Belgarath

Agree. Like you, we are a strictly fee-based TPA, and receive nothing from such a referral. Although I haven't digested the impact of the regulations yet, everything I've seen leads me to believe we would not be considered a fiduciary in this situation. One thing I haven't looked at yet is a situation where we provide a list of possible advisors, and one of those advisors is chosen and recommends a fund that pays the TPA (us) some amount of Revenue Sharing (when we receive Revenue Sharing, by the way, we don't keep it in addition to our normal fees - it is used to offset those fees). Haven't yet looked to see if this might somehow throw us into a fiduciary role, but everything I've skimmed from third-party sources seems to indicate that it would not, which makes sense to me. P.S. ASPPA is doing a webcast on this today. I signed up for the recorded version so I could review at my convenience, so it won't be available to me until next week. But anyone who is interested in the webcast today should check ASPPA's website.

Maybe this will help - IRC 7503. When the last day prescribed under authority of the internal revenue laws for performing any act falls on Saturday, Sunday, or a legal holiday, the performance of such act shall be considered timely if it is performed on the next succeeding day which is not a Saturday, Sunday, or a legal holiday. For purposes of this section, the last day for the performance of any act shall be determined by including any authorized extension of time; the term “legal holiday” means a legal holiday in the District of Columbia; and in the case of any return, statement, or other document required to be filed, or any other act required under authority of the internal revenue laws to be performed, at any office of the Secretary or at any other office of the United States or any agency thereof, located outside the District of Columbia but within an internal revenue district, the term “legal holiday” also means a Statewide legal holiday in the State where such office is located.

Well, I'm not sure what they are looking for - you may have to ask them. But here's a link to the 1.436 regulations, which includes the text of the (j) 1-9 definitions. Good luck! http://www.ecfr.gov/cgi-bin/text-idx?SID=f08104df7ff53f8d0cf900e730130990&mc=true&node=se26.7.1_1436_61&rgn=div8

I'm not sure I understand the question. Section (j) is definitions. Did they just want you to remove the incorporation by reference, or do they want you to actually insert the text of all the definitions?

Thanks Bird. Good enough for me. Of course, since this precise situation has not (to my memory) come up in 30 years, it seems unlikely to be problem one way or the other...

Gateway only has to be provided to anyone who is "benefiting" under 1.410(b)-3. In this case, see (a)(1). So just because someone has satisfied the eligibility requirements, if they receive no employer contributions/forfeitures, they don't receive gateway.

"Some don't tax income. ..." I think I need to move. I'm pretty sure I get taxed on the air I breath, a user tax because my feet touch the ground when I walk, and because I'm either a member of a family or know people who are members of families.

Hi Lou - do you have a cite/reference for that? Don't know as I've ever seen that specific situation come up, but I wouldn't, off the cuff, have said that filing before the original non-extended deadline invalidates the extension. I'm sure I'm probably wrong on that... Thanks.

Agreed - see 1.415©-1(b)(6)(i)(B). Technically that would make it on or before 4/14, as it is 30 days as Lou mentioned.

And just FWIW, not in this case, but I have found that you can't necessarily rely on the term "SERP" to mean a 409 plan. I've found several situations where this term is used for a qualified plan - usually in the context of a new comparability plan where there was a takeover of a standard type PS or 401k plan with a pro-rata allocation, and the new salesman finds that it would pass testing with large amount to head honcho by converting to new comparability, so it is sold/marketed as a "SERP."

I can only give you my gut feeling: if the plan excludes commissions from the definition of compensation for match purposes, and the "recoverable wage" of $2,000 is later offset by commissions, then it wouldn't count for plan purposes. Only way it would count is if there weren't enough commissions to offset it. I've not (knowingly, at least) encountered a state minimum wage law that says a commissioned salesperson must receive at least minimum wage. But let's suppose that under that regime, a salesperson works 2000 hours, yet only generates $3,000 in commissions. Minimum wage is - whatever - say $10.00 per hour. So the employer must pay the salesperson $17,000 in additional minimum wage. In that case, I'd say there is plan compensation of $17,000 for match purposes.

Suppose a corporation has a 401k, but never makes any contributions to it - this is an additional twist on a question from last week. Plan established only to allow a participant loan for owner, from funds rolled in from another plan. Employees eligible, but never notified. NOT a safe harbor plan. Please ignore the qualification implications of the above for purposes of this question. Client in a subsequent year establishes a SEP. Let us assume for the moment that is a prototype SEP, and not an IRS model SEP. Client makes a contribution to the SEP for a given year. Under the terms of the SEP, he is the only one eligible (3 year eligibility) - BUT, since the plans are aggregated for TH purposes, doesn't this trigger a contribution requirement in the 401k plan? Or am I dreaming? P.S. - poll question - I've never actually heard of this being a problem raised on audit - anyone ever encountered a situation in real life like this? If you start a new 401(k) plan for an employer who freezes a SEP after the prior year, do you always get all the SEP contribution/account balance data for all prior years when determining TH status for the new 401k?

Don't file for many d-letters these days. Although I'm by no means surprised at the timeframe, I'd certainly contact the IRS to inquire. Last one we filed was a 5300 for a Defined Benefit plan, and we got approval (without even a comment or question, which was a surprise) in app. 8 months.

I don't see a problem switching to an EZ for anyone eligible to file an EZ. I'm not certain from your post - you refer to the DFVC program, but EZ filings aren't eligible for DFVC, as that is a DOL program. The IRS has a similar program for EZ filers - pretty much the same thing, but it is governed by Revenue Procedure 2015-32.

If you want to copy and paste, click on the little toggle button (light switch) in the upper left hand corner. Once you have pasted, you can turn it back off and the text will return to normal size.

