Belgarath

So, corporation A purchases 100% of corporation B in a stock sale. Both corporations sponsor a 401(k) plan. 2 weeks after the sale, they now decide to look at the plan issues.

So, clearly a controlled group now. Corporation A crediting service with Corporation B, etc., etc.

Corporation A wants to now terminate Corporation B plan. But this brings in successor plan rule. How is this mess typically dealt with? 

Many people here must be old enough to remember Readers Digest condensed books. That's what we need for the continuing barrage of Statutes, DOL and IRS regulation, etc.!

Thanks.

Not actually a 5500 question - is there any penalty relief program for late or non-filing of the 8955-SSA for ESOP plans, similar to the programs for late 5500 forms? 

Nope. 

22. Is there a delinquent filer program for late filers of Form 8955-SSA?

There is no delinquent filer program where only the Form 8955-SSA (or schedule SSA) is delinquent. Notice 2014-35, however, provides penalty relief in cases where the Form 5500 series return is also delinquent and the filer is eligible for and satisfies the requirements of the Department of Labor's Delinquent Filer Voluntary Compliance Program. See IRS Penalty Relief for DOL DFVC Filers of Late Annual Reports.

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P.S. it appears that no SSA reporting would be required for participants in pay status - e.g. receiving payments over 5 years, etc. - but I'm not aware of any dispensation for not filing the form if, for example, they must have a 5-year break in service, or reach age 65, etc..., or if a participant elects to postpone distributions.

Although I think the probability is vanishingly small, relying solely on the new comparability could bring top heavy into play where it MIGHT not be otherwise. Just a thought...

At least some pre-approved documents provide for an "other" election for excluding participants from the Safe Harbor contribution, where they specify that it must be "an HCE, or" ............... so I don't see any prohibition about specifically naming an HCE as excluded. But I'll ask this - why? Given that documents can provide complete flexibility to exclude all HCE's, but make a "discretionary" Safe Harbor to "any or all" HCE's - what would be the point of limiting the flexibility by specifically naming one HCE?

Thanks. I thought about this last night, as it had a chance to percolate a bit in my so-called brain, and that's what I came up with as well. I appreciate the confirmation!!

Thanks again.

Thanks!

Hi Peter, thanks for the suggestion, but that aspect has unfortunately already been investigated, and rejected. I probably should have mentioned that in the original post, sorry.

IRS Notice 2024-2, Section G, Q&A-7 re Section 332 of SECURE 2.0, provides the following:

When the SIMPLE IRA plan is replaced by the safe harbor section 401(k) plan mid-year, the total amount that may be contributed as salary reduction contributions under the terminated SIMPLE IRA plan and as elective contributions under the safe harbor section 401(k) plan may not exceed the weighted average of the salary reduction contribution and elective contribution limits for each of those plans (weighted by how many of the 365 days in the transition year each plan was in effect). Thus, the total amount that may be contributed as elective contributions to the safe harbor section 401(k) plan is equal to:

(1) The annual limit on salary reduction contributions under a SIMPLE IRA plan for the year (taking into account catch-up contributions described in section 414(v)), multiplied by a fraction equal to the number of days the SIMPLE IRA plan was in effect for that year divided by 365, plus

(2) The annual limit on elective contributions under a section 401(k) plan for the year, under section 402(g), multiplied by a fraction equal to the number of days the safe harbor plan was in effect for that year divided by 365, minus

(3) Any salary reduction contributions under the SIMPLE IRA plan for the year.

(1) above specifically includes catch-up contributions under 414(v) in the calculation, whereas (2) does not. Does this mean the fraction in (2) is only taking into account the $23,000 limit, and not including the $7,500 catch-up? That's how I read it, although it doesn't make sense to me... 

Interesting situation. An ERISA 403(b) plan - large plan, audited - was treated as a controlled group/affiliated services group for several years, when in fact, it was not - it was a MEP. 5500 forms did NOT have the MEP attachment.

If amended forms are filed with the MEP attachment, would that require a new audit? It seems unreasonable, as nothing changes except the attachment detailing the breakdown of the assets between the participating employers - total assets, participant counts, etc., remain the same.

Anyone ever encountered this?

Interesting line of thought.

Agreed! And even if you went to a VCP filing on this (which would be an absurd waste of time and money IMHO) I'm very dubious that the IRS would approve it.

It's a sticky situation.

23 minutes ago, Paul I said:

Bottom line... file the correct form now and avoid anxiety of waiting to see if a letter from the IRS shows up in the mail.

Thanks, and agreed. I was thinking more of a 2022 form which was already filed (timely) on the SF...I suppose a client could avail themselves of the IRS late submission penalty relief procedure, and file an EZ now.

Suppose you have a 1-person plan with over 250k in assets, so subject to filing a 5500-EZ. Suppose a 5500-SF is filed instead. Is there a PENALTY for filing the SF? Are you considered to have not filed? I'm not 100% sure on this.

Here's the wording on our document, FWIW...

The following are optional administrative provisions. The Administrator may implement procedures that override any elections in this Section without a formal Plan amendment. In addition, modifications to these procedures will not affect an Employer's reliance on the Plan.

Many pre-approved documents (which is about all I see these days) have a specific Administrative Procedures addendum that specifically deals with questions like this - Relius does, for example. Take heed of Bri's comment. 

On 6/29/2024 at 1:39 PM, C. B. Zeller said:

Verily, and with great haste, thou shalt consulteth thy plan's governing documents and discover therein the answers thou seekest.

Should fortune smile upon thee, thou may findest that thy plan be graced with a determination letter, be it sealed by the hand of the wise ones who dwell within the halls of the Internal Revenue Service, granting reliance upon the terms found therein. In that happy moment, thou shalt knowest that thy plan's allowances of in-service distribution of rollover accounts shall never be said to fail to satisfy the requirements of section 401.

Brilliant!! Brightens up an otherwise garbage Monday morning. Gracias!

Thanks Paul.

I'm not aware of any formal guidance on this issue - plans are often effective January 1 in such situations to avoid prorating limits, etc.

Curious as to how folks generally feel about this? The EOB refers to an old IRS Q&A response at an ASPPA meeting opining that it was allowable, but of course that's unofficial. (Naturally, no retroactive deferrals allowed!)

Thoughts?

I'm certainly no investment expert or tax strategist either. I have sometimes seen a strategy where part of the "diversification" is that the "aggressive" investments are converted to Roth, on the theory that if they hit a home run and get big returns, it'll be tax free. The conservative investments remain as pre-tax.

I simply cannot fathom why a PA would do anything BUT self-certification (barring additional unwelcome guidance on the subject in the future). With all the compliance/fiduciary responsibility issues that must be dealt with, the ability to offload an onerous compliance issue is a rare "win" for everyone involved, as far as I'm concerned. Will there be some fraudulent/BS "hardship" withdrawals by participants? Sure. But that's their problem.

Thanks.