RatherBeGolfing

Or as I had to tell a client this morning: You DON'T get what you refuse to pay for...

I haven't done a paper submission in years, but I would assume they would not approve it since the instructions are clear that is has to be a person unless its government entity.

FTW has a report in the compliance module that breaks down the 5500 count. So for an SF it will tell you BY count 10, 9 already active and one 1/1 entry, and so on for each count. Its accurate about 99% of the time, but every now and then a rehire or something like that will throw it off. I had the same issue back when we used Relius. I'm not sure why they roll, other than that it may be a legacy issue. A long long time ago someone explained it to me as "IRS wants last years end count to match current years beginning count", and while that may have been true at some point, they sure want an accurate count now...

What is there to correct? Having a successor plan is not a violation in itself, it just creates a problem if you made certain distributions from the old plan that are no longer distributable due to the successor plan. Or am I missing something else?

If you use both the compliance and 5500 modules for FTW, it will also pull the 1/1 entry folks. And yes, I would add them if FTW did not do so for me.

Sure it does, the responsible party is still person even if the trustee is an entity. They need to designate someone to be the responsible party, this is the person who will receive mail and notices etc... Why EIN and SSN if you cant use an EIN? From the SS-4 instructions (emphasis mine): Lines 7a–b. Name of responsible party. Enter the full name (first name, middle initial, last name, if applicable) and SSN, ITIN, or EIN of the entity's responsible party. Responsible party defined. The “responsible party” is the person who ultimately owns or controls the entity or who exercises ultimate effective control over the entity. The person identified as the responsible party should have a level of control over, or entitlement to, the funds or assets in the entity that, as a practical matter, enables the person, directly or indirectly, to control, manage, or direct the entity and the disposition of its funds and assets. Unless the applicant is a government entity, the responsible party must be an individual (i.e., a natural person), not an entity.

Most will use the calculator either way. Sure they can. They DOL does not recognize self correction, so as far as they are concerned you have not actually corrected yet. I always recommend it, but not all clients will opt for it. As for the cost to fix vs tax and earnings argument, I look at it a little different. What you are actually correcting is the clients failure to follow the law. You shouldn't look at it as "it will cost me $500 in consulting fees for a $50 excise tax", instead, its a $550 dollar correction

Im saying that making the last payment (or payments) after the 5 years is fine as long as its within the cure period for those payments. So if you had at least 1 day left on the loan term you could say "correct by lump sum on the last day of the loan", and then make the deposit at some point during the cure period and be fine. I don't see that as an option the loan term is already over.

I agree you can't re-amortize. But if you can't re-amortize after the 5 year period has expired, why would you be able to correct with a lumpsum? I think the only payment that can be made after the maximum term of the loan is a payment that still has a cure period. I think the only options you have are 1. Deem and 1099 in the year of default (2018) 2. Deem and 1099 in the year it was discovered (2019)

don't you have to re-amortize all the payments where the cure period has expired though? I don't think we get around the amortization problem by a lumpsum of payments if they are outside the individual payments cure period, can we?

Correct. Before the SCP option, you had to go through VCP in order to issue a 1099 in the year of correction rather than the year it actually deemed.

I missed the part of it being the same loan... So, the loan defaulted in 2018 and should have been a deemed distribution in 2018. Under EPCRS, you can deem it in 2019 and issue a 2019 1099-R rather than go back to 2018. You don't have to deem it in 2019 though, you could still issue a 2018 1099-R. For the second part of the question, what I was saying was that the cure period does not actually extend the loan. If your last payment is due on the 5 year day, and the payment is made 30 days after that, you still have not exceeded the 5 year maximum. In your case though, we are already past the 5 year mark. I dont think you can correct by re-amortizing retroactively. In other words, if your correction is to re-amortize and pay the loan off in order to avoid a deemed distribution, that new payoff date cant fall outside of the 5 year window because your scheduled payment exceeds the maximum term. You cant correct by saying I will pay a lumpsum 30 days ago but since we are still within the cure period I can deposit today. If you had a day left on the maximum term, you could correct by saying pay the lumpsum tomorrow, but actually make the deposit within the cure period and be ok. Does that make more sense?

