C. B. Zeller

The plan can not require that your payment occur later that 60 days after the end of the year in which the latest of these happen: You attain age 65 (or normal retirement age under the plan, if earlier); The 10th anniversary of your becoming a participant in the plan; or You terminate employment with the plan sponsor. I agree with Mike that 999 days seems like a placeholder that should never have been included in the final documents. However if the plan's normal retirement age is 65, they could in theory hold on to your payment for a couple more years.

Yes, you can use the corrective amendment rules of 1.401(a)(4)-11(g) to correct a failed non-discrimination test. However please read your plan document carefully. Most plan documents I have seen provide for an automatic waiver of the last day and/or hours of service requirements as needed to pass the gateway test. This would usually apply only if the participant was otherwise eligible for a contribution that would require them to be included in the test, such as a top heavy minimum or a safe harbor non-elective contribution.

Here is the discussion that Lou S. mentioned: In that case, the conclusion was that they could not do it because of a controlled group issue, as the companies involved were owned by a husband and wife. In this case, as long as the brothers' companies are not part of a controlled group or affiliated service group with the company currently sponsoring the plan, then I don't see why they couldn't do it. That said, I agree with the other posters that they would be better off starting new plans anyway. If there is not a controlled group or affiliated service group, then by creating a MEP you would be subjecting them to a combined 415 limit that would not otherwise apply if they had separate plans. And if there is a controlled group or affiliated service group, then you can still add a new plan with additional benefits that you wouldn't be able to retroactively add to an existing plan.

The SPD is provided very infrequently in most cases, and as such may not be the best vehicle for constantly-changing information relating to cybersecurity. I think Belgarath has the right idea about providing the information outside the SPD. Surely they provide account statements and a SAR at least annually? The "cybersecurity notice" could be enclosed with those documents. A more frequent notice cadence would allow the plan sponsor to keep up with evolving best practices.

This type of plan design relies on the ability to disaggregate the portion of the plan that covers otherwise excludable employees. Under this design, you have two groups of employees and two disaggregated plans. The first plan covers the group of employees who have satisfied the minimum age and service conditions under 410(a). That plan satisfies the ADP test by way of the safe harbor contribution, which is provided to all NHCEs (and optionally HCEs) who are eligible to defer. The second plan covers those employees who have not yet satisfied the minimum age and service conditions under 410(a). This plan will typically not cover any HCEs, since an employee has to have prior year compensation above the applicable limit to be considered an HCE, and employees who do not have a year of service will typically not have prior year compensation that high (if they have any at all). This plan satisfies the ADP test automatically as long as it covers no HCEs. If you have any employee who will be an HCE before they meet the statutory eligibility requirements, you can have a problem with the otherwise excludable group. Usually this would happen if someone who is a 5% owner by attribution (such as the owner's spouse or child) becomes an employee. If that is a concern you may want to specify in the plan document that 5% owners have to complete a year of service before they become eligible to defer. As sb0828 mentioned, if the plan is top heavy, they lose the top heavy exemption with this plan design. If we are talking about a 3% safe harbor non-elective contribution, then the sponsor is going to end up making the 3% contribution for all employees, except those who terminated before meeting statutory eligibility. The contribution for the employees who have not met statutory eligibility can be subject to a vesting schedule, although if the employer was not intending on making other contributions which would be subject to a vesting schedule then this may be more administrative hassle than they were prepared to deal with.

1. Yes 2. There is no mandated method, any reasonable method should be fine. A reasonable method might be to allocate the contribution in proportion to the pay credits earned for the year.

If you are filing 5500-SF you do not need to attach Schedule D.

At least one formerly prolific contributor to these forums believes that the summary substantiation method should be avoided, although he did not go into much detail as to why. Under the new hardship regulations, a plan administrator is also required to obtain a participant's written certification that they do not have enough cash or liquid assets to satisfy the need. The plan administrator may rely on that certification unless they have actual knowledge to the contrary. A plan sponsor may limit hardship distributions to 2 per year.

They may or may not send more letters in the future. They may or may not also decide to audit the plan. I am not aware of anything that would allow a multiemployer plan to be exempt from the fiduciary rules that apply to plan assets, but multiemployer plans are outside my area of expertise.

Did they report late contributions on the 5500? These letters are usually sent in response to that. It's just the DOL saying, "Hey, we noticed you had some late contributions, you might want to correct the fiduciary failure under VFCP." You don't have to - the "V" stands for "voluntary," after all - but if the client wants to dot every i and cross every t they could. The fix under VFCP is basically to make up the lost earnings and pay the excise tax under IRC 4975. Hopefully the plan sponsor already did that. Then they would just need to file the VFCP form.

