justanotheradmin

This is definitely NOT the same letter. The prior letter was way friendlier and did not require a VFCP submission in 60 days. Also, it does cost something. For a small employer, it either comes at their own time to figure it out, or they have to hire an attorney, CPA, or TPA to figure it out for them. For a small employer the difference between using the actual rate of return and the DOL calculator is small. We routinely see plans with lost earnings to make up of less than $10, but we charge hundreds to do the calculations / 5500/ VFCP etc. using the DOL calculator to save a few cents is not enough incentive. But saving the additional TPA / CPA/ Attorney fee to prepare the forms, plus all the back-up documentation (payroll records, deposit records, etc) can be substantial for a small plan. If the plan sponsor has already made the participants whole, plus filed and paid an excise tax, the VFCP should be voluntary, which the ARA has been pushing for. The DOL threatening enforcement measures is definitely new.

Anyone else find this alarming?! Seriously? What if i'm a small plan sponsor and I've done my own lost earnings calc and deposited to the participant accounts, I've done an amount involved calc and filed and paid excise tax with the Form 5330. Seriously, the DOL is going to come after me for also not filing a VFCP?! ARA article: https://www.napa-net.org/news/technical-competence/regulatory-agencies/ebsa-threats-of-alternative-enforcement-actions-trigger-ara-response/ Letter from the DOL (see the last paragraph in particular): https://www.napa-net.org/wp-content/uploads/letter-from-DOL-4.27.2018-002.pdf ARA letter to DOL: https://www.napa-net.org/wp-content/uploads/18.06.07DOLEnforcementFinal.pdf

The terms of the plans would govern. 1. Does the plan document automatically revoke beneficiary designations to a spouse upon divorce? Some do. 2. If it does, (or there is no signed beneficiary form) the order of benefit named in the document governs. typically, spouse, children, sometimes parents, and then estate. I've never seen a document that includes ex-spouses in the order of default beneficiaries. So unless his parents are alive, likely whoever is getting the rest of his estate would get the money.

So - to play devils advocate - could a participant take a hardship to make a mortgage payment? perhaps for the portion of the payment that is principal and not interest? They are "purchasing" that part of the home back from the bank. I've always said no - the participant should demonstrate foreclosure related paperwork, but perhaps I've been looking at it wrong. And would the answer be state specific? I understand in some states the lender has a much more protected right in the home than others, and may hold primary title, etc. I don't really know, i'm not real estate lawyer, but maybe someone else here does know.

I've never heard otherwise. Not having an account should never be a barrier to receiving a required benefit. I'm guessing the plan and trust is set up for each participant to have their own individual recordkept account (as opposed to some sort of pooled arrangement). Whether someone has an actual physical account for their money, or if the plan just maintains an account on paper, the contribution should show as being for that participant. The participant's consent is not needed to set-up an account. I have occasionally seen sponsors deposit the corrective amount into a holding or suspense account for the plan, and then immediately pay it out (subject to the plan's distribution force-out rules). In that case, the participant's account something that is tracked or shown on the year end accounting, but isn't necessarily going to show up on any statements from the financial institution because the money will be labeled "holding account" or whatever. what kind of plan is it? 401(k)? 403(b)? what is the asset arrangement? recordkeeping accounts subject to participant direction? brokerage account? pooled investment account?

Thank you Larry, this helps.

Thanks Mike! I was thinking more along the lines if there was a specific exemption/waiver that it would be written somewhere and possible to cite, but yes, I see what you mean about citations. We've gotten pushback, so if there was a citation I could go look up, I would have wanted to read it. I rarely work with PBGC covered plans, so its just not an area I have much familiarity.

I would read the plan document - ours says that they are a participant for purposes of their rollover account only, and specifically addresses loans from rollover accounts for limited participants. Our doc allows them (assuming the plan allows loans) unless a limitation on such has been written into the adoption agreement (there is a specific spot available to do so).

hmm - maybe start a new plan for the spouse, write it however you want - test it with the existing plan at year end - then merge the two for next year? Or maybe the doc for the existing plan allows for different contribution allocation formulas for different participating employers? More like a multiple employer plan would be drafted (but not actually since you say they are control group)?

