Belgarath

Thanks. Yes, when I said it would be required for "certain" of the missed deferrals, I was referring only to those beyond the 3-month period. But I didn't make it very clear...

I was wondering about something on this Revenue Procedure. It seems odd to me that the rules are more favorable for ACA failures than non-ACA failures. For example, in the ACA plan, a participant makes an affirmative election to defer 10% in 2015. As long as corrected by 9-1/2 months following 2015, and in accordance with the other requirements, no QNEC required. Same situation, except a non-ACA plan. Now, you have the rolling 3-month period, and will have to do a QNEC of 25% for certain of the "missed deferrals" - which in this case would be 2.5%. Any idea why the discrepancy? Ultimately the "why" doesn't matter - the rules are the rules, but I was just curious if anyone had any insights on this.

Please don't waste any time doing research if you don't know this off the top of your head, as I don't work with these forms and my question is purely for my own general information. For a small (<50) employer who has an INSURED plan - does the insurance company file both the 1094-B transmittal and 1095-B forms, so that the employer has no filing responsibility, or does the insurance company just PREPARE the 1095-B forms, and the employer still has the responsibility to actually prepare and submit the 1094-B transmittal and the 1095-B forms that the insurance company prepared? Same basic question for a large (ALE) employer? In other words, what responsibilities does the EMPLOYER have for insured plans? Thanks for any information - or do you know of a good, concise source/summary on this?

Not sure - are you talking about a "discretionary" match that does not exceed the regular safe harbor matching formula? If so, then yes, it can be done. SunGard's new pre-approved PPA docs have a specific election in the adoption agreement that allows you to exclude the HC's from the Safe Harbor contribution, while allowing a "discretionary" safe harbor contribution, as long as that amount doesn't exceed the safe harbor contribution provided to the NHCE's. And you don't lose your top heavy exemption solely by making this "discretionary" safe harbor contribution.

A lot of IRS pre-approved documents have an exclusion for part time, temporary, seasonal, etc., BUT, they also have "fail-safe" language that says if any such employee actually completes a year of service, they will no longer be part of this excluded class. I would check the document language VERY carefully to see if you have some similar provision that will take them out of the excluded class.

Well, hard to know not knowing facts and circumstances, but presumably the employees are notified of the ACA at hire, or in the employee benefits manual, or upon plan eligibility, or SOMETHING like that, so perhaps the argument might e along the lines (stated more nicely, perhaps) of the following: "We're an employer, not a babysitter. We tell them (whenever - at date of hire, etc.) and it is their responsibility thereafter. Any employee who doesn't want it can make a new election - either to stop deferrals, or change to a different deferral amount. Not going to waste time and taxpayer dollars doing needless notices that aren't legally required."

Right, and IRS Notice 98-4 is very clear that rollovers don't count as a "contribution" for purposes of violating the "only plan" rule.

Following up on this. So, suppose we assign FSO status to the partnership "x", and make all the individual doctors participating employers at some as yet unspecified point. Has anyone actually processed a VCP correction submission, where each of the partners currently sponsors a plan independently but there is no plan for the FSO, or if they have one it is a SIMPLE or a SEP? This could turn out to be a pretty off-the-wall correction process, and I'm wondering if anyone has a methodology that they have submitted and gotten approved. Since all the plans have different provisions, how do you reconcile these? For example, trying to be "reasonable" - do you think the IRS would approve something where each Doctor's plan, for prior years, would be allowed to stand alone, while the "most favorable" provisions would be applied to the Partnership X retroactively, and going forward all the plans would be merged into one plan sponsored by the FSO (the partnership X) as of (for example) 1/1/2016? Or are you aware of another suggested methodology? Thanks!

Not discussing the relative merits of one vs. the other, as there are folks here far better qualified to do so, but a cash balance plan IS a defined benefit plan.

Is this a profit sharing account? If so, perhaps you could just use a stated age, such as age 21? 1.401-1(b)(1)(ii) permits distributions due to stated age.

I'm confused - not an uncommon problem. Key employee status is determined for a plan year based upon the plan year that contains the determination date. So for 2015, you aren't a key employee unless you satisfied one of the key employee tests for 2014, because 2014 is the plan year containing the determination date. So this person didn't satisfy one of the key employee tests in 2014, hence for 2015 is non-key. In 2015, the person then acquired ownership and therefore passes one of the key employee tests, so for 2016, is now key. How are you reaching the conclusion that this person is key for the 2015 valuation, and ineligible for a TH contribution (if the plan is top heavy and plan doesn't allocate TH to keys)? If it is because you think the rules require that you must count his ownership with DOG because CAT credits prior service with DOG for eligibility/vesting in CAT, (the OP's question) then if you are right, I'd agree. Off the cuff, I'm not aware that such a rule applies in the situation given, but perhaps it does. Otherwise, I'm still confused. If you do believe you must count the DOG ownership, do you have a cite? Thanks.

