Belgarath

Based solely on the information you have provided, and ASSUMING he had no ownership in 2019: Non-key for 2020. IRC 416(1)(A) provides that the key employee tests are made for the plan year that includes the determination date. IRC 416(g)(4)(C) defines the determination date to be the last day of the prior plan year. except in the case of the first year of the plan. So if no ownership in 2019, and with the comp level you provide, non-key for 2020. Will be key for 2021.

I'm a little (a lot?) confused on this. So, say an ESOP plan that was individually designed (weren't they all until relatively recently?) applied for and received a determination letter in 2014 - back when individually designed plans were on a 5-year cycle. That letter said it expired 12/31/2019. But, didn't Rev. Proc. 2016-37 eliminate the 5-year cycle, and isn't it true that you generally cannot file for a determination letter currently (except for initial qualification, plan termination, etc.)? So even if the plan sponsor wanted to apply for a determination letter, they can't? Or, is there a special situation for an ESOP that I'm missing?

Interesting. Thank you all for the input.

Never seen this one... client wants to NOT allow prepayment on participant loans. Not seeing anything in 1.72(p) or 2550.408(b)-1 specifically prohibiting this, but it seems wrong on so many levels that I've got to assume this has been addressed somehow before. First, it doesn't seem like ERISA would pre-empt state law on this question, so if state law doesn't allow for such a provision on loans, then that nixes it, perhaps. Then I start thinking about fiduciary issues - if a participant wants to pay it off early, and the plan/fiduciary won't allow it, then the participant is, in essence, being forced into an investment that is perhaps "underperforming." Etc., etc., - anyone ever heard of this question coming up?

Unanswerable questions. No way for me to know what the attorney would or wouldn't do, what the client gave to the attorney for information, what the VCP filing said/asked for, etc., etc...

Well, at least in theory, you can attempt almost anything in a VCP filing. However, whether or not it will be approved is another story. Did the IRS already approve such a correction? Without full facts, census, information from the VCP filing itself, it's nearly impossible to say. And the IRS can only approve or not based upon the information submitted in the filing, which may or may not be accurate.

FWIW - our general procedure is that we're not restating if official plan term date is prior to 8/1. For your categories 2 & 3, we are restating. (Of course, client has the ultimate choice one way or the other...)

Thanks Peter. Is there any authority/citation for this, or is this an intelligent and common sense approach? P.S. hi Peter - this HSA thing isn't anything we have anything to do with - just a question from a retirement plan client. But I just this moment received another tidbit of information about it - apparently the HSA custodian has formally said they won't accept the 2019 contribution now, so that sort of negates your solution. Sounds like no option left other than issuing a corrected W2? (I'm going to refer them to their own tax counsel anyway...)

Curious to know what "fix" - if any, might be available. Say an employer withheld HSA contributions in a prior year (let's say 2019). Never deposited them into the HSA. W-2 for 2019 showed the deductible HSA amounts. Now the error is discovered. Is it just a case of "so sorry, too bad" and a revised 2019 W-2 must be done, or is there a "correction" such as depositing the HSA funds now (although I suppose the HSA custodian might not allow it anyway...) In the 401(k) world, these things can be fixed, but I don't know about HSA's...

Also, check the Trust provisions carefully - many say that there must be a specified advance notice (e.g. 30 days) prior to the removal being effective, unless the (soon to be former) Trustee consents in writing to earlier removal, or the employer reasonably concludes that earlier removal is necessary to protect plan assets, etc., etc...

Lou - are you allowed to offset the loan in this situation? I'm frankly confused on this issue. So two situations: A. Plan allows Covid distributions. Is this considered a "distributable event" if you default on the loan, such that you are allowed to offset? B. Plan does not permit Covid distributions. Same question, can you offset defaulted loan? P.S. - I suppose I should add that I'm assuming there has been no OTHER distributable event that would allow the offset...

NYET. Unless the sub meets one of the other definitions of eligible employer. See 1.403(b)-2(b)(8)(ii) - if my magic thumbs typed the citation correctly...

In the context of the original question, if your rounding method gets you to 1 or more, then at least theoretically ok. However, there are potential document and timing issues with the timing of the "election" and whether you can simply "elect" it or must amend plan, possible anti-cutback provisions (although I would say that's generally unlikely) - facts and circumstances issues to be determined for each plan.

Bingo! We used to call it stepping over a $20 to pick up a $1. Of course, on the other hand, since most of the experienced personnel are salaried, employers sometimes couldn't care less if those folks have to work 80 hours a week for the same pay - until people start leaving, they will keep piling it on. I hasten to add that by no means are all employers like that, but you know they are out there.