Are PBGC plans exempt from an ERISA bond? Specifically asking about small DB plans that typically would not be subject to audit if the bond requirement is met. Does anyone have a citation for an answer?

We submitted a determination letter request for a defined benefit plan with a normal retirement age of considerably less than 62. The IRS is asking for statistical data to verify the NRA of less than 62 is acceptable for the industry standard. The plan is a one person plan for a professional athlete with endorsement deals. Can anyone point me to what kind of information and sources of information the IRS is willing to accept? Are there other threads that have already covered this question?

thanks Bird. I did miss that. Does the P.C. shareholder receive a W-2? So the 2017 W-2 box 12 shows more than $18,000? (or 24k if over 50?) - Ignoring the fact that the deposit was probably late if it didn't occur until 2018- the result is a simple - 402(g) excess. Corrective distribution for the excess, plus earnings, plus 1099-R. it gets paid out to the principal. The 1099-R taxable amount counteracts the excess in box 12 on the W-2. Earnings probably taxed current year. Probably needs to happen ASAP (April 15) though to avoid double taxation.

We are a scrivener. As to why the employer is involved - well the loan payments would be processed from pay, and the employer remits the payments to the trust. So the ER is involved every time a payment is made. Some employers are very traditional / paternalistic / conservative and this one clearly wants to discourage loans to the point where I think it is going to end up hurting NHCE. Allowing a provision that ends up hurting plan participants is counterproductive to me.

Assuming there is reasonable compensation, how can a sole proprietor have excess deferral? There is no W-2 to offset a 1099-R corrective distribution of a 402(g) excess. Wouldn't the SP just claim less as deferral, just the 18K on their taxes? Wouldn't the extra just be reclassified as a mis-directed / over deposit? I agree the money should not be removed from the plan, - under the principals of EPCRS once deposited to the trust, absent a specific distributable correction, it should remain in the trust, and be allocated. If the deposits all occurred in 2018, why can't the excess be counted as his personal deferral for 2018? Has he already made the maximum 2018 deferral deposit? As to why making his match deposit before everyone else's - its a discrimination issue - he as the HCE would get the benefit of the investment gains / losses, he could count it if considered an allowable loan, etc. None the NHCE get the same benefit. If anything his match deposit should always be last because his compensation as a SP isn't calculable until after year-end. If his employees receive W-2 based compensation, they could in theory receive the SH Match on a per paycheck basis, and then an annual true-up after year end. (I'm assuming the SHM is on a full year basis since he seems to be depositing things in large lump sums once a year). As to the TH issue - SH NEC is only more favorable if the dentist wants to use a PS to get a higher contribution. If they are satisfied with the SH Match (maybe its a 6%?) and possibly a layer discretionary match (such as an additional 4%), then no PS is needed. Maybe cross-testing doesn't work well, due to ages, comp, whatever. The doc we use (and I would guess many others are similar) provides that a SH MAtch contribution is deemed to satisfy the TH min as long as no other employer contributions are given. It does say an additional Match is also allowed if it is within the ACP SH 4%/6% rule.

I agree with you QDROphile. I guess the last sentence in the original post should have been worded better. I think this is a bad idea - there are plenty of times where I think certain provisions are a bad idea - But unless there is some compliance reason not to allow a provision, we usually help the sponsor amend their plan to work the way they want. But the question still remains - is this a permissible provision? Or is there some discrimination or compliance issue I'm overlooking?

"My understanding is you can self-correct on those loans that are within the three-year statute of limitations by reporting on a 1099-R in the year of the failure." What citation do you have for a three year SOL for loans failures? My understanding is that loan failures have to go through VCP for anything outside of the box, including treating the loan as taxable in a year other than the year of the failure. Specifically, that the IRS is the only entity that can grant tax relief, so any correction that changes the standard taxation of a loan failure can't be done as a Self Correction. From the Revenue Proc. "As part of VCP and Audit CAP, the deemed distribution may be reported on From 1099-R with respect tot he affected participant for the year of correction (instead of the year of failure)." the Rev proc goes on to explain that taxable relief is sometimes available/approved if the loan is corrected in accordance with the Rev proc, AND the failure is submitted to VCP, AND specific relief is requested on the submission to the IRS. Because the type of tax relief you are seeking is only available under VCP, from the IRS, I think the question as to whether these failures are significant or not is moot.

