Briandfox

Thanks, good cite.

If 50% of the vested account balance is used to secure the loan, shouldn't that portion of the account balance be frozen during the life of the loan?

Follow up question, if a participant is current on a loan and the plan allows for in service distributions, can a participant take an in service distribution of their total account balance even though the loan is outstanding? I think they can and their account balance is not collateral or security for the loan but for some reason it rubs my boss the wrong way because a participant is generally limited to taking 50% of their vested account balance when they take a loan. He thinks the account balance is security for the loan. I don't.

Aren't loan offsets eligible for rollover?

Yep, the loan isn't in default, it is current. I think I know where you are going with this (loan offset is triggered on default if the plan has in service distributions?).

In that situation is the hardship distribution not offset against the remaining balance of the loan?

If a participant elects to have an in service distribution when there is an outstanding loan to the participant is it mandatory that the in service distribution trigger an offset for the amounts of the outstanding loan receivable? Situation is as follows, say a participant has a 50k loan outstanding from the plan and a non-loan balance of 50k. The participant is eligible for an in service distribution and wants to take an in service distribution of the 50k and roll it over to an IRA. For whatever reason, he wants to retain the loan balance in his account and wants to make repayments, as in he does not want to treat this as a loan offset. Is that ok? Is there anything in the code or regs. that makes a loan offset mandatory in these circumstances? All, I can see is that the terms of the plan document and promissory note govern. What if both are slient?

Hello all- Since April 30, 2016 falls on a Saturday, does that mean we have until May 1, 2016 (the next business day) to submit PPA Plan restatements to the IRS via Form 5307? Thanks

Just curious, anything on this or it's just fine.

I know the general fees have changed (generally reduced) under Rev. Proc. 2016-8. But, have the special fees indicated on the last 9-2015 8951 remained the same? Thanks.

I believe that for purposes of qualified plans, in determining whether or not a brother sister control group exists, the shareholders of the two or more organizations being analyzed need to be individuals, defined as individuals, trusts or estates. If the direct sharholders are partnerships, not individuals, does the inquiry stop there. Or do you look to see who the owners of the partnerships are and attribute ownership through the partnership to them and see if a brother sister controlled group exists through organizational attributions. Thanks

I don't think so, because technically that money is owed to the participants if the settlement encompasses excess fees that were charged to participant accounts. However, if the distributions to each participant would result in a $0 after accounting for distribution fees, custodial fees, etc... Then it would make sense to refuse the settlement fee. That, and in this situation if the employer accepted the money (as opposed to the plan), I think it would be taxable as a reversion to the employer (excise tax, etc.)

Thanks Fiduciary Guidance Counsel. So basically if the costs of administering the settlement exceeds the value, we don't have to do it because the net effect is the sum total of the expenses, and then some, will run negative.

A 401(k) Profit Sharing Plan was terminated and paid out over 2-years ago. The Trustees just received information from the former custodian that they would receive a payment as part of some class action settlement because the Plan was charged "too much." Questions: 1. How should this money be accounted for? We are thinking it should be paid out to the participants pro-rata (to the extent the charges affected each participant's account balance). 2. A final 5500 filing was already done over 2 years ago. Do we simply do another final 5500 filing in the year of asset recovery? 3. One consideration here is to try to minimize audit risk, will the filing of a final 5500 filing 2 plus years subsequant to the execution of a plan termination amendment and resolution trigger it for audit, or make this an "ongoing plan." Thanks

We typically exclude all items of compensation listed under Treas. Reg. 1.414(s)-1©(3), such as "reimbursements or other expense allowances, fringe benefits (cash and noncash), moving expenses, deferred compensation, and welfare benefits." It occurs to me that amounts deferred under 125(a) could be a welfare benefit, which we would typically include in comp under our plans. Does anyone know if 125(a) elections are included in the exclusion as welfare benefits? I have found nothing that clearly defines what a welfare benefit is under the reg. Most people seem to believe that, whatever it is, it is an employer (not an employee) funded benefit. Thanks

Here are some of my thoughts: 1. Are the loans at issue past 5 years from issuance? If so, I don't think there is a Schedule 5 VCP option and if you approach through VCP you would be requesting retroactive amendment of the loan program because all the loans you would be seeking to correct are past the 5 year term and were technically defaulted on. 2. If the loans at issue are within the 5 year term, then the VCP approach would be under D. on schedule 5 and these would be treated as loans that are defaulted. The correction would be to reamortize under what was the "program" and the missed interest would be made up going forward. 3. If you don't go VCP, do you have the original promissory notes and loan amortization schedules for the participants? If so does the note state the interest rate that was relied upon and was it signed by the participant and a plan representative? If that is the case, and there was some audit risk you should keep this if the issue comes up so there is some backup of the lower interest rate.

