisa.com and sign up for a new account if you don't already have one. They have an EIN finder...you can enter the company name or do a reverse lookup and enter the EIN. How cool is that?

I'm moving this to the 401(k) board (previously housed in Operating a Pension Firm board) in hopes for some additional comments. Thanks!

I think you must run the numbers, especially if you want to prove the Plan is due $0.00. The way I see it, since the end of September the DJIA is up about 13% and since the end of October its up about 10%. Someone might have to dig deep on this one. Who cuts a check when transferring plan assets? That's asking for trouble. Good Luck.

This is always a tough spot to be in and unfortunately I don't think there's much you can do now. What if the market was up? Would the 10% remaining participants share in a 77% increase? It works both ways.

I'm looking for some research on the amount of charge offs/write offs a TPA running daily valuation generates. We are trying to determine how we stand up when it comes to the errors we make and the costs associated with errors. Any information remotely close to this topic would be appreciated.

Our system tracks daily accurals and automatically posts them with a triggering event (transfer out, distribution, etc.) just like Jim mentions. Which makes sense since I'm using a variation of the Omniplan system. This can create a headache. If there is only 1 participant in a daily accural fund (not common, but it happens) and that participant decides to transfer out mid-month, you have a situation where the trust is short that accural until its paid by the fund company. Again, not very common, but it does happen. I'd be interested in other people's thoughts, but I think it would be a real pain to administer by posting interest/dividends when they are received.

I say nonsense. Is this a trick question?

Not for 1997, but we received some requests for 1998 plan years. Not all for terminated plans. We also have copies, so no big deal...just a pain in the potato. Funny thing...I received TWO copies of each request. Two envelopes, received same day requesting the exact same thing. Hmmm... If you don't like IRS letters going to the client, use your address (we use our PO Box) instead of the client's address. Our clients won't even know we received these requests.

Timely subject so close to Halloween... At a Corbel seminar on Friday it was reiterated that the DOL is putting the smackdown on ERs for late deposits. Here's the latest twist: The DOL has issued subpoenas to TPAs requesting them to provide information about their clients and whether any had late deposits. A real life example that was used was a TPA was issued a subpoena, the TPA gave the DOL a list of 8 of their clients that may have submitted late deposits and ALL 8 were audited by the DOL. I agree with the DOL and their position about submiting deposits in a timely manner. I've seen one to many ERs not give a hoot about the employees money. I do have a problem with their attitude & bulliness they are displaying.

I just recently found a 1998 Welfare Benefit return on freeErisa.com. There's another free web based service that recently advertised in the Retirement Plans Newsletter, but I can't remember the name. I think it also begins with free, anyone help me out here?

Tom had it right with his first sentence of his first post. The best way to learn the mathematical side of the tests is to actually do some. Perhaps you can take some of the tests you ran on your system and do them by hand to see if you can come up with the same results. Also, everywhere I've been has had some sort of system to do the test, but how do you know its right? There probably isn't too many people doing testing by hand, but there is probably a bunch of us who double check what the system is calculating. As far as your job search, I would think a TPA (smaller ones anyway) is what you want. Otherwise, try a bank (a locally owned one). Bank's do have a reputation of being on the low end of the pay scale, but there are usually some other trade-offs. Plus, if the bank is the trustee on the plans you are working on, there's an added sense of responsibility with your job.

I've always held the opinion that mutual funds are considered a single security. I've never attached anything listing each fund/security and its value. In the past, I usually tried to cram this information at the bottom of the page in the "free form" message area, but with the new forms I won't be doing that. I'm going to plug the total of all the assets that exceed the 20% and make a note for our files.

No offense John, but I think you could've filled out and printed a Schedule P and mailed it to the Trustee in the amount of time it took to write all those questions. That's what I would do. Sorry, just a little cranky about 5500s today.

...I'm bumping this back to the top.

Ok, I think understand all of this. I have one question: If on the day of the refinancing, there is a replacement loan and the replaced loan for purposes of §72(p)(2), how does this apply to a loan policy that only allows one loan at a time? Here's the part from Sal's text that has me befuddled: "Since the repayment term of the replacement loan ends after the term of the replaced loan, the plan must treat both loans as outstanding on June 1, 2004, to determine if the §72(p)(2) limits have been exceeded. If we add the loans together, we get a total of $16,000." Two loans, eh? What do you think?

If you are reporting the entire distribution on a 1099-R what distribution code are you using? Here's an interesting way that I've seen: 1. Report the amount the participant should've received on 1099-R. 2. Report the overpayment on 1099-MISC (showing as all taxable). If the overpayment is less than $600, don't report it. Regardless of the amount of the overpayment or how its reported the overpayment is taxable income to the participant. The 1099-MISC helps with keeping the participant honest with the IRS and sometimes will help with the recovery of the overpayment. Lastly, the plan needs to make whole and it should be done as soon as possible. Someone needs to fork over the money to be put back into the plan and then they can bicker over who owes who what.

The brokerage firm should not send you any 1099. They should recognize that the excess contribution was not eligible for rollover and distribute the $$ with no tax reporting. They may not be willing do this for you so be prepared to defend yourself on your tax return. You should also receive a corrected 1099 on the amount rolled over. The two 1099s added together should equal the amount of the original distribution. [This message has been edited by Fredman (edited 04-07-2000).]

I've never seen a 5500 filed as a combined return. If you have two plans, two documents, two plan ids (001 & 002??), two of this and two of that, I think I'd be filing two 5500s. I'm kind of surprised that the IRS hasn't been around looking for that second 5500. Anyone else?

Give this site a try...freeErisa.com. You can view prior 5500 filings for just about any plan. The latest news for the site states that they have about half of the 1998 forms available. You need Adobe Acrobat version 4 to correctly view the files. [This message has been edited by Fredman (edited 03-21-2000).]