justanotheradmin

I don't think it's been reviewed in the past. There is a difference between having a very undetailed report, and having a report where the transactions are not coded correctly. For the forfeitures, a number of participants had distributions during the year, and the forfeiture account had a decent balance at year end. The trust report has a forfeiture column on it. But there isn't much shown in that column. After asking for more detailed information, it turns out that the forfeitures were shown as any of the following: forfeitures, transfers, realized gain / loss. So a participant (or trustee) looking at a statement or trust report would have no way of knowing how much was actually forfeited without asking for additional transaction information. I expect that lack of detail from brokerage statements, where there is no recordkeeping at all. I don't expect it from a company specifically hired to do recordkeeping, but just seems to do it really poorly.

Thanks David and ESOP Guy. I suspect the account balances might be okay, but unless someone takes the time to request a complete detailed transaction history (which I doubt is available) and go through it line by line, I doubt there is any way to verify. I agree it seems like a contract issue. The recordkeeper does (or rather did) send participant statements out, so in the case of the incorrectly recorded deposits, it could easily look like someone did not receive all the money they were due. The plan is not audited. It has too few participants. The trustees are just trying to keep accurate records, and that is hard to do when the reports don't show things correctly. I'm concerned about the errors we haven't identified. The only ones that have come up so far are the super obvious ones. If they are willing to lump forfeiture transactions into earnings for participants, what else is being randomly lumped into earnings? More deposits?

A 401(k) plan sponsor used a daily recordkeeper for it's plan assets. It has become clear from the trust report (which is by participant and money source) provided by the recordkeeper, that the transactions are not recorded accurately. For example, several distributions were processed in 2018 with the non-vested account balances to be forfeited. The report has a column for forfeitures, but in many instances, it isn't used. The forfeited amounts are variously lumped into Transfers, or Gain/ Loss, etc. Similarly, several items which I would expect to show up as Contributions, are instead listed under transfers. The known errors have been pointed out to the recordkeeper and several requests for an updated trust report have been made. The recordkeeper will not provide an updated report unless someone agrees to their hourly fees for the time it would take to fix the transaction history and trust report. I suspect there are a number of other mis-coded transactions that haven't even come to light yet. At what point should the plan sponsor and trustees contact the DOL? Would that be futile? For what it's worth, due to other issues with the recordkeeper the money and recordkeeping was moved away to another provider, so future errors should be limited. I usually only see DOL involvement when it looks like fiduciaries might mis-handling plan money. I don't usually see the plan fiduciaries go to the DOL (or IRS) over an issue with a service provider. So i'd love some suggestions, or to hear of people's similar experiences and how they were resolved.

You'll want to look up "transition rule" or "transition period". There are several threads here on BenefitsLink about it, as well as articles from other places that can go into detail. Assuming the plans can utilize the transition period, yes, you can test them separately for the year of acquisition. Ilene has some great columns on it, here is one to get started. http://ferenczylaw.com/article-the-elusive-irc-section-410b6-transition-rule/ https://www.erisapedia.com/static/CommonProblemsinMergersAcquisitions.pdf

You'd have a 415 excess. Either the excess is moved to suspense and used toward something else, or if due to the EE contributions, a distribution would be processed. The question I would have is typically the employer contribution is reduced first, but if they were allocated SH, which they are guaranteed to receive, is the SH reduced? That seems counter-intuative. I don't know the answer, but I'm sure someone does. The Rev proc is clear that if the 415 excess is due to employee contributions ( including after-tax) then a distribution is processed. There are several examples in the revenue procedure, but here is basic part. From Rev Proc 2019-19 "beginning before January 1, 2009, the permitted correction for failure to limit annual additions (other than elective deferrals and after-tax employee contributions) allocated to participants in a defined contribution plan as required in § 415 (even if the excess did not result from the allocation of forfeitures or from a reasonable error in estimating compensation) is to place the excess annual additions into an unallocated account, similar to the suspense account described in §1.415-6(b)(6)(iii) (as it appeared in the April 1, 2007 edition of 26 CFR part 1) prior to amendments made by the final regulations under § 415, to be used as an employer contribution, other than elective deferrals, in the succeeding year(s). While such amounts remain in the unallocated account, the Plan Sponsor is not permitted to make additional contributions to the plan. The permitted correction for failure to limit annual additions that are elective deferrals or after-tax employee contributions (even if the excess did not result from a reasonable error in determining compensation, the amount of elective deferrals or after-tax employee contributions that could be made with respect to an individual under the § 415 limits) is to distribute the elective deferrals or after-tax employee contributions using a method similar to that described under §1.415-6(b)(6)(iv) (as it appeared in the April 1, 2007 edition of 26 CFR part 1) prior to amendments made by the final regulations under § 415. Elective deferrals and after-tax employee contributions that are matched may be returned to the employee, provided that the matching contributions relating to such contributions are forfeited (which will also reduce excess annual additions for the affected individuals). The forfeited matching contributions are to be placed into an unallocated account to be used as an employer contribution, other than elective deferrals, in succeeding periods. For limitation years beginning on or after January 1, 2009, the failure to limit annual additions allocated to participants in a defined contribution plan as required in § 415 is corrected in accordance with section 6.06(2) and (4)."

