Belgarath

Weellll - having previously worked for a large corporation, I can say that they sometimes settle completely bogus claims, where there is realistically no chance of losing, (but never say never) just to clear it up. Sadly, this often saves them money, so they pay $3,000 to make it go away. The plaintiff contacts an attorney. The attorney then sends a letter to defendant, threatening to sue, but willing to discuss an "amicable" settlement, and sometimes the defendant pays a small amount. It is a game played by the attorneys with, no doubt, zillions of permutations, but I've seen it happen. To those of us who were non-lawyers, it used to drive us crazy sometimes. I'm sure some of the attorneys here can relate horror stories - anyway, I'm of the opinion that IF the proof of distribution can be produced - do it and try to head off trouble. So I'm agreeing with My 2 Cents. As galling as it may be, sometimes refusing to pick a fight is the best option.

That's rather disturbing. Did anyone ask the DOL auditor why they were investigating your client, rather than going after the entity that refused to provide the information? If so, what did they say? Or were there other reasons for the investigation?

Just want to see if I've got this right - if a participant terminates after age 55 and 10 years of participation during the 6-year diversification period, they continue to be able to diversify, correct? Or does that go away when they terminate employment? I believe it is the former. Thanks.

Lou already gave you the answer. You are looking at the definition of annual additions, which cannot exceed... Catch-ups are NOT considered annual additions, and are not subject to 415 limitations. Also see Treasury Regulation 1.415(c)-1(b)(2)(ii)(B).

I'm not sure I understand what you mean by changing the definition of large plan to participants with account balances? Do you mean, just as an observation, that if the DOL changes the rules in the future that this client will benefit?

I can see them saying they won't withhold any more until your new 20% election is used up - for example, salary during the error period was 50,000 - they should have withheld 3,000, but instead they withheld 6,000. So there is a 3,000 excess. Now your new election is 20%. Until such time as 20% of your pay under the new election equals 3,000, they don't withhold anything. That seems like a reasonable and appropriate correction. It does not seem reasonable to refuse to honor your new 20% election until the "correction" is made based upon an ONGOING 6% assumption, even though you have elected a new percentage. As alluded to above, I would push this, and ask for a WRITTEN explanation.

Well, technically, it is an operational violation. You HAVE to process it at a later date - as soon as possible when error is discovered. But I have a hard time seeing where the real problem is, unless this is a recurring theme - the only correction is to process it, there's no lost interest, since presumably the account continues to earn interest. I suppose, if the assets LOST money, that there might be a make-up required since the distribution wasn't made timely under the terms of the plan. And as with any self-correction, documentation in the files as to how this will be prevented from happening in the future.

Sort of a twist on post hoc, ergo propter hoc. And lest anyone accuse me of attempting to be snobbish or pretentious, I hereby fully disclose that I only know this phrase 'cause I saw it in an episode of "The West Wing!" The last Latin I had was in 7th grade, and I don't remember much of it...

I should have noted that participants rarely read the SPD, UNTIL they want a distribution. Then they instantly become ERISA lawyer wannabe's. A few employers do actually read them, but it is a very small percentage, as far as I can tell.

Have a great day.

Minutes, e-mail, written communications. Could be a draft AA with Box "A" checked, with a letter form the client saying "the provisions of this draft document are what we want" and the final document checks box "B" instead. The possibilities are endless. Many SPD's are custom drafted, or based on the doc and then modified. I could see where someone has a bad day, modifies the SPD to be correct, then forgets to change the AA. (Well, that'd be a REALLY bad day, but anything is possible.) Other than no one ever making a mistake, I don't know how you can generalize too much about these things in advance, as the good old "facts and circumstances" seem crucial in any such situation.

Peter - corporate minutes, plan illustrations, prior plan document if the error is a restatement, e-mails or other written communication, SPD, etc. - I suppose it might depend upon the error and the specific situation. Could include payroll records, employee handbooks - anything to support your case!

