AndrewZ

Thank you! This is helpful. I never ever receive anything from IRS regarding my ERPA other than the on-screen confirmation of filing/paying my renewals, and the email saying I'm missing a ton of CECs. My last renewal card is from 2015, so I always just have to assume everything's OK.

My business partner has repeatedly requested an updated enrollment card by phone, and they always say they will send it but never do. Her most-recent one is 2012, mine is 2015. Last we knew, there was only one employee in the ERPA department. But it looks like it may now be handled by the regular EA staff? Let us know if you're able to get the card!

Thank you so much! This wasn't making sense to me, especially as they did initially provide me with some corrected certificates for 2021 then backtracked. I'll email you. I also would not expect extra ethics credits to not count. Good to be aware of. Neither I nor my business partner have ever received renewal certificates, and we've renewed several times. She also didn't receive credits under her PTIN for the same 2021 webinars and receive an email from the IRS. I'm sure no one is thrilled with maintaining only a few thousand ERPAs.

Hello, When I submitted my 2021-2023 renewal, I included many live and on-demand ASPPA webinars in my CEC counts, as I normally do (I don't normally pay attention to my PTIN record as I didn't think they normally rely on that). The IRS emailed me saying I was short a bunch of credits (all that weren't on my PTIN record), and that I had to submit the "IRS program numbers" for the courses in order to receive credit. Upon requesting the program #s from ASPPA, I learned that none of their webinars that originally aired in 2021 (whether viewed then or on-demand in 2022) were eligible for ERPA credit. It appears that at least some of them had program #s at some point, and it seems like they were intended to qualify but something failed in the process (perhaps related to COVID?). Now I'm short a bunch of credits. I'm not able to find whether ASPPA originally communicated whether ERPA credit was available for each webinar, but I normally confirm that when I sign up. Obviously, we need to monitor our PTIN records closely real-time. Has this happened to anyone else? Were you able to resolve it with the IRS?

Thank you! It looks like the IRS is latching onto NAPA's prior incorrect reference to EFAST (instead of FIRE) being the e-filing system for these, suggesting that incorrect e-filing could be part of the issue. Clearly, it's not -- I'm sure no practitioners are trying to use EFAST to file them.

We're providing our clients who contact us with the sample letter from FTW to submit to the IRS. However, one of them called the IRS before contacting me, and the agent told her there was a glitch that could be the cause, and she'd submit an inquiry request and our client should receive a letter in 30 days with the results. We processed 40 8955-SSAs in the same FIRE batch, and so far only about 4 have contacted us. So I'm hoping it's random and not all of them, and am hesitant to contact all of the clients included in that batch at this time.

NAPA just issued an announcement (though they erroneously refer to EFAST2 when it's actually IRS' FIRE system). Glad we're not the only ones and that it appears that the IRS will have to address this! https://www.napa-net.org/news-info/daily-news/plan-sponsors-advisors-receiving-erroneous-irs-late-filing-notices

I've never run into a late notice before, even with ones that were actually filed a little late. I just ran across something from years ago (I think 2010 when EFAST was introduced) saying they were eligible under the Form 5500 DFVCP program, it sounded like you just mark "DFVCP" and send it to EFAST, and then on paper to the IRS at no fee (I wasn't clear if it had to be associated with a late 5500)... but I didn't look into it closer as that's the not the issue here.

We have the same issue. We filed 40 8955-SSAs for 12/31/2022 PYEs that show as submitted to the IRS on 7/29/2023. We've been notified by two clients they've received late filing penalty notices (with huge penalties that don't make sense). We're really hoping to learn more, and that's it's a random issue and not all of our clients will receive these notices. That would be a nightmare to deal with!

That's my thought also, but the employer definitely has stated it will generate taxable W-2 income. Maybe they're not communicating it to us accurately, or they're handling it wrong. But we have to go with it and advise them on how to apply deferral elections.

