Belgarath

But beware! As always, make sure what the plan document says. Ours, for example (and I hate this provision) says that for purposes of determining who RECEIVES a top heavy allocation, it is based on the plan year for which the contribution is being made, and NOT the plan year containing the determination date.

If a traditional, frozen DB plan was timely amended in 2012/13 for 436/MAP-21/PRA-210 (Basically IRS Notice 2011-96 stuff) and hasn't made any discretionary amendments since, are there any required amendments that must be adopted now if plan is currently terminating? I don't think so, but maybe I'm missing something... Thanks.

I'm guessing that this is a small (non audited) plan? If so, I'd personally vote for filing amended forms.

Most likely true, but you might have to then give to a bunch of people otherwise not eligible, due to less than 1000 hours, for example.

Agree. (as an aside, any forfeiture issues in this plan? There can be some nasty surprises when a plan has forfeiture reallocations...)

Agreed. Our document language is flexible in this regard - allows exclusion of HCE's, but as part of that exclusion, allows a "discretionary" safe harbor for the HCE's - only restriction being that it cannot exceed the safe harbor being provided to the NHCE's. A nice feature.

My 2 Cents - I don't think the stock market being closed would matter for a non-publicly traded company, as is the case with many ESOP's?

I'm not aware of any, either.

I seem to recall something about if, in the judgment of the Fiduciary/Administrator/Sponsor/whatever, the imposition of the surrender charge would result in a lawsuit, then the plan sponsor would be justified in paying the surrender charge. But I really don't remember the details, and would have to dig into it to see if my memory is even remotely correct, and even if it is, does such a stance still exist.

I'm not clear from your original post - is the plan being amended to waive eligibility for this one person by name or title or whatever, or are you just amending it to change overall plan eligibility to immediate? If the latter, certainly no problem. And the fact that this person will be named Trustee is also no problem. Can you perhaps amend the plan to include service with a prior employer (wherever this person worked before) which would hopefully allow immediate entry, so it has the same effect without actually modifying normal 1 year/1000 hour requirements? Only hitch there might be if this employer also hires other people who have worked for that prior employer. In my prior life, we frequently amended plans to include prior service with a prior employer, even for Highly Compensated employees, and filed for d-letters, which the IRS always approved - we never had a rejection. It was a commonly used "recruiting tool" by employers to entice certain people to come to work for them, and as long as there was no "pattern" of doing this routinely, the IRS didn't have a problem with it. (I'll state here that I do not know if they currently feel the same.) But since in your situation it is a NHC anyway, then I'd have no qualms about it.

There really are a lot of people out there who only want what is right and fair. Of course, none of them are in politics...

Well, it is an ERISA plan, so there is a formal procedure involved for denying a claim for benefits. I don't believe a simple "We don't have it" will qualify. At the very least, the plan must follow the formal plan procedures as outlined in the Plan/SPD, although if the claim is not made in writing, I don't know if that negates the participant's rights, or partially negates them, etc. If the appropriate procedure is not followed, it may result in unfavorable results for the Fiduciaries/Administrator if the participant decides to bring a lawsuit. I have to agree with Jpod that at the very least, this should be discussed with counsel prior to the formal or informal rejection, as it is obvious that the plan has not encountered this situation before.

Let me start by saying I have absolutely no knowledge of the legal arguments or principles involved, so I cheerfully defer to the attorneys. It seems, however, that it is pretty hard for a participant to "prove" that they never received payment. It would seem to me that once the participant claims that they were never paid, the burden of proof rests on the plan, to prove that payment WAS in fact made? And perhaps there are all sort of applicable statutes of limitations, court precedents, etc., etc., that can be used to negate or overcome that burden if a certain amount of time has passed, or whatever? And I'm probably COMPLETELY off base in my thinking.

This is why when clients ask, "How long should I keep plan records?" I tell them forever. Was it over $5,000 so that it couldn't be cashed out without consent, or was it small enough so that it might be reasonable to think it was cashed out? How old is this person now? Has the plan been through several TPA's before it came to you (seems like that's the way it usually works...) SSA's ever filed? I really don't have any bright ideas on this. Hopefully someone else can provide you with something constructive.

"does the fact that they terminated put them automatically into a reasonable business classification in that case?" While I absolutely think that this is a reasonable business classification, I don't think it alters the fact that you have to decide, before you ever get to that stage, whether you think you can use the ABT for coverage or not in a plan where everyone is in their own group. If you believe you can, then I don't think it matters. If you believe that you can't (or the IRS position is that you can't) then again, I don't think it matters. Interesting IRS comment, although I can't figure out what his real position is based on that! By the way, the sound you just heard was my head exploding.

Depends upon how aggressive you are. If you believe, or more importantly, if you believe that the IRS believes, that everyone in their own group is tantamount to enumerating by name, then no, you can't use the ABT because it would then be, by definition, and unreasonable classification. If you are more aggressive, you could take the approach that the IRS doesn't believe this, or you are willing to bet that you can win that fight. Personally, I'd do the 11(g) amendment. If there is no last day requirement for an allocation, then if your document does not provide for passing coverage via the ratio percentage test, I guess you'd have the bizarre result of amending it to pass coverage when you already have a 100% coverage ratio? I haven't actually thought this part through - it seems too strange to be possible, but...

Yes. See IRC 404(a)(6).

" I am of the strong opinion that it can be applied on a participant by participant basis." I agree. And if you are interested, Derrin Watson agrees - I only know that because I watched a webinar where he said so! And no, our software doesn't handle it either.

Let me play Devil's Advocate for a moment - suppose plan accepts loan payments by check? (some do) - or suppose this person was they payroll person, and doctored the accounting somehow so that embezzled funds were run through payroll as a normal loan payment? Doesn't seem like any plan operational error there to me.

Hi Gary - do you have a citation for requiring an additional 10% in this situation? I'd have just filed with the $250 fee and included a new, signed, SEP (or SIMPLE if this were a SIMPLE plan) IRS model document...how is an employer even going to know the amount of "plan assets" if there are individual IRA's all over the place - employees might not even be willing to provide the account balance information. Thanks.

This seems like it should be a simple question, but I'm not so sure it is. Suppose you have 4 separate welfare plans 501-504. Client decides to consolidate them under 1 "wrap" document so that only one 5500 form has to be filed. Two questions - would you create a new, separate plan number for the wrap plan, or would you appropriate one of the existing plan #'s and "merge" all the plans into that? For the 3 (or 4, depending upon your answer to the question above) plans that "merge" or "terminate" - how do you handle the final 5500 filing? Just do it is a final form? There are no assets to distribute. I don't really see any other alternative, but perhaps I'm missing something obvious. Thanks - any thoughts/opinions appreciated.

"the advantage of prior year testing is you can tell the HCEs their limit (assuming they all defer the same % or whatever)" While I absolutely agree with Tom, I find this is often more of a theoretical advantage. How many times have you had clients completely ignore your instructions not to defer more than x%, and they do it anyway!!? Grrr... But on the bright side, hey, it is more income for fixing their problems that could have easily been avoided if they did what we told them to in the first place. Sometimes I forget that.

Stock sale? Is Company B still part of the controlled group? I'm assuming, based on your question, that the answers are yes. That being the assumption, I'd say that yes, since as co-sponsors of the plan, they are treated as a single employer for purposes of IRC 404. Now, the accountant/controller, whatever, might possibly have some problems with that approach from a corporate accounting viewpoint - that's a separate issue.

" Isn't it great to not have to actually know or remember anything anymore?" I never knew or remembered anything anyway, so it isn't a change for me...

Yup.