I'm probably missing something, but I can't find anything in 414(q) or the 414(q) regs addressing this. S-corporation, new leveraged ESOP has the two head honchos irrevocably waiving participation, as the plan would otherwise fail 409 testing. The plan document utilizes the top 20% election to determine the HC. Question is this - when determining the top 20%, are these two INCLUDED or EXCLUDED from the determination process? Since I find nothing that says you can or must exclude them, it would seem that they should be included. On the other hand, this doesn't seem reasonable, similar to doing 401k testing where someone has zero comp for the year, so you exclude them entirely from the testing. Of course, following the coverage testing rules, these people are treated as non-excluded and not benefiting, so maybe that is the more reasonable interpretation, in fact, that's where I lean. Anyone ever encountered this, or have an opinion?

I'm assuming this is not a controlled group/affiliated services group? Without doing any research for confirmation, assuming no CG/ASG, I'd say he is non-key until 2016.

When you say "non-profit" do you mean governmental, or non-governmental? In either case, you may exclude employees who normally work less than 20 hours per week - see 1.403(b)-5(b)(4)(ii)(E). However, if this is a non-governmental ERISA 403(b), be careful that your language has some sort of "fail-safe" provision so that if you are using the 20 hour exclusion, anyone who works 1,000 hours will be eligible, and will remain eligible for all future years. And in either case, the document must provide for the 20 hour exclusion in the first place - some documents do not. It'll be interesting to see what language the IRS approves in 403(b) prototypes regarding this issue, once they approve them.

Thanks Mike.

Ignoring the wisdom or folly of starting a DB plan for a start-up company... A question came up as to whether a new business - started up on 9/3/15, and has a 9/30/fiscal year end - can install a defined benefit plan, and participants accrue a full year's benefit for 2015? Is there a minimum hours/service requirement? Also, and I believe this is debatable, can the plan effective date predate the existence of the corporation? I've seen this done a lot in DC plans, to avoid short plan/limitation years, but I'm not sure if this is common in DB plans? I've not heard of the IRS challenging this in a DC plan - but I don't know what the actuaries of the world think about this on DB plans? (debatable in DC plans as well, but that's a different subject) Thanks.

Well, if you have someone who has already terminated, with more than 500 hours, then you have an issue...because they have already satisfied the requirements for an allocation based upon the current formula.

Seems to me there are two separate issues. The failure to do 1099 reporting is, as MoJo mentioned, irrelevant to the question of subsequent loan repayment. The deemed distribution occurred, and if a 1099 wasn't produced properly, then that is an error that needs to be corrected. Failure to report such a distribution is subject to all the appropriate penalties. Then the subsequent repayment to the plan is basis, and should be treated as such upon later distribution.

This is so unbelievable that I have to wonder if there isn't SOMETHING more to it than what you have stated - and I mean no disrespect to you. It is just hard to even imagine that any company sponsoring an ESOP, which almost always requires an attorney and TPA involvement, would do something so blatant.

Does the fact that 14A is for a general partner, and 14C is for an individual partner make the difference? For example, 14C means no deduction (I think) for unreimbursed partnership expenses? Just tossing out a random thought.

Well, no, I wouldn't go quite that far, depending upon your definition of "comfort." I would feel comfortable using a document provided by any of the major providers - with a good faith compliance effort like that, the client should be fine with retroactive adoption of an approved document (once available) to correct any defects as to form. Naturally, if they want an additional layer of comfort, they could see their friendly ERISA attorney. Basically, once the documents are approved, everyone will have a grace period to adopt retroactively and have reliance (for form, not operational compliance of course.) It's just that adopting a document now, even if ultimately approved unchanged in its final form (which seems unlikely, but possible) wouldn't give you that same reliance - in order to get it, you have to adopt retroactively AFTER the IRS issues the opinion/advisory letter. Plus, I rather expect that the IRS is going to have, at least, certain streamlined operational corrections available for what is likely to be an avalanche of corrections for common errors, once documents are approved and everyone gets up to speed. But that's just a guess.

No. See the following excerpt from Section 19.03 of Revenue Procedure 2015-36. (2) An adopting employer has no reliance if the employer’s adoption of the plan precedes the issuance of an opinion or advisory letter for the plan.

See link. The IRS had extended the deadline for providers to submit docs to April 15, 2015. Presumably they did this, unless it has been extended further - if it has, I don't know about it. Yes, you'd want to check with the providers to see, but I assume pretty much all of them that do 403(b) docs have in fact submitted already, unless there was a further extension. http://www.irs.gov/irb/2014-16_IRB/ar16.html

I believe the answer is currently "none." Everyone has their docs with the IRS now pending approval, which will come at a time still unknown. There are prototype "style" documents out there, however.

Random musings... Unusual drafting. All the pre-approved plans I have seen (or perhaps those that I've noticed) have a default which is generally the state (or commonwealth) of the principal office location of the employer, or corporate trustee, etc... - UNLESS specified otherwise in the adoption agreement/appendix/whatever. Are you sure there is no such default language in the body of the plan you are looking at? If not - if it is truly a fill-in-the-blank option and there is no default language, then as a non-lawyer, I would tend to agree with my 2 cents. I doubt that the IRS would disqualify a plan for failure to complete this option, but relying on their generosity might not be a good policy.