It depends on the business entity type. From the 5500 EZ instructions " A one-participant plan means a retirement plan (that is, a defined benefit pension plan or a defined contribution profit-sharing or money purchase pension plan), other than an Employee Stock Ownership Plan (ESOP), which: 1. Covers only you (or you and your spouse) and you (or you and your spouse) own the entire business (which may be incorporated or unincorporated); or 2. Covers only one or more partners (or partners and their spouses) in a business partnership; and 3. Does not provide benefits for anyone except you (or you and your spouse) or one or more partners (or partners and their spouses)." I've always understood the instructions to mean that a corporation ( LLC, S-Corp, C-corp etc) could NOT file as a one-participant plan (and thus use Form 5500-EZ) unless it was a single owner, or single owner plus spouse, or two owners who happen to be spouses to each other. Multiple owners who aren't spouses don't seem to qualify. A general partnership with more than one partner WOULD meet the requirement for one-participant plan.

Trying to understand a bit better... Were these policies tied to a retirement plan for a company your father used to work for? And his former employer no longer exists, nor do the insurance companies that issued the policies? If the policies were part of an old profit sharing retirement plan, its quite possible the plan cashed out the policies and your father was given a distribution ( cash or rollover) of the money if the plan closed down, or he elected a withdrawal either when he stopped working for that company, or reached retirement age. Life insurance policies in retirement plans used to be more popular, but they aren't anymore and over the years I see plans reducing or eliminating the life insurance part of their profit sharing plans.

No problem with it. I think it happens regularly.

I think all of the software out there used for plan administration pretty much has proposal capabilities and report options built in. ASC, Relius, FT William are three of the more common ones. Datair is another that comes to mind. I'm sure there are lots others out there. I don't know of any specifically just for proposals though.

The 5-Percent owner status is as of when they turn 70 1/2 . Specifically "(I) except as provided in section 409(d), in the case of an employee who is a 5-percent owner (as defined in section 416) with respect to the plan year ending in the calendar year in which the employee attains age 70 1/2, or" that's from 401(a)(9)(C)(ii)(I). So if they sell before then, it's fine. If they sell after then, they are still forever for RMD purposes a 5% owner. the table is the same, with Uniform table for most, and Joint Life if spousal beneficiary is more than 10 years young ( see pub 590-B).

ASC's document software has a similar option, but during the last DC restatement cycle ASC made crystal clear during webinars that the collapsed document could NOT rely on the IRS opinion letter. If I recall they had tried to get the IRS's blessing, but did not. So the suggestion was to have the regular fully expanded AA signed as always, and use the collapsed version only as a reference copy. For the reason you mention, familiarity, I prefer to use the full adoption agreement, and I prefer sending it to clients. I have seen other TPAs send just the collapsed AA out for signature, which I think is less than ideal, though for an unsophisticated plan sponsor it is definitely easier to read and use.

