RatherBeGolfing

@Belgarath @ETA Consulting LLC @actuarysmith @Bill Presson I submitted this question for this years ASPPA Annual "ask the experts" panel discussion. Sal Tripodi maintained his position that it should be tested as separate controlled groups for the reasons outlined above. Another panelist pointed out Derrin's position and that there is no real consensus on this issue and that there is no direct guidance. It was also mentioned that when discussing the issue with the IRS for a prior year IRS Q&A, the IRS answer was that either approach "would not be an unreasonable interpretation".

Depends on what you mean by bringing over. Are you looking at converting all years on a year by year basis?

Yes.

Are there other "great opportunities"? Kidding aside, I have seen some crazy investments with amazing returns, but like I tell my clients, that doesn't mean that they are appropriate investments for a plan...

This is by no means limited to a geographical area. It happens wherever a client has an adviser with a "great opportunity for investment" .

That is what I would do. Just make sure it is invoiced AND paid in the year when the forfeitures must be used.

Why would you have plan procedures that you approve something that you can't legally do and then ignore part of the order you just approved? It is just a non-starter in my opinion.

Same here. EDIT: Not always a copy from the audit report. Most platforms have an import option that eliminates most of the work though...

The more I think about it, the more I gravitate towards @Kevin C's conclusion. Here's is where I get a little stuck though. Without some kind of action on the part of the plan, is the clause in the employment agreement even enforceable? From a plan perspective, they are still allowed to participate. So is is an unenforceable restriction still a restriction?

I agree with the above, I don't think it is has to be goodbye safe harbor. You have an unenforceable clause in the employment agreement and an operational error in the plan that can be corrected. Going forward, look at a proper exclusion in the plan document if possible. They made a mistake in the employment agreement and now they get to pay up for not checking with their plan expert first.

Section 318 makes it clear that a spouse of an HCE (because of ownership), is also an HCE due to attribution. A spouse of an HCE who is not owner (compensation test) is not an HCE unless the spouse also happens to satisfy the compensation test. So you could have a non-HCE spouse of an HCE. Without aggregation, under what mechanism is the spouse of a non-owner HCE also an HCE (Assuming the spouse does not also satisfy the compensation test)?

Absolutely, the spouses can't be included unless they are also employees. As for 1.414(q) Q&A 11 and 12, they deal with family aggregation (rather than attribution) which would only apply to pre-1996 plan years due to SBJPA. Right?

You should look up IRC §318.

Employee (and thereby participant) is defined by the Code, so however creative you try to get in your document really wouldn't matter.

The most simple answer I can come up with is that a plan has to be maintained for the exclusive benefit of employees and former employees (the exclusive benefit rule), and what you are proposing would violate that very basic premise.

HA! I have been thinking of asking Dave to add some sort of "ping" feature but it appears he already thought of it!

ASPPA Net and NAPA Net news bulletins usually have a few good reads, free if you are a member but not sure if you necessarily have to be a ASPPA or NAPA member to get them.

I think you can successfully argue both dates. But in theory, in order to terminate on 1/1, wouldn't it also have to be active on 1/1? If we terminate on 12/31, lets say at the very end of 12/31, the plan clearly starts 1/1 as terminated and your count is 99. If it does not terminate on 12/31, it has to start 1/1 as active, right? Technically the count would be 200. I don't think the IRS would ever argue it this way but 12/31 makes more sense to me.

12/31

Im not sure you will see anything on the IRS site about the law change since the IRS relief is different from the legislative relief.

Perhaps it is good news that the practitioner did not make an error in making the participant take a taxable distribution from the plan?

Its fine, unless the document states otherwise.

FWIW, I just came from a local "benefits round table" and one of the ERISA attorneys I spoke to said that these are absolutely regional initiatives that are spreading. This would make it even more concerning than rogue auditors since they would be acting on orders from higher ups. One of his examples included refunding not only fees and expenses like MoJo has discussed, but also investment losses. The idea being that the account would not have suffered those losses if distributed timely.

Happy to help :)

Creating small balances can be a pain, no question about it. But it really doesn't change the fact that the forfeiture needs to be used, either for fees or as an allocation. Where it really causes an issue is where you have top heavy plan that relies on the exemption. Having to allocate thousands in top heavy minimums because of a few hundred in forfeiture allocations can really sting...