Larry Starr

OK guys, listen up here. Here are the two questions Austin listed: Q32: Can I register to get Filing Signer credentials for my clients? No. The EFAST2 process for obtaining Filing Signer credentials is designed so that the person signing electronically must be the person registering for the credentials. Further, Filing Signer credentials are attributed to a single person and must not be shared. Q33: I am a plan administrator that needs to electronically sign a Form 5500. Can I tell the service provider that manages the plan's Form 5500 filing process what my PIN is so the service provider can sign and submit it for me? No. As the plan administrator, you must examine the Form 5500 or 5500-SF that will be sent to EFAST2 before it is submitted. Your electronic signature attests that has been done and that, to the best of your knowledge and belief, it is true, correct, and complete. Since the EFAST2 PIN is the plan administrator/plan sponsor electronic signature for purposes of the Form 5500 and Form 5500-SF, PINs must be protected and not shared. However, as described below in response to question 33a, if a service provider manages the Form 5500 filing process for your plan, the service provider may get his or her own Signer credentials and electronically sign the filing attesting that he or she is authorized to submit the return/report and has attached a PDF copy of the plan's Form 5500/Form 5500-SF that has been manually signed and dated by the plan administrator under penalty of perjury. These are exactly the same things they said at the industry meeting where this was announced and I sat in the front row and asked questions. With regard to Q32, I explained earlier how it took me 2 seconds to explain that their "design" was faulty. I could (and have) obtained credentials for every one of our clients with a unique email address, all of which are really ME! (They are called aliases.). So the answer is YES, I can register to get Filing Signer credentials for my clients (and we do). As to the "must NOT be shared" in the last sentence, my question to them was "or what?". In other words, what is the "penalty" if they are shared. They hemmed and hawed and finally said "there is none". And, folks, they are not authorized to have any penalty. If there is no penalty, then saying you "can't do it" is a nonsensical statement, because obviously I can and without any repercussions. Now, with regard to Q33, again the answer is YES. The client gets a hard copy (or electronic copy to print out) and must return a SIGNED 5500 to us before we file. That means he has done all those things that he is attesting to by signing it, and us attaching his credentials for DOL is perfectly ok. Again, while they say ... the "PINs must be protected and not shared", I again asked "what is the penalty" if they are? Guess what? NO PENALTY. And to reference the Q33, that is what they came up with after our meeting and specifically asked for my input on before announcing it to the world. I told the it was a step in the right direction, but I specifically objected to having a PDF copy of my client's signature available for all the world to see and duplicate. Talk about identity theft issues!!!!! They added that last sentence to the second paragraph of Q33 ("The service provider also must inform the plan administrator, employer/plan sponsor, or DFE that, by electing to use this option, the image of the plan administrator's, employer/plan sponsor’s, or DFE signee’s manual signature will be included with the rest of the annual return/report posted by the Labor Department on the Internet for public disclosure") was added specifically because of my objection to this methodology. So, we will stick with our perfectly permissible method and the client's legal signature is not out there for everyone to copy.

I'll give it the old college try.. tomorrow. BTW: Yesterday we were in NYC for a Tony Party. My show WON THE FRIGGIN BEST MUSICAL REVIVAL!!!!!!!! Got home at 3:30 this morning and had a dental appt at 7:30! Once On This Island.

Contact Millenium Trust; I believe they will set up the SEP IRA for the participant and allow the employer to make the contribution without the employee being involved. They handle all our mandatory rollovers when we don't get responses from participants. http://www.mtrustcompany.com/professionals/offerings/retirement-services

Is his SEP IRA already in existence or is this the first (and I guess, last) SEP contribution?

Hmmmm.. on page 48, Kevin left out the important part of that reg (as I see it). See my prior discussion. The Relius tease was from 2013 and only raises the question but doesn't provide and useful discussion.

