WCC

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

Here is a similar discussion if it is helpful.

Update to this question if anyone is interested. The sponsor sent this question to outside counsel. Counsel said the plan is now considered a non amender and must file via VCP to correct the document failure. Their reasoning is that the plan was not amended for SECURE or the Bipartisan Budget Act before the termination resolution was signed.

You may be right. After reviewing the OP again, I was assuming the following (should not have assumed): seller sponsored a plan, attorney's recommended the plan be terminated the day before closing, board resolution was drafted and signed timely to terminate the plan due to acquisition. Also assuming the plan was terminated, not just SH removed. If that is not the fact pattern, then my answer will need to be revised.

Section 1.401(k)-3(e)(4)(ii) A short plan year due to a 410(b)(6)(C) transaction still maintains safe harbor status.

Here is a similar discussion.