Belgarath

I haven't heard anything. I had the same question about three weeks ago - hopefully they will come out with something, but I speculate that given the long lead-up to this, plus the extension granted already, that they might not be as inclined to grant additional relief as in the past.

IMHO, I think Revenue Ruling 86-142 covers this, and no, you can't do it. It would be considered a plan contribution for 404 purposes. Stretching far into the dim and distant past, I have a hazy memory that this might have been allowed for a while under some old PLR's (we never had anyone attempt to do this for plans where we were the TPA) but then the IRS reversed course anyway. Whether or not such an arrangement might raise Prohibited Transaction issues, I'll leave to one of the PT experts here - I certainly don't know off the top of my head - but I think the PT issue is moot since they can't successfully utilize the arrangement you mention. P.S. Here's an interesting piece by Groom Law Group on paying "wrap fees" - https://www.groom.com/wp-content/uploads/2017/09/1000_Dold-Levine_MAG_05-11.pdf

Ugh. When you say it is your first year, does that mean someone else in your firm has been doing it and now it has just passed to you, or it came over from an entirely different TPA? If the latter, then I'd be inclined to make it the client's decision - we'll fix for 2019 and 2020 - for all prior years, they should be fixed, and I'll do it (for a princely fee), but if you choose not to do it, you are liable for the consequences. Alternatively, if they refuse to fix, give them their walking papers. How big a plan, and how much interest might this turn out to be - lots, or "not too bad 'cause it is only 11 participants" or something like that? These types of situations make me question my career choices. I should have been an optometrist!

Now THAT makes sense. Thanks for obtaining that clarification.

Interesting. I'd have said the opposite from the CPA. Has the CPA given an explanation for the position taken?

Bringing this up again, due to a non-ESOP question where the SCP issue is raised. I originally thought, without doing much research, that perhaps (as stated in OP) such a situation could be corrected via amendment under SCP. I think that is wrong - the IRS states that SCP may not be used to retroactively amend/conform the plan to the operation if it doesn't provide for a UNIFORM increase in benefits, rights, or features. The fact that this error only affected a few participants wold seem to negate this requirement. This brings up my real question, for a non-ESOP situation: if a plan misses the restatement deadline for pre-approved plans (401(k), 403(b), etc.) can the restatement be done after the fact via SCP, within the two year timeframe, of course, since document failures are always "significant?" A strict reading might seem to say no, yet I have seen opinions that it is allowable, without going through VCP as a non-amender. Any thoughts on this?

If it truly can't be located, file under VCP as a non-amender. However, when faced with a substantial fee (IRS fee and TPA fee to file) you may be astonished at how the employer suddenly locates it. Many times the "I can't locate it" is code for "I can't be bothered to really look." Not saying that is the case here, but it often is. As to your proposed solution, my advice is don't even think about suggesting this to a client. Did the employer search corporate minutes, etc., to see if there is at least a resolution adopting the restated plan?

Interesting. Thanks!

As I recall, there is a VCP fix for this - an Employer Eligibility Failure. Essentially, the employer must cease contributions, but the contributions already made are treated as a proper SIMPLE contribution. I haven't checked to see if this still holds true under RP 2019-19.

Hi Peter - for my own edification, I want to see if I have some of the nuances right here. First, the 2510.3-2(f) is a safe harbor - and meeting this safe harbor is itself a facts and circumstances determination, correct? And even if you fail to satisfy this safe harbor, the fact that it is a safe harbor allows you to still theoretically avoid ERISA status, even if you fail to satisfy the safe harbor? Is it your best guess (or direct experience) that the DOL would more likely focus on the document, or the operational compliance aspect? Just curious. I sincerely hop to never encounter this situation! Thanks.

Taxable Term Cost. Often referred to as PS 58.

Yes. There is still an "economic benefit" and the taxable term costs would be reported. In other words, even if premiums paid from a Roth account, the TTC is not a "qualified" Roth distribution. I have a note here in my file from some time ago, referencing 1.402A-1, Q&A -11. I haven't (thankfully) had to deal with life insurance in plans for a number of years now, so you should probably look this up to make sure it is still valid (and that I haven't misrembered). Also be aware of the different "mechanics" on TTC if you are dealing with an unincorporated owner, as opposed to a common law employee. By the way, it occurs to me that I didn't specify above, but only the portion that represents earnings on the Roth account, that is used to purchase life insurance, would be taxable - not necessarily the entire amount. Gosh, I'm glad I don't have to mess with this stuff any longer!!

