Belgarath

"Our clients are going to go mental." Geez, Austin, you are lucky. All of ours are already mental!

Absolutely deserved!

Seems reasonable. Another possibility, depending upon payroll system flexibility, might be to adjust (reduce) the deferral taken out of paycheck for as long as it takes to equal the extra loan repayment, then increase the deferral back up to the original level.

As to when it is a "pattern" - I don't think there is a bright line standard. Good old facts and circumstances. As to the second question - first, is your question regarding a BRF? 'Cause I think the section you are citing refers only to a BRF correction. (g)(3)(i) says that you must satisfy the requirements of (g)(3)(ii) through (vii) "..whichever are applicable." (g)(3)(vi) refers specifically to a BRF correction. So assuming you are talking about a BRF, I'd vote for it having to run through 2014. The regulation says after the "date" of the amendment, not the "effective date" of the amendment. Reasonable people might well disagree with my interpretation.

Going from memory (so, so dangerous) I seem to recall that the IRS stance is perhaps more strict than the law, or at least a reasonable interpretation of the law. I'm remembering that the IRS says your vested percentage prior to the amendment applies not only to benefits accrued at the time of the amendment, but also to FUTURE benefits accrued. While this is arguable, most people don't want to fight with the IRS. So if prior schedule is 1 year 50%, 2 years 100%, and you have 1 year vesting credit, then plan is amended to 6-year graded, then your vesting percentage for year 2 and year 3 allocations will also be 50%, then it will be 60% for year 4. (it is certainly easier this way - whether correct or not!) But this is from memory, and not based upon any current research.

Thanks. Maybe this only happens to me, but sometimes when I'm in the middle of 16 things, I get a question to which I really know the answer if I'd just take a deep breath and clear my head, but instead I give it a quick thought with a small part of my so-called brain, and suddenly find myself confused. Very annoying...

Wow, it has been a long time since I've looked at one of these. Trying to refresh my memory. They want to amend/restate MP plan to a PS plan. Calendar year MP plan, with a 1,000 hour AND last day requirement. The 204(h) notice has to be given (large plan) at least 45 days prior to the effective date of the amendment. So, let's say they want to avoid a MP contribution for 2015. As long as the "effective date" of the amendment is, say, March 1, so that no one can have reached 1,000 hours, is there any problem? They haven't "accrued" anything under the MP plan at that point. (Actually, as far as that goes, the amendment should be allowable up to December 30, 2015, as long as the Notice is provided at least 45 days prior to that, right?)

Got it! Thanks.

Thanks. Regs are 54.4975-7(b)(8). I think I'm probably worrying about nothing, but I'd rather make sure than miss something crucial.

Thank you both! But I'm still a little confused (obviously) - the language in the regulations I referenced seems to say that at least for the principal only method, annual loan repayments are required. Is this correct? Or does it actually mean that it must "provide for" at least annual payments, but if you prepay, that satisfies the requirement as you have discussed? I assume it is the latter, but I just want to make sure. Does your prepayment scenario apply only if the principal and interest method is being used? Is there additional guidance that clarifies this further?

I have always been under the impression that in an exempt leveraged ESOP where the proceeds were used to purchase the stock from the owners, in order to avoid the prohibited transaction rules there must be a release from encumbrance EACH plan year based upon the loan repayment schedule. The repayment schedule must be at least as rapid as either the principal only or the principal plus interest method, as per 54.4975-7(b)(8). Is there any legitimate circumstance whereby such a leveraged ESOP can NOT release shares for a given plan year? (Not talking about plan termination or bankruptcy/insolvency situations either, just "normal" ongoing plans.)

What's a Cubs fan? I thought the last big asteroid strike made them extinct.

Just to muddy the waters - how about he opens up a solo(k) plan rather than a SEP, make a token Roth deferral, have the plan allow VOLUNTARY AFTER TAX contributions, and immediately convert the voluntary contributions to Roth. Doesn't lose anything for deductions, since he was going to pay income tax upon converting to Roth anyway. All under the approval of tax/legal counsel, of course.

I would make the restatement effective 1/1/2014, BUT, in the Appendix A, make sure the Profit Sharing Allocation method is effective 1/1/2015.

Not necessarily. 1.403(b)-5(b)(4) permits certain exclusions without violating the universal availability rule.

Thank you both. And this loan WAS initiated as a home loan.

Just encountered a similar situation on a takeover plan. Plan limits principal residence loans to 10 years, but granted a loan for 15 years (to a Highly Compensated Employee, naturally, although I don't believe there was any intentional hanky panky). Since the loan itself does not violate any of the 72(p) restrictions, seems to me that perhaps it can be considered an operational error, and corrected under SCP by reamortizing to pay it off within the 10 years allowed under the plan. I don't see why this should need to go through VCP if it otherwise can be considered "insignificant" in the larger context of the plan due to size, amount, only time it happened, etc... Thoughts?

Kind of a mess! I'm a big fan of DFVCP. First, it limits the penalty to a "reasonable" level. Otherwise, you are playing roulette. I'm not sanguine about the penalty being waived due to potential negligence on the part of the TPA. Without really knowing the facts and circumstances, conversations, agreements, e-mails, whatever, it is hard to say who "should" pay the penalty. The Plan Administrator (client) is liable for late filing penalties, but if there was a valid agreement/understanding with the TPA to handle and file the extension timely, there might be support for the TPA being liable. If I were a client, and felt that the TPA had mishandled, I'd certainly ask them to pay for the late filing penalties. If the TPA refuses, then the client can try legal action. Many States have Small Claims Courts that provide an option to file a claim for a nominal fee, and that can sometimes help in a situation where hiring legal counsel, or the hassle/time involved may be too expensive for what you get. Might be worth asking a lawyer, if it comes to it - perhaps some of the attorneys on this board will provide you with some thoughts, which will certainly be better informed than mine, as I'm not an attorney.

Gee, burst my bubble! I've been so busy this week I haven't even checked scores, so I guess I'm down to one out of two...

K2 - at this point, I'm hoping for a Royals/Pirates World Series, so good luck.

For those of you misguided individuals who are fans of other teams, I just want to say that in spite of the 2014 debacle, our enthusiasm and loyalty remain intact.

I suppose you could make it quite uncomplimentary when responding to someone who isn't a lawyer, by combining texting shorthand, and say, "UANAL."

Gosh Lou - that's an unfortunate acronym! But amusing...

FWIW - I'd lean towards allowing it.

I find it hard to believe that the IRS or DOL would assert prohibited transaction status if there's no stamp tax paid. Seems like quite a stretch.