C. B. Zeller

Honestly this is an employee relations issue and not a plan issue. There is nothing in ERISA that says a report to the plan committee has to be disclosed to participants. The plan administrator would be completely within their rights to tell this guy to take a hike. The employer, of course, is going to want to weigh their options. Is there anything in the report that is sensitive and could harm the sponsor if it became public knowledge? Is this guy likely to bring an action against the sponsor if they don't give him what he wants, or is he just full of hot air?

A penalty of up to $2,233 a day for each day a plan administrator fails or refuses to file a complete and accurate report. See ERISA section 502(c)(2), 29 CFR 2560.502c-2, and the Federal Civil Penalties Inflation Adjustment Act of 1990, as amended by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (2015 Inflation Adjustment Act). Pub. L. No. 114-74; 129 Stat. 599 and the DOL’s implementing regulation at 85 FR 2292 (Jan. 15, 2020). $750, if it is a small plan. The "hoops" are just submitting your info on the DOL's website and then paying the fee on pay.gov. For those of us subject to Circular 230, we would risk our own professional livelihoods by encouraging a sponsor to report false information to the government. Other professional organizations also require their members to adhere to certain codes of professional conduct, and individuals violating those codes could be sanctioned or expelled. Not that it would change my analysis, but our firm charges the same fee to prepare a timely 5500 that we do for a late one. The $750 goes to the government, not to us.

Here are the highlights of the new rev proc:

There due date of the 5500 is automatically extended to the sponsor's tax filing deadline, as long as the sponsor's tax year is the same as the plan year. If you adopt a plan on September 14, that leaves you 1 day to get your minimum funding done and prepare and file your 5500. Another possibility is that you just add $750 for a DFVCP filing to your plan setup costs.

From the 5500 instructions (emphasis added): I understand the reference to "manual" signature to mean that is must be signed by the person's own hand. If they want to sign electronically, the only acceptable option is for them to obtain EFAST credentials. For what it's worth, most of our clients obtain their own EFAST credentials and sign their own forms. It is a bit of pain the first year but after that they usually don't have any problems.

It's in VFCP. The plan document probably also has some language about timing of deposits, so you can rely on the general principles of EPCRS to put the plan back in the same situation it would have been had the failure not occurred. Forfeitures can be used to reduce contributions, or allocated as an additional contribution. However lost earnings are not a contribution. I say you can't use forfeitures to fund lost earnings.

What correction method are you referring to? Late deposits are usually just corrected by making the deposit with lost earnings. It is not a QNEC. EPCRS does provide for corrections with QNECS for improper exclusion from a 401(k) plan, or failure to implement a deferral election. Regardless, if the plan adopted the changes made by the 2018 amendments to the regulations, then forfeitures can be used to fund QNECs. See https://www.irs.gov/retirement-plans/issue-snapshot-plan-forfeitures-used-for-qualified-nonelective-and-qualified-matching-contributions

I've used Google Docs for collaborative editing before, and it's quite good at it, but it does need to be set up correctly to get the most benefit out of it. My number 1 recommendation when using Google Docs is to assign only a small number of people to the "Editor" role - just 1 or 2. Most people should be "Commenter." Changes made by Commenters do not directly modify the original document, but show up in a different color. The Editor(s) can then approve or reject the suggestions. Suggestions made by Commenters also show up on the side, and you can have a discussion thread attached to each one. There is also a chat box assigned to the document as a whole, for things that do not fit into a comment discussion thread.

They're available now. https://www.law.cornell.edu/cfr/text/26/1.401(a)(9)-9

In the case where actual returns are less than the returns calculated by the VFCP calculator (or negative), I usually use the greater of the two. (Is the plan trustee-directed or participant-directed? If trustee-directed, do they have an IPS? Does the IPS say they will invest 100% in money markets? That doesn't pass the sniff test for prudence, or diversification, in my opinion.)

But they invested their contributions in a vehicle of some sort, right? If they had made the deposit timely, what would the earnings have been?

The plan must permit a reversion according to its terms. No money has to actually go back to the sponsor though. While you could read IRC 4980 to mean that exactly 25% of the excess (and no more) can be transferred to the QRP, every actuary I know understands it to mean at least 25% of the excess, up to and including 100%.

What would the actual return have been if the contribution had been deposited timely? You might need to check historic unit values for the investment election(s) to make that determination.

