Luke Bailey

If you are doing W-2c (I refrain from any judgment as to whether that is correct under the circumstances; will assume it is for rest of this comment), then I think you need to recalculate deferrals and any other contributions for 2017 to what they would have been if the corrected comp amount had been used for all purposes. Then any excess would be refunded to the participant under EPCRS self-correction. If the participant still owes something to the employer, he can use what he receives as refund to continue to repay employer. If he has fully repaid employer, he keeps the refunded amount from the plan.

ERISAAPPLE, it's in Section 1341 of the Code. Yes. Very messy. Many cases, many shadings.

The rule as stated by Mike is in 1.401(k)-1(d)(4)(I).

Unless the negative to adjustment to the commission in 2018 is going to result in the issuance of a W-2c for 2017, reducing elective deferrals for 2017 is a non-starter.

Disclaimer is the way to go, as per Fiduciary Guidance Counsel above. Will add that under 25.2518-2(c), the disclaimer needs to be made within 9 months of date of death. Long story as to why the estate tax rule applicable, but it is.

You could either do late QNECs (duh), or, as pholosophizer's question suggests, make late distributions with earnings now to continuing employees and termed vested who have not yet received distributions and write letters to those termed vested who did get eligible rollover distributions telling them that parts of the distributions did not qualify for rollover.

Good point, Mike, could be insignificant depending on relative number of HCEs who got wrong amounts and the individual shortfall amounts. Actually, probably is insignificant. However, if the error was significant, I'll stand on 2014 vs. 2015. If the ADP test was failed for 2014 because some HCEs were distributed too little, then under 401(k)(8) and (m)(6) they would have had until the end of 2015 to fix without EPCRS at all (and would have owed the 4979 excise tax on the aggregate shortfall amounts, unless corrected by 3/15/2015). and under 9.02(1) of review 2016-51 would have had until 12/31/2017 to fix under SCP ()and would still owe the 4979 excise tax.)

I think if the ADP failure was for 2014 or later, you can use SCP. For a 2014 failure, the distributions (i.e., the correct distribuions) should have been made in 2015, so you could correct them under SCP by end of 2017. Earlier than that, you're into VCP.

It's inaccurate to say they are holding your account "hostage" if they are not trying to exact a concession from you, e.g. a release of claims, in return for earlier distribution of your account. If they were doing that, then "yes" it would be a "hostage" situation and "yes" it would potentially be a violation of law.

The 410(b)(6)(C) transition rule by its terms applies only for 410(b), and there are no regulations under it (other than the helpful, but limited Treas. reg. 1.410(b)-2(f), which tells us that the form of the transaction, i.e. stock acquisition, purchase of assets, or merger does not matter). However, 410(b) is all you should need, right? As long as you do not change the eligibility for the two plans (e.g., they each continue to cover employees of the pre-transaction businesses, including new hires in the legacy businesses, at least within limits), you can test them separately for 2018 and 2019, even if they would not satisfy 410(b) otherwise on a separate basis. So for one you test with ADP/ACP, the other is a safe harbor. That should be fine.

The buyer would not really be starting a loan program. It would just allow the employees it hires to roll their accounts, including the loans, into the buyer's plan. Thereafter, yes, the buyer's payroll function and record keeper would have to service the loans until they are paid off or the employees terminate and have to pay off or get 1099-R'd then.

Good luck, calexbraska.

There is a grace period until the end of the next plan year when the target could continue to maintain the SIMPLE for its legacy employees. See IRC sec. 408(p)(10). I don't think you can terminate it before the end of the year. See https://www.irs.gov/retirement-plans/terminating-a-simple-ira-plan.

MoJo, I really have no preference. I was just pointing out a possible way to go. BTW, it was worth the length of this thread just to see that someone had actually written a law review article on the topic. Sooner or later, you see everything.

I've never done so have not thought through, but I would point out that assuming the funds are invested in annuity contracts or individual custodial accounts, you don't have the ability as you would with 401(a) to base the plans' separateness on separate trusts. Having said that, if the plans had separate documents, you could probably do it.

Right, Mike. And of course that rule was written long before the excise tax, when someone might have actually had something to gain by doing it!

Sure, can have a completely frozen plan indefinitely, but then everyone must be 100% vested, at least in a DC plan. In a DB must be vested if freezing would cause a reversion, I believe.

JamesK, I agree with you regarding the requirement for government action, but the employer can amend the plan to exclude the individual, retroactively, have the individual sign an ostensibly binding agreement, etc. My point was that if the IRS then said, "Hey, that is inconsistent with the way we interpret 401(a)," the employer could use the RFRA as a defense.

I'm not sure about this at all, but you might be able to exclude him by amendment no matter what the plan doc says prior to the amendment, and even going back to retro years, under 42 U.S. Code Chapter 21B - RELIGIOUS FREEDOM RESTORATION Act. The current Supreme Court has been pretty aggressive in enforcing this. If you amended your plan to exclude him (assuming that's really what he wants and he gives you what appears to you to be a bona fide religious reason for it), I think this federal law might overrule an IRS claim that the plan was disqualified. Just something for your lawyer to look at.

Agree with ESOP Guy's point as to what the risk is, i.e. that when the period of no contributions started there were more participants and they left without full vesting. The vesting requirement goes back to when contributions stopped. Start making some contributions, even 401(k) deferrals.

The annuity has to be valued for 415 purposes. If, as seems likely, the sales charge is contingent and/or variable, the actuarially likely charge (not the maximum possible) would need to be used to value the annuity.

Yes, that would help, Sh-ERPA.

I believe that Prop Reg § 1.414(o)-1(b), regarding "leased owners," would, if someday finalized, treat B, with respect to John and Jim, as if it were a member of an affiliated service group. Prop Reg § 1.414(o)-1(b) was proposed in 1987, if I remember correctly, pursuant to the broad grant of authority in IRC sec. 414(o) and, as proposed, would be retroactively effective to 1984 if finalized. It was the only part of the 414(m) and (o) proposed regs that was not withdrawn in 1993, perhaps because the IRS saw the same "too easy" potential that you seem to sense, shERPA. Perhaps without the reg the IRS could also attack on the basis of substance over form or business purpose. Might depend on the business purpose of organizing the work this way, as well as what protections Jim may have, if any, regarding the arrangement that places him under John's control with respect to Corp B. It's a gray area.

Agreed, you seem to be stuck, but VCP may be an option if enough at stake and employer was 100% consistent in how it handled and employees had full disclosure. Fix immediately going forward by amending plan doc or including the amounts in calculating contributions.

Questions for Madison71 to avoid having to pore over 2016-51: 1) Given the timing, do you think this qualifies for self-correction, or since the plan terminated does this have to go in as a VCP submission. I'm thinking self-correction, but don't recall if there is anything specifically addressing one way or the other in 2016-51. 2) Since the trust no longer exists, can the employer just write the checks to the employees and "deem" them to be from a qualified plan? I think the IRS will give you that as a correction in VCP, but issue makes me waiver on whether can be done by self-correction.