If anyone cares - discussed this (informally!) with an ERISA attorney, who agreed that this should be considered definitely determinable.

I think calling it a "fiduciary violation" is ridiculous. Seems like there are a lot of different opinions on the wisdom of loans from a 401(k) plan, regardless of roth or non-roth. Just spitballing - it does seem like since the big advantage of Roth (vs. the current tax reduction for pre-tax) is the accumulation of potentially tax-free earnings. I suppose one could argue that by taking the loan, you are potentially reducing the earnings in your Roth account, thereby negating some of that advantage. (of course, if the market tanks during the 5-year period you are repaying the loan, then you have actually increased your potential earnings substantially, if you have a longer timeline) But investment theory/results is out of my bailiwick. Buy stock in the Brooklyn Bridge!!

"your post does bring about a point worth following in practice - even if someone doesn't want to defer, have them fill out the form at 0% just so there is protection from someone coming back and saying 'no one told me'." Agreed. We ALWAYS recommend this, even though employers often don't do it... And in this case, no employee was ever notified of one darned thing re the 401(k) plan. They did, at least, file 5500 forms, albeit with incorrect participant counts (only showed one participant, rather than counting those that should have been eligible.) And since it was set up as a "solo" 401(k) plan, pretty good bet that no SPD, etc., was ever done regardless. I expect they will terminate it, and take their chances on an audit. If plan audited and disqualified, then loan would presumably be a deemed distribution, and client will pay back taxes and penalties, which will likely be less than any make-up amounts for employees that might otherwise be required to retain qualification. But that's up to their tax/legal counsel to figure out. I really have no idea what I'd submit for a "fix" if employer ultimately decided to attempt to fix this. But I'm betting employer will instead sweep it under the rug and hope for the best.

But what "free pass" is the HC getting? And I'm talking strictly in terms of "make-up" contributions? The HC has contributed nothing, has taken no deductions, etc. The establishment of a plan solely to take a loan is a separate issue, and I understand that. (I intentionally did not address that in the original post) The IRS could disqualify the plan for a nondiscrimination failure (eligible employees were not permitted to roll money into the plan and also take loans) or a coverage failure, but I can't see an argument for a required employer make-up contribution, since under coverage/nondiscrimination testing for employer contributions, you are going to pass automatically if there is no contribution for any HC. But as I think more about it, I can see your point that the pre-approved fixes are not the only corrections under 2013-12. Possible, for example, that in order to keep the plan qualified if submitting under EPCRS that you might have to propose a correction similar to, for example, what would have been required under a safe harbor plan.

It does seem to be the season for the oddball situations to creep in. Suppose you have an employer who sponsors a 401(k) plan. Doesn't do anything, doesn't contribute, but it is still a plan that is "maintained" by the employer. Now the employer establishes a SEP, using the IRS 5305 model SEP document, and contributes to it for, say, 2014. It just comes to light now, when the CPA starts looking at all the employer's "stuff." I read this as an employer eligibility failure. So it can be fixed under VCP, and it appears to me that the "fix" is to immediately cease contributions, while of course also making sure that all eligible employees received their contributions - if not, make appropriate corrective contributions with interest. Anyone ever seen/done this? Am I missing anything? Seems like a very reasonable solution/correction, without too much "pain" involved for the employer (which is why I want to make sure I'm not missing something!)

An odd one here. Employer established a 401(k) plan several years ago. At the time, it was a 1-person corporation. He rolled in some money that first year, specifically to be able to take a participant loan. Fast-forward to several years later. He now has employees who should have been eligible under the terms of the plan, BUT, he has made no deferrals or contributions of any sort, other than repaying his loan. When I look at Appendix A of RP 2013-12, the correction under .05 (2)(b) is to correct for the "missed deferral opportunity" based on 50% of the "missed deferral." Since the "missed deferral is based on the ADP, which in this case is Zero, then it would appear that there is no correction required! An odd result, but that's where I end up. Any other thoughts?

No, that's not correct. You can file the return prior to the deadline, yet still have until the deadline to actually make the contribution. But always be aware that the minimum funding deadline (if applicable) is independent of the tax extension deadline.

Yep, that's what I meant. Thanks.

Although done through payroll deduction, not part of 125 plan. These should be included in income, and 401(k) deferrals should be withheld from these amounts unless specifically excluded, right?

They ways clients can find to mess things up...someday I'm gonna write a book. Client establishes a 401(k) plan for 2015. Had a SEP for 2014, and swore they didn't make any contributions for 2015. Now we find that they did, in fact, contribute to the SEP for 2015 - made two contributions FOR 2015 in January and February of 2015. Don't know yet if this is a prototype SEP document that would allow contributions to another plan - if so, no problems. But that would be too easy. Let's assume it is a 5305-SEP, or a mutual fund company clone that has same language so that no other plan can be maintained. I'm stretching here - do you think it would be acceptable to amend their SEP document to a prototype allowing contributions to another plan? Personally, I don't think it is, at this point, since we are now in 2016. Possible that the fund company (Putnam) would agree to transfer this directly to the 401(k) plan without reporting as a distribution, but I doubt it, and I couldn't blame them if they won't. Ditto for transferring it back to the employer. But, MAYBE they would... Anybody ever submitted a VCP in this situation, requesting that the amounts remain in the SEP, and just make sure no 415 limits are violated between the two plans? With a SIMPLE-IRA, you can do this, and pay a 10% tax on the amounts retained in the SIMPLE, but I don't see this listed as an option for a SEP in the Appendix C "easy" fixes in Rev. Proc. 2013-12. What a pain. Any additional suggestions/observations appreciated! P.S. also possible that they could convince the fund company(ies) to reclassify as a 2014 contribution, but I don't know if they will do that either...