Belgarath

Thanks Peter - I should have specified - the question assumed use of an FIS 403(b) document. I looked at one, and the AA doesn't provide a default if an election isn't made. And the FIS document (which I have, 'cause we use it) specifies that it is as elected in the AA. So your second paragraph, while good advice, doesn't apply here. But thank you for the suggestion. I don't know the expense involved - I think there may be a very large number of participants in total, and have no idea of the expense. Your last point is interesting. Assuming the plans are restated early in the next cycle, (so could be perhaps early 2024) the updated SPD would be furnished then, so the "window" of not providing the SMM even if required isn't all that long. I'll mention this to their ERISA attorney - many of them don't have your experience or creativity! Thanks again for the response. Since we aren't administering the plans, this whole thing is an intellectual exercise only, but forces me to think outside the box, which is a great thing when you aren't responsible for the outcome!

We have had an unusual situation posed to us as a hypothetical issue, although I'm pretty nearly certain it is real - pretty hard to dream this up. A group of several large 403(b) plans (not a controlled group or affiliated services group) that were set up with intentionally identical provisions. The 403(b) documents required a Year of Service to be eligible for employer contributions. Plan uses 1,000 hours for a Year of Service, measures the initial computation period from date of hire to the end of the 12-month period. So far, so good. However, no election was made in the adoption agreement as to whether subsequent eligibility periods switch to plan year, or remain on anniversary years. The adoption agreement is clear - one or the other should be chosen. But it wasn't. The plans have been ADMINISTERED with subsequent eligibility periods changing to plan year. Given that there is an omission in the adoption agreement, this is good, as it is more favorable to employees (potentially earlier eligibility for employer contributions). I don't believe this is a "document failure" in the technical sense for purposes of RP 2021-30. It doesn't, "on its face" violate a requirement of 403(b), I don't think. Thoughts on this? Ignoring that aspect, and pushing a tenuous position - when the plan is amended to correct this, is a SMM necessary? Obviously, the safe and solid answer is "yes." But is there a valid argument to be made that since the employees have been treated consistently under the "change to plan year" option, that there's no material change that actually affects them? Beyond that, there's no specific penalty for failure to provide an SMM. I understand this is legal counsel territory, and that is what we are recommending. However, curious as to thoughts on this, and the "risk" factor in taking the aggressive approach.

Honestly, I just quickly skimmed it, until such time as I have to deal with it on a real-life case. But I just sort of "assumed" that the distributions would have to be taken in 2023 as you would with "regular" missed distributions.

Hopefully not a Freudian slip... I also would like to think there would be some leniency if there is SOME evidence of a reasonable attempt at compliance. It's already becoming difficult to remember how crazy things were, and the pace/confusion of all the changes. We are plodding ahead with our CARES amendments right now - no intention of waiting!

I'm a little confused - you say that the plan was operated according to its terms, so there's no operational failure. Yet it sounds like the plan was NOT operated according to its terms, (even though it was more generous) according to your first paragraphs. Based on what you've presented, I'd say that there is an operational error, so the full range of allowable corrections under EPCRS should be available to you, as appropriate under the specific circumstances. One question - sometimes plans contain a clause in the contribution section to the effect that contributions to union employees will be made under the terms if the current CBA - so were some of these changes already automatically included?

No. At least IMHO. Maybe others will chime in here.

I would respectfully disagree. See the following PROHIBITED change, copied from IRS Notice 2016-16. 3. A mid-year change to the type of safe harbor plan, for example, a change from a traditional § 401(k) safe harbor plan to a QACA § 401(k) safe harbor plan. You can't change the TYPE of safe harbor plan mid-year, even though certain formula changes can be made.

I interpret that phrase differently. I believe it is meant to say (or mean) that it can only be rolled to a designated Roth account, or Roth IRA - in other words, can't be rolled to non-Roth. I don't believe it is meant to preclude rolling it back to the same plan Roth designated account. But I may be all wet. I haven't done any research on this!

Might be useful https://retirementlc.com/filing-form-5500-without-an-audit-report/

This doesn't lend itself to a simple answer, and a whole lot of specific information would be required. But as a poor stab at a general, quick answer (with the HUGE caveat that are many possible permutations): When you have a controlled group of corporations, all of the employees of all of the corporations must be CONSIDERED for coverage, nondiscrimination, etc. Doesn't mean that you necessarily have to cover them, depending upon results, but they will be included in your testing. Your document provisions can matter - some automatically include them unless excluded, some are the opposite. Another issue is whether they signed on as participating employers, and the timing of such. Any back correction? Quite possibly, and might likely be looking at VCP rather than SCP. It sounds to me like you should take this to an ERISA attorney, or get the assistance of a TPA who is more familiar with these types of situations. It could be relatively simple, or incredibly complex, or anywhere between. Good luck!

