RatherBeGolfing

To be clear, Kelsey said that in her opinion it should be OK as long as the class is otherwise OK to exclude. In other words, you can't invent a new division B that just happens to be all your LTPTs, base the exclusion on service, or a disguised service exclusion. She also said that we have no idea if the IRS guidance will allow the exclusion of LTPT by class. Just adding a bit more context here since it was an opinion answer rather than here is what will or is likely to happen.

Whether they are an LTPT or not depends on whether they meet the requirements under either S1.0 or S2.0. We still need guidance on whether they can be part of a class exclusion.

Thanks Peter. So technically, that means they can only asses or remove the penalty, they cannot reduce the penalty to a lower amount, correct?

But the IRS has discretion to reduce or remove the penalty

I'll be honest, I don't think these penalties will actually be collected, except for extreme cases. Going to 10X penalties was the "revenue raiser" to make the math work on paper, but there is just no way they will collect these penalties in 99.9999% of cases.

Yes, you should still be eligible as long as you haven't gotten the CP283 notice. CP 220 is the notice informing you that they made a change and what the result of the change was. A CP403 notice will probably follow, which is a notice of late penalties. I would not waste any time and file through the penalty relief program asap. IRS should be able to confirm that you are eligible for penalty relief. For a small fee of $500, I think it's worth it to know you are good rather than wait for them to make a call on abatement.

Thats a risky proposition. If you request abatement and get denied, you are ineligible for the penalty relief program. In this scenario you pay the $500 and go with the sure thing.

This is the right answer for a 2022 Plan Year.

NO! See Q 33a EFAST2 FAQ

In my example, the RM would receive everything from the back office departments and communicate it to the client. So while all departments have a hand in things throughout the year, the client only works with the RM. Almost as if the RM did A-Z. There are going to pros and cons with every approach, but I think you get more bang for your buck by compartmentalizing your employees. You just don't need a someone making $80k processing distributions 10 hours a week when you can have a cheaper first year employee doing it...

I think it depends on company circumstances. Average plan size and type of plans... how much tech do you utilize? Is everything done manually or can annual emails be sent as a batch, etc? these things all factor in. The more manual work is needed by the RM, the fewer plans they can handle. 150-200 should be doable though, and the number increases as you offload time consuming work.

Everything runs through the RM, and they communicate with the internal departments like compliance, distributions, etc.. That makes them the single point of contact for the client.

The smaller the TPA, the more common it will be for each person to have A-Z responsibilities. As employee count and plan count grows, the more common it will be to segregate departments. Unless you are a boutique or "white glove" type of firm, I think you have to segregate department to achieve any kind of scale.

Timely article that came out in ASPPA NET yesterday afternoon: Flexibility on the Use of Forfeitures—Not so Fast!! Lawsuit against Thermo Fisher. Document states that forfeitures can be used for expenses and to reduce contributions. Thermo Fisher opted use forfeitures to reduce contributions over a 6 year period, while also paying plan expenses from plan assets. Claims are breach of fiduciary duty and engaging in prohibited transactions. Dimou v. Thermo Fisher Scientific, Inc., S.D. Cal. No. 3:23-cv-01732 (9/19/2023)

Thanks MoJo!

I haven't seen much talk about this... Proposed rule published 2/27/2023. It did not receive many comments (ERIC, ARA, ABA, and ABC among the few that submitted comments). The proposed rule would establish a requirement to use forfeitures no later than 12 months following the close of the plan year in which the forfeitures were incurred. There is also a transition period for forfeitures incurred during plan years beginning before 1/1/24. These forfeitures will be treated as having been incurred in the first plan year that begins on or after 1/1/24, and have to be used no later than 12 months following the close of the PY. Proposed applicability date of 1/1/24, no final rule yet, but plan sponsors can rely on the regulation now. How are you handling this? Fire drill to use up forfeitures from past years to get in compliance? Plan document/amendment issues? Absent clarification, would you consider the use of forfeiture for the 2025 PY but allocated in 2026 as being used no later than 12 months following close of the PY? Curious what other think.

This is correct, you cannot do retroactive SH if you did not meet the requirements for SH inthe first place.

As a follow up on this, is anyone aware of instances where this has been denied by IRS? On the IRS website, they state that the IRS will generally waive penalties for filers who satisfy DFVCP (and also file form 8955-SSA and meet the requirements of Notice 2014-35). In the DFVCP FAQ, DOL states that the IRS may provide relief and that PBGC has agreed to provide relief where conditions of DFVCP have been satsfied. You have to love the certainty...

We could just stipulate no rehires in the service agreement...

That used to be the case for me, but at this point most prefer that we file for them anyway.

Just to clarify, if you file a 5500-EZ, you are NEVER eligible for the DFVCP. You are eligible for the IRS Penalty Relief program under Rev Proc 2015-32 (different from DVFCP which is DOL) unless you have received CP283 which is the penalty assessment. The IRS logic is that you ignored the previous notices before the assessment, so you are not eligible for the relief program. You can still request an abatement (which is not guaranteed like the relief program). If you are not familiar with the abatement process and the penalty is substantial, I would recommend the assistance of a professional in this practice area.

It shouldn't have an impact on testing. You already include receivables in testing. If you report on a cash basis, your reporting just wont line up 1:1 with testing if you have receivables.

Which also goes away starting with the first plan year after 12/31/2023

You are correct. They have now backed down and accepted that their position was incorrect.

And not for 2023