In terms of things I could ask a client and expect them to reasonably give me an answer on their own: What type of entity is the company? What is the principal business of the company? Do any of the owners of the company (or their spouses, children, parents or grandparents) have any ownership interest in any other organizations? Do any of those other companies have employees? Does this company provide services to any of those other companies or vice-versa? Are any of the companies regularly associated in providing services to the public? If the answers to those questions indicate that we need to consider whether an ASG exists, then I would start digging in further.

Keep in mind that RMDs due 4/1/2022 (for someone who was 72 and terminated in 2021) are still technically 2021 RMDs and will use the 2021 table.

Please flag PeterN, Suzanne85, and Aaron_Co as spammers.

This was not the question you asked, but it bears pointing out that the earnings calculated by the VFCP calculator are only acceptable if you actually correct the prohibited transaction under VFCP. If you are merely self-correcting then you must calculate earnings as provided under EPCRS, which usually means the actual rate of return.

Three or four brand-new users are currently replying to old, in some cases years-old, threads adding just "Thanks" or other useless replies. My front page currently has dozens of these. What is going on? Is this some sort of automated spam attack (what would be the point)? Or are these legitimate new users? It seems suspicious that they all joined roughly Saturday at 2 pm. Edit: So now it looks like they each made 12 posts and then stopped. I guess the board software has some rate limiting built in, which is great. Let's see if they manage to create any more new users and continue the attack.

I agree with shERPA, but they might be able to achieve the same, or mostly the same, result if they do it right. You said these people are on payroll during their probationary period, presumably that means they are employees during that period. If that is the case then you absolutely cannot disregard their service during the probationary period when determining eligibility. What you can do, if they are willing to open up to more than semi-annual entry dates, is rely on the actual maximum entry conditions under 410(a), which says that you have to become a participant no later than the earlier of the 1st day of the plan year or 6 months following the date that you meet 1 year of service and age 21. For example, they could write their plan document to say that you enter the plan on the first day of the month coincident with or next following the 1 year anniversary of the end of your probation period, or the beginning of the next plan year, if sooner. An employee hired in June 2020 would complete their probationary period in September 2020 and enter the plan October 1, 2021. That is fine, because it is less than 6 months from the day they actually completed 1 year of service, which was June 2021. However if you have someone who is hired late in the year it doesn't work right. Say you have an employee hired in November 2020, they complete their probationary period in February 2021, so you would want them to enter March 1, 2022, but they have to enter on January 1, 2022 instead, because it's the first day of the plan year.

The plan document should specify what happens when a contribution cannot be allocated due to 415 limits. It will probably say that the remaining contribution is allocated to other eligible participants.

404(a)(6) absolutely applies to DB plans.

Here are the slides from a presentation at an ASPPA conference a few years ago. It was about DB plans but I don't see any reason why the deduction timing question would be any different for a DC plan. https://www.asppa.org/sites/asppa.org/files/PDFs/2016AnnualHandouts/WS18 - Deduction Limits for DB Plans and Combined Plans.pdf (deduction timing starts on page 24) On page 27 they cite a PLR where the IRS allowed a plan sponsor to take a deduction in 1989 for a contribution made in 1989 that was used to satisfy minimum funding for the 1988 plan year. I know that a PLR can't be relied upon as precedent but it does show that the issue is not as clear-cut as this individual may feel. Of course, if they weren't thrilled about relying on a 20-year-old document, they would probably be even less excited about a 30-year-old ruling that does not even provide reliance.

I once heard it put this way once and it has stuck with me: IRC 401(a)(4) says a plan may not discriminate in favor of highly compensated employees. It says nothing about discriminating in favor of non-highly compensated employees. You can discriminate in favor of non-highly compensated employees all you like. If the plan is using a Cycle 3 pre-approved document, they will have to provide a notice describing their discretionary match formulas and what formulas apply to which groups of employees. As Mike said, they should make sure that they are not including a disguised age or service condition that would disqualify the plan.

The 10-year rule was added by the SECURE Act. If the plan currently applies the 5-year rule, it will need to adopt an amendment permitting an eligible designated beneficiary to use the 10-year rule instead. Your plan document provider may already have this amendment available. A plan is not required to permit the beneficiary to wait the full 5 years before forcing them to take a distribution, so it would follow that use of the 10-year rule would likewise be optional.

The max lump sum is considered to be the present value of the 415 limit, so I think you can apply the 415 aggregation rules that exist in the plans, i.e. apply the limit to plan A first.