Belgarath

As to your first question, yes, absolutely. As to the second, I'm asking because sometimes the funding companies charge a separate fee "per plan" - just looking, at this point, to minimize fees at the request of the broker. We're just at the initial "feasibility" investigation, and I want to get my ducks in a row. Thanks.

Yup, I've been saying ASG all along when I should have been saying CG. Sorry about that. But I don't think it alters the question, or the results. Perhaps, as Peter notes, I just can't make the leap to use this in a 457 context. Seems crazy to have to set up two plans, but maybe that's where it ends up.

Hi Peter - point well taken. I had considered this, but in this case they are both eligible employers. Two 501(c)(3) non-governmental employers, who do, under 1.414(c)-5(b), constitute an ASG. Granted that the documents we are using are not "pre-approved" by the IRS, they do contain language for "participating employers." Do you think it is being too aggressive to have such an employer sign on as a "participating employer?"

Actually, to me it was more a question of whether another member of the ASG COULD sign on as a participating employer if they wished to. And it would appear that they can. I wasn't concerned about discrimination/coverage in a Top Hat plan anyway, but my original post didn't specify why I was asking the question, so I certainly can't expect anyone to read my so-called mind... Thanks for the response.

Thanks Peter. After taking a little time to peruse the regulations under 1.414(c)-5(f), and (g) - see Example 2, it does appear that the ASG rules would apply to a 457(b) plan. Agree/disagree?

The boilerplate language in our preapproved plan states that the terms of the CBA are incorporated by reference and attached to the AA as an Addendum. If it is good enough for the IRS, good enough for me! I probably should have specified this in my first response. Does this alleviate your concern?

Is there any reason why the ASG rules wouldn't apply? Never happened to see a situation where a non-profit member of an ASG sponsors a 457(b) plan, but I wouldn't think it is unheard of.

We have language like that. It isn't a specific election in the AA, but you'd use an "other" choice, and the language is in the boilerplate section of the document. I suspect most preapproved plans do have some type of provision such as what you want, these days.

Our document permits the Employer to OPERATIONALLY elect to use any definition of 414(s) Compensation provided such definition satisfies the nondiscrimination requirements of 414(s) and the regulations thereunder. I'm just guessing that yours may be similar. Your approach is interesting, and seems valid to me - I've just never happened to see it used. But I may be missing a crucial point - I haven't looked into it in detail!

I think 1.414(s)-1(d)(2)(ii) permits excluding only a portion of the bonus. The question, I think, is whether your document gives you the discretion to arbitrarily choose the portion of the bonus that is excluded/included from year to year?

Since I see DB plans so infrequently, I want see if I've got this straight... DB plans using pre-approved docs need to be restated by the deadline next year. DB plans using IDP documents, that already have a prior D-letter from the IRS, are not required to restate, (and generally can't apply for a D-letter) but do need to keep up their amendments required by the IRS annual list within the appropriate timeframes. I realize that D-letters are now available in certain situations where they weren't previously, but I'm just confirming what MUST be restated. Thanks.

I think I would just do a substitute page. Clearly it is impossible to have the SH date effective prior to effective date of plan. And a substitute SPD (with an effective date of 5/1/2018) if the document system produced a SPD showing the 4/1/2018. I wouldn't recommend a substitute page(s) in the SPD, 'cause participants will screw it up or throw it away, etc., etc. I'm not a fan of "finding" substitute pages, but some situations are so obvious that it just isn't reasonable to do anything else. I sure as heck wouldn't go through VCP for this, and I wouldn't amend.

Hi Peter - as you know, I am neither an attorney nor a legal expert. It does seem to me that Basch Engineering Inc. V. Commissioner clearly refers to a plan requiring compliance in both form and operation. This also provides links to Buzzetta and to Ludden, which say the same thing. Does this help at all? Excerpt from Basch below, as well as the Basch link which you can follow through to the others, if they are helpful "A qualified profit-sharing plan both by its terms and its operations must meet the statutory requirements. Buzzetta Construction Corp. v. Commissioner [Dec. 45,555], 92 T.C. 641 , 646 (1989). " https://www.leagle.com/decision/199054159ddtcm4821434

Thanks Luke - I agree, I don't see this as a viable SCP correction.