From Rev Proc 2019-19, page 45. (emphasis added) "(5) Treatment of Excess Amounts under a SEP or a SIMPLE IRA Plan. (a) Distribution of Excess Amounts. For purposes of this section 6.11, an Excess Amount is an amount contributed on behalf of an employee that is in excess of an employee’s benefit under the plan, or an elective deferral in excess of the limitations of § 402(g) or 408(k)(6)(A)(iii). If an Excess Amount is attributable to elective deferrals, the Plan Sponsor may effect distribution of the Excess Amount, adjusted for Earnings through the date of correction, to the affected participant. The amount distributed to the affected participant is includible in gross income in the year of distribution. The distribution is reported on Form 1099-R for the year of distribution with respect to each participant receiving the distribution. In addition, the Plan Sponsor must inform affected participants that the distribution of an Excess Amount is not eligible for favorable tax treatment accorded to distributions from a SEP or a SIMPLE IRA Plan (and, specifically, is not eligible for tax-free rollover). If the Excess Amount is attributable to employer contributions, the Plan Sponsor may effect distribution of the employer Excess Amount, adjusted for Earnings through the date of correction, to the Plan Sponsor. The amount distributed to the Plan Sponsor is not includible in the gross income of the affected participant. The Plan Sponsor is not entitled to a deduction for such employer Excess Amount. The distribution is reported on Form 1099-R issued to the participant indicating the taxable amount as zero." To me, the excess amount failures describe above in Section 6.11 are separate and distinct from the employer eligibility failure described in Section 4.06 and Section 6.03, though like everything else they may be related or coincide with each other.

Have you read the updated EPCRS publication? Revenue Procedure 2019-19? Typically I would say if you are issuing the 1099-R for 2018, then yes, the interest stopped in 2018. If showing it as taxable in 2019, I would include the accrued interest. Page 33, Section 6.02 - But if the failure is the employer's fault, the employer should really pay the difference in the interest. I doubt that will actually happen, but it's worth considering.

A more conservative approach would be to give it to anyone who was active and eligible at any poitn in the year (even if terminated w/o a balance at year ). as well as any terminated participants who had a balance at ANY point during the plan year, even if zero balance at year end. That's based on the fact that the A in SAR stands for Annual, so anyone who was part of the plan during that Annual period I would think should be included. BUT: I don't have a cite to support that conservative approach. Nor is it terribly practical . If I had some eligible employees who left during the year and never had an account balance, am I (plan sponsor) really going to send them the SAR? Probably not.

What you propose is a permitted correction method. Make sure to give out a written notice explaining the error, the correction, and the right to adjust future deferrals. The specifics of what needs to be in the notice is in Revenue Proc 2018-52 Since your SH match is annual and you are not required to deposit each pay period (even though you choose to) I think letting it get fixed in the year end true-up is acceptable. Just make sure the true calculation is based on a total deferral amount that includes what WOULD HAVE been been deferred for the missed comp, not what was actually deferred. Here is a link to the Rev Proc. https://www.irs.gov/pub/irs-drop/rp-18-52.pdf One more thing, usually the notice has to go out within 45 days, so hopefully you can meet that deadline, depending on when you caught and fixed the error.

My understanding is the invalid SSN is a completely distinct issue from the right to the plan accounts. Just because someone does not have a valid social doesn't mean they don't have a right to compensation or wages. There are lot of intertwining issues, but especially if there are deferrals (but even if only employer contributions), the money belongs to person the same as any other plan participant. Now if the IRS were to get awarded the accounts because of tax fraud and a court judgment, that would be entirely different. Similarly, if I find out someone's SSN isn't valid and I fire them, it doesn't mean I can withhold their final paycheck. If they worked and earned the money, it is theirs. As for what to use on a 1099-R, I would suggest getting a taxpayer ID from their home country if they do not have a SSN. And don't forget the higher possible tax withholding, and W-8BEN.

I can assure you that filings are available on efast for public viewing, even if filed as part of DFVCP. We have a number of clients that have used DFVCP and their late filings are viewable the same as if they had been filed timely. If there are other reasons why it wouldn't be available (one-participant plan etc, ) those limitations would still apply. But if you have a one participant plan, you wouldn't be correcting with DFVCP anyhow. You'd use the special program for those kinds of plans. Now, I can't say if they would all be available back to 2002... for most plans the filings on efast only go back a few years. I don't know if they are archived based on the plan year end, or on the filing date. If based on plan year end, I would think the very early years (2002 to maybe 2013) wouldn't be on efast. But if done based on filing date (which is what I think is more likely) then if all filed this year, they would all be available for download.

Is the concern that the signature will be viewable? Any 5500s filed by a third party vendor (instead of with a PIN directly by the signer) has an attachment with the signature on it. So there are lots of 5500s out there on efast with signatures already. Many vendors have the signers use their PIN for direct filing ( or semi-direct filing through the preparation software), but not all do. Some plan sponsors find it easier to wet sign, and authorize the service provider to e-file on their behalf. When done that way, a copy of the wet signed Form 5500 is usually visible. I don't know that will make your sponsor feel, better, but it might. Or they just might think the ones that don't direct file with a PIN are taking an unnecessary risk.