What specifically are you looking for in this rev proc? Because 2017-56 does address both a change in the valuation date to the first day of the plan year (at any time), and a change in the valuation date for a terminating plan from the last day of the year to the termination date. If you look at the end of 2017-56, it states that it modifies rev proc 2000-40 and announcements 2010-3 and 2015-3. Are any of those what you were looking for?

Would they be eligible to use the PBGC's missing participant program for DC plans? https://www.pbgc.gov/prac/missing-p-defined-contribution

I am not a tax expert but my understanding is that 401(k) contributions are not included in salary reported on the corporate tax return (just as they are not included in Box 1 of the W-2). They are deducted as pension contributions. From the instructions to Form 1120S:

This is what EPCRS has to say about it, RP 2019-19 sec 6.02(5) The VFCP calculator is a last resort. Even though it may be "inconvenient or burdensome" to determine the actual rate of return you still have to do it, or use one of the simplified methods I mentioned in my previous post, unless it is absolutely impossible to obtain the necessary information. Even then, I think that using the plan's earnings as reported on the 5500 to calculate an estimated rate of return would be more reasonable than the VFCP calculator.

I've never seen it done either but it certainly seems like you could. This is from the instructions for Schedule H: I would advise checking with the auditor first and make sure they are on board before doing this.

Rev Proc 2019-19 Appendix B section 3 offers some simplified methods of calculating earnings.

Thanks, Belgarath, for the on-point rev ruling. Here are the good bits: So if you can classify the fee reimbursements as "restorative payments" then they would not be treated as contributions. However: If the fees being paid out of the plan are reasonable, then there is probably not a reasonable risk of fiduciary breach, and therefore they could not be reimbursed with restorative payments. Time to find a new custodian.

Is the 3 months of service eligibility for deferrals only or for deferrals and safe harbor match? If it's 1 year of service for the match, and you have any employees who can defer but are not eligible for the safe harbor match then you lose the top heavy exemption.

I'm guessing the Key is under 50, since her contributions were refunded instead of being reclassified as catch-up? There are some tricks you can pull with catch-up and the top heavy minimum, but if the owner/key employee isn't eligible for catch-up then it isn't going to help. Does anyone know off the top of their head whether they can determine the alternative top heavy minimum using the net contribution after the refund? Meaning, key employee contribution rate=500/comp instead of 2500/comp. I agree with BG - this seems like a major plan design oversight.

I don't see how. The 1/1/2020 valuation has to be run using assumptions that were reasonable on the valuation date. If at the end of 2019 it was reasonable to expect that the owner would work 1000 hours in the upcoming plan year then he would be expected to accrue a benefit and have a non-zero target normal cost. If the sponsor gave you information that would make it reasonable to assume as of 1/1/2020 that he would be working less than 1000 hours in 2020 then you could take that into account, and as you said it would be a change in assumptions. If you wanted to change the valuation date to the last day of the year, then you could take into account the actual hours worked during the year, but that would be a change in method that would require IRS approval. If you watched Kevin Donovan's ASEA webcast earlier this year (or attended his session at ASPPA All Access last year) he presented a possible workaround to this type of situation that will not eliminate the MRC, but could substantially reduce it, by amending the plan's formula to move the accrual for the year into the funding target and then you can amortize it over 7 (or, thanks to ARPA, now 15) years.

He is referring to the last sentence of Code section 404(a)(7)(A).

I'll link my own post and point you here: A SEP is treated like a DC plan in this calculation.

Pretty confident. 401(a)(9)(C) as amended by SECURE reads The owner will have an RMD for 2022 if he defers in 2021.

1. You can determine the account balance either on a cash basis, or on an accrual basis. If you use a cash basis, his account balance on 12/31/2020 would be zero, so his 2021 RMD would be zero. Has the business been around for a while? For RMD purposes, you are only a 5% owner if you owned 5% during the year you attained age 70½ (or 72, post-2019). If he started the business at age 72, for example, then he would have been a 0% owner in the year he turned 70½ (because the business didn't exist) and therefore would not be a 5% owner and would not be required to commence RMDs until actual termination of employment. 2. I don't see any problems.

I think you have a problem with the refinanced amount plus the highest outstanding balance in the last year being greater than $50,000. The highest outstanding balance in the last year was probably on the day before the first repayment was made in 2021, so take $50,000, subtract that amount, and the difference should be the maximum they can add by refinancing. The loan payments do have to be level throughout the term of the loan, so for all remaining 69 months. If the new payment is at least equal to the amount that would be needed to amortize the additional loan amount over 60 months on its own, then you should be fine. For example, it would be a problem if the outstanding balance on the original loan was $1,000, and they wanted to add $40,000 by refinancing. The amount that would amortize $41,000 over 69 months would not be enough to amortize $40,000 over 60 months.