WCC

I am not aware of a regulation that would require a mandatory 30 day wait to amend. My guess is the RK cannot amend any faster due to their internal processes and therefore they are pushing the 30 day timeframe to give them time to amend.

This post is intended to gather the groups thoughts about auto enrollment to pretax or Roth. Let's assume the document allows for either choice. Among our clients who auto enroll, 100% auto enroll with pretax. At the time of making the decision to auto enroll to pretax, there is no analysis done to determine if it should be pretax or Roth. The decision is always made solely based on the idea that pretax is most common and therefore must be the right decision. I feel like no one wants to be the first one sued over a Roth default. Even though pretax is the most common default and little thought goes into the decision, a decision is still being made by the sponsor to determine that pretax is better and more prudent than a Roth default. Either choice impacts the participants tax situation. Does anyone see auto enrollment to Roth among your clients? I think there is a valid argument to say Roth auto enrollment may be better for certain employers. Are there any publications that suggest auto enrolling to Roth is not a prudent decision? Thanks for your thoughts.

Thanks. Both plans currently meet all requirements under DOL Reg. §2520.103-1(c) to receive the audit exception.

A single employer maintains two calendar year plans to avoid the audit. On January 1, 2022 Plan A has 90 participants and Plan B has 90 participants and both plans are identical from a benefits standpoint. On July 1, 2022 Plan B will merge into Plan A (waiting until 1/1/2023 to merge is not an option due to other business reasons). On July 1, 2022 Plan A will have 180 participants approximately. Is Plan A a large plan filer beginning on January 1, 2023? Or does the mid year merger have any impact on making them a large filer for 2022? I am being told they will require an audit for 2022 and can't figure out the reasoning why and the person telling me this can't provide any support for their reasoning. Thank you

I have learned more on these boards than any credential program I have gone through. Those programs are excellent, but it is impossible for them to cover the amount of information that comes through these message boards. There are some incredibly intelligent commenters that I have come to trust over the years (I know that is scary based on a message board, but it is true). They have helped me more than they will ever know and I am grateful to them (all of you!!). Thank you!!!

This depends on how the document is written. The document will tell you if the match is based on the pay period (no true up) or plan year (true up) or some other method like quarterly, but that is more rare with our clients. If the document says the match is based on the plan year, then yes, you have to true up based on annual compensation and deferrals. This statement is not adding up, maybe I am misunderstanding the way you use "safe harbor". But a 3% match does not qualify as a safe harbor match in terms of ADP/ACP safe harbor.

Yes, because of IRC §1563(a)(1). IRC §1563(b) does not apply.

Depends on how the acquisition was structured. Your employer should have provided you a notice of what you can and cannot do. Also depends on how the acquisition was structured. You may want to request a copy of the summary plan description (SPD) which will tell you if you are eligible for an in-service distribution (e.g. based on age 59 1/2). If you are eligible for a distribution (because of age or details of the acquisition), you should seek the advice of a professional financial advisor, no one on this board can tell you if it is in your best interest to take a distribution. There are a lot of details that go into that decision.

good point. Did the terminated plan allow for in-service distributions? Or was their distribution only allowed based on the plan termination? If it did allow for in-service, but the distribution was processed on account of plan termination, does that mean the distributions are okay with a successor plan in place? I don't know the answer to that, but it is an interesting question.

Yes. Treas. Reg. §1.401(k)-1(d)(4). No alternative defined contribution plan. A distribution may not be made under paragraph (d)(1)(iii) of this section if the employer establishes or maintains an alternative defined contribution plan. For purposes of the preceding sentence, the definition of the term “employer” contained in § 1.401(k)-6 is applied as of the date of plan termination, and a plan is an alternative defined contribution plan only if it is a defined contribution plan that exists at any time during the period beginning on the date of plan termination and ending 12 months after distribution of all assets from the terminated plan.

Thanks!! I think you are right and that was the connection I was missing.

we posted simultaneously. No distributions have happened yet. My worry is a participants claim to distributable event.

FYI - this comes from the EOB and answers my question. However, if the buyer takes over the sellers plan after close, could the plan continue to operate as is, but essentially any participants involved in asset purchase/change of employer, would be eligible for a distribution on assets accrued at the time of the sale? All assets accrued afterwards would be subject to the distribution rules as defined in the document. This may be very difficult to administer. Thoughts? 3.b.2)a) Acquisition documents need to address whether purchaser is taking over seller’s plan. If the purchaser intends to take over the seller’s plan (or a portion of the seller’s plan), that intention should be addressed in the acquisition documents and steps to assume that responsibility (e.g., trustee-to-trustee transfer of the affected account balances from the seller’s plan to the buyer’s plan, merger of the plans, or formal adoption of a separate plan formerly maintained by the seller) should be taken as soon as administratively feasible. In fact, if this is not addressed in the acquisition documents, the employees of the seller who go to work with the buyer will have a claim for distribution from the seller’s 401(k) plan on account of severance from employment service. This underscores the importance of addressing qualified plan issues in acquisition documents, particularly if the seller does not intend to have distribution become available to the employees who are leaving the seller’s employment on account of the asset sale.