I'm inclined to agree with your colleagues. 1.416-1, M-20 states that elective contributions on behalf of key employees are taken into account in determining the minimum contribution under 416(c)(2). The fact that these 402(g) excess distributions are not considered annual additions is a 415 issue, and I don't think that trumps the treatment otherwise applied to deferrals. What if the ADP for Keys ended up being 1%, but due to catch-up deferrals (which don't count against 415) the Key defers 4%. Would you still maintain that TH should only be 1%? I don't have time to do any in-depth research on this, but I suspect the IRS might take the approach that the top heavy is required. I know that for, say, an ADP failure where deferrals are distributed, those deferrals still apply for calculating Top Heavy. I also happen to think that requiring Top Heavy in the situation you posit is clearly a ridiculous result, but that's where I believe the guidance leads. Of course, I may be all wet, and I'll be interested to see what other opinions may be.

I agree with the auditor. There might possibly be an argument that it was timely if it was mailed (with PROOF of mailing) on some date reasonably before the 12/31/deadline - say it was mailed on December 23rd, for example, but didn't arrive until January 4th. That's grasping at straws, however. I don't know the specific details of your situation. Anyway, my take is that given the generous timeframes that IRS allows for the corrections, they are unlikely to be overly sympathetic.

We also have had very few requests for CRD's. I do have some expectation that perhaps Congress is going to end up extending the timeframe for CRD's, given what is happening with the new surge, which shows little sign of abating any time soon. If things remain bad, then I think that many folks who have thus far managed to hang on by their teeth and toenails, may be forced to dig into the retirement savings.

Caveat - I am not a Section 125 expert. I would respectfully disagree. Prop. Reg. 1.125-2 regarding cafeteria plan elections, and Revenue Ruling 2002-27, provide for automatic elections and carryover (I've also seen the carryover elections referred to as "Rolling" or "Evergreen" elections. Although the regulation gives an example utilizing health insurance, it doesn't preclude using this for FSA's. The phrase in the IRS wording, "...must make this choice again for 2019..." is misleading, I think. The employer must certainly allow for the employee to REVOKE the otherwise automatic election, and simply not revoking it also constitutes a "choice." Having said that, I would not think that utilizing it for an FSA is a good idea. It isn't that hard to get a new election, and FSA usage is FAR more likely to change year by year, and it seems to me to create an enormous potential for problems. In addition, STATE payroll deduction laws may require an annual written election. So again, I wouldn't do it... And I have no idea on the other two questions, either.

In my very limited contact with ESOPs, most participants do not diversify. Many of them have regretted it. Other folks here who deal more with ESOPs will undoubtedly chime in.

To be clear, I'm not questioning it either - I fully agree. I'm just saying that in many real-life situations, it isn't that clean. What SHOULD happen and what DOES are often different.

Thanks. Your response re the FFCRA is very helpful. (I was under the impression that FMLA leave can be either paid or unpaid, but if unpaid, this question is moot).

It is a potentially messy situation, and sometimes with no good answer. The non-governmental entity keeps its hands off to the greatest extent possible, yet some vendors require a sign-off before processing distributions, etc. - the employer is then left with the choice of having a needy employee being unable to get a hardship distribution, or to "cross the line" and make certain determinations or give approval. Rock - Employer - Hard Place.

Re the definition of compensation for PLAN purposes (for a plan that uses W-2) - as I understand it, absent a specific exclusion in the plan, FMLA wages, even if under a "special" category for employer SS payroll taxes or whatever, would still be considered as wages for purposes of calculating employer match, whatever. Did anything override this that I missed? Thanks.

Agreed, and thanks. I already told them that step one, regardless of any special program that might be offered, is to adopt the updated plan!

Hmmm- I also do not recall seeing this. But I can see a reasonable basis for it. Suppose a plan does allow only core investments. A participant could still reasonably want an investment advisor (whom they know and trust) to advise them on which core investments to use, asset allocation strategy, etc., etc... Administratively, I haven't considered what might be involved.

You may find this useful. https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-seps-establish-a-sep

So, a situation has been brought up where a public school has a 403(b) plan, elective deferral only. They utilize the 20 hour exclusion (which I'm sure they are botching, but that's a separate item). The PLAN does not exclude any compensation from elective deferrals. On the other hand, the collective bargaining agreement states that elective deferrals will not be withheld from "Summer paychecks." I'm paraphrasing here, because I have no documentation on this - only a phone call from the school's business office. Assuming this is correct, how could one reconcile this? Could the collective bargaining agreement be deemed to be an "election" by all members to stop deferrals for Summer pay, and to restart them again when school resumes in the Fall? Failing that, or some similar interpretation, it seems like an operational violation (which has apparently been going on for anywhere from 10 to 25 years). Going forward, since they didn't restate their document, could this "piece" of compensation simply be excluded for purposes of elective deferrals, without violating the universal availability requirement? I'm not sure that 1.403(b)-5(b)(2) prohibits such an exclusion, but it also seems as though it could be read that it DOES prohibit such an exclusion. Sort of a gray facts an circumstances issue. Has anyone ever dealt with this issue? As an ancillary issue, has anyone ever seen a situation where the collective bargaining agreement prohibits union members from deferring in the plan? What happens then - you apparently have a legal collective bargaining agreement that is presumably enforceable, yet this is a plan disqualification issue?