We generally say something to the effect of, "Sure, we'll be happy to forward those. Would you please tell me why you need them?" Honestly, these days when it is as simple as attaching a PDF to an e-mail, we don't find it much of a burden. Maybe we are just lucky that we don't get too many of these requests. Wasn't as easy in the old days - then these were a thorn in the side.

While I recognize that 1.414(q)-1T, A-3(b) allows any "reasonable" method, IMHO you are playing with fire by taking your interpretation. Good luck convincing an auditor that this is permissible. It isn't reasonable to abuse this discretion to blatantly ignore common sense coverage and nondiscrimination testing rules. I'd strongly recommend that you reconsider this. Good luck!

From the 5500-EZ instructions Who Must File Form 5500-EZ You must file Form 5500-EZ for a retirement plan if the plan is a one-participant plan or a foreign plan that is required to file an annual return and you do not file the annual return electronically on Form 5500-SF. A one-participant plan means a retirement plan (that is, a defined benefit pension plan or a defined contribution profit-sharing or money purchase pension plan), other than an Employee Stock Ownership Plan (ESOP), which: 1. Covers only you (or you and your spouse) and you (or you and your spouse) own the entire business (which may be incorporated or unincorporated), or 2. Covers only one or more partners (or partners and their spouses) in a business partnership, and 3. Does not provide benefits for anyone except you (or you and your spouse) or one or more partners (or partners and their spouses). A one-participant plan must file an annual return unless the plan meets the conditions for not filing under Who Does Not Have To File Form 5500-EZ below. A foreign plan means a pension plan that is maintained outside the United States primarily for nonresident aliens. A foreign plan is required to file an annual return if the employer who maintains the plan is: • A domestic employer, or • A foreign employer with income derived from sources within the United States (including foreign subsidiaries of domestic employers) if contributions to the plan are deducted on its U.S. income tax return.

Just a guess, they may be talking about a CARES, etc. Amendment, which is voluntary? I'll be interested to see, thanks.

Thanks Brian, I appreciate the response - that's what I was afraid of! More facts and circumstances, less certainty...

I'll leave it to the lawyers, but I think I respectfully disagree. What do you mean when you say "his designation?" His former beneficiary designation for HIS plan benefits is meaningless, unless the PLAN somehow provides something crazy that specifically states that a former participant's plan beneficiary designation still applies in this situation. I certainly have never seen anything like that, although I guess anything is possible. As ESOP mentions, the plan may have provisions dealing with this situation. Likely it will go to the estate. If by "his designation" you mean that the plan has provisions/forms for a potential beneficiary to designate their own beneficiary(ies) in the event that the participant dies, and the beneficiary also dies before receiving benefits, and as such potential beneficiary he validly executed such a beneficiary designation, then that's a different story, and presumably such a designation would control.

Maybe I'm missing the point here, but HIS beneficiary designation for his own benefits as a participant in the plan, shouldn't have any effect on the payment of HER benefits, based upon her beneficiary designation and plan provisions. The death benefit from HER Plan account should be distributed according to HER beneficiary designation and the plan provisions.

Bumping this one up with a related question: Is there any way to reasonably know what provisions REQUIRED an amendment or amendments? Let's say, for example, the document was done in (pick a year - 2008). Is there any source that says, in effect, that Section 125 plans were required to be amended for(law/act/regulation) by (date) - so that you could check to see if they had been amended? Alternatively, assuming no amendments whatsoever have been done since 2008, any source to discover what amendments were required, or potentially required, from 2008 to the present? This information is available for qualified plans, but for 125 plans, it seems to be lacking.

I absolutely agree with C.B.!!!

Thanks for your comment - just getting back to this. It does appear (although it seems a little odd, based on past history) that a 403(b) Plan Document Failure (as defined in 5.01(2)(a)(i) and (ii), as well as 5.02(2)(a)) is eligible for SCP within the normal 2-year period for significant violations, under 9.01 and 9.02(1). Has anyone actually heard the IRS comment on this, even unofficially? I'm conditioned to be suspicious that this is really that easy...

I'm absolutely NOT disagreeing with this; in fact, I agree. But to relate ancient experience... In a prior life some 20-odd years ago, wen I worked for a company that had an Enrolled Actuary and the EA always attended the EA annual convention, this issue came up. At the time, the IRS representative opined (of course, this was unofficial) that it was ok establish the plan on, say, 1/1 even though the employer didn't exist until later. Back then, all plans other than standardized were submitted for determination letters, and we had plans like this approved with nary a question. Haven't done this for a long time, and wouldn't do it now without some sort of clear guidance.