I have a question similar to the below thread, my question is the same as QP-Guy which was never answered. Buyer purchases the assets of another company. The seller maintains a 401k plan. The attorney's overlook/never discuss the implications of the 401k and the deal closes with no mention of the 401k. The buyer and seller then ask what happens to the 401k. My question is, all employees of the seller incurred a distributable event on date they were terminated by the seller and hired by the buyer. Now, (one month later) the buyer wants to assume sponsorship of the sellers plan to avoid defaulted loans, distributions or any disruption to the sellers plan. I don't think it works that way. 1.401(k)-1(d)(2) references a change in sponsor but I have always seen the change in sponsor in connection with the buy sell agreements at the time of closing. Can the distributable event be undone after closing? Thank you

Below is the basis for my comment, This comes from the Federal Register, 2013 DFVCP update. DFVCP does not extend relief to a plan sponsor for a deficient/incomplete filing. I may be interpreting this incorrectly. https://www.govinfo.gov/content/pkg/FR-2013-01-29/pdf/2013-01616.pdf Section 2—Scope, Eligibility and Effective Date .01 Scope. The DFVC Program described in this Notice provides relief from assessment of civil penalties under section 502(c)(2) of ERISA applicable to plan administrators who fail or refuse to file timely annual reports. Relief under this Program does not extend to penalties that may be assessed for annual reports that are determined by the Department of Labor (Department) to be incomplete or otherwise deficient. (emphasis is mine) This answers the OP question which comes from Section 3 in the above link: (a) Requirement To File The Delinquent Annual Return/Report. The plan administrator must file in accordance with this section a complete Form 5500 Series annual return/report, including any required schedules and attachments, for each plan year for which the plan administrator is seeking relief under this DFVC Program.

The end of this thread addresses a similar question. Once you file an incomplete filing you are deficient, not delinquent (I confirmed this when I spoke with the Office of the Chief Accountant years ago); therefore, DFVCP is not an option.

When you file without the audit you are deficient, not delinquent. The Delinquent Filer Voluntary Compliance Program (DFVCP) is for delinquent filers.

Thank you for this, I learn something new on these boards everyday.

I know the question of filing without the audit has been discussed many times. However, my question seems to not be addressed in prior discussions and this bothers me. I am looking for any clarification. The following sentence is above the signature line of the 5500: Under penalties of perjury and other penalties set forth in the instructions, I declare that I have examined this return/report, including accompanying schedules, statements and attachments, as well as the electronic version of this return/report, and to the best of my knowledge and belief, it is true, correct, and complete. (emphasis mine) I know the DOL has issued FAQ25 on EFAST2 Q&A https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/efast2-form-5500-processing.pdf I understand there are extraordinary circumstances that cause the audit to be late. However, in my experience, 99% of the time audits are late due to procrastination. My question up for discussion is: does the penalty of perjury sentence mean nothing to the DOL? Or does it apply to all the data besides the audit? Does the perjury sentence mean nothing to CPA's and those under Circular 230 who recommend filing without the audit? Filing without the audit seems to just be a way to buy another 45 days of "extension" and the DOL seems to be okay with it. Thank you

Thank you all. I really appreciate you sharing your expertise.

Yes, in this case we are 100% certain the stock transaction created taxable income. Thank you for your input.

A volume submitter document defines compensation as W2 wages. The only exclusion listed are fringe benefits. The document does not elaborate or provide any additional details of what a fringe benefit is. IRS Publication 15-B and IRC 132 provide some assistance. A plan sponsor pays non-statutory stock options during 2020. This is clearly taxable income reportable on Form W2. The taxable compensation was not taken into account for deferrals and/or employer contributions. Question: IRS Publication 15-B mentions stock options as a fringe benefit. Usually we specifically exclude stock to avoid any confusion, but with this plan, other circumstances caused the exclusion not to be written in. Can we rely on the 15-B to define non-statutory stock as excluded pay as a fringe benefit? If we can't consider it a fringe benefit, we are looking at VCP and asking the IRS to approve a retro active amendment. Thank you

Yes, they were notified timely/properly and my thoughts were similar to C.B. Zeller in relation to Rev Proc 2021-30. Thank you all for the comments, I will review 401(b).

A 401k plan document is written with a $1,000 force out provision for non-responsive terminated participants. The plan recordkeeper (bundled provider) processed force out distributions as if the document allowed for the $5,000 limit rule. 200 participants were forced to IRA's when they should not have been. This error happened within the last two months and was an isolated incident to these 200 participants. Rev Proc 2021-30 now provides more options for retroactive amendments pending certain conditions, one of which is (i) The plan amendment would result in an increase of a benefit, right, or feature. Benefit, right or feature is not defined (as far as I know). My thought is that this error does not provide an additional benefit, right or feature. However, do others believe this can be corrected under SCP using a retroactive amendment to change the limit to $5,000? Thank you

Company A sponsors a traditional calendar year 401k plan. Employee A contributes $19,500 during 2021 (not catch up eligible) to said plan. Company A goes out of business and terminates their plan May 2021. The plan fails the 2021 ADP test and Employee A receives a refund of $9,500. Employee A is hired by unrelated Company B. Employee A contributes $9,500 to Company B's 401k plan during 2021. Question - can the $9,500 ADP test refund be considered a return of excess deferrals and therefore the 402g failure has been corrected? Thank you