C. B. Zeller

https://www.irs.gov/forms-pubs/additional-guidance-for-substitute-and-telephonic-submissions-of-forms-w-4p-and-w-4r Whoever told you that "the IRS didn't rule on implementing" might have meant that the IRS hasn't provided any rules for implementing a simplified substitute form, like we were used to with the old W-4P. The rules for using a substitute form now are so onerous that it is basically impossible. The new forms W-4R and W-4P (or suitable substitutes) must be used starting in 2023, unless the IRS comes out with some guidance before then.

There are differing opinions on this, but my opinion is yes. Under IRC 404(a)(6), the contribution deemed to have been made on the last day of the prior taxable year if it is made "on account of such taxable year." Clearly it was made on account of the prior plan year, but what does it mean to be made on account of the prior taxable year? The IRS doesn't elaborate, but the only thing that makes sense to me is that the employer deducts it on that year's tax return. Since they didn't do that, I would argue that it defaults to being deductible in the year contributed (assuming it meets all the other requirements to be deductible, of course).

I'll address your second question first. With respect to coverage testing, Treas. Reg. 1.410(b)-8(a) provides that plans may satisfy the coverage test using a daily testing option, a quarterly testing option, or an annual testing option. In practice, most plans will satisfy coverage using the annual testing option, but the other options may provide better results in certain circumstances. For nondiscrimination, Treas. Reg. 1.401(a)(4)-1(c)(3) provides that the nondiscrimination requirements will generally be met on the basis of the plan year. For the definition of compensation used to apply the various tests, you have to look at the test in question. For the ADP test, for example, compensation is defined in Treas. Reg. 1.401(k)-6, to mean compensation as defined in 414(s) and 1.414(s)-1, measured over either the plan year or calendar year, or the portion of the year in which the employee was eligible. For the top heavy minimum, however, the definition of compensation - as per Treas. Reg. 1.416-1 M-7 and T-21 - is the definition in 1.415(c)-2 and you do not get the option to measure it over just the period of the year in which the employee was an eligible participant. For HCE determination, Treas. Reg. 1.414(q)-1T Q&A-13 references IRC 415(c)(3). In general, the term "compensation" doesn't mean the employee's stated rate of pay, but rather the amount actually paid by the employer to the employee. A popular definition of compensation is the amount shown in box 1 of the employee's W-2, plus deferrals. However, compensation is a complex topic and this is only scratching the surface of it.

If it's not eligible to file 5500-EZ then they are probably looking at one or more years of delinquent returns.

It would - at worst you could do the amendment to suspend the match on one day and then adopt the 4% non-elective the next day - but can you really do that? Notice 2020-86 Q&A-8 says you can suspend a plan's safe harbor nonelective contributions during the year, later readopt the 4% nonelective, and still retain the safe harbor. It doesn't say anything about suspending a match and being eligible for this treatment. Given that the IRS chose to specify nonelective in this Q&A - combined with the section of 2016-16 that Belgarath referenced - it seems that you can not get this treatment with a safe harbor match.

https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/efast2-form-5500-processing.pdf

was due a reasonable amount of time (usually 30 days) before the 2022 plan year, e.g. November 30, 2021.

What is the correction they're looking to make? Do they want to not have to make an allocation to the former employee? The 3% safe harbor is probably required no matter what, but they might be able to get away without the 2% profit sharing if the allocation formula in the plan document says that each participant is in their own group, and if all the testing passes without it. If they do want to still give the former employee the 2% profit sharing for 2021, then go ahead and do it now. The last date to make a contribution that can be counted as an annual addition for 2021 is 30 days after the employer's tax filing deadline for 2021, including extensions. As you noted it would be deductible for 2022.

You would treat it as a reduction to the value of benefits expected to be paid out. The instructions for the standard termination filing discusses the election to forgo receipt of benefits (don't call it a "waiver") for line 7 of the EA-S, under the heading of "Plan Amendments."

This is what the Form 5500-EZ says right above the signature line: So I don't see how a plan administrator could sign a 5500-EZ before the Schedule SB has been signed without perjuring themselves.

My recollection from looking into it with regard to last year's hurricane Ida relief is that the relief is available if a plan's service provider is located in the declared disaster area, however, the plan administrator should be prepared to receive correspondence from the government agencies and to provide evidence (or at least a statement) that the disaster actually prevented them from filing timely. In other words, the extension is not automatic; if the plan administrator could have filed timely, then the extension would not be automatically granted merely because the service provider was located in the disaster area. Presumably the relief for hurricane Ian is granted under similar principles. It's interesting to note that the relief granted for Form 5500 filers is actually retroactive - it extends to returns due on or after September 15, even though the disaster did not occur until September 23. https://www.irs.gov/newsroom/irs-announces-tax-relief-for-victims-of-hurricane-ian-in-florida

1. Sure, why not? Unless the plan sponsor has already been contacted by the IRS. 2. If the prior service provider didn't do something as basic as file a 5500, who knows what else they might have done wrong? I would start by making sure the plan document is up to date with all required restatements and amendments. It also couldn't hurt to ask about any current or former employees, controlled group or affiliated service group issues, other plans, etc. etc. etc.