You might try mentioning that (presumably) the employees (and there are obviously lots of them) have already received SPD's. All it takes is one participant to complain to the DOL when they don't receive a contribution that they see that they are entitled to, and the results could be FAR more expensive to your employer, in addition to the possibility that the IRS will audit the plan. Furthermore, the 5500 forms would be KNOWINGLY falsified, and that's bad news as well. It is illegal, and otherwise just plain wrong, on so many levels. "Do I keep my job, or help Bernie Madoff embezzle funds from his clients?" It really boils down to the same thing, albeit on a smaller level! I truly sympathize with your situation, and can only wish you good luck. And, it is possible that when some of the "bad stuff" is pointed out to your employer, they may surprise you, and take the bull by the horns and accept responsibility. On a more realistic level, you might suggest they contact an ERISA attorney about the possibility of a "John Doe" VCP submission where they propose the reform the document to what was "intended." I haven't been involved in a situation such as this, but perhaps it is a possibility.

145. That includes doc. AA, appendices, administrative procedures, loan policy, QDRO procedure, and SPD. We won't count the several thousand pages of e-mails that some clients seem to require... P.S. - to my knowledge, NO ONE has EVER read it all. I did have a client read an entire 403(b) document ONCE.

Thanks Dave. This is great work, and we appreciate it! Tell the Elves to take a long weekend for the 4th.

So, if you have a salaried employee who has an employment contract that says the employment contract begins on January 1, 2017, and ends on December 31, 2017, at a stipulated monthly salary of "x" - do you keep this person out on the 7/1/entry date? Just curious. We take whatever employment commencement date the employer gives us (unless there is something obviously wrong) and run with that. Sal puts it nicely, as usual, when discussing this issue. To paraphrase, he says it is a matter of interpretation, and that the "benefit of the doubt" is usually given to the participant. Also says "The terms of the employment agreement (if any), the manner in which compensation is calculated for the individual, or other relevant factors may need to be considered in identifying the appropriate ECD."

Yup, precisely illustrates my point. Up to the employer to determine "hire date." And the employer can't artificially keep people OUT of the plan either. For example, if you have an employment contract stating you are an employee as of 1/1, (but due to the weekend you don't actually perform an hour of service until 1/4) then I'd argue that you cannot be kept out of the plan on the 7/1 entry date because you didn't start "work" until 1/4.

Ah, but how do you KNOW you exist? Welcome to...The Twilight Zone.

It depends upon what the employer defines as the "hire date." If the actual "hire date" is 1/3, then I say no, not eligible on 7/1. If the "hire date" was officially determined as 1/1 or 1/2, then enters on 7/1. I agree that consistency is necessary.

Thanks.

What's interesting about this is that the transition period, unlike the transition period in 410(b)(6)(C) which is the end of the calendar year following the calendar year the transaction takes place, is a TWO year transition period. So if it takes place in 2017, and you otherwise satisfy the requirement, you can run the SIMPLE through the end of 2019.

A new one to me. Employer gives incorrect payroll data - essentially added back in deferrals twice, thus overstating comp for many participants. As it happens, this excess amount put one person over the top to be considered a HC. And this person, as incorrectly being considered HC, caused an ADP failure, resulting in refunds! So, question is, can this be corrected as a valid self-correction under RP 2016-51, Section 6.06(4), by notifying the affected participants, and giving them the option to repay, or not, and for those who do, issuing corrected 1099-R's showing zero? Other solutions? Even if you went through VCP, I'm not sure what other reasonable solution could be proposed anyway? This business is rarely dull. P.S. - I just found this:

Thanks. But, coverage was never the question - the question asked to us was preserving the safe harbor status. And given that it turns out that the plan was already amended to suspend safe harbor contributions, I don't see how SH status can be preserved. Thanks to all for your responses.

Thanks Kevin - good point. These aren't plans or businesses we have anything to do with - just trying to answer a question from a CPA who does some business with us, and we are operating on nearly zero information. It turns out, however, that the business sponsoring the SH plan already amended it to suspend SH contributions, so all of this is probably N/A. But good to remember the next time it comes up!

Thanks. However, I'm not certain I necessarily understand what you are saying. Are you saying that the "A" SH plan in this situation retains safe harbor status, or not? Since the buyer is assuming the plan of the seller, there's no severance of employment/distribution event. I agree that service with A must be credited for B's plan, etc.