I don't have a sample notice specific to that, but usually I try to include the things mentioned in the EPCRS revenue procedure. Usually the format is something like: Date To: Participant in XYX From: Plan Sponsor Re: XYZ {Information about what is required - e.g. there is a SEP plan and sometimes employees are required to share in employer contributions} {Information about the failure - Contributions weren't made to accounts } {Information about the correction - opening accounts, depositing corrective amounts etc} {Other required information - for example in a 401(k) usually a mention about a right to change deferrals if there is a deferral error, or disclosure that plan information is available on paper upon request, etc) For more information contact NAME of PERSON Name of Company (usually sponsor) PHONE NUMBER E-mail address Address

It cannot unless the plan has never allowed deferrals. If the plan is amending to add a deferral option then yes, safe harbor can be added at the same time. Otherwise NO. Safe harbor cannot be added mid -year (though some in the industry wish it could be).

We've been amending documents all along, and at present the document provider we use is providing amendments for both the EGTRRA cycle docs and the PPA cycle docs so that EGTRRA doc clients can still be fully up to date even if not restated. If there are any other interim changes needed before 4/30/2020, I suspect they will continue to provide / support regulatory amendments to the EGTRRA document.

Update the document - Yes, that's been done. Amendments have been done as part of the plan termination process. The question is the actual requirement to fully restate the document. I don't see that addressed on the IRS website. The guidance I find on other items (such as this example for GUST https://www.irs.gov/pub/irs-tege/chap101.pdf ) mentions making sure the terminating plans have been amended. It doesn't mention restating terminating plans. It does not seem to use the terms restatement and amendment interchangeably, so I presume when it only references amendments, that's what it means. I'm having a hard time finding Notice 87-57 can someone provide a link?

Thank you draper1 and Ratherbegolfing. I think the discussion my colleagues are having is over the distributions that occur during the RAP. There is no question that any plans that still have money in them at the end of the RAP we will try to restate. The issue is plans that had their final distributions during the RAP. Some colleagues are taking the position that if ANY of the distributions occurred at ANY time (past or present) during the RAP then a restatement is required. I've heard some take a practical approach to split the different and not worry about restatements for plans that had already paid out when they started preparing them. Then only do restatements for any that have money in them now. I suppose that will help with the date issue, because typically I don't back date restatements. I find it easier administratively if the restatement is effective to coincide with an upcoming plan year. For instance, restated docs prepared in 2018 were made effective 1/1/2019 (calendar year plans), and restated docs prepared in 2019 will be effective 1/1/2020. For plans that already terminated and completely paid out, the restated documents would be signed NOW, but would have an effective date in 2018. That doesn't seem right to me. The earliest I would typically like to go back would be the start of the current plan year. But that's just me. What are other people doing? Is there something from the IRS that explains the rules more clearly? Admittedly I haven't delved into the weeds. I was hoping someone else here already had.

What say all of you about terminating plans and the current restatement cycle? Assume the documents have amendments to bring them other wise up to date, just not restatements. I have a couple of different scenarios. Are document restatement required in any/all of the following circumstances. There has been some debate among our actuaries and senior folks. A. Plans that are terminated and completely paid out as of today, but the plan termination date was AFTER the restatement cycle started. B. Plans that are terminated and NOT completely paid out, the plan termination date was AFTER the restatement cycle started. C. Plans that are terminated and completely paid out as of today, the plan termination date was BEFORE the restatement cycle started, but final payouts occurred AFTER the restatement cycle started. D. Plans that terminated AFTER the restatement cycle started, but distributions will be complete BEFORE the restatement deadline. When was the termination amendment? Before or after the restatement cycle started? When are distributions complete? During the restatement cycle or after the restatement deadline?

Why? There seem to be two different parts to that statement. 1. Are related employers ( Control group, ASG) automatically part of a plan, or is an affirmative participating employer election by the entity required? The document (a volume submitter) we use says Not automatically part of the plan, affirmative election is required. I have seen documents default the other way too, but unless you've read that part of the document, don't assume. 2. Pulling in another employer due to coverage? Is there a coverage failure? The spouse's are HCE, so I don't see why it would be necessary to pull in another HCE due to a testing failure on a 401(k) plan. These aren't DB plans with minimum participation under 401(a)(26). Even if there is a coverage failure, not all plan documents default to a fail safe that automatically pulls in extra employees to give them benefits.