An employer is buying back stock from employees, which it will be reporting as taxable income on their W-2s. It seems clear that this is includable for plan purposes (including deferral contributions) for a plan using "W-2" compensation definition (if the plan doesn't specifically exclude it) -- similar to an exercise of non-qualified stock options (NSOs). But for employees who terminate employment prior the transaction (if the transaction happens within the later of 2.5 months or end of the year), is such compensation NOT treated as "regular pay after severance from employment" and so excluded? (It's clearly not part of optional "post-severance compensation.) Treas. Reg. §1.415(c)-2 (ii) Regular pay after severance from employment.— An amount is described in this paragraph (e)(3)(ii) if— (A) The payment is regular compensation for services during the employee's regular working hours, or compensation for services outside the employee's regular working hours (such as overtime or shift differential), commissions, bonuses, or other similar payments; and (B) The payment would have been paid to the employee prior to a severance from employment if the employee had continued in employment with the employer. (iii) Leave cashouts and deferred compensation.— An amount is described in this paragraph (e)(3)(iii) if the amount is either— (A) Payment for unused accrued bona fide sick, vacation, or other leave, but only if the employee would have been able to use the leave if employment had continued; or (B) Received by an employee pursuant to a nonqualified unfunded deferred compensation plan, but only if the payment would have been paid to the employee at the same time if the employee had continued in employment with the employer and only to the extent that the payment is includible in the employee's gross income.

Correct - that only applies for a plan that already contains Nonelective SH provisions. The OP asked for confirmation that such Notices are no longer required (separate topic from adding SH to an existing plan), so I clarified that practitioners may still want to issue them to make it easier to reduce or suspend contributions (requiring 30-day advance notice to participants).

I agree that trying to administer those loans is an unreasonable nightmare, but I haven't heard that we have a choice! I don't believe any of the many major recordkeepers we're working with are taking the position that loan payments due later than 12/31/2020 can be extended. I'll have to look into it.

You're correct with regard to the COVID payment suspensions. Payments due starting in 2021 have to be timely made, but those due through 12/31/2020 can be suspended for a year (into 2021) from the date of COVID suspension. However, if a participant has gone on an approved Leave of Absence, and the Loan Policy allows, they can take up to a one-year suspension under the regular LOA rules (I assume starting from their date of LOA).

Also, if you add Nonelective Safe Harbor to an existing plan within one month of the plan year end (e.g. 12/1/2021 or later for a 2021 calendar-year plan), the minimum SH contribution percentage for that year is 4% instead of 3%. And according to our document provider, although Notices are technically no longer required for Nonelective SH, if you want to have the option to reduce or cease SH mid-year without a qualifying business hardship, Notices that include that language continue to need to be provided prior to each year.

A small company's industry is that of leasing its employees to other companies for their specific projects, so its employees typically don't work for it more than 18 months, and aren't typically re-hired. My understanding is that the employees understand this when they're hired. Therefore, even though employees become eligible for profit sharing contributions due to satisfying initial eligibility requirements, most of them terminate with 0-20% vesting under the 2/20 schedule. There are around 30-50 NHCE participants and a few HCEs. It seems to me that there could be BRF "effective availability" issues, partial plan terminations (though that's "facts and circumstances" and it could be argued that the terminations are voluntary), and the Form 5500 reporting of large #s of partially-vested terminees could be an audit flag. And just the general design seems clear that it's intended to circumvent nondiscrimination rules to only benefit the owners, and the government would view it that way in an audit even if there's not a black-and-white violation. The "safe harbor" plan option for Leasing Organizations (100%-vested MP plan, that allows a recipient organization to exclude such Leased Employees) may indicate that the IRS wants to avoid this type of scenario. Maybe an ERISA's attorney's opinion that this specific employer's employee terminations are voluntary and don't create annual partial plan terminations, with a caveat to the employer by the TPA that it can't ensure that the government may not approve if the plan were to be audited, would help? Also, I'm wondering if a vesting schedule was chosen where most participants at least partially-vest, or if they're receiving a 3% Nonelective Safe Harbor contribution, would give them a meaningful benefit that may help. I'd appreciate any input on this. Thanks.

The Prevailing Wage contributions were already determined and deposited, so no flexibility there.

