Larry Starr

I am pretty sure the answer is no. The acquisition was one of assets. There is no controlled group. There is only one company. The employees are no longer employees of B. There is no change in group membership of a controlled group. From Derrin's book: Q 11:1 Is there a grace period for coverage when there is a change in a controlled group? Yes. The Code sets up a grace period, called the “coverage transition rule” of more than one year during which a plan automatically passes Code §410(b) and Code §401(a)(26), the minimum participation and coverage requirements. [For more on the coverage and participation requirements, see Chapter 23.] To take advantage of this transition rule, all of the following conditions must be met: The plan’s sponsor must be involved in a change in group membership. [Q 11:2] The plan must have existed prior to the change. The plan must have satisfied the minimum participation and coverage requirements before the change (without regard to the transition rule). Coverage and benefits under the plan must not change significantly during the grace period, other than by reason of the change. Q 11:2 What is a change in group membership that qualifies for the free pass of the participation and coverage requirements? The Code speaks of an entity becoming, or ceasing to be, a member of a group of employers aggregated under the Code. This could be: A controlled group of corporations under Code §414(b) [Chapter 8], A group of trades or businesses under common control under Code §414(c) [Chapter 12], An affiliated service group under Code §414(m) [Chapter 13], or Another set of businesses required to be aggregated under the nonexistent Code §414(o) regulations [Chapter 15 ; Code §410(b)(6)(C)]. The plan sponsor need not be the entity that joined or left the group.

Not true; he will just ignore it.... ?

The summary substantiation appears to me to be a trap for the employer client, and thus, we do not ever talk about it. Here is a good summary of those rules, and after reading, you might understand why we don't want to use that process. https://www.shrm.org/resourcesandtools/legal-and-compliance/employment-law/pages/irs-hardship-withdrawals.aspx As to the summary substantiation, this is what the IRS says is needed: A. Medical Care Who incurred the medical expenses (name)? What is the relationship to the participant (self, spouse, dependent, or primary beneficiary under the plan)? What was the purpose of the medical care (not the actual condition but the general category of expense, for example, diagnosis, treatment, prevention, associated transportation, long-term care)? Name and address of the service provider (hospital, doctor/dentist/chiropractor/other, pharmacy). Amount of medical expenses not covered by insurance. Given those two items, it seems that no reimbursement can be made until the cost is INCURRED and some amount is NOT COVERED by insurance, which to me can only be shown by the insurance company EOB which shows lack of coverage. FWIW. You'll find this in Exhibit 4.72.2-1 in 401(k) plans – see Internal Revenue Manual (IRM) Section 4.72.2.7.4.1 (09-05-2017), and Exhibit 4.72.2-2, Attachment One Hardship Substantiation Information and Notifications for Summary of Source Documents

Interesting. In my feed it still shows as a smiley face; I'm using Chrome. What do you use for your browser? That might be the difference.

Yes, you are reading it right. In addition, you should call the local Department of Labor and tell them what you suspect; they will actually get on the case very quickly and find out what the client is doing. He is not allowed to hold the money more than a couple of day and if he does, he is subject to penalties (and even could go to jail, though that's unlikely). It is a criminal act not to pay over the withheld deferrals.

What are the plan provisions on hardships? Some only allow one per year. If there is no limit, then I would suggest they need to provide the information each month (it's for unreimbursed medical, and you don't know it's unreimbursed until the insurance company says so). If the plan only allows one per year, it might be time to go to the bank and work out something like (if available) a home equity loan that they can use during the year and be reimbursed at the end of each year (and then pay the bank back each year). Best I can come up with; maybe someone else has another idea.

Easy answer; consult with your competent (in this area) lawyer. No other answer is appropriate (IMHO).

There is a catch-all provision in the regs that says the IRS always has the ability to classify something as discriminatory on a facts and circumstances basis. 1.401(a)(4)-5(a)(2). But since, by definition, the -11g amendment has to be non-discriminatory standing on its own, I'm not sure this would be the way to challenge this. In our discussions with IRS (that I was involved in), they never brought this issue up, fwiw. So, yes, I think it isn't "aggressive" because there is nothing that I can find that would suggest you can't do that. FWIW, we have never had to do it that way, and that is probably why I was originally NOT going to bring this up, but then Mike etc etc etc!

Yes, and The NEW NAME should be associated with the TIN by the end of the year, not the old one. That is what the W-2s are going to show, and that's what the plan report should show.

Kevin, you need to drop this argument. We know it is not correct and the IRS knows it doesn't work that way. When you make a contribution under the terms of an -11g amendment, it is not considered a contribution that was subject to the plan's allocation scheme. That's the way it is; accept it and "don't worry; be happy".

Also, since we are talking about 2019 W-2s issue in 2020, the employer could just issue a corrected W-2.

No, the notice was REQUIRED to be distributed in 2019, so they were still subject to the notice requirement in 2019 and that is the year they missed it. The 2019 plan year notice you mention should have been sent in 2018 (and we will assume it was). Nonetheless, we agree that it is unlikely anyone would give a hoot! I would not effort over the issue.

I would suggest that a loan made before there is a need for it would not (may not?) meet the requirements of the PTE and I would not suggest it be done. If they have actual need for cash, then I think the loan could be made at that point. I'm not sure the desire NOT to cash out securities is a valid excuse for long term loan under this PTE. The few days that it might take to secure the sale and receive the cash to deposit in the bank account is what I would consider a reasonable period. The trustees should NOT be holding a "note receivable" to the employer when they have the clear capability of NOT having a loan payable. How do we argue that it is in the best interests of the participants to have such a loan? I would prefer that the employer make some of its plan contributions to the bank account, which can hold cash for the purpose of making payments to participants, but only in an amount that is reasonable (that would be a fiduciary issue). If the money is just sitting there, I don't know that we can say it is being used "for the payment of ordinary operating expenses of the plan, including the payment of benefits in accordance with the terms of the plan and periodic premiums under an insurance or annuity contract...". FWIW.

