RatherBeGolfing

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).

So never taken from EEs pay but deposited from Employer funds? In that case, I would move both the deposit and associated earnings to forfeiture and use for future contributions or fees.

What actually happened here? They reported too much or the HCE deferred too much? Two very different scenarios. If the HCE deferred too much the excess and interest are distributed and reported on form 1099. If they simply reported too much, there would be no contribution or interest to correct right?

It tends to be an "expensive" plan design so it doesn't work for most of my clients. I have never come across a situation where the rank and file employees did not increase deferrals when going from a 3% SH or regular SH match to a tripple stack. It never falls in the "this is how much you save if participation stays the same" column. The clients who DO use it fall into two categories 1. The client who is willing to pay a premium to avoid giving something for nothing. 2. The client who is willing to give more to those who do more for themselves. I have several clients in both categories and they are well aware that they could be paying less and still max out. the last client I had who switched from a SH Match + integrated PS to triple stack match went from a handful employees deferring to all employees deferring at least 5%. Sponsor is happy, employees are happy, adviser is happy. Not my average client but they do exist.

I agree, this would generally be considered 2016 pay and contributions. That said, it is still possible for a plan document to include "post year end compensation" in the definition of comp. In my document (if elected), Post Year End Compensation means amounts not paid during the year earned solely because of the timing of pay periods and pay dates provided these amounts are (a) paid during the first few weeks of the next year and (b) included in Compensation.

I agree with the above. That said, I have been able to get the DOL to accept a combination of their calculator and a spreadsheet. It has probably been 5 years since I did it that way so I'm not sure if they would still accept it, but it may be worth a try. For example, lets say you have 100 participants who deferred and you have one late payroll. Rather than doing 100 individual calculations,you do one earnings calculation on the entire amount and use a spreadsheet to distribute the lost earnings based on each participants "share" of the late deposit. The result can be a little different from one by one calculations due to rounding, but it is minimal and to be on the safe side you can always round up so that a participant will get a fraction of a cent more rather than less.

I don't think so. OPs plan allows for self direction. It allows for SDBAs (it actually requires it), and it allows for the participants to use a brokerage account other than the default brokerage account. At this point, the BRF are available on a non-discriminatory basis, because they all have the same opportunity (stay with default or go elsewhere). The option to select a brokerage firm other than the default is the feature, not whether Brokerage XYZ will take on Participant A as a client. What would cause a BRF issue here is if the option itself is restricted. For example, If staff are only offered the default option and the owner is offered a non default option would be a problem. Similarly, If there was a minimum balance requirement in order to have the option to use a non default broker, those employees employees with an insufficient balance would be treated as not having the option available.

I agree. My document simply states "The Company shall notify the Plan Administrator in writing of the amount of contributions allocated to each group. anything that meets that requirement should be sufficient.

In a nutshell, yes. Some of my clients will let a participant go where ever they like. I don't like this policy and caution them about their responsibilities and duties. It is still their responsibility to make sure that the broker the participant wants to use is appropriate, that the fees are reasonable, etc. Most of my clients will review a participants request on a case by case basis and it usually isn't an issue because most participants will stay with the default even when they can go elsewhere.