RatherBeGolfing

Absolutely not. Thats kind of a chicken or egg question, no? The sponsor is required to provide statement, notices, and disclosures to the participant. The fact that employee never received anything doesn't mean that they were never a participant, it could be a failure by the sponsor to provide them with statements and notices. I don't think that you can require the employee to produce a document that the employer was required to provide to the employee, and then treat the lack of such document on the part of the employee as an indication that he/she was never a participant. I think that the the SSA notice is enough to put the document or research burden on the plan, not the participant. If the sponsor can't put their hands on those documents, its on them to try harder and spend more in order to get an answer. Again, Im not saying pay out, Im saying we keep sloppy records is not an answer. I think most of them are people who got paid out but never removed from the SSA list as a code D, rather than employees who were never entitled to a benefit at all. An answer like we went through our records and you were never vested or you were paid in 19XX is sufficient, but "prove it!" isnt.

Correct. No reputable auditor would. In fact, if you find an IQPA who is willing to ignore prior years, run the other way. Almost guaranteed that you will get caught. Might take a few years, but they will come knocking. Their position will probably be that the 5500s for past years have never been timely filed because they were incomplete. And you might not be eligible for DFVCP. As a service provider, I think you have take the hard line approach and tell them to do it right, or find someone else to help them. If they agree to do it right, get paid up front.

I have had similar experiences.

Absolutely! Just because you contract some of your duties and responsibilities out to others, you need a fail safe. In the event of catastrophic failure, there might not be anyone left to compensate you for the contractual breach.

I think the point was that you are asking the participant to prove that he/she did not receive a distribution, which would be "proving a negative". If participant says they dont have a record of getting a distribution, I think it is on the plan to show that they did. The plan sponsors failure to keep records could be an issue. I would not simply pay out, but I dont think the plan can say "sorry, due to our poor record retention we dont know if you got paid, so we cant pay you out unless you prove that you didn't paid" Sponsor/TPA is going to have to do the heavy lifting to come up with the answer.

Did they do their own admin and 5500, as in no TPA? If there was a service provider involved, what did the service agreement look like? I find it hard to believe that a 50 participant plan didn't have a service provider who found it strange that they had 100% participation or compared reported payroll to a W-3 or something along those lines...

NAPA site is also a little easier to navigate for stuff like this. From the home page, go to Industry Intel --> Hot Topics https://araadvocacy.org/ is a good if you are looking for comment letters and such

Agreed.

If a notice with a penalty has been issued, they are supposed to issue a new notice with a $0 balance if it is abated or removed. That process used to take a while (months) during normal conditions so who knows. you can always call them and verify verbally after a few weeks.

Huh? No. A plan isn't eligible to file an EZ, it is a requirement. As a workaround for electronic filing, an EZ filer can file a limited answer SF (which is technically still an EZ filing), but this option will go away next year when the EZ can be electronically filed. Either way, it has nothing to do with whether a return is delinquent.

until you don't want to be bundled anymore. I have seen so many "cheaper" plans become more expensive overall when someone wants to leave that service provider. And this is exactly what my experience has been as well. An honestly, the vast majority of my clients pay for (and deduct) the service provider fees on the employer level rather than plan level.

This

I agree 100%. Which is why most of the promoters are no longer using cost and "economies of scale" as their main selling point, instead pivoting to more of a "we are a fiduciary and will take care of everything!" pitch.

Agreed.

I really don't disagree with you, but I think you can make a reasonable argument in support of Luke's position as well. Netting them out is just a more conservative position IMO.

Agreed, but can you point to something that says it is required? Code, reg, or guidance? If it is not specified in the code or regs, then it comes down to whether it is a reasonable interpretation rather than correct/incorrect FWIW, there was a JPB article a few years ago that mentions that the IRS has informally stated that in situations where you have earned income from more than one entity, you can treat negative earned income for an entity as zero, and allocate based on the entity with positive earned income. I don't think the negative earned income and W-2 scenario is that different

Why wouldn't this be a PT?

The big players are absolutely going to have them, but they will wait until all the questions have been answered before they start marketing. At this point, Id expect marketing from the smaller shops since they dont have small army of attorneys telling them to hold off until the have crossed every t. There is a market for it, but I dont think it is going to drastically change the industry.

It is a glitch/processing issue at IRS. If you contact the IRS they will get it corrected. Phone wait times are probably going to be long, but it is your quickest option. Fax is second best, I would not send regular mail at this time. Good luck!

Yep, sure looks like a calculation issue to me. I'll update as soon as I hear anything.

If anyone has received one of these notices and is willing to share a copy without the identifying information, we can try to get an answer through ASPPA/ARA. Thanks

What was the full timeline here? When was the form due? When was the first IRS notice received? When did the attorney request abatement? etc The CP-283 issue comes down to 5500/SF vs EZ. EZ filers are not eligible for DFVCP, they have to use the Penalty Relief Program for Form 5500-EZ Late Filers. Under the IRS penalty relief program, you are not eligible if you have received a CP-283. If you request reasonable cause relief and it is denied, a CP-283 is issued and you are no longer eligible for the penalty relief program. The details are going to be very important.

Just to add on to Luke's answer, the code used (1 or 2) for the 1099-R really doesn't matter. Filing Form 8915-E is what will signal "no early distribution penalty" to the IRS.

There was an ARA write up early this year that said further IRS guidance needed, but assume that the 3 month requirement is still there. The 3 month policy is meant to give all participants an opportunity to make meaningful deferrals, I don't think that changes with SECURE. The have started to address SECURE issues, so we might get something closer to the 3 month deadline.

Keep in mind that a CRD is NOT a hardship distribution. There is no heavy and immediate need requirement. Whether the employees are back at work is immaterial.