Luke Bailey

Zach Del, I would second (or, actually, third) what PamR says. Even with weaker language, you may be able to get a legal opinion that the auditor will accept. I handled a case like that once. I also had a separate case involving VCP where there was no such language. We were able to demonstrate to the reviewer that we administered the plan consistently over the years and that we had communicated to employees (e.g. in employee meetings documented with PowerPoints and also job offer letters) that bonuses would not be included in comp. The SPD was neutral on the subject and comp without bonuses passed 414(s). We got a favorable result in VCP.

Neither do I. It doesn't seem that counterintuitive to me. They should live by the guidance they've provided. But I don't know enough about administrative law to reach a conclusion on whether you would win in court or not, EBECatty.

Nate X, was your experience with EZ-filers only? Q&A-4 seems inconsistent with the more general guidance regarding the IRS's willingness to waive penalties if the plan successfully completes DFVCP. My thought is perhaps Q&A-4 was intended to apply only to EZ-filers, for whom DFVCP is not an option. The Q&A's are specifically addressing EZ filers.

The DC probably didn't need the DB to pass 410(b) and (a)(4), however, so it's probably OK. The post-distribution certification does ask for date of IRS DL. Don't know what happens if you put "none." In theory, the PBGC, if it new all of the facts, could take the position that the plan had a liability equal to trust taxes if IRS found out disqualified.

Even though age 50 is potentially disqualifying, if you amend to 62 isn't that a benefit cutback, so VCP required? I guess if the fully subsidized ERA comes out to be the same benefit amount, arguably not.

Only the final step is a shortcut. I'd have the surviving spouse fill out all the regular forms (electronic or paper) to take a distribution of deceased spouse's account, in which they would request a direct rollover. Obviously, the direct rollover would be handled by the plan recordkeeper internally, without a wire transfer or check, although they could use a check if that simplifies/clarifies the process. The rolled over funds would go into a rollover account and take on all the characteristics of a rollover account, e.g. distributability and 10% penalty application if surviving spouse under 59-1/2.

Maybe I'm missing something, but can't she just elect to take it as a lump sum death distribution and then elect a direct rollover to her current (the same) plan? This assumes the plan accepts rollovers, of course, which most do.

EBECatty, the way I read both the DOL Fact Sheet and the FAQs, any correspondence or related action by IRS is not going to disqualify you from DFVCP. Only a DOL letter will do that. So let's assume you are successful under DFVCP. You should be. The IRS "guidance" on the topic, which is just what it says on its website, would seem to say that it will probably abate penalties once you demonstrate success under DFVCP. My guess is that you would be successful here as well, but I am not aware of anything in the IRM or anywhere else that discusses this situation, and of course dealing with IRS is often a demanding process on something like this.

Why do we still have to work so much now that we have the inernet, Bill?

I would argue that Aaa is the appropriate rate and you want to look at 5-year term for most loans, but obviously that can vary. Today the 5-year Aaa rate is 4.95%.

Agreed, but relevant to both your points, Peter, I wouldn't completely disregard the possibility that there are folks at Treasury and IRS who are embarrassed by the mistake and will work with staff on the hill to bring consistency to this provision.

When I first noticed this in reviewing the bill back in January, I figured it was a drafting error, but one that couldn't be solved administratively. That is still my view. Does anyone think it's not an error, e.g. there is some technical issue with having it apply to self-employment income. I don't see it, but maybe I've overlooked something.

Yes, but also consider that the loan (if executed properly) has better security than an AAA Moody's bond. The employer gets to withhold the loan repayments and if there is a default it has the loan itself as security. Participant defaults, you 1099 the loan, and "poof" you've been repaid.

Sometimes there is other evidence of legal adoption, e.g. board minutes (not backdated). But even then you'll have to argue with IRS if the document isn't signed. Otherwise I completely agree with the above comments.

Good point, but they only have to make their election by December 31. They can fund later, and of course the election is automatically reduced to the extent would exceed 415(c). I get it that they would be missing the tax-deferred earnings. Just pointing out that there is an alternative.

stainedglass80, I think the IRS would give you that in VCP, but I would question whether an employer eligibility failure qualifies as an "Eligible Inadvertent Failure" under Rev. Proc. 2023-43. In other words, I am skeptical that such a failure qualifies for self-correction according to IRS.

I'm with Belgarath. As long as the Roth option is operationally in effect 1/1/2024 and adequately communicated to all, what grounds would DOL, IRS, or any participant have to complain if it was not actually adopted until the end of year?

KaJay, I think both Peter and CuseFan are right on with their comments, but I would start with the above and whose name and EIN are on the W-2, if it is W-2.

Here's a link to DOL guidance. More of a warning. Compliance Assistance Release No. 2022-01 | U.S. Department of Labor (dol.gov)

It's a business issue between the parties to handle in the acquisition agreement, with due consideration to HR issues on both sides. Actual execution details of whatever they decide may be impacted by whether it's an asset or stock deal.

Right. I think under 412(e)(1) you're subject to 412 until after plan termination if you the plan was ever qualified.

I agree with both CuseFan and CB Zeller, although they seem to reach different conclusions. Per CB Zeller, if the deal is that the employee can defer and get the match, or not defer and get the amount of the match as additional cash compensation, you have a nonqualified CODA. If, per CuseFan, you just assume that they will all defer and get the match, and so get them all to take a voluntary pay cut as compared with what they had agreed to (assuming nonunion employees, of course), and they pay cut applies even if they don't defer and get the match, then you'd be OK. The key is whether my not pressing the deferral button is in effect pressing the cash bonus button.

PensionPro, does the plan have a minimum funding deficiency? Did the closing agreement address funding? Is the plan covered by ERISA, i.e. by its terms covered someone other than a sole proprietor, partner, or sole owner of corporation, or their spouses?

Thank you, ErnieG. Like CuseFan, I learned another little detail of this that I was not previously plugged into.

Peter, I think you're on to something here. But how could you resist pointing out that 401(a)(9)(B)(ii) refers to distributing after the employee's death "the entire interest of the employee" over five years, subject to exceptions.