RatherBeGolfing

Yep, that is exactly how I would do it. You know it is coming back, so at the end of the year it is a receivable.

I think we are actually saying the same thing, but the order in which things occur is the key (I think) 1. Plan has an operational failure when the SH contribution is not deposited within the 12 month deadline. 2. Uncorrected, the plan loses SH status for the year in question. But we don't have the option of not correcting, so we go to step 3. 3. Failure is corrected through EPCRS. Plan no longer has an operational failure and plan keeps the SH status for the year in question. So uncorrected you have a loss of SH status, but since you have to correct the failure, you end up with the SH status protected.

This has to do with the required procedures for the auditor rather than the plan requirements that we work with. I am not intimately familiar with the ever changing requirements of the auditing process, but I do work with many different auditing firms so my "knowledge" here comes from what they have explained to me. As I understand it, the auditor must take steps to be reasonably certain that the numbers they use are accurate. For example, I just had a plan that is 15 years old go through a first audit last year. They went back three years to establish the beginning balances. The most I had ever seen before that was two years. I asked around and the answer I was given by this firm (and other firms) was that three years was good sample for this plan and barring any issues, they can use those three years to establish the beginning balances. They found no issues in the past three years and were fine with relying on my numbers to establish the beginning balances. It seems reasonable that they cannot use those numbers if they have reason to believe that the numbers are inaccurate. In your case, they have found a lot of issues in the current year and the past three years. The auditor therefore cannot rely on those numbers without going further back. What sticks to me here is that from your original post, it does not sound like the auditor is requiring the correction process to play out before issuing the audit, rather they insist on the errors/failures being quantified. To me this is a big difference.

No. Per the document, you have committed to making a SH contribution in lieu of ADP testing. Not making the SH contribution is an operational failure.

I probably shouldn't have included the self correction part of my answer even with my may qualifier. Self correction can be available in cases of late SH contributions. In this particular case, I would agree with Tom that it is probably not insignificant and therefore VCP would be the way to correct. A correction has to be made. Whether corrected under SCP or VCP, safe harbor status is protected and no testing would apply for that year. For this particular case, I agree that VCP is probably necessary.

I disagree with the conclusion that there is no issue as long as the contribution is made. You have two primary issues here. 1) deductions 2) deposits 1) In order to be deducted for a particular year, the contribution has to be made by the due date of the employers tax return. While they could be fine for 2016 if the corporate return was extended (assuming a calendar year plan), they certainly have an issue with the 2015 deduction since they haven't made the 2015 contribution. 2) On the deposit side, you have an operational failure. SH contributions must be made no later than 12 months after the close of the plan year. Setting aside the deduction issue discussed above, you would be fine for 2016 but 2015 was due no later than 12/31/16 if this is a calendar year plan. The primary correction method here would be to make the participants whole (credit lost earnings on the late contribution). You may be able to self correct.

EDIT Ugh responded to the wrong thread...

Yep, code G is correct. And for extra credit, if you are reporting both a conversion and non-conversion rollover (Code G for both), you report them on separate Form 1099-R's.

This report Mr IRS agent, should you choose to accept it, will self destruct in 5 seconds....

Yep, I have had similar issues where the only electronic means of delivery to the IRS is fax. We use an email to fax program anyways so that isn't an issue for us. That said, with the slow pace of audits, I seriously doubt she would look at it right away so I would insist on sending it regular mail instead (if that is better for you).

It sounds more like the auditor won't issue the audit because the amount of errors/issues found in the past three years has left them unable to take the basic step of verifying beginning balances. From the OP, it doesn't sound like they have even started digging into the prior years beyond the last three years. With the scrutiny on auditors nowadays, I'm not surprised that they wont issue an audit without first identifying all the issues. What was the timeline between filing with a "audit not yet available" to amending with the audit? From what I understand, this will only work during the short period between submitting the 5500 and when the DOL folks (or algorithm) verify that the attachments do not contain personal information such as SSNs. If they discover your "audit not yet available" note during review, the 5500 is rejected as incomplete and delinquent if past the due date.

Im thinking it is vested balance. Technically, you could take a loan in excess of vested balance if you apply the old $10,000 exception. In that case you would need additional collateral and I guess truth in lending DOES apply. The way I read it, a participant who takes a loan from his/her vested balance (requiring no outside collateral) is exempt from truth in lending.

the reg language (that I am now adding to my EOB notes) 12 CFR 226.3 Exempt transactions. This regulation does not apply to the following: 12 CFR Part 226.3(g) Employer-sponsored retirement plans. An extension of credit to a participant in an employer-sponsored retirement plan qualified under Section 401(a) of the Internal Revenue Code, a tax-sheltered annuity under Section 403(b) of the Internal Revenue Code, or an eligible governmental deferred compensation plan under Section 457(b) of the Internal Revenue Code ( 26 U.S.C. 401(a); 26 U.S.C. 403(b); 26 U.S.C. 457(b)), provided that the extension of credit is comprised of fully vested funds from such participant's account and is made in compliance with the Internal Revenue Code ( 26 U.S.C. 1et seq.).

EOB, CH 14, Section II, Part B, 2.d.4) Regulation Z (Truth In Lending) does not apply to participant loans. Regulation Z, 12 C.F.R. Part 226, §226.3(g), 74 F.R. 5244 (January 29, 2009), which implements the Truth In Lending Act, as been amended to exempt an extension of credit to a participant in an employer-sponsored retirement plan. This includes loans from qualified plans described in IRC §401(a), section 403(b) plans, and governmental 457(b) plans. In order for the exemption to apply, the loan must be made from fully vested funds from the participant’s account and must be made in compliance with the requirements of the tax code. The amendment is effective July 1, 2010. Prior to July 1, 2010, Regulation Z applied to a plan that has made more than 25 loans in the preceding year. The 25-loan threshold was decreased to 5 in the case of loans secured by a dwelling. ERISA does not preempt the Truth-In-Lending rules, so the federal government was able to apply these rules to loans without regard to ERISA. The elimination of these rules with respect to participant loans should help simplify the process of making loans from plans.

No. As long as the loan meets all the usual requirements, it is exempted from truth in lending. Exemption effective 2010 I believe.

Interesting... especially the part where it MUST be used for fees.

Like BG, I suspect they are referring to a specific unallocated account, not all unallocated accounts. 6.06(2) is pretty clear that the unallocated excess contributions must offset contributions, and that no further contributions can be made until exhausted.

As a follow up, how do you treat the assets(contributions) in the unallocated account for deductions? I assume that since they were never truly allocated contributions, they would be deductible in the year when they are finally allocated.

Are they making any other ER contributions until they make the match contribution next year?

How? It was ER money that was deposited, why shouldn't they get to use it?

Yes. 6.06(2) uses the language excess allocation adjusted for earnings so the interest should be used to offset contributions as well.

That makes sense since it isn't actually forfeiture, just an unallocated account. Which would also be why it cannot be used for fees... Thanks!

I think that answers my follow up. Thanks BG

As a follow up, the unallocated account would not have the same restrictions as a true forfeiture account, correct? What I mean is, if the plan is deferral and safe harbor only, and $5,000 was deposited and removed, can it used to fund safe harbor contributions?

I am a little unsure on this one to be honest. I think BG is correct that it has to be used for contributions and that no further contributions can be made until exhausted per 6.06(2).