Bob the Swimmer

My own view is that this is fairly ridiculous--I'd send a strongly worded letter from an ERISA attorney asking for the document saying that the client's prior contributions (and deductions) as well as tax-exempt status overall affecting all the participants could be hanging in the balance.

My experience is to contact the Agent assigned to the case directly and communicate the change and if they approve, then change the filing and send it to the Agent. Have had this happen several times as in some cases, circumstances can change and the IRS has been taking much longer to resolve these cases than 5 to 10 years ago.

I’m in the camp (after 43 years of consulting) of file all of them at once. When you show up with 2 years it’s a dead giveaway that you don’t yet have years 16 and 17 and experience has told me it works better (despite the interim risk you mention) to arrive with all of your ducks in a row.

Great question---DOL gets over 100k calls per year from disaffected participants, disgruntled ex-employees and others. Some of these generate audits and even litigation. Many of the audits are generated by their computer review of 5500s---usually a significant inconsistency n the filing from year to year or answering the PT questions a certain way. Several years back they did a questionnaire which was "voluntary" on 457(b) plans and if you answered it a certain way, you got audited. That's how voluntary it was. They do not have the staff that IRS has, so audits are much rarer at their end. In several dozen of these DOL audits over my career, they have never told us why they were auditing whereas sometimes the IRS agent has told us. Hope that helps-- BOB

Agree with Larry 110%---for 40 years have set up plans with less notice than you've received here--- A signed document (or even summary of the document according to the case law) can be valid as evidence of a plan. I prefer to have the entire document signed beforehand or adoption agreement---before midnight on 12/31.

I agree with Larry and Mike whole-heartedly. I have a one-person DB plan (as well as a one-person profit-sharing 401(k) plan) and have worked with my actuary over the past 12 years to be funding it reasonably, but not overly so.

The reason for the 45 days is DOL knows well if you act quickly and hire a reasonably good EB accounting firm, they should have this done within 4 weeks max. I have been involved in this for a Big Four many, many times and the key is to file it timewise as quickly as possible with a request for abatement--but if you get a DOL letter before you file, tell them your scheduled timing to get the audit report done and then make sure that you MEET that schedule under all circumstances.

Sure--it's on the DOL website and they send you a confirmation of the receipt of your exemption certificate--the exact same requirements for the paper filing.

no requirements I am aware of---remember that DOL's online registration filing only began a couple of years ago--I had several of the first 20 filings with them. Before that, my sources told me they were housed in a warehouse someplace and not really reviewed.

Early in my career (now 43+ years), I thought everyone set up their calendar year plans in December !

As a Trust Counsel for 8 years for a Top 100 Bank early in my career, I agree with most of what has been said and Peter Gulia's point is well-made. I think more specificity could be good in certain circumstances (non-institutional trustee, special knowledge and acumen regarding p. and p/s plans and rules, experience with the former trustee and the business, etc.) but I also agree with Luke that maybe you'd close some avenues to yourself that might change anyway. (I have two LLCs and I have confidence that my spouse, kids and/or estate attorney would handle this in the right way for my 2 DBs, NQDC, and numerous DC plans). Bottom line, it probably depends on the circumstances.

SCP and VCP are very different solutions under EPCRS. I'm not sure that you can self-correct this late and egregious of an error under SCP.

Agree with what has been said thus far---a Trustee agreement should also be in the mix, but it might be incorporated in the Adoption Agreement mentioned above. Certainly a resolution adding the new Trustee is in order. Relius has a good set of forms to accomplish this in their ERISA library.

The effect of legislation, tax or otherwise, is a common discretionary adjustment to plans like this by Comp Committees. So I don't have angst about you doing that. In fact, much of 2007-2008 bonuses were paid using uber-Committee discretion because hardly anyone was making their goals back then, according to available survey data. ISS does not like discretion yes, but many companies adjust their results somewhat or minimally if circumstances outside the control of management affect the results. Not sure what you mean by the 162(m) reference.

Worked for a Big 4 for 20 years and reviewed several hundred audits in that time span ---you will need 6 x 1-year audits as many here have said, no question.

Interesting arguments both ways---all I can say conclusively is that if there is a default, then VCR is the only solution we know of and have utilized.

ESOP GUY- I agree with most of what you said and there are a number of benefits for the ESOP transferors---loan benefits, 404(k) dividend, etc., but I'm seeing as an exit strategy, that not all 100% owners (or a combination of owners) are willing to part early on with their 100% single or combined ownership in the process. I have at least half a dozen private clients over the past 10 years that had less than 100% ESOPs for some very good reasons also. Just want to throw that out there.

We just handled several of these loan defaults. It is a VCR filing under EPCRS and there is a need to file to correct the errors if you want it to not be an ongoing risk under audit (and my understanding is that it must be disclosed on the 5500 for this year)----I'm not sure if your employer is willing to foot the expense of having this done, but this is the only way now that I know to validly cure this for posterity.

What is Board doing to document that they have market-priced these executive positions and are paying them reasonably ?

I might be missing something here---but the Table does not show a 0.4 to my knowledge----my Dad just turned 100 and he still has a factor of 2.9 ---wonder where does the .4 come from ? (I'm slow on Mondays).

JPOD and ESOP Guy, I'm a tax guy---not sure what you mean by the "100% sub s construct" in this context. Can you share with us what you mean ? Thanks. Also, not sure what the benefits of being a 100% S Corp ESOP are--sometimes (and very often in my world), owners of private companies need to share actual ownership of stock with their top people for retention or to attract/hire a top recruit---so, when the smoke clears, the ESOP might be 90% owned----what's wrong with that ? (I have several clients in the private company space who have ESOPs and yet have shared actual ownership as well).

SAR awards can be payable in cash or in stock, so we're assuming that this Plan only provides for cash awards at distribution time.

Some number of years ago, I remember dealing with several demutualization issues and there was a helpful--ALI-ABA, now ALI-CLE article/outline that addressed many of the relevant issues. You may want to call them and have them check their records---it was at least 10-15 years ago, maybe longer.

Agree with everyone---DOL has a number of exemptions for sale-leaseback arrangements by medical groups, but we don't have enough info here.

Agree---And the proposed nondiscrimination rules for insured plans would also make this taxable, if the regs are ever written (while I am still young).