Belgarath

Hard to give good answers without all the facts, and there isn't necessarily a "right" answer. One of the great things about the Revenue Procedure is that although they list many "pre-approved" fixes, they are not the ONLY methods of fixing problems. I think the IRS is generally pretty reasonable about what constitutes an acceptable correction.

Yes, if you had the 2-person unincorporated partnership, and one partner leaves, the partnership is dissolved. I wasn't being very precise with my language, I guess!

Thanks Kevin. Yeah, I guess that's why I really asked this question - clients are usually so fee-driven that it surprises me a bit that more of them don't choose the successor sponsor route. Maybe we we just have a client base where all the owners hate each other!

I would pose this question to Avaneesh Bhagat at the IRS. He's the one who is the supposed guru regarding EPCRS issues/questions. And if you do, would you be so kind as to post his response?

Just curious as to what others "typically" find that employers choose to do. Say you have a two owner corporation, or a two person partnership, and either the partners split to form their own separate businesses, or the corporation dissolves and both owners form new corporations. It seems like it is rare for either person to do an assumption of liability and change over the plan to new employer name/id #. They typically just terminate the old plan and set up new plans. I can see reasons why they would do this, but I just wondered if this is typical in your experience? Maybe the biggest factor is they just want a clean break with the prior business. Any thoughts on specific pros and cons that you have experienced?

What about capping only the highly compensated employees? The SH match only requires the NHC to receive the minimum amounts already discussed. Realistically, no NHC could ever get to the $10,000 cap anyway, so this would only cap HC's, which appears to be what is intended? Am I missing something? (quite likely...) I'm assuming there is no top paid limitation group issue in effect here.

I have to think that the chance of the IRS ruling it an "operational error" if you fully vest such a participant is remote. Certainly I would classify that as a lower risk than ignoring the (apparently) current IRS position. Again I return to the issue, not of what is "correct" or not, but how much is it worth to your client to potentially have to fight this out with the IRS. If it is two participants and $450.00 of what should be forfeitures, it hardly seems worth it. (If they are determined to fight it out just on principle, and hang the expense/consequences, then that's a different matter.) If it is a large plan, with $48,000 of what should be forfeitures, then perhaps it is worth retaining counsel and going all the way, assuming that fighting it through normal channels doesn't produce a favorable result. I do hope that the IRS will clean up their act on this, and stop taking this ridiculous position - and assuming Sal is correct, then at least some movement on this issue is taking place.

But Tom, since free advice is worth what you pay for it, then the excise tax is 15% of nothing. Unless, of course, you have "imputed" or "phantom" value.

Here's a new one, to me anyway. Plan has basic safe harbor match. For purposes of DEFERRALS, the participant may make a separate election to defer up to 100% of any bonus. However, for purposes of the MATCH, bonuses are excluded. Aside from the issue that this doesn't necessarily make sense to me, I'm wrestling with the question of whether this automatically violates the safe harbor provisions.I believe that if a compensation definition satisfies 414(s) it is permitted under 1.401(k)-3(b)(2). Since excluding bonuses is not a "safe harbor" but IS a "reasonable" definition for 414(s) compensation ratio testing, it seems like as long as the compensation ratio testing is passed, that this definition would be permissible. However, I'm wondering if the fact that this definition applies only to the match, and not to the deferrals, changes that answer, if indeed it is correct in the first place? Any thoughts on this would be appreciated!

I'm not sure why you would be surprised. Let me ask you - do you advise your clients to ignore what is (apparently) the current IRS position? In spite of Sal's comment, you have the offsetting comment in the MCHO release, which purportedly came from discussions with IRS personnel. Or, do you present both sides and give them a choice? I'm not saying advising your clients one way or the other is right or wrong. However, I do happen to believe that arguing with the IRS can be risky and counterproductive. If the IRS either takes the (what we all believe) incorrect interpretation, or if they are inconsistent internally, which also happens, then I'm just not sure it is a "good" risk, and I was curious as to how people handle this. Personally, I'm pretty conservative (see cowardly) on these issues, and I'll freely admit I'd make the client choose.

I'm not disputing your interpretation of what is correct, (I agree with you) but do you really want to pick a fight with the IRS on this, that you might lose? Do you advise your client to take this interpretation, or do you present both sides of the issue and make them choose? Just curious.

PROHIBITED TRANSACTION!!! He's darned lucky no participant has gotten wind of this and reported it to the DOL. And among other things, if the 5500 form has already been filed without showing a PT, it needs to be revised to show it. The Fiduciary needs to get this corrected, with all appropriate penalties, etc. IMMEDIATELY.

According to Sal, internally the IRS has been training agents to require only the involuntarily terminated participants in the applicable period to become 100% vested. My observation - whether this is correct, or when it will actually happen if ever, or whether it will be consistently applied, is anyone's guess.

