RatherBeGolfing

Thanks BG. I remember that call now that I read the transcript. While I can't cite anything, I believe the IRS was pushed on this issue after the call and they reiterated that they don't back ANY particular rate as it depends on facts and circumstances. There were some pretty wild discussions on the ASPPA linkedin message boards at the the time.

Oh we can gripe about the weather here in the sunshine too. I'll have you know we had an unusually cold "winter" and had more than a handful of mornings with temps in low 30s... It is quite comical to see people dig up sweaters and gloves they only wear once a year

I think sitting through that movie was karma for going to see all those Pauly Shore movies....

Obviously there are a lot of these calls with various people from the IRS but from my experience they have not gone as far saying "use Prime +2". What I have heard is more along the lines of the IRS not endorsing a general policy of Prime +1 and in many cases Prime +2 is probably more reasonable. That said, Prime +1 is what I see 99% of the time and I have never seen it be an issue on audit.

I agree that the loan example is questionable, but the following section of the EOB seems to back up Robert Richter's example in the presentation attached above. It would be an odd example to include for BRFs if is isn't doable because of 2550.408b-1(b)(1). The last sentence of 5.b. suggests that you could limit loans if it is restricted to benefits accrued before elimination, and it satisfied the currently available test at the time it was eliminated. I think in-service distributions would be doable subject to the same limitations. I don't think you can allow a select group of participants to take an in-service of future benefits without BRF testing. EOB Ch 9 - Section X - Part B - 5 (current online edition)

WS62 - Benefits, Rights and Features Identifying, Testing and Amending.pdf This if from the 2015 ASPPA Annual conf. Look at slide 15. DC Plan is amended as of November 1, 2015 to only permit new loans to those with account balances in the plan as of November 1, 2015 Plan passes current availability as of Nov. 1, 2015 Retention of loan feature does not need to be tested in future for current availability provided: – Loans only based on account as of Nov. 1, 2015 – Not required to be adjusted for earnings (loans are not 411(d)(6) protected benefits)

Yea I realize I should have worded it differently. I didn't mean to say he is ineligible even if he is misclassified, but rather that this is an employment issue first. If he is an IC, he cannot participate as an employee (because he is not an employee) If he is an employee treated as IC, he is either improperly excluded (because he is an employee), or properly excluded if the document uses a clause you discussed above. Even if he is supposed to be eligible because of misclassification, wouldn't the classification have to be addressed first since he wouldn't have comp as an employee as long as he is classified as an IC (1099'd as non employee wages)?

Should the plan cover a non-employee?

For plan purposes, he is an IC because that is how the employer is treating him, even if the IC/EE is misclassified. As long as the employer treats him as an IC he is not an employee and therefore cannot participate.

Thanks for clarifying QP_Guy. That is a clear distinction from the IRS 5500-EZ penalty relief program that draws the line at the CP-283.

I agree, it can't be an ongoing issue. I was looking at it this as the first incident, and what can they do to correct it and then move forward. Im not advocating it as an ongoing practice.

If the plan has 500 hours / last day as allocation conditions, does it really matter that you calculate and deposit it on a payroll basis? If they fail to meet the conditions, they are not entitled to the match, and it is never allocated to the participant. In my opinion, it is no different than depositing $1,000 for a $700 allocation, you move the excess to an unallocated account and use that those funds for your next deposit.

I think filing under DFVC should be done no matter what since the DOL could also assess penalties for a late filing. The question is whether the CP-283 precludes you from using using DFVC to get out of the IRS penalty. For the 5500-EZ, you are ineligible for the penalty relief program once the IRS issues the CP-283. I think it is the same thing for the DFVC, you are eligible as long as it is a proposed penalty but you are stuck once the penalty is actually assessed. I would start a dialog with the IRS to see if there is anything they can do at this point.

OK if its a CP-283 Notice its an assessed penalty rather than a proposed penalty and DFVCP is no longer an option (at least for the IRS). I believe you can still seek penalty abatement for reasonable cause, so that would be the first thing I would try before paying a $15,000 penalty. One thing is bothering me though. The IRS penalty is $25 per day with a cap at $15,000. If the form was actually filed 2 weeks late, the penalty should not be the maximum $15,000. Even if it was a year late, it shouldn't get to $15,000. Something isn't adding up, or I haven't had enough coffee today...

Is it actually a bill for $15,000? Or a proposed penalty for $15,000? What is the IRS form/notice number?

Yes. CP406 is the final notice but still eligible for DFVCP. The notice should say that it DFVCP is an option.