I was joking about terminating the employee (I expect most people "got" that; see smiley face at the end of that post!). I never said to withhold their paycheck (that is absolutely NOT legal), but, while I doubt anyone will (or should) hold out termination of employment as a penalty, it actually is possible to make the return of the form a condition of employment in most states. Just FYI.

They are wrong.

But that doesn't solve your problem (if you have one) because it was the 2019 year that did not have a SH notice, and for 2019, they were still required. This is a question that I dealt with during the IRS Q&As at the 2004 ASPPA Annual. This is from the EOB: 6.b.2) Notice failures and suggested fixes informally discussed by the IRS. The IRS’ view may be affected by whether the safe harbor plan provides the safe harbor nonelective contribution or the safe harbor matching contribution, as evidenced by informal “guidance” provided by the IRS at the ASPPA Annual Conference in 2004 and in a newsletter publication posted at the IRS’ website. 6.b.2)a) Failure to provide notice under plan that provides for the safe harbor nonelective contribution. At the ASPPA Annual Conference in Washington, DC, a Q&A session with the IRS held on October 25, 2004, yielded an interesting dialogue on this issue. Where the safe harbor nonelective contribution is provided by the plan through a "hard wired" provision (i.e., the Maybe Notice approach is not used), then the IRS would consider the operational failure to be the failure to provide the safe harbor notice that is required by the plan. The corrective action would be to furnish that notice. The employer would still retain the liability to provide the safe harbor contribution and no ADP testing would be required since the plan is designed to be a safe harbor plan. Of course, repeated failures to issue the notice on a timely basis might prompt the IRS to require additional corrective action which might include performance of the ADP test or invalidation of the elective deferrals of the HCEs. The IRS' response, however, is encouraging that a reasonable method of dealing with a notice failure may exist without additional onerous consequences. Bottom line: in this case, I would ignore the issue; I would bet big bucks the IRS would not care even under audit. Larry.

Agreed. Since we don't have any idea what they actually want to do with regard to allocations to HCEs (I would have asked that if I had actually intended to talk about -11g's, but of course I didn't plan on that until Mike etc etc etc....), I'm going to assume the -11g lists only NHCEs for allocations. If the -11g includes HCEs, then it will have to pass a4 as a stand alone. That may limit what HCEs can get in the -11g IF the intent was to give HCEs bigger numbers than a standard SS integrated plan would provide (actually, in this case because of the comps involved, a standard non-integrated PS plan).

Oops! Went back and re-read; agreed, we don't know about HCEs (though probably any that exist are by ownership).

The answer is "nobody cares". ? The reason is that the only thing that really matters on those forms is the tax ID numbers provided. A plan name change will not result in a change of the tax ID for the plan or the sponsor. What would I put on the actual forms? The name as of the end of the year for which the reporting is being done. But if you used the old one, NOBODY CARES!

I think your last sentence is a great idea for those who have this as a concern; at least they can document that every so often they send the form with the paycheck.

Not meaningless, but effectively, with just a little bit of attention, almost trivial and not restrictive. Boy, I really didn't want to get into this, but there you are......

Mike and I agree that the original allocation does not need to "fail" a4 in order to use 11(g). I think every knowledgeable practitioner agrees with that; I didn't know there were still people who thought otherwise. BTW, the IRS in ASPPA Q&A Sessions from years ago agreed as well. Remember, even if you do "fail" on your usual testing methodology, there are so many alternative testing options that maybe you would not fail if you used them; I believe IRS recognized the impracticability of having to PROVE every possible option was examined and failed in order to use 11(g). Therefore, no requirement to fail in order to use 11(g). Now, I have also thought (in this case, but decided not to cover it until Mike opened the door..... SHEESH!) that maybe a 1% pre 11(g) contribution allocated across the board might be one route, followed by an 11(g) that added all the additional monies to the individual participants as decided by the employer. Since we were told there were no HCEs involved, the 11(g) will meet the requirements for non-discrimination on its own that is in the regs. Could that work for this situation? If it was my client, I might very well try it. But, as we have noted, this is NOT a retroactive amendment to add grouping; it is a different methodology that might get the same result that the client was looking for. FWIW.

Agreed; now if she REALLY wants the zero elections, she can tell them that if the form is not returned, the company will consider that they have voluntarily terminated their employment! That should wake them up!!!!! ?

Gee, what a unique idea! Let's see if the plan document deals with it. Lo and behold, I bet it does. The following is found in our Year of Service definition - FIS volume submitter doc (the first sentence is applicable to vesting; the second to accrual, which may or may not be in your document depending on what options you elect): Notwithstanding the foregoing, for any short Plan Year, the determination of whether an Employee has completed a Year of Service shall be made in accordance with Department of Labor regulation §2530.203-2(c). However, in determining whether an Employee has completed a Year of Service for benefit accrual purposes in the short Plan Year, the number of the Hours of Service required shall be proportionately reduced based on the number of full months in the short Plan Year.

Ooooo... gonna have to check on that; might mean we will have to use the 8822-B. Why on earth would they have dropped that mechanism?????? Just to piss me off!!!!