Okay; understood. I would probably not be willing to accept the modest paperwork as a substitute for the plan document; for many years I maintained prototype documents for my firm that I basically never used (I do all individually produced volume submitted documents). The prototypes were for one use only: someone comes in on 12/31 and need a plan. I can fill out an adoption agreement to give me what I want in a matter of minutes and it is a fully legitimate plan. I then replace it within the next several days to a week with the longer term document as an amendment in its entirety. Now, we can usually get a VS document done in a day if we had to. I've had signing sessions at new year's eve parties in the past! While I'm not surprised that you were not questioned on a DL request, your DL request would have had to be on the full document you submitted. I don't believe you can get a DL that would say it was "ok" to use the corporate documents to justify the plan contributions for that year. The qualification requirements under 401 are pretty significant; I don't know how one could justify that the corporate documents come anywhere near being adequate, but one can certainly take the risk (knowing it's a risk) and pray that no one checks (which is the likely scenario, especially in today's IRS limited resources world).

Sorry Austin; not even close. Definition of chutzpah : supreme self-confidence : nerve, gall It is an absolutely permissible use of the system they designed; it is creative, but not nervy.

Bird, No, we would not have signed 5500s before the E-Fast system. No, this is not doing the same thing. We are applying THEIR credentials; we have their authorization to both get the credentials, store them, and apply them on their behalf. DOL treats it exactly as THEIR signature (it is not me signing their name; it is their actual "signature" under this ridiculous system). I will tell you that there are a large number of entities that are now doing this very same thing; I have freely provided the system and the simple forms we use for client authorization. While the DOL was not happy with me finding this "hole" in their system, they have agreed that there is nothing wrong with what I am doing as long as the client understands that our sending in the electronic version is considered THEM signing the form, which is perfect because that's exactly what we want. Remember, we have a signed copy of the form in our records.

Sure, they might mean something else, but I am having trouble expecting that a participant who knows what a lump sum payment from the plan is would be suggesting getting an order on a payment that does not involve the plan! Seems to me the plan has to be involved since that is where the money is. But it could be fleshed out more to make it absolutely clear.

Austin: I suggest you read my long response; at the end of it there is a specific comment that you might (or might not) find helpful for how you might do things.

When the DOL revealed their overly complicated system for dealing with "credentials", I was in the audience and raised a number of questions. Like, why can't *I* get the credentials for all my clients? They thought they were so smart because each request has to be from a unique email address. DUH! I have my own domain and explained that I can assign a "unique" email address to each client that all comes right back to ME! If I have the credentials, and store them in my client records, I can sign their returns with their credentials. They were NOT happy with me. They said you CAN'T do it that way; then I asked what the penalty was if we did! That stumped them. They finally relented that there is no penalty, but it would be as if the employer actually signed, and they thought that was a bad thing. I explained that's exactly what we want! And that's what we developed. A short while later, they introduced the additional option of having the the admin firm sign with written authorization, but they actually checked with me before issuing that to see what I thought of that. I told them I thought it was better, but we still weren't going to do it that way. The IRS has had a system for years that allows practitioners to sign, but DOL was guilty of the NIH (not invented here) malady and had to invent their own complicated method. So, now we get the credentials for all clients (using an authorization form that they sign when they become a new client that spells out exactly what we are doing). We send them the hard copy of the 5500 and have them sign and return the first page to us for our files to prove they got the hard copy. It comes back mostly by fax or scanned and e-mail. We then file electronically and the clients don't have to deal at all with the EFAST system; they don't even really know that it exists. Austin: if you went with this methodology, then I think using Docusign would most likely provide all you need to have in your files.

Luke, I had to delay responding because of the complexity of your example and the fact that sometimes I have to do real work that allows me to sign the paychecks every couple of weeks! :-) I had to take some time to figure out what was going on here; I think I understand it. I would be very cautious in accepting your premise that the IRS would accept that the plan was was in existence on 1/1/ of year 2. Obviously, and if this was my client, we would have gotten the plan document in effect before anything moved from the old company. If this came to me with the situation you describe, as I think I understand the example, I would not be willing to accept that the plan was in effect on 1/1/ of year 2 and would proceed from that position to figure out what we had to do. Maybe we could get IRS to buy it but that would certainly be a chore and, I expect, an expensive one. I'm not sure how I would fix it otherwise, because I do see it as a real FUBAR situation. I'm glad I don't have to figure out how to fix it! :-)

Absolutely.

