RatherBeGolfing

There is an example in the EOB (CH3B - Section XI - Part B - 2.b.4)b)) where a court (Daniels v. Agin, 736 F.3d 70 (1st Cir. (Mass.)) held that a one person plan was not qualified in operation, and thereby got around bankruptcy exclusion extended to working owners in a plan that otherwise meets the definition of an employee benefit plan. It sounds like its an outlier, but following this logic it would be worse off in a one participant plan than an IRA. Thoughts?

Other than 401(k) contributions, is there a difference between a husband and wife profit sharing plan and a "solo 401(k)"? *Edit: Looks like Larry beat me to it

I find the DOL behavior very odd. In my experience they act fast on participant complaints. Make a complaint of your own, and like Bird said, shame them into doing their jobs if you have to.

For document purposes, there is no problem with a mid year amendment. For safe harbor purposes, you have messed up royally.

I thought even payroll providers knew better than to retroactively try to change the type of SH... I think Mike and Larry are correct. You are stuck with the match because you have led the participants to believe the have to contribute to get a contribution. you also have to follow the document and provide a 3% contribution, even if it blows up your safe harbor. Your document doesn't allow ADP/ACP combos at all? I could understand that it wouldn't allow both as the ADP safe harbor, but I have never seen a document that doesn't allow for a match in addition to the 3%

You probably have contact the IRS after DFVCP since there is nowhere on the assessed penalty notice to respond with the DFVCP information like there is on the proposed penalty. But the result should be the same.

They use this language in their current VS as well, so I talked to their document folks about it. Both of our interpretations are reasonable, but yours is more conservative. An amendment similar to what @Kevin C described could be done with the FTW document as well.

Well, there is nothing on point because it is not a protected benefit :) what is the exact language in your current document? And I'm pretty sure FTW can accomodate this change, there is simply no reason for a provider like FTW to restrict their volume submitter like that, and I don't eve think they have a standardized document any more. After the next restatement there wont even be a prototype or VS document, just a pre approved document since there is almost no difference any more.

Tom, I'm not reading that the same way you are. What it says (to me) is that if you are eligible on the effective date, you enter on the effective date. If you were not eligible on the effective date, you enter on the specified entry date if you are still an employee. I don't read that as not permitting changing eligibility. It really just makes the effective date a "special" entry date.

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.