Belgarath

Yup. I'm not sure it's correct, mind you, only that it seems a "reasonable" fix. It may be that the IRS is being more generous, and allowing you just to fix the SHNEC, plus interest, and be done with it.

I'm not so sure. We knew that the plan couldn't contain "fallback" language that permitted a plan to rely on ADP instead of the safe harbor contribution. But under 1.401(k)-3(h)(1), the contribution must be made withing the 12 month period after the close of the plan year. So when it comes to the "fix" I'm not sure it is invalid to make the requisite contribution, then ADP test. (I think you must always make the 3% nonelective, regardless of whether you then ADP test or not.) RP 2008-50 does not address this specific situation, so I think there is a bit of latitude. In our case, we just had them make up the 3% with interest, then ADP tested and did the necessary refunds. We did, if course, refer them to legal counsel to make the final decision, and they gave us the go-ahead. This might be a good one for someone to bring up at the ASPPA meeting this fall for clarification?

I fully understand that. But I figure that two such obviously brilliant minds can't possibly be incorrect. The line for rebuttals will please form to the left.

Sieve - thanks for this: "Joyce took the position that if a safe harbor plan fails (for example, if the safe harbor contribution is not made within 12 months after the end of the plan year), then the natural consequence contained in the regs--i.e., that the plan no longer is a safe harbor and must pass ADP--does not apply, and to correct you must make the late SH contribution (with interest). I think what she meant is that you can't rely on passing ADP if you fail to make the safe harbor contribution timely, because you would simply get out from under the SH contribution obligation without following proper procedures (such as in the "maybe"--supplemental notice--non-elective SH contribution situation). I would suspect, however, that if failure to timely make the SH contribution resulted in failure of the ADP, and correction of that ADP failure under VCP would give the NHCEs more than making the SH contribution would give them, then she would require that the failed ADP test be corrected rather than that the SH contribution be made." We ran into this precise situation a couple of weeks ago, and after much cogitation I came up with precisely the same fix, using precisely the same thought process, as you have outlined above. Wish I'd seen this (or remembered it) then - would have saved me a ton of time!

Andy, some misguided people (not to point fingers at Mr. Rigby...) are closet Red Sox fans, but they just aren't yet willing to openly admit it yet. Really only two types of people in this world: Red Sox fans, and wannabees! Although after last night...baseball is a cruel game.

Wow, that makes it hard. We always require a sign-off from the client on an information/disclosure regarding required funding for a DB plan before we ever install it. Perhaps you could gently suggest this to your boss? Is your boss selling product so there is commission income? This sometimes produces a, shall we say, "tension" between good disclosure and dollar signs shining in the eyes.

I agree with the previous posts. The only citations that I know of are PLR 8716060, and Durando vs. U.S. There's an older Revenue Ruling, 59-221, which clearly stated that pass-through income may not be used - and the Durando decision referred to this in the analysis.

Don't know how much this will help, but at least it is official DOL guidance... http://www.dol.gov/ebsa/regs/fab_2006-1.html

Thanks J4 - yes, we would want a d-letter. But the more I look at this, the more I come back to Section 12, which refers you Section 7, which seems to get you to 1/31/2011, which is the end of the initial 5-year cycle for individually designed plans - what do you think? Or at the very least, 1/31/2011 would appear to be a "safe" date in this particular circumstance as per the original post, that may possibly be extended under the right combination of circumstances - for example, if an employer first adopts a new plan in 2011. This does seem unnecessarily complex...

It's considered individually drafted.

Thanks Kevin. Maybe we are both trying too hard. When I looked at this again this morning, Section 18 seems to indicate, since this is a DB plan, that it would really be 1/31/2013? If the plan is - The last day of the initial cycle (i.e., EGTRRA remedial amendment period) is – The next six-year remedial amendment cycle ends on - Defined Contribution January 31, 2011 January 31, 2017 Defined Benefit January 31, 2013 January 31, 2019 Sorry - formatting just isn't working - best I could get...

Thanks Kevin. I had actually been messing around with 2007-44 this morning - what a joy it is. But based upon the following: 04 Although a new plan may file off-cycle and will receive review priority under section 14.02 if it is described in section 14.02(2), a new plan does not have to be submitted for a determination letter off-cycle. This is because the initial remedial amendment period for a new plan is extended to the end of the applicable remedial amendment cycle in which the remedial amendment period would otherwise end. See section 5.03. I'm thinking that they would have until 1/31/2011, or if later the normal "unextended" deadline (date of tax return plus extensions). What do you think?

Wow, for some reason I'm just drawing a blank here. New plan is adopted this year, for employer with EIN ending in 6. So the Cycle A deadline ended on 1/31/07. What is the deadline for filing for a determination letter for this employer? Is it 1/31/2012, or is it some earlier date? I looked through Revenue Procedure 2005-66, and I'm sure it was there and I skipped right over it. Thanks!

Jay - FWIW - the 412(i) (now 412(e)(3)) plans that I have seen do indeed have a trust. As with other qualified plans, the trustee is the owner and beneficiary of the policies. I actually haven't seen a "non-trust" plan such as you describe.

There's a difference between being tax qualified and subject to Title I of ERISA. If the school system or whoever wants to offer a tax qualified plan to qualify under 403(b), then they have to comply with IRS requirements, regardless of whether Title I applies or not.

I should think you'd have it apply only to participants with an hour of service on or after the effective date of the amendment.

AndyH - I can't spell it, but wasn't that the "Kobeyashi Maru?" So you are suggesting that they reprogram the computers? I agree with your comments. I do have my doubts as to why such a scenario is being explored - in my experience, it usually means someone is trying to sell an investment to the new DC plan...

I'd like to inject a very nit-picky observation to Jsimmons' first paragraph. The 415© limit is for limitation years, not plan years. Now, in 99.99% of the cases, they should be identical, but you might, on occasion, run into a plan that has different plan and limitation years. Why people do this I'm not sure, but that's another issue...

A profit sharing plan may permit a participant to purchase incidental life insurance on "him or his family". 1.401-1(b)(1)(ii)

Ah, thanks. That makes good sense. And our document DOES have similar language.

But I did just think of one other area of concern. The preamble also states that the plan must prorate the 401(a)(17) compensation limit - presumably for allocating the safe harbor contributions only, as per another discussion thread. And our plan does not currently have language that would automatically accomplish this if the safe harbor is reduced/eliminated. Do your documents have such language, or will they require amendment for this?

Nope. And thanks for the response.

Thanks Bird. Yeah, I'm just passing along what we got third-hand. But with all the problems we've encountered over the years with IRS/DOL filing glitches, this wouldn't surprise me...

We received the following from an advisor to a client today. I wondered if this was mere rumor, or if any of you have discovered anything similar. Client received a $15,000 penalty letter for not filing a 2006 form. "However, I have encountered this same issue with other plans handled by an outside actuarial firm. They informed me that this problem was very common. The reason for that is that the IRS hired an outside firm to handle the returns for the year in question and approximately 30% of those returns have come up as never having been received. The actuarial firm had to write to the IRS 2-3 times before the IRS acknowledged their receipt of the return and eliminated the penalty." P.S. - these are EZ forms.

If a halfwit is quartered, I'd vote that the result is a nitwit. I remember my Dad commenting on some political figure that, "He must be twins. One person couldn't possibly be that stupid."