Sorry QDROPHILE. but my answer is still correct. Not sure what your problem is with precision, but this is a participant asking (I usually refrain from talking to participants) but I felt sorry for them and especially what they paid for the QDRO (if that is all that it covered). The questioner said: ". I was wondering if we could go back to the court/Master/Judge and ask that the need for the Qdro be removed and that a mutually agreed upon lump sum might suffice.". That would NOT be adequate since this is still envisioning that the PLAN would make the distribution of a lump sum to each of them. I understood what Dpf wanted; not a surprising request, but the PLAN can't ever do that without a QDRO. That is why I suggested the IRA route, which no one else had suggested. That is the use of imagination (call it creativity) to solve problems, which I am well known for!

I think it is a good idea to get the Master to agree and write that new provision. That protects everyone. However, I am not your attorney and therefore can't really advise you legally. I assume you are not represented by individual attorneys and the master is serving in that role. If that is the case. then talking to the master is a wonderful idea; ask him/her how to proceed to make this change.

I would suggest that you actually don't have a plan; I'm not sure it is "fixable" to do anything that would make that plan exist in the prior year. You can't adopt a plan retroactively to a prior year (though that is one of the proposals that is with Congress, but it isn't law at this time). Therefore, there is no "fix" to make that happen. I don't know how VCP can help. Now, if you could be more specific with your problem by giving us dates of when these things are happening, our answers would be more on point. For example, we have clearly said you don't have to adopt the plan before the effective date. Assume calendar year company; you can adopt the plan, say, in June and make it effective back to 1/1/ and all would be fine. it could even be a safe harbor 401(k) in that circumstance. But you can't adopt it 2/1 and make it effective for the PRIOR calendar year. In that case, a VCP filing can't help you. You don't have a plan for that prior year. Period.

No, you can't do that. David Rigby gave you the correct answer. However, if you are both willing, the participant can take a 100% distribution and roll it over to an IRA. THEN, the IRA can be split between you on the basis of the divorce agreement; part in his name and part in her name. From your posting, it appears that your jobs have changed, so if the participant is eligible for a total distribution, this might be your easiest path. This, of course, does require trust in the participant to actually make the IRA division. I have to point out to our readers that it makes no sense that you had such difficulty, or, frankly, that you paid so much for a QDRO that didn't happen. I'm going to assume your fee covered other services as well and that we really don't know the full story.

I'm not sure we disagree. If the plan document was drafted and presented to the board and the board resolution says the plan AS PRESENTED was adopted by the entity, then I think you are ok. I didn't get any information in the prior posts that that was done. If all that happens is a resolution saying that the entity will adopt a plan and that specific plan document has not already been drafted and the subject of that resolution, THEN I think they are SOL. If Jpods post (which started this jump off of the original post) was meant to suggest the actual document was subject to the board discussion and approval, then I am in agreement, as I think we all probably are. But if all it was was a discussion about adopting a plan and they agreed to do it and now a corporate officer is going to go get it drafted with all the provisions, until THAT document is signed, there is no plan. Does anyone disagree with that?

The two prior answers are the only correct ones. Not filling can cause a big problem for the participant. The IRA custodian reports the incoming funds to IRS (as they do every year for every IRA). Without the corresponding 1099 showing the funds coming out of a qualified plan, the deposit looks like a BIG (and illegal!) annual IRA and could cause all kinds of problems for the participant. The participant NEEDS to have that 1099 filed for his protection if nothing else.

No way. A plan is required to be a written document. What you describe is not a written document until it is reduced to writing and signed/adopted. A resolution authorizing the adoption of a plan is not the same as adopting the plan. As an aside, many years ago, I believe it was J.C. Penny that actually authorized the adoption of a cafeteria plan so that employee contributions to the health insurance premiums would be pre tax and they treated it as such. Then, it was discovered by IRS that the plan was never actually executed. As I remember, it cost them a fortune to fix it. Authorization to adopt is not the same as adopting.