Small (less than 100) 401(k) plan does not presently allow for loans - but would like to add them, subject to the hardship rules. they would like to restrict salary deferrals while a loan is being repaid. Meaning the participant cannot make deferrals until the loan is repaid in full. The thinking is that if the participant has extra cash available to make deferrals, then they should be using that extra cash towards the loan. i don't see anything on the face that would make this provision a problem - except a possible BRF issue. If loans are available only for hardship purposes, probably NHCE will be the primary users. If so, then the deferral restriction will primarily affect NHCE. HCE that do take a loan would likely have more means to repay it quicker. Am I over thinking this? Thoughts? Should this provision be allowed?

https://revenuelaw.floridarevenue.com/LawLibraryDocuments/2000/07/TIP-38278_487282ff-105d-48b9-8df7-4a4d989faa2a.pdf This publication is old, but I'm wondering if any portion has been challenged what the outcome has been in the 18 years since it was published.

I have a related question - I can start a new topic thread, but since there were some good comments here, I am hoping folks will chime in. PW plan is Top heavy. PW is immediate, but plan also allows deferrals and SH after 1 YOS. SH is offset by PW for those employees who are eligible for SH. Does the PW (particularly to those who are not yet eligible for SH) trigger a minimum TH contribution? If the plan was Def + SH only doc is clear that no TH min is needed (even if say def were immediate and SH was 1 YOS), but it doesn't address TH min with the addition of PW.

Madison71, yes, that's exactly what that means. Full fees apply except in very narrow circumstances (such as an orphan plan that is terminating).

https://www.irs.gov/retirement-plans/voluntary-correction-program-fees

I just noticed this! It stinks. For simple things like a 403(b) failing to have a document, or a 401(k) plan missing a restatement, etc, small plans are out of the loop. Plus, anything we sent to plans in the last month or two is now wrong! Plus submissions sent in over the last week probably require additional fees! I noticed a portion of the fee section isn't effective until February 2, 2018. But the main schedule (on the website) appears to be effective immediately . I even went back through my IRS Employee Plans News to see if I missed an announcement. It feels like the IRS didn't want plans to know such a big change was coming - or I just missed some announcement, which is possible too.

Has anyone tried using the IRS website to request a trust identification number recently? What should be listed for line 7a, and 7b? I would think the "Name of responsible party" would be the Plan Sponsor as the trust grantor, and then the EIN of the Plan Sponsor would be used, but the instructions say to use EIN only if the Name of the responsible party is a government entity. The website will not accept an EIN, and that screen cannot be by passed? Should the instructions for listing a responsible person for the business entity (principal officer, etc) be followed instead? but we aren't applying for an EIN for the business, its for the trust. what have folks been doing?

Just to confirm how frustrating this continues to be - the financial institution has confirmed unequivocally that they will not put someone into pay status - not even to process an RMD - without the participant's consent. So even for participants whose whereabouts are known, if they haven't returned the consent forms, there has been no RMD.

I have read the recent memorandum on missing participants, it doesn't help much because the lost participants isn't the primary issue. The actuary won't even calculate the RMD based on the single life annuity without confirmation from the plan one way or the other that a participant is married, and if so, what their spouse's date of birth it. I agree that participant consent is not needed for RMD - so the fact that the financial institution is insisting on it is a problem. For ones that the actuary will calculate, where marital status is known along with SDOB if applicable, the financial institution should take direction from the plan about RMD payout without regard to participant consent. I also agree that it is the plan's responsibility to comply with the RMD rules, or at least attempt to, even though the failure to do so is borne by the participant. the plan is trying to comply, but at present the actuary (and secondarily the financial institution) seem to be hampering that process. Specifically I'm looking to see if there is any guidance, even if informal, that we can use to push back against the actuary's assertion that martial status and SDOB must be KNOWN to calculate RMD.