I'm so confused... I was able to take a look at the plan language. It is Sungard/corbel plan language. There's an early retirement benefit in Section 5.1(b) of the document, and the "regular" benefit in 5.1© of the document. In Section 5.7(b), which discusses benefits in a different form than a life annuity, it clearly states that the benefit, available in several forms including a lump sum for a standard plan termination, is based upon the actuarial equivalent of the monthly retirement benefit from 5.1©. Since 5.1© is NOT the subsidized early retirment benefit in 5.1(b), this would seem to indicate that for this purpose, you wouldn't have to apply 417(e) rates to the SUBSIDIZED lump sum benefit, but only to the "regular" unsubsidized lump sum benefit? I'm not sure there's any 411(d) issue here - the participant still has the option to take the subsidized early retirement benefit as an annuity payment. It's just whether for lump sum purposes, the lump sum must be calculated in the subsidy, or just the regular benefit. With what passes for "logic" - and I use that term very loosely - with me, it seems counterintuitive that you apply 417(e) rates to a lump sum based on the "regular" benefit, but would not do so on the subsidized benefit. But that seems to be where this is heading?

I'm not sure if this is related to Andy's question earlier, which is why I'm posting it separately. A DB plan with an early retirement subsidy is terminating. The plan was frozen in 1994 if that makes any difference. When calculating the lump sum, is there any reason that you would NOT apply 417(e) rates to a lump sum where there is an early retirement subsidy? I don't have a scrap of information to go onj other than what I've just posted, so this may be unanswerable without seeing what the document says, etc., but I thought I'd give the question a shot to see if it is a simple yes or no. Thanks!

Who is the wise guy who put the letter "s" in the word "lisp"???

Over time, I've developed a terror of making definitive statements in this business, 'cause it always seems that there's at least one situation that is an exception. Off the top of my head, how would your method work if you are using the prior year testing method? Say a NHC terminates employment in 2013, you ARE counting him for 2014 for ADP testing, yet for coverage, he's not counted for 2014, right? There may be other situations, but that's just one that sprang to mind quickly. Or maybe I'm nuts and am misunderstanding something completely, including what you are saying - it has been a very long week...

Interesting question. IMHO: The general rule would be that yes, you would include this compensation. I think this is supported by the fact that specific exclusions re certain union employees (for the "top paid" test) are provided in 1.414(q)-1T, Q&A-9 (b)(i)(D). So if a specific situation with a specific exclusion doesn't cover your situation, then I think the general rule is that yes, you'd count it.

I go back to the specific wording of the regulation. (Mind you, this type of overkill is absurdity in my opinion, but I'm concerned about the specific requirements of the regulation - and the DOL isn't noted for being reasonable on such issues...) - the statement I specified, while it satisfies the the requirement in (A), does not satisfy the literal requirements of (B) as it does not describe the service. The regulation provides: (ii) At least quarterly, a statement that includes: (A) The dollar amount of the fees and expenses described in paragraph ©(3)(i)(A) of this section that are actually charged (whether by liquidating shares or deducting dollars) during the preceding quarter to the participant's or beneficiary's account for individual services; and (B) A description of the services to which the charges relate (e.g., loan processing fee).

I can't help thinking that there may be self-dealing by a fiduciary here. But I would refer to ERISA counsel on this one - I'm sure they would look through to the possible benefits to the fiduciary of this transaction. I may be all wet,

Does having sole control (in essence) of the LP confer any benefit upon the owner, as opposed to owning only 50%? This is just an off-the-cuff reaction - I haven't done any research on this question. But it smells bad...

Thank you for the responses. A follow-up question - What are the specific penalties involved IF the DOL were to determine that not providing the quarterly notice nder the "common sense" approach doesn't satisfy the requirement? Seems like the only thing I can come up with is it is a fiduciary breach under the general fiduciary requirements of ERISA 404a? I don't think it falls under the civil penalties for failing to provide a quarterly statement under PPA, although I suppose the DOL could attempt to assert that. And I guess the fiduciary would lose 404c protection. But I'm still struggling with the specific penalties for this as a fiduciary breach, if indeed that is what it is. Certainly all potential outcomes are bad, if adverse determination is made, but it would be nice to understand just HOW bad...

Here's the situation: DC plan has individually directed investments. Participant has brokerage accounts. Assume all other disclosures - annual, SPD, etc., are correct and timely. The participant takes an in-service withdrawal, for which there is a $125.00 fee. This fee is deducted from the brokerage account, and the statement to the participant shows the fee, but only says "check to TPA XYZ" - it does not specify what the check is for. The question that came up was whether this, in conjunction with the withdrawal request form which clearly states that there is a $125.00 fee which will be deducted from the participant's account, qualifies as appropriate notice and therefore doesn't require a "redundant" quarterly notice? I can see both sides of this. This compliance part of me doesn't think this satisfies the letter of the regulation, (because the brokerage statement doesn't identify what the $125.00 is for) but the everyday practical side says that "darn it, this ought to qualify." The compliance side of me is winning. Just wondering what others think? The regulation provides: (ii) At least quarterly, a statement that includes: (A) The dollar amount of the fees and expenses described in paragraph ©(3)(i)(A) of this section that are actually charged (whether by liquidating shares or deducting dollars) during the preceding quarter to the participant's or beneficiary's account for individual services; and (B) A description of the services to which the charges relate (e.g., loan processing fee). The preamble says: To the extent such a charge is otherwise disclosed during a particular quarter, for example by a confirmation statement after a charge is deducted from an account, that charge would not have to be disclosed again on the subsequent quarterly statement.

I don't know ASC documents, but are you sure it doesn't have language to take care of this? I think a lot of pre-EGTRRA restatement documents lacked the special language, but it seems like generally EGTRRA restated documents have appropriate language to provide gateway even if normal allocation conditions would preclude it.

In your situation, I would read this to allow a 6,000 loan.