BTW, I really don't think it is over aggressive. Really.

What exactly is your concern. My 404(a)(6) says this: (6)Time when contributions deemed made For purposes of paragraphs (1), (2), and (3), a taxpayer shall be deemed to have made a payment on the last day of the preceding taxable year if the payment is on account of such taxable year and is made not later than the time prescribed by law for filing the return for such taxable year (including extensions thereof). I think that is exactly what I said. More important is the reg you quoted: 1.401(a)(4)-11g(5): (5)Effect under other statutory requirements. A corrective amendment under this paragraph (g) is treated as if it were adopted and effective as of the first day of the plan year only for the specific purposes described in this paragraph (g). Thus, for example, the corrective amendment is taken into account not only for purposes of sections 401(a)(4) and 410(b), but also for purposes of determining whether the plan satisfies sections 401(l). By contrast, the amendment is not given retroactive effect for purposes of section 404 (deductions for employer contributions) or section 412 (minimum funding standards), unless otherwise provided for in rules applicable to those sections. And here, that last clause that I highlighted is what I explained in my prior email. As long as you follow the rules for deduction (contribution made by extended due date of return), then you are in compliance. What exactly do you think the problem is with 404(a)(6) that I am missing?

Tom, I do think you are overthinking it. But I do believe that the allocation done that included the HCE who was not entitled to that allocation needs to be re-run and the full amount allocated without him in it since it appears those funds were contributed prior to the year end. Those funds belong to those who were entitled to the allocation of the plan contribution as of the year end. The -11g amendment has to be an ADDITIONAL amount of money, for the HCE and all the other terminated employees now included. And yes, I have no problem with bringing EVERYONE in and then giving the appropriate amount of money so the plan passes all the tests, now including the additional folk. That's why the IRS wrote those 800 pages of regulations and if this passes, it passes. It clearly (to me) is NOT discrimination in favor of the HCE when they amend to give the money to everyone. It is no different than if the plan had been amended on 12/30 to eliminate the end of year provision, held off its contribution until after 12/31, figured out what had to be contributed INCLUDING any -11g amendment in case the plan was cross tested, and then adopted the amendment and contributed the funds. On your MP example, how they ran a wrong allocation at 10% is immaterial. They found out it should be 5%, they want it to be 10%, now they don't need to do an -11g amendment because they can adopt an amendment within 2 1/2 months and give it retroactive effect under 412(c)(8) for deduction purposes. A -11g amendment doesn't give a MP plan retroactive increase in minimum funding if done after 2 1/2 months.

Whew! That's a load of my mind. I'm glad that's your citation, because that is exactly saying what I'm saying. The -11g amendment allows for the additional funds to be deducted in the prior year tax return. Now, to accomplish that, you still have to comply with either 404 or 412. So for a PS plan (401(k) plan), you have to make the contribution within the due date of the tax return plus extensions. If you are not on extension, making the -11g amendment AFTER 3/15 (4/15) does not allow for the deduction in the prior year EVEN though it is allowed to be effective for the prior year for the other purposes noted. If it is subject to minimum funding, you have the 2 1/2 month rule in order to have it effective for deduction purposes for the prior year and the election that is attached to the 5500 under 412(c)(8). But other than that, a -11g amendment done after the year end for a DC plan is deductible if done and funded prior to the extended due date of the applicable return.

Trying to find citation that shows -11g additions are deductible so long as contributed by the due date of tax return plus extensions. Here is the parallel issue for QNECs (from EOB): 4. QNECs must be made within 12 months after close of plan year. To be counted in the ADP test or ACP test for a plan year, QNECs must be contributed no later than 12 months after the close of the plan year for which they are allocated. This rule is found in Treas. Reg. §1.401(k)-2(a)(6)(i) (ADP test) and §1.401(m)-2(a)(6)(i) (ACP test). Usually, the employer will make the contribution sooner (i.e., the due date of its tax return for the year for which the QNECs are allocated) because it wants to deduct the contribution for the year for which the QNECs are allocated.