A. No, you aren't thick, obviously! B. No, this isn't my question, I may have been presenting it very poorly, but please don't pursue further - this has gone as far as I need to go, and I don't want you to waste your time! Thanks.

Agreed. We never put in a window period.

Thanks Kevin.

No, but the violation technically renders any rollovers of the elective deferrals invalid. Suppose everyone rolled over their account balance. So my question is, what methods might be employed and approved by the IRS to remove this result? I suppose one could technically somehow get the invalid rollovers restored to the terminated plan, but this seems realistically impossible. So I'm interested to see if anyone has experienced this, or knows of a valid correction method? Thanks.

So let's assume there is a successor plan rule violation - 401(k) or 403(b) plan, doesn't matter for purposes of this question. All participants in the terminated plan rolled their assets over to the new plan, which was established prior to the 12-month period. How would one even present this for correction under VCP? Anyone tried this, asking the IRS to allow it? Etc., etc.? - I don't recall ever seeing this - successor plan questions usually come up prior to the termination of the first plan. Any "fixes" that the IRS approved? I wouldn't think that this is very common, but maybe it is.

Thanks, but I still don't get it. This is not an employee deferral under a Section 125 plan. I don't see any reporting code on the W-2 that applies. And the employee election form in the original post even states that the IRA amount will be considered taxable income. Can you point me to anything official on the W-2 that indicates otherwise? Anyway, I'm not going to pursue this post further regardless of your answer, 'cause we don't have anything to do with a plan like this anyway - all this was merely for my information. And I thank you for taking the time to help educate me! All or some of the funds can be allocated for an IRA set up through the (employer). Please note: You may allocate funds not used for the above to be put into an IRA at the end of the year. However, this will be considered taxable income and must be reported.

A couple of observations - the 402(g) limit is a calendar year limit, and isn't pro-rated. Also, and you've probably encountered this - it is sometimes impossible to get the payouts done in time - sometimes participants just refuse to send their forms back in on a timely basis, and if you have many that are over the cashout limit, you may not be able to get it wrapped up by the end of the year. We always tell clients this in similar situations where they are anxious to get everything wrapped up before the end of a year. Also, watch out for top heavy if you have had people enter mid year and the plan excludes comp prior to participation date. (I'm assuming this termination is not due to "business hardship.")

Leevena - thanks, and I'm not meaning to be difficult, but I'm confused as to how an individual IRA contribution made from the unused pool of money the employer makes available to the participant can possibly be reported by the employer as pre-tax? The employer has no idea as to what the individual's filing status is, and whether they are eligible for a deductible IRA or not. Why wouldn't the employer have to simply report it on the W-2 as compensation? This isn't an employer contribution to an employer-sponsored qualified plan. Can you walk me through the mechanics of why you believe it is reported as pre-tax?

Thanks, but I think that discussion was where the termination date preceded the end of the plan year. When the plan termination date is the end of the plan year, then I can't find any problem. No different than if all non-key employees are laid off in July, and then employer decides to terminate plan as of December 31. Do you think top heavy is required in that circumstance? I'm not seeing a problem. (I am talking about DC plans, not DB) Thanks for any additional thoughts.

In the "old days" when we applied for determination letters on almost every plan, we frequently amended the plan to credit prior service with "x" employer. We often did this even for HCE's, and the IRS NEVER had a problem with it. Not saying they would be the same now, just tossing this out FWIW as another possible option.

Maybe I put it badly. What I meant is that the money that goes to the IRA is reported as taxable compensation, and then the individual claims a deductible (or possibly non-deductible, depending upon income/filing status) contribution to the IRA on their 1040. Would the other welfare benefits be non-taxable?