Thanks. I did see discussion about the year-end issue, but it seemed like it may not apply to discretionary contributions which haven't yet been declared. Fortunately, the client took my recommendation to not retroactively amend.

We have a client with a 401(k)/profit sharing plan with prevailing wage contributions. We just discovered that in 2018, they increased the rate of prevailing wage contributions, causing a large nondeductible contribution amount. We can reduce it a bit by pushing a post-year-end deposit into the 2019 fiscal year deduction. Another option to further reduce the nondeductible amount may be to retroactively amend the plan to bring in an excluded class, and employees who had not met initial eligibility, and give them a profit sharing allocation (the plan is not Top Heavy). I know this would require approval under VCP to be sure it's acceptable. If the client were to do that (assuming waiving the VCP submission), what would likely be considered a "meaningful benefit"? Would 1% of compensation work, or should be more conservative and give them 3% (to match what the IRS considers the minimum for Top Heavy)? They will still have a nondeductible amounts, with a 10% penalty and offset to the 2019 404 limit. Thanks.

Vested balance here also. That's also what FTWilliam exports from its compliance system.

One of our clients received a call from the "DOL" to the effect of claiming that their plan is "not recognized" by the DOL because they're not in compliance with 408(b)(2), and they'll call back in a week to confirm they've taken appropriate actions. The client says it sounded like a robot. It seems obvious this is some sort of scam (like the IRS, the DOL would only initiate contact by mail, and they have no way of knowing if a plan complies with 408(b)(2) unless they audit it). If they call again, we're asking our client to request a return phone # and agent ID # to call them back with. Has anyone else experienced this, or have any insight? Another client recently received a letter from an advisory firm trying to scare them into hiring them for a "free" 408(b)(2) compliance review. Thanks.

I filed one in early April 2017, a one-participant-plan non-amender. Should be a rubber-stamp. I just heard from them again that it hasn't yet been assigned to an agent.

When QNECs are used in the ADP test, I understand that they have to pass 401(a)(4) general testing both alone, and combined with profit sharing (and apparently 410(b) is tested only with them combined). If you have QNECs allocated that exceed the amount used in the ADP test, do those amounts need to then be carved out and combined with profit sharing for separate 401(a)(4) test (that excludes ADP-tested contributions)? For example, for a Prevailing Wage plan with the P-W contributions classified as QNECs, the amounts exceeding the 10% "disproportionate amount" P-W limit (or the amount needed to make the ADP test pass, if less)? This would be the preferable option, as we are allocating profit sharing to maximize HCEs, so need allocations to NHCEs in the test. (Assume the plan is using current-year ADP testing, and document seem to have no language addressing this situation, other than P-W contributions up to 10% "can be" used in the ADP test.) It seems pretty obvious that you would test the "excess" P-W QNECs combined with profit sharing, but this is a rather unusual situation and I'd like to confirm. Thanks.

Husband owns a company 100% that has a 401(k) plan with 1 non-NHCE. His wife has a SEP for her sole prop (she's the only employee). They're in a community property state, so the businesses are a controlled group. I do know the SEP is required to cover all employees in the controlled group (which it's not), and be aggregated with the 401(k) plan for top heavy determination (and may not be allowed to co-exist with a qualified plan, depending on the SEP agreement). I'm pretty sure that SEPs are not subject to 410(b), BRFs, and 401(a)(4) testing (since a proper SEP would always automatically be non-discriminatory), and so the 401(k) plan does not have to be aggregated with it for testing. The 401(k) plan has a non-standardized document that doesn't cover other controlled group companies. So my understanding is that the 401(k) plan is not negatively impacted by the SEP or the other controlled group company. Is this correct? Thanks.

Thanks, QDROphile - that's the conclusion we've come to. Although it seems that the plan documents should clearly address this (the current ones don't), and to add such language to our VS document would take it out of pre-approved status. I still consider it a gray area, as the regs don't seem to expressly allow it, and there's not a merger or spinoff that would inherently require transfers. But the regs don't prohibit it, and the participants' benefits aren't affected by it (unless perhaps the 2nd plan had higher investment-related fees).