jpod

Either (a) someone filled out the k-1 incorrectly, (b) k-1 was filled out correctly but someone handled 104 incorrectly, or © both (a) and (b) or some combination of the two. I agree this is a personal 1040 problem, not a problem that can be fixed vis a vis the plan. I would run, not walk, to a good plaintiff's/professional negligence lawyer. While SOL for some tax years may be closed, the SOL for a negligence action for some or all of those years may still be open.

masteff: Very useful information. Still, I am interested to know what is the rational, and how does that affect ADP testing (positively or negatively)?

I too remember that guidance vis a vis mandatory contributions under "thrift" plans. Perhaps it's good authority, but maybe not given that the effective availability doctrine now has some real regulatory teeth, as opposed to one individual within the IRS's employee plans office calling the shots as he saw fit 35+ years ago. In any event, I still am not convinced it's a good idea.

Just curious, but what is the theory behind a 3% minimum? Is it that all those NHCEs who do contribute, but contribute at less than 3%, will do 3% if their only choices are 3% or 0%, thereby enhancing their ADP? If so, that's interesting, but I'd like to see the studies that back that up.

I could defend it, but it's not as clear cut as other costs, such as the actual recordkeeping fees themselves. I think it's pretty aggressive, especially since much of the RFP and the bidders' pitches will be directed at minimizing the employer's day to day burden in connection with plan administration.

Don't waste your time. Ask for the agent's supervisor.

I think if you file late EZs voluntarily, the likelihood that the IRS would assess penalties greater than the DFVCP amount is negligible, and I would not be surprised if that is their "top secret" policy.

Let's assume after some reasonable investigation the Plan concludes that the participant wasn't involved in the scheme. Obviously, there is no "loan" or reportable "distribution." While there may not be evidence of a fiduciary breach on the part of any Plan fiduciary, the Plan fiduciary(ies) have a fiduciary responsibility to try to get the money back for the plan. If the employer decides that it would cost as much if not more to go down that road than it would to restore $9,500 to the employee's account, and then call it a day after the restoration, I see nothing wrong with that approach, although there probably is a need to consider whether some change to administrative systems should be made to reduce the risks of this happening to other participants. There is authority for taking the position that the employer's restoration of the $9,500 is neither a contribution subject to 401(a)(4) etc. nor an annual addition (and deductible as an ordinary and necessary business expense and not as a Section 404 pension contribution).

The best approach is to include the letter with the late filing. P.S., if the employer is a first time filer (i.e., none of the EZs ever due were filed), make sure to point that out in the letter.

I changed my mind. I don't know what the correct approach should be. Now that the Plan has knowledge, should it take steps to prevent the check from being honored? What if it already has been honored? Any banking/UCC experts out there? What are the Plan Administrator's fiduciary responsibilities here if it actually sees a copy of the negotiated check and has proof that it was forged? Interesting question.

I agree with JSimmons' conclusion. Way too much brow beating over this one. Plan should do nothing.

Don't know if there are mewa issues or not, but gosh, unless the payrolls are integrated in some fashion, why would you even bother? What's the advantage of having one plan over two plans for two separate workforces? Some savings on tpa services maybe, but hard to imagine the additional costs would be significant if you have two clone plans rather than one plan.

The OP describes it as a non-ERISA plan. I have no idea what kind of plan he/she is talking about. In drafting top hat nqcps, phantom stock plans and the like, I always raise the question of whether they want beneficiaries or not.

Another alternative is don't allow beneficiary designations; i.e., all unpaid amounts go to the estate. Yes, a bit of an extra complication at death for the survivors, but maybe it's worth it.

Unless a law is enacted waiving MRDs for 2010. At least one bill is pending, but I am not making any prediction as to the likelihood of passage. Nevertheless, some people are deferring MRDs until the last minute just in case. In your case, can the distribution/direct rollover be deferred until the last minute?

Note that there probably is already language in the plan protecting protected benefits, so arguably the amendment is ineffective with respect to the accrued benefit as of the date of the amendment, but that still leaves an issue with respect to benefits accrued post-amendment. IRS doesn't buy the scrivener's error theory, but it will favor relief under VCP for a retro amendment if it can be demonstrated that there was no intent to eliminate the in-service option.

The correct (technical) answer is that this cannot be corrected through SCP, at least under the current version of EPCRS. (Possibly if you wait until the new Rev. Proc. comes out in June/Summer the answer will be different, but I doubt it.) However, I have a high degree of confidence that the IRS will allow correction via retro-amendment through VCP (assuming the facts stated are accurate).

Isn't the 415 early payment reduction waived for qualified firefighters and police?

How "important" could this employee be if he/she wants to throw his/her kids out on the street naked, without health insurance. If those are the facts, I agree with the Section 125 analysis, but the stupidity of it makes me wonder whether they really are the facts.

Query whether you would have a reasonable basis for taking the position that the plan was effectively amended prior to 1/1/10 by virtue of the execution of a new collective bargaining agreement that provided for the participation by the union employees (of course, that is a fact which I am assuming and it may not be true). If so, you could avoid the determination letter step.

I think there is one bill, at least, HR 4421.

It wns't.

Before everyone goes on and on about trust/fiduciary law implications, what I was getting at is this. First, this most likely is a governmental plan. If it was a NP plan, it should be a top-hat plan, and therefore (a) ERISA rules of fiduciary responsibility would not apply, and (b) state laws that might otherwise be pertinent to the administration of the plan would be preempted. If this is a NP plan that does not qualify as a top-hat, it (and the employer) have problems that may dwarf any fiduciary issue. Assuming it is a government plan, then my first inquiry would be whether there are any applicable State laws, regulations or ordinances that control the issue. The common law of trusts would be a distant, secondary inquiry.

Exactly what fiduciary responsibility laws/standards do you believe are applicable here? Certainly not ERISA.

I detect a scent of an ongoing pt. By any chance was the art hanging or on display in "someone's" home or office? If so, you may not wish to show your cards to the DOL. Just take the art as a distribution in kind, pay the tax and move on.