QP_Guy

We have a spinoff of a grandfathered PE from a grandfathered plan into a new spinoff plan. I don't think MEP/PEP/SEP matters here but help me if that's not right. That spinoff plan will be 001 for the EIN with a 1/1/2025 original effective date. Assuming that’s the right original effective date for the spinoff plan (as compared to the original adoption date of the PE into the grandfathered plan…) Where/how does the document distinguish this grandfathered 1/1/2025 plan from a new non-grandfathered 1/1/2025 plan? In other words, where/how do we inform the participants/IRS/the world that this plan is NOT subject to the EACA mandate?

Ralph W. Shaw in Denver. rshaw@shawlawdenver.com Let him know Guy Hocker sent you!!

No, i don't think it would be a successor plan: I think that the reason why it's suggested to terminate a plan prior to stock sale is to eliminate the successor plan issue

Required by whom? I can't think of a legal obligation to provide anything to a non-client. If anything there'd be a strong presumption against providing anything to a non-client. If you are a member of a professional association, there may be an industry ethic to abide by. Are you a member of ASPPA? Check out https://www.asppa.org/member/code-conduct

The interesting question to me is "when does the non correction of a discovered fiduciary breach become a current breach by the QTA?" And Master Preston has it right: the QTA will know what will get them in trouble.

To my mind, the Employer has to have some way to update the plan for ongoing law changes and resulting changes in the LRMs. More, some parts of EPCRS required reliance on a favorable letter, and after the IRS has published a required amendment, the previous letter (even without an expiration date) may not satisfy. Seems like a pre-approved document would be a no-brainer: relatively inexpensive with great reliance. I think the better question is "what alternative is better?" Maintaining the IDP long term likely isn't cost effective.

What about this? If the Employer can identify plan expenses that were paid by the Employer, then the Employer could view this money as reimbursement of Plan Expenses.

hmmm, i would answer "we need guidance". 1. We know that we can cease a SH plan mid year. 2. We know that we can adopt SH provision up to 12/1 @ 3%, later @ 4% NEC. 3. We know that we CAN'T switch from SH match to SH NEC. But i don't think we know that we can't do 1. and 2. in the same year.

if you exclude HCEs, i see no reason why this wouldn't just be fine

Gang, All assets/annuities of a plan are distributed: Am i correct in saying that we file a Final 5500 on a non-ERISA "one participant" plan solely because the 5500-EZ instructions tell us to? Am i correct in saying that we DON'T file a Final 5500 on a non-ERISA 403(b) plan solely because the 5500-SF instructions DON'T tell us to? Are there better citations?

So what is the standard? I mentioned "unless newco adopted the plan prior to purchasing the assets": that would certainly avoid the severance. I've advised including the plan as an 'enumerated asset' on the asset purchase contract. that works. But what if there is, for example, a one year delay between the newco's asset purchase and the newco's sponsorship of oldco's plan? Does that satisfy the "in connection with a change" standard above? A distributable event until there isn't? The original post doesn't mention the timing, that was my point, poorly made i guess.

I had always understood that if there were an asset sale, then the employees would have a severance of employment with the oldco and a new hire date from newco. (I think the same desk rule went away in 2000??) Unless newco adopted the plan prior to purchasing oldco's assets (with the plan as an enumerated asset), that severance of employment would remain as a distributable event, wouldn't it? And that distributable event would follow any plan merge, wouldn't it?

Help me understand what you're hoping for. I would think that once you restated, you'd have 'reliance' to use EPCRS. What other help will the LOD provide that you don't have already? That said, I'd confirm : 1. the 5300 clearly asked the right question ("may i have a LOD on initial qualification?"); and 2. the IRS's failure to provide a favorable letter won't kick in the referral to Exams that is already in the Rev Proc (Sec. 7, .02) and that the IRS is saber rattling about nowadays.

Thanks, guys, you're both hitting on exactly why the plan fiduciary WOULDN'T want to open a temporary account. Hypothetically, the fiduciary is saying it's within his administrative discretion to choose an investment provider and the soonest administratively feasible enrollment date will be 12/1. And that in the fiduciary's opinion, this provides effective availability to the 1/1/19 plan effective, adopted 9/30/19. Maybe another way to ask the real question: do we have audit experience or citations on 'facts and circumstances' deference with the SH 3 month plan year requirement? Maybe another way to ask the question is: what do you guys really do with these last minute SH deadline plans?

