bluesi2004

No worries on not engaging further. My suggestion would be the same as yours. In this situation, the client (an attorney, but not an ERISA attorney) has simply asked for references in the code as to why it cannot be done and what the consequences would be if it were. Guess we can only lead a horse to water, but we can't make them drink. Knowing this client....they would likely just make the amendment and accept the $50 per day penalty if discovered.

For discussion purposes, lets use the IRS example of amending from a DFI to NonDFI effective mid-year (lets say effective 7/1/16). Lets further assume that the notice/summary description was correctly provided in 2015 prior to 11/2, but it would not have included the ability for the EEs to select their financial institution and would have included the ability to make a no-cost transfer. In this example, the fact that the notice did not contain the ability to select a financial institution would result in the notice now being considered defective and the $50/day penalty for failure to provide the correct notice would apply. Now...what I find interesting is what are the actual consequences of amending mid-year? I am not aware of any provision in IRC 408(p) or Notice 98-4 that provides for further consequences such as making the plan invalid, etc. An operational failure has definitely occurred for which EPCRS could be used, thus requiring a reasonable and appropriate correction. In this situation, what that correction is would be up for debate, but could possibly entail offering the ability to transfer at no cost/no restrictions those balances that could have been transferred had the amendment been done as of 1/1/16 and the correct NonDFI notice provided prior to 11/2/15. Are there any additional considerations that should be made? Or any additional provision in the code (besides the fact that the notice must be provide prior to the beginning of the year) that prohibits a mid-year amendment?

Ok, I know this one has been covered before, but I am not certain it has been addressed in the following manner. Regarding mid-year amendments to SIMPLE IRAs, the IRS has provided some guidance in the form of an LRM (2005 LRM) and a 2012 Newsletter suggesting that a mid-year amendment is not permitted. However, what isn't clearly addressed is what portion of the code/regulations the IRS is relying on to come to their conclusion as well as what the consequences would be. My thoughts are as follows: Since SIMPLE IRAs are governed solely by IRC 408(p) and Notice 98-4 (the LRM and Newsletter to not qualify as code/regulations), and Notice 98-4 clearly states that an employee must be provided with annual notices (e.g. summary description and right to defer, including right to select financial institution if applicable) prior to November 2 of each year; a mid year amendment affecting the information required to be in such notices would result incorrect notices having been provided and thus, not meeting the notice requirements. That being said, my understanding is that the consequence would be a $50/day penalty (pursuant to Notice 98-4, Q&A section G). Beyond that, I am not aware of any additional consequences formally provided in the code/notice. The SIMPLE IRA fix it guide addresses the situation and simply provides that a reasonable correction should be made. As a result, it would seem to me that if a sponsor was willing to accept a $50/day penalty and make reasonable corrections (depending on the situation), a mid-year amendment could be made. Is there anything I am missing or any other portion of the code/notice for SIMPLE IRAs that I haven't considered that prohibits mid-year amendments? Thoughts are greatly appreciated.

Thanks for the response. The reference to 404(a)(5)(b)(1) along with the correction method being that another prudent plan administrator would take is helpful information as options are considered to address the situation.

Separate but related inquiry as to what others thoughts are regarding a different 404(a)(5) failure situation. In this situation, the participant notice was provided, but contained inaccurate information (the 1, 3 and 5 years returns for a few of the investment options were incorrect as well as a few benchmarks). While I am know that a breach of fiduciary duty under 404(a)(1)(A) and (B) will have occurred, what I am curious about is, at a high level (given every situation and the extent of the error will vary), what steps would people take to mitigate the fiduciary's exposure? Anything beyond providing the correct notice ASAP such as calling out the errors and providing the participants with the option to rescind their original investment selection and make another? I have searched far and wide and am surprised not to have been able to locate any information regarding any suggested corrective steps fiduciaries should take to mitigate exposure for a participant fee disclosure failure. Any suggestions/thoughts are appreciated!