Plan generates the 1099 for the 10k distribution - shows the 20% withholding - since it was not a direct rollover. Just a distribution to the plan. You do not report it as a rollover, 'cause it wasn't.

Hi Tom - whatever the reason, that's great news! Sincerely hope you continue healthy!

Thanks for the detailed analysis!

Thank you both for the comments. FWIW, the reason I'm concerned with this because I don't necessarily find the DOL to be reasonable...

These blasted things. The DOL has stated: Section 105(a)(2)(B)(iii) of ERISA provides that participant-directed individual account plans that furnish quarterly benefit statements under ERISA § 105(a)(1)(A)(i) must include the lifetime income illustrations on only one pension benefit statement in any 12-month period. So let's look at a participant directed quarterly valuation plan. Suppose the 12/31/2022 valuation is completed, and the valuation and lifetime income illustration is sent on February 15, 2023. Then the 12/31/2023 valuation and lifetime income illustration is sent on March 31, 2024. This is more than 12 months later. What's your interpretation on this? Is it out of compliance?

Thanks for the response. Yeah, that's where I was coming out. I was hoping that a valid argument could be made along the following lines: It is permissible to amend a DC plan to eliminate FORMS of benefit (installment, etc.) as long as a lump sum distribution remains available. For this post-severance distribution, a distribution is still available at any TIME, just not at multiple times. Since it is available at any time, and since it is permissible to offer only lump sum, it is ok to amend to remove the partial distribution option for these post-severance payments for current accrued benefits. Quite a stretch, I know, but I didn't know if anyone has seen/done it, etc...

Just checking myself - ERISA 403(b) plan allows "ad hoc" distributions - i.e. partial withdrawals for terminated participants. Is it allowable to eliminate this option for current accrued benefits? (Plan provides for lump sum distribution.) Note that this is not an "in service" distribution question.

Best of luck - hopefully it won't be too severe. We're pulling for you!

And now it has been formally extended to the same date as the RMD extension. Not sure - we'll probably end up proceeding with the 12/31/22 deadline to get it out of our hair (not that I have much after a lifetime in this business...). Certainly don't want to wait until 2025! But nice to know there are options for something that gets missed, or on takeovers, etc. https://www.irs.gov/pub/irs-drop/n-22-45.pdf

Yes, the 402(g) limit is a calendar year dollar limit. So the fact that the plan is terminating mid-year doesn't alter the maximum dollar deferral allowed.

Yeah - we said they should check with their payroll/corporate tax advisor before we proceed. I'm sure the answer will come back as we expect, but I thought I'd see if anyone here had ever heard of such a thing. I'm not a CPA.

We have an employer who wants a projection for a 2022 profit sharing contribution. Client insists that the bonus being PAID in February or March of 2023 (which is based on 2022 compensation) will be reported on the 2022 W-2. I don't see how this is correct, or possible, and although it isn't our problem (we use the projected figures we are given) and it is only a projection, I'd still like to confirm that I'm not crazy (on this issue - be nice!)

I have a nit-picking question on this. Section 404(a)(3) refers to a deduction limit which takes into account the compensation of "beneficiaries" under the plan. the IRS, In PLR 2012229012, as noted above, appears to say that this means the employee who is eligible to defer, even if they DO defer, does not have their compensation counted unless they receive an "employer" contribution. What about in an ESOP? 404(a)(9)(A) refers to the compensation paid to "employees" when calculating limits. That's a difference from "beneficiaries." Does this mean that compensation from employees who receive no allocation may be considered? Seems like a stretch to me.

Completely agree with CuseFan's response. And we don't state a reason (other than referring to the contractual resignation provision) - it can only lead to trouble, IMHO.

Many (possibly most, I don't know?) IRS pre-approved plans provide for a consecutive month (not more than 12) with at least (not to exceed 1,000) hour requirement for eligibility. And as Lou suggests, if they don't meet it in the initial eligibility period (of less than 12 consecutive months) they are swept into the 1 Year of Service requirement. I see no problem with a 6-consecutive month/1,000 hour eligibility, as long as you have the "fail-safe." We have a couple of employers who use it.