WCC

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.

This discussion is opposite of your question #2. We obtained an opinion from an ERISA attorney and he agreed with the recordkeeper that the uniformity rule had to apply to everyone, there could not be two separate groups at different default rates. Not sure if that is helpful to you.

Company A and Company B both sponsor 401k plans. Company A purchases Company B in a stock acquisition. Prior to the acquisition, the attorney's draft a board resolution establishing a termination date for Company B's plan. The plan termination date was the day before the closing of the purchase of Company B. The resolution was executed timely. The TPA for Company B's plan is stating that since the plan was not restated for the tricycle amendment prior to the establishment of the termination date, they are now considered a non-amender and must file under VCP to bring the document current. They state that had they known about the acquisition ahead of time, they could have avoided VCP by restating the document before the termination date. Note - the purchase happened within the past two weeks, all assets are still in the trust. I know the document needs to be updated, but I have never heard that it must be updated before the termination date is established. Is the TPA correct that Company B must file via VCP to restate the document as if they are a non-amender? Thank you (I should have posted this under the termination message board, not sure how/if I can move it or if a moderator can move it for me, thanks)

A participant submitted a CARES distribution request in November 2020. The request was valid and in good order, however the recordkeeper did not process it. The recordkeeper is a large national bundled provider. The plan sponsor was upset and has been in an argument with the recordkeeper since it was not processed timely. The solution from the recordkeeper is to process the CRD today and issue a 2020 1099R and call it a CRD. The recordkeeper will file a VCP submission asking the IRS to approve a 2021 distribution based a procedure error since the paperwork was received in good order and the recordkeeper failed to process it. Apparently, this happened with multiple plan sponsors because the recordkeeper is filing a VCP submission of behalf of multiple plan sponsors. (note - the participant does not qualify for any other type of in-service distribution). Does the IRS have authority to approve a VCP submission to treat a 2021 distribution as a CRD due to the recordkeepers error? Thank you