jpod

If there is a third party advisor who is responsible for this mistake consider contacting that advisor and telling them you are going to hold them responsible and ask them which they prefer. Aside from that consideration, I would not want to roll the dice on a closing agreement or audit cap and I would file for VCP ASAP.

Cuse Fan, how does what you said about TH square with this, from the IRS website: Is a Frozen Defined Benefit Plan Subject to the Top-Heavy Minimum Benefit Rules? Yes. A frozen defined benefit plan must meet the top-heavy minimum benefit rules. A frozen plan may be one in which benefit accruals have ceased but all assets have not been distributed to participants or their beneficiaries. A defined benefit plan is top-heavy if, as of the determination date, the present value of the accrued benefits under the plan for the key employees is more than 60% of these benefits under the plan for all employees. If a frozen DB plan is top-heavy, it must provide top-heavy minimum benefit accruals to all non-key employees. Many employers sponsor both a defined contribution and a defined benefit plan. In many instances, these plans’ provisions require the defined contribution plan to provide an extra minimum top-heavy contribution covering employees in both plans instead of the defined benefit plan crediting top-heavy minimum benefit accruals for these employees. Alert: Employers that are amending a defined benefit plan to freeze benefit accruals should carefully review the plan’s top-heavy language. If these employers also maintain a defined contribution plan, they may want to amend both plans so that any top-heavy minimums are provided under the defined contribution plan. These amendments would avoid the frozen defined benefit plan having to provide minimum benefit accruals if the plan becomes top-heavy.

Assuming for the sake of argument that there was a valid volitional freeze per a 204(h) notice, isn't it possible that minimum accruals were still required post-freeze under the top-heavy rules?

Pension actuaries do, and are required to do, many things that involve the application of law, e.g., ERISA and Internal Revenue Code funding requirements. If an actuary made a mistake in applying minimum funding rules, which are LAW, and as a result the employer got hit with an excise tax, that is malpractice. It is not a stretch to conclude that a failure to mention the 204(h) requirement when an actuary is helping the employer through a freeze is also malpractice.

If there was a lawyer involved, maybe the malpractice was committed by the lawyer by not mentioning the 204(h) notice requirement, and my comment would extend to the lawyer and his/her insurance. Nonetheless, if the actuary was the only one involved in advising the employer in connection with the freeze and never advised the employer about 204(h), the actuary has significant exposure in my opinion. Of course it's always possible that the employer was properly advised and either forgot to follow through or intentionally ignored that advice.

The other thing you may have going for you is that if there was no 204(h) notice, and you press the point and demand the continued accruals, the extra cost to the plan, or at least much of it, may end up coming out of the plan actuary's pocket, or it's insurance company's pocket, and not your former employer's pocket.

Also, I believe the regulations make it clear that if you didn't distribute the 204(h) notice to anyone it is egregious, i.e., you aren't saved by ignorance of the law.

That's why you shouldn't have asked for the 204(h) notice without the benefit of counsel. They can look up Section 204(h) and then "find one" and say "oh, you mean this thing we sent to you and everyone else 9 years ago?"

Years ago I had a great deal of success getting the local DOL office to put pressure on a client's former employer where there was a missing 204(h) notice, and it was a small employer (less than 25 employees). Who knows what luck you may have now given the thinness of DOL's resources.

Talk to an ERISA lawyer, preferably an ERISA trial lawyer, before you ask for a copy of the 204(h) notice.

Was it a defined benefit pension plan or a money purchase pension plan? Are they saying it was frozen before you left employment? There may be an ERISA 204(h) violation here which could give you a strong case for additional benefits if you are inclined to take an adversarial approach here.

I don't see how it necessarily helps Corp B if he is buying stock of B from his brother. Using plan assets to benefit your brother can absolutely be a self-dealing PT, although I agree with Mike that there may be a self-dealing PT by virtue of John Doe's purchase of the stock to benefit himself.

Sounds like this could easily be a self-dealing PT by John Doe, i.e., John Doe as a fiduciary of a plan using the plan's assets to benefit a person in which John Doe has an interest: his brother.

When it comes to failure to withhold FIT on wages, if the IRS can't collect from the employee, they can and in the right circumstances WILL go after the employer (maybe I should have said "wrong" circumstances).

Isn't the "payor" (and not the employer) secondarily liable for the 20% in the same way an employer would be secondarily liable for the amount of income tax it should have withheld from wages?

I would advise a client that it MUST file a 5500 for the plan you describe. I think you are way off the reservation here.

I am not aware of any legal obstacles to the simplest approach, without giving the participant a choice: Pay a lump sum equal to the missed payments plus some reasonable interest factor. This would not be an eligible rollover distribution. Before I do anything I would try to get a sense of whether this was a one-off mistake, or if you've stumbled upon a systemic problem involving several participants and many more dollars. That could impact resolution.

A medical flexible spending arrangement is absolutely an ERISA welfare plan. Show us the authority upon which you rely for saying it is not.

Yes, I would agree that assertion is incorrect.

I haven't looked at the slides, but if they say what you say they say I don't see how that could be correct.

The Rule does not apply to advice to a governmental plan participant about taking a distribution and/or rolling to an IRA or an ERISA plan.

It seems to me that if they are true 3(16), and at least if they have a concern, they have a fiduciary duty to study further and try to come to the correct conclusion vis a vis the administration of the plan.

Yes, this is very silly. And My 2 Cents raises a good point. He couldn't have made an IRA contribution without earned income, deductible or otherwise (unless his spouse had earned income and his was a spousal IRA).

One would hope that a reasonable IRS agent wouldn't make a fuss if ESOP Guy's approach is followed, but the employer may not be so lucky. You are at risk for plan disqualification and excise taxes for non-deductible contributions. (Not sure about the reversion excise tax is contributions were never deductible in the first place.)

Borrowing is perfectly fine as long as it is isn't a PT or part of a PT. There's nothing impermissible about UBIT.