Situation involves a plan with 2 loan failures. Failue 1 can be corrected through reamortization because the 5 year term has not already expired. Failure 2 cannot be corrected within the 5 year term and we are requesting that the deemed distribution be reported in the year of Correction as opposed to the year of the Failure. The problem is Schedule 5 (Form 14568-E) does not accomodate both corrections on a single form. I was thinking of either doing 2 separate schedule 5s for a single VCP filing, or not using schedule 5 at all and just drafting something individualized for this situation. At this point I am leaning to doing two separate schedule 5s, it just strikes me as a little counter intuitive. Any thoughts on this would be appreciated.

Don't know the answer, but in these situations if you disclose the issues on audit (in good faith) shouldn't they give you the opportunity to do VCP following the examination? What if you were in the middle of working on a complex VCP submission and got audited before everything was assembled for submission, does that mean straight to audit cap?

I spoke to an IRS agent who was reviewing a submission we had on the prior 5307 form and asked the agent for guidance on the new form. He said he didn't know and suggested that we attempt some good faith response. I am a bit weary of that because these submission just seem to be getting at oppurtunities for referals to audit cap or other sanctions or penalties for minutia that wouldn't even be inquired about on audit.

We have a nature and effect statement that is generated automatically by the SunGard document system. However, that appllies to the current 1/1/2015 PPA restatement. There is no such statement for the 10 amendments that we are listing that have prior effective dates to the 2015 document and apparantly we are supposed to indicate yes or no for each amendment. I still have no idea what 3g(ix) is asking to be indicated.

Interesting. When you file a Form 5300 or 5307 application would you list and include participation agreements as amendments? What about a plan loan program referenced by the Plan document? I do agree with you that if the plan says nothing about participating employers or participation agreements that the Plan would have to be amended for such purposes.

This may depend on the core Plan document in use. I believe that the Sungard documents can be set up so that entities that share a control or affiliate service group relationship with the plan employer are automatically in the plan absent additional adoption paperwork (the idea is that they are treated as a single employer anyway for may purposes). So the first thing I would do is check to see how the plan document defines Participating Employer, if this is a prototype I would look to the Basic Plan document to see what the document prescribes as the procedure for participating employers. If they don't automatically come in, then they typically need an adoption resolution and a participation agreement with the primary employer, whereby the primary employer consents to the participating employer's adoption of the Plan. Since that didn't happen, it is as if they never adopted a written Plan document in 2014. For issues like this I have typically done a VCP, which is easy, but I don't treat it as a retroactive amendment to the Plan because there is nothing to amend in the Plan document (the written Plan document doesn't really change). I like to proceed with the position that the Participating Employer had adopted the Plan on a de-facto basis with the consent of the Primary Employer and Plan sponsor but never formalized it's adoption of the Plan as of it's initial effective date of Participation with the required paper work specified in the Plan document.

I am having trouble with item 3g column (ix) for the current IRS Form 5307. What is "The Required Practioner Statement" that should be attached? 1. Is this refering to amendments where the Prototype Sponsor adopted the amendment on behalf of all adopting employers, and states somethin to the effect of: "Except with response to any election made by the Employer in____, the protoype sponsor, on behalf of all adopting employers, hereby adopts this Amendment on ________"? 2. How do we judge the adequacy of these statements? I have one that just says: "Except with respect to amendments made by the Employer to this adoption agreement, this amendment is hereby adopted by the prototype sponsoring organization on behalf of all adopting employers on. [sponsor's signature and Adoption Date are on file with Sponsor] 3. If any amendment was signed by the employer and not the prototype Plan sponsor, do we indicate "NO" or "NA" in item 3g of column (ix)? There are no instructions for the current Form 5307 that indicate how 3g(ix) should be answered. Thanks

Does it make any difference that the non-safe harbor match is a new match in 2015 being added after the cessation of the prior safe harbor?

I am working on a Plan that ceased a safe harbor enhanced matching contribution before the 2015 Plan year and implemented a new discretionary matching contribution subject to vesting. for the 2015 year. The discretionary matching contribution is the same formula as the enhanced safe harbor matching contribution. Consequantly, one of the people I work with expressed the opinion that the change is really an amendment to the Plan's vesting schedule 100% vested matching contribution to a match subject to a vesting schedule. As a result, he believes that participants who had previously received safe harbor matching contributions would have to be given the choice between a 100% vesting schedule and a 3-year cliff vesting schedule. I don't think that this is correct. I think an adp safe harbor contribution is by it's nature a 100% vested contribution and a non-safeharbor match is subject to vesting. If the employer decides to implement the safe harbor again it will of course be 100% vested. Any thoughts?