Anyone have experience with an IRS audit or a citation on what are facts and circumstances around providing the 'effective opportunity' for a participant to defer? Hypothetically: we have a client who will sign a new plan document with SH basic match on 9/30/19. The recordkeeper chosen by the client has previewed that it will likely take 60 days to set up the new plan and to provide enrollment materials to the participants. So the participants will likely only have 1 month of match. Of course the owner will max out. So the plan will be in existence for 3 months, but... Again, i'd really appreciate anyone who's been challenged by the IRS on this point (if anyone!), or if you have a citation that says more than "Whether an employee has an effective opportunity is determined based on all the relevant facts and circumstances" 1.401k-1(e)(2)(ii) And i don't think this is an EPCRS issue, as the reason for the Employee Elective Deferral failure is NOT due to the plan improperly excluding anyone. EPCRS App A .05(10) Anybody??

I think the requirement to follow the plan terms come from the "definitely determinable" rules. See 1.401.1(b) (b)General rules. (1)(i) A pension plan within the meaning of section 401(a) is a plan established and maintained by an employer primarily to provide systematically for the payment of definitely determinable benefits to his employeesover a period of years, usually for life, after retirement. definitely determinable benefits require that the employer follow the plan terms precisely (otherwise the benefits aren't determinable ahead of time).

Maybe that's correct but it leaves the essence of the question unanswered: what about the 1099? It's wrong. Because the employer didn't pay over the loan payments, the recordkeeper deemed the loan and issued a 1099. The IRS is expecting the participant to declare that 1099 amount as income. The participant and plan request a new corrected 1099. MUST the recordkeeper provide a corrected 1099?

thanks guys for your good input, truly. While we may guess at what the IRS meant with loans defaulted due to the participant's fault, that really wasn't the focus of my question. I'm not focused on VCP vs. SCP. (sorry i used the words 'self correct' in the OP.) Rather, under either SCP or VCP, if the loan was cured how does the participant file taxes? How does the participant deal with the incorrect 1099-R? MUST the 1099-R custodian correct? What to do if the 1099-R custodian doesn't or won't. Does satisfaction of EPCRS requirements create an OBLIGATION for the tax reporter to "fix" the now incorrect 1099-R?

Great feedback, but what about... That just can't be right when the employer withheld the pay and simply didn't pay it over to the recordkeeper. More, then the correction would be subject to the whimsy of the recordkeeper and the timing in the year of the deemed distribution. (a Q1 deemed distribution won't get a 1099 for 9 months, a Q2 will have 6 months, etc.) A Q4 deemed distribution would get a 1099 within weeks, certainly that's too high a bar for EPCRS. Is there ANY citation or guidance that everyone is relying on for that understanding? RP 2018-52, section 6.07(3) (3) Defaulted loans. A failure to repay the loan in accordance with the loan terms where the terms satisfy § 72(p)(2) may be corrected by (i) a single-sum repayment equal to the additional repayments that the affected participant would have made to the plan if there had been no failure to repay the plan, plus interest accrued on the missed repayments I know that i was surprised that i've not heard more on this, seems like a big deal.

Anyone have any experience using EPCRS to correct defaulted loans? (d) Defaulted loans. A failure to repay a loan in accordance with loan terms that satisfy § 72(p)(2) may be corrected by (i) a single-sum corrective payment equal to the amount that the affected participant would have paid to the plan if there had been no failure to repay the plan, plus interest accrued on the missed payments, This is pretty cool, but I am getting stuck on details… I have a 2018 deemed loan with a 1099R, the participant and employer do all they should to self correct -- done. How does the participant handle the 2018 1099R? Don’t report income and wait for the IRS to ask? Must the custodian issue a corrected 1099? Or??

There are a number of ways to handle the Denomination A plan. Formal freezing would be the best approach. The participants need to know which plan they are in and when.

I don't think that's a necessary result. As Patricia notes (Hi Patricia!!), participation can be "frozen" in plan #1 and begun in plan #2. Done. Maybe there's a felt need to move money away from Denomination A. Then the spin off approach would be used, and your steeple will have its own plan. Then the steeple can participate in Denomination B's plan and leave its own plan frozen for a year. Then terminate the spin off plan after a year and there's no successor plan rule. Or, the steeple can inquire as to the merging of the now standalone steeple plan into Denomination B's plan. In any event, avoiding the successor plan rule shouldn't be hard.

Seems to me that we have to precisely understand what is happening. Is this a termination of a church's participation in a Multiple Employer Church Plan? If so, the only way I've heard to terminate that participation is via spin off to a new plan, and then terminate. Once the Participating Employer has spun off and become the Sponsor of its own plan, then there may be no need to terminate it. But if there is a need to terminate it, then the successor plan rule will apply.

i think adding kids/spouses/purchaser of the business (even if asset sale) are my favorite options in this scenario.

Yes, ERISA 408(b)(2). Simple truth: these are still plan assets under the Trustee's control. The add on complexity doesn't change the essence of the Trustee's role.