Napa Net article today on IRS testimony on the IRS rationale behind user fee increases. IRS Pressed on VCP Fee Changes at Hill Hearing Andrew Remo •4/18/18 Members of a House subcommittee pressed IRS representatives this week to explain their recent decision to dramatically increase the cost to small businesses of remedying retirement plan mistakes. An April 17 hearing held by the House Small Business Subcommittee on Economic Growth, Tax, and Capital Access focused on examining the rationale behind the recent change to the user fees that the IRS charges to correct retirement plan mistakes and the impact that change will have on small businesses and their willingness to sponsor a retirement plan. The American Retirement Association has previously expressed its deep concern that the vast majority of small plans will now see a significant fee increase when a small business has to correct a retirement plan mistake, a concern that was shared and communicated directly to the IRS during the hearing from subcommittee members of both political parties. The American Retirement Association submitted a statement for the record on the issue at the hearing. Sunita Lough, Commissioner of the IRS’s Tax Exempt/Government Entities (TEGE) division (who is currently assigned to lead the IRS’s Tax Reform Implementation Office) provided testimony to a skeptical subcommittee to explain her rationale behind the changes. Lough argued that the IRS was bound by an obscure intragovernmental policy document, Office of Management and Budget (OMB) Circular No. A-25, that directs all federal agencies to assess user fees that reflect the resources required to administer federal benefit programs. The IRS seems to have unilaterally determined that the retirement plan correction program – the Voluntary Correction Program (VCP) under the Employee Plans Compliance Resolution System (EPCRS) – falls into this category. She failed to mention in her oral testimony, however, that section 1101 of the Pension Protection Act, which authorized the EPCRS program, specifically directed the IRS to take into account the special retirement plan compliance concerns of small businesses. Under questioning by members of the subcommittee, Lough admitted that the IRS did not study how an increase in VCP user fees would affect small businesses’ willingness to adopt and/or maintain retirement plans. Instead, the IRS’s sole focus was on calculating the average time its employees spent on processing applications approving retirement plan corrections. Lough argued further that according to the IRS’s data analysis, the minimum user fee to correct mistakes through VCP should actually be $3,000 (up from a minimum fee of $500 in 2017) but that the IRS decided to only charge a $1,500 fee for plans with less than $500,000 in assets. Lough did offer that the IRS recently streamlined the work flow it used in the past to process retirement plan corrections such that user fees could be lowered during the next biennial review. She also stated that “we are open to looking at” where the IRS can expand the instances where retirement plan sponsors can correct mistakes by themselves – through EPCRS’s Self-Correction Program (SCP) – which will not involve any user fee. However, she qualified that response by suggesting that there are certain instances where self-correction doesn’t work and that the IRS needs to be careful about where there is a “third-party” or participant tax consequence that won’t fit into a self-correction regime. The American Retirement Association plans to be an active participant in a retirement plan community stakeholder meeting with the IRS in early to May to discuss the ways that the IRS can ameliorate the detrimental impact that these recent fee increases will have on small business retirement plans. The meeting will focus on ways to improve and expand the SCP program. ARA recently filed a comment letter April 4 with a number of recommendations to do just that. Andrew Remo is the American Retirement Association’s Director of Legislative Affairs.

We need more information, or possibly a better description of what happened in order to give you accurate advice. How much did she get? How much was she supposed to get? How much are demanding she repay?

No limitations or dates. A domestic partner is treated as spouse for all plan purposes if the provision is elected. None of my clients have elected to apply the provision after discussing it. I think that would be very different pre-Windsor. Spousal consent would be triggered by the election, but I'm not entirely sure what would happen if the participant were to elect an annuity. Would the issuer of annuity contract recognize the domestic partner as a spouse for the survivor portion? Even my openly gay clients have decided against this provision with the reasoning that marriage is now option in every state.

I haven't seen this pitch on its own, but I have seen it as part of the "we take on all fiduciary liability" marketing.

Let me guess, they are willing to take on that "liability" for a fee?

Nope. Like Larry, my clients are mostly small businesses with no HR department. We are lucky if we get a practice manager for day to day stuff, but even then auto-enroll and auto escalation type plans will be more problematic than useful. We have had a couple of advisers bring up the question but our clients have shot them down pretty quickly. I never encourage loans. Most of our clients start out without them, but some have added loan provisions down the road. Yes. Most of our plans include hardship provisions. All but one or two use the safe harbor rules. No. Actual hours of service unless there is a compelling reason not to (and that is very rare). We have a handful of plans that use some sort of equivalency, but only because that is how they do it for other reasons and they want their plan to have the same rules. Not an issue for our plans. The question has come up a few times, but in each case it was because someone misunderstood what it means. Our document has the option to recognize domestic partners as a spouse. There have been times where I have had to explain the difference between domestic partner and spouse. Investment direction. If a client comes on without an adviser, we always talk about what the client wants to do for investment direction. A lot of clients start with the position of "I want the participant to be responsible for their own investments" because they have heard that its a good way to get rid of liability. Once we explain what is required of them, many of our clients decide that pooled investment aren't so bad after all. We have plenty of trustee directed 401(k) plans and they outperform participant directed plans every single time. Many don't even realize that you don't have to let participants play Gordon Gekko just because they can defer.

We never discuss all plan-design choices, regardless of how much time we have at our disposal. Most clients don't want to know all the ins and outs, they want a plan that fits their needs and wants. I do have a few attorney clients who have read every single page of the document and asked a couple of hundred questions, but those clients are very rare. The way I look at it, plan design is a service. I don't expect my clients look at an adoption agreement and tell me which boxes to check. Instead, I find out what the client wants (often with input from the CPA, adviser, and sometimes attorney) and I design a plan to fit those needs. I will then present that plan and explain why I designed certain sections the way I did. If the client wants something changed, we talk about why they want the change and whether it is the best way to achieve it.

Thanks guys. The actuary got back to me as well and came to the same conclusion.

Thanks Mike