"Seemingly" being the operative word there. Snark aside, I googled the quoted bit and found the website being referenced. To be fair to them, the page does include a a brief discussion of what a floor-offset arrangement really is. It doesn't go into detail about the various pitfalls and unintended consequences that come along with floor-offsets, but that's to be expected from a marketing perspective. All this does, however, highlight the dangers of using language loosely like that - it's very easy for people to take quotes and re-post them without context, which can change their perceived meaning and lead to misunderstandings.

This is false. Misleading at best.

For me, I would want a sponsor to tell me in writing that they want to elect the alternative method. Then I'll prepare the premium filing using the alternative funding target. There is a checkbox to say that you are electing the alternative method, which would need to be checked. The rates for the alternative method are just the 430(h)(2)(C) segment rates without stabilization, which is to say, they are the segment rates used for calculating the maximum deduction limit. Your premium funding target using the alternative method is just your (vested) maximum funding target. Good question about the lookback month, it doesn't come up very often that a plan changes its lookback month. My guess is that if you changed the lookback month for funding purposes, it would also change for alternative premium funding target purposes. Remember that the segment rates for the alternative method are 24-month averages, so they will tend to be higher (=lower premiums) when interest rates are falling, and lower (=higher premiums) when interest rates are rising, as compared to the standard method (spot) rates. With interest rates looking to rise sharply this year, I would be very careful about recommending a sponsor switch to the alternative method now, since it will lock them in to the 24-month average rates for 5 years.

When you say "refund one participant," what I'm hearing is that there are multiple HCEs and you want to just pick one to eat a refund. That is not ok under any method I have ever heard of. The 401(k) regs and EPCRS lay out specific methods for correcting an ADP test failure. Try something else at your own peril. Also don't forget to read the plan document. Does it say anything about how an ADP test failure will be corrected?

If you're worried about it, maybe write the benefit formula as the greater of 0.5% per year, or the benefit provided by the cash balance account. That should make sure that you're benefiting for purposes of 410(b)/401(a)(26), even if you don't actually accrue a benefit in the current year.

Post-SECURE Act, the notice is no longer required for a 3% safe harbor non-elective contribution to satisfy the ADP safe harbor, but you do still need the notice if you want to satisfy the ACP safe harbor.

You can always correct using refunds or QNECs up to 12 months after the end of the plan year that failed. Otherwise, if it's eligible for self-correction, you can use the One-to-One method in rev. proc. 2021-30. If it's not eligible for self-correction, then it's into VCP. If you don't want to use the one-to-one method, you could try proposing an alternative method in VCP, but I think you'd better have a darn good reason why you aren't using the method that was specifically provided in the rev proc.

1. Will probably pass on accrued-to-date. 2. I don't see how it can pass with only 33% of the employees receiving a benefit.

See Treas. Reg. 1.411(b)(5)-1(d) and (e). You might find this page helpful as well: https://www.irs.gov/retirement-plans/issue-snapshot-how-to-change-interest-crediting-rates-in-a-cash-balance-plan Any fixed interest crediting rate of not more than 6% annually is fine. The IRS is generally concerned about interest crediting rates being too high, not too low.

Strictly speaking, a retroactive amendment to cure a 401(a)(26) failure is a 1.401(a)(26)-7(c) amendment - however most of the same rules apply as under 1.401(a)(4)-11(g). So no - you can't do a -7(c) amendment to increase only an HCE, because the amendment has to be nondiscriminatory on its own, under the -11(g) rules. If there are no NHCEs that could be added to the plan (including possibly someone who has not yet satisfied age and service requirements), then your options are: 1. VCP (if they even approve it) 2. Retro amendment that increases the one HCE, plus enough NHCEs to satisfy coverage and nondiscrimination on its own All of this is assuming of course that the plan says a 401(a)(26) failure will be corrected by amendment. If the plan document has a fail-safe in place, then you have to apply the fail-safe.

No. There is a requirement under Title I of ERISA to file the 5500, but that only applies to plans which are subject to Title I. Plans which cover only the 100% owner of a business, or partners in a partnership, are exempt from Title I. The reason the 5500-EZ exists is for those plans to provide a report to the IRS, since the DOL reporting requirements don't apply. For the most part, a plan which can file 5500-EZ is the same thing as a plan which is exempt from Title I. That line has become a little blurred recently, but there is coordination between the IRS and the DOL here. A plan administrator is only required to file either the 5500-EZ or the 5500(-SF) for any given year.

Then what does "because we put the participant account" mean, and how is it relevant to whether you file SF or EZ?

2019 was the last year you could file a one-participant plan on SF. Starting in 2020 you could file the EZ electronically. If there is a non-owner participant in the plan, even if they are not active, then you can not file 5500-EZ.