Yea I tend to agree. If a 2018 payment was missed and not corrected during the cure period, the loan should be defaulted. You could still correct it it through EPCRS tho. Most likely yes. The cure period and the term of the loan are two separate issues. IRS has informally agreed with this position at a past ASPPA Annual Q&A.

I have never had that issue with filings before, but I have had that issue in the past. As it was somewhat recently explained to me by the folks at USPS, tracking is done by scanning at each stop on route to the final destination. The barcodes sometimes get messed up and which means that it does not get logged at the stops or final destination. The problem is that it is also possible that the item has been lost. There is no way to know without further investigation which includes USPS contacting the recipient at the final destination. It is a loooooooong process. With time remaining, I would send a new batch. Even if both get there it wont be a problem.

Who says you cant mail them in one envelope? Its common practice and as far as I am aware there is nothing in the instructions that prohibits it. You just have to list each plan on a separate 5558 and while many include a list of the plans included for record purposes the IRS will either toss or return it.

Usually the person who issues the legal opinion knows what issues are involved or research the relevant legal issues... I would not feel comfortable with an attorney who does not know this practice area well enough to know what points should be addressed.

The TPA should know. If it doesnt, or does not at least know what looks questionable, it's a problem. I come from a small TPA, now ERISA department at a larger tax and consulting firm, and it's the same, we always know.

Well not quite. VCP (or SCP) as part of EPCRS corrects the operational failure, but not the prohibited transaction, which is cured by filing VFCP with DOL. So they are really not different versions, they are different programs with similar names that sometimes work with each other.

@Below Ground, I'm going to have to blame my last post on jet lag... The VCP requirement for a no action letter is for the correction of loan failures, not late deferral deposits. What I suspect happened in your case was that you had late deferrals (an operational failure) that you fixed through SCP and paid the excise tax. The DOL then sent one of their "invitation letters" to go through VFCP (not VCP) to correct the prohibited transaction and get a "no action letter". The DOL VFCP (no user fee) and the IRS VCP (user fee) sometimes work together but are different programs correcting.

Yes, but... It is more accurate to say that there is no additional filing fee. If you want a DOL no action letter for your late deposits you need to go through the IRS (VCP) first. It's not an IRS or DOL choice, it's IRS then DOL. This is why some will opt to forego the new SCP option in Rev Proc 2019-19. Without VCP there is no "no action letter".

I don't see why it wouldn't be suitable. 6.02 also says the correction method has to be reasonable and appropriate, that you could have more than one reasonable method, and that the methods in the appendix are deemed reasonable. As long as you consider all the principles for determining whether a method is reasonable (6.02(2)(a)-(e)) you should be fine.

I will bet anything that the paychex document does not distinguish between earned/paid. I don't think paid or earned matters for yor purposes though. He earned 6/1-6/10, he will get paid on 6/7 and 6/14. The last paycheck hits after he terminates its still payed and earned while a participant (just not active anymore) I have seen many variations on this question but it usually questions whether its eligible comp for the next year even though there are no hours of service. Its earned in 2018, paid in 2019 (on the 2019 w-2), but since the employee terminated in 2018 he/she will have 0 hours of service for 2019. Even with that variation the answer is always yes it counts.

Looking at your amortization table, use the ending balance that corresponds to the number of payments you have made.

Current balance. Since its a new loan, the interest hasn't accrued yet. Do you have something like an amortization schedule for the loan detailing balance and payment details?

$390k You can report on either cash or accrual basis as long as you are consistent. If you use cash basis then its only contributions before the end of the plan year. Using accrual basis you report contributions made on behalf of the plan year, even if they are actually deposited in the next calendar year. Most people report contributions made on behalf of the plan year because it lines up with the deductions. In this case, $3k is reported for 2018 even though the deposit was in 2019. The loan balance at the end of the plan year.