C. B. Zeller

Maybe there is some subtlety I am missing here but it seems pretty straightforward. The definition of 5% owner in section 416 references the constructive ownership rules of section 318. 318(a)(2)(B) says that stock owned by a trust is considered as owned proportionally by the beneficiaries of the trust. So I agree that the one person who directly owns 1.6% of the company plus is a 25% beneficiary in a trust owning 15.9% of the company is a 5% owner for purposes of 416.

From the DFVCP FAQ: https://www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/resource-center/faqs/dfvcp.pdf Q12. May plans participate in the DFVCP if they have already received correspondence from the Department or the IRS? Plan administrators are eligible to pay reduced civil penalties under the program if the required filings under the DFVCP are made prior to the date on which the administrator is notified in writing by the Department of a failure to file a timely annual report under Title I of ERISA. An IRS late-filer letter will not disqualify a plan from participating in the DFVCP. A Department of Labor Notice of Intent to Assess a Penalty will always disqualify a plan. So it appears the answer is no, receiving an IRS penalty (or notice of penalty) does not stop you from seeking relief from the DOL by using DFVCP.

Would the DOL be pursuing penalties on a late EZ?

Your guess about the future is as good as mine, but you can see from the table that the 430 rates have been steadily trending down, and the 404 rates have been steadily trending up. So FTs and TNCs for minimum funding purposes have been getting larger, and for maximum deduction purposes have been getting smaller. In all likelihood, market fluctuations and demographic changes (e.g., a participant with a large AB going from 2nd to 1st segment rate) are going to have more significant impacts on your funding requirements than changes in the segment rate.

See Table 1 here: https://www.irs.gov/retirement-plans/funding-yield-curve-segment-rates BBA 2015 extended the 90-110% corridor through 2020. I wouldn't be surprised to see it extended again before then. However the 25-year average now includes 10 years of very low interest rates, this combined with the fact that interest rates are now starting to rise again, means that the HATFA rates are not going to be very much higher than the unadjusted rates for long.

Once the IRS has assessed a penalty, it's too late to go back and use the delinquent filer relief program.

But is it "F. T. William" or "Fort William?" Asking the important questions here.

For what it's worth, Kevin Donovan and Kurt Piper quoted this same section of the gray book in their presentation at the 2016 ASPPA Annual, and argued that (b) is allowed as well. See the last slide here: https://www.asppa-net.org/Portals/2/PDFs/2016AnnualHandouts/WS18 - Deduction Limits for DB Plans and Combined Plans.pdf

The only reasonable way to deal with a single entry date in a 401(k) plan is to reduce the service requirement to 6 months and the age requirement to 20-1/2. Then they enter the plan on the first day of the plan year following. It's going to be up to the employer to decide whether the cost of allowing some additional employees into the plan outweighs the administrative burden of checking who is becoming eligible and handing out SPDs and enrollment kits one extra time per year. Edit: If this were a profit sharing plan, with 100% immediate vesting, he could use the 2-year eligibility rule to keep more people out. But of course that option is not available in a 401(k) plan.

This presentation has some good info: https://www.asppa-net.org/Portals/2/PDFs/2016AnnualHandouts/WS18 - Deduction Limits for DB Plans and Combined Plans.pdf Discussion of deduction year starts on page 24.

The 404 is limit is 25% of compensation paid during the tax year. So unless the sponsor also had a short tax year from 11/1 to 12/31 then there is no problem.

Assuming both of the 2 new owners are >5% owners, all 3 are HCE for 2018 and 2019.

Presumably the owner must be doing some non-union work; as the management, after all, he would be the other party in the collective bargaining agreement. In the next paragraph of the reg you quoted, 1.410(b)-6(d)(2)(i) it states "An employee who performs hours of service during the plan year as both a collectively bargained employee and a noncollectively bargained employee is treated as a collectively bargained employee with respect to the hours of service performed as a collectively bargained employee and a noncollectively bargained employee with respect to the hours of service performed as a noncollectively bargained employee." I think as long as you can account for the non-union hours, you can base a plan just on those hours (and presumably the comp paid just for those hours). However I can't disagree with ERISAAPPLE's suggestion to get advice from an attorney first.

There is a new code M for 2018 used to report loan offsets due to termination of employment. The withholding is 20% of (cash distribution + loan offset) and it is taken entirely from the cash distribution, since it can't be taken from the loan offset. There is no withholding on the amount rolled over.

Yes, unless your plan document says otherwise, you can use average annual compensation to test amounts that were allocated based on current compensation.

You can use any 414(s) definition of compensation for testing, it does not have to be the same definition used for allocations.

Larry, Not to doubt you, but can you provide a cite? Required beginning date is pretty clearly defined for a non-5% owner as April 1 of the calendar year following the year in which the participant turns 70-1/2, or retires. It doesn't make any reference to when pre-retirement in-service withdrawals begin. If the participant is not yet retired as of 12/31/2018, then her RBD would not be 4/1/2019, and therefore 2018 would not be a distribution calendar year, and therefore the distribution taken in 2018 would not have to comply with 401(a)(9).

Does testing on average compensation help? Does the document contain a fail-safe or any other language that would apply? If you have to fall back to the general test, you only need to satisfy the gateway if you cross-test. If you are able to pass by, for example, imputing permitted disparity on allocation rates, then the gateway is not needed.

SCP can be used to correct significant failures up to the end of the second plan year after the failure occurred. The deadline to make the 2015 SH contribution was 12/31/2016, so you would have until 12/31/2018 to self-correct that failure. Furthermore, insignificant failures can be corrected under SCP at any time. I can't determine for you whether or not the failure was insignificant, but based on the number of participants affected and the dollar amounts it may be.

I sincerely doubt there was a determination letter. We have as yet been unable to locate the original plan document though. Honestly there are quite a few document issues and we are planning to go to VCP after the 5500 issue is settled. The government might know the plan exists, because 1) they have been reporting profit sharing expense on their corporate returns for many years, and 2) we recently put in a new cash balance plan for this company with plan # 002 (and those 5500s have been filed timely).

The plan has never filed Form 5500 in the past. The plan started in 2005 and covered just the owner and his wife. The balance was over $250,000 due to a large rollover contribution in the first year. It continued to cover just the owner and his wife until 2012, when an employee became eligible. So we have late 5500-EZ filings for 2005 through 2011, correctable under Rev. Proc. 2015-32, and late 5500-SF filings for 2012 through today, correctable under DVFCP. However, we are still waiting for the client to find the end of year account balances for 2005 through 2007. Without that info we cannot prepare the EZs for those years. My question is, should we do the DFVCP filings now, in order to close the door on the DOL penalties, at the risk of potentially alerting the IRS to missing past EZs? Or should we wait until the client is able to find their old account statements, and do both submissions at the same time, hoping that neither the DOL nor the IRS come knocking at their door before then? Has anyone had a similar situation in the past? Am I just paranoid thinking that the IRS will see a "First return/report" with an opening balance greater than $250,000 and immediately come looking for the past EZs?

Correct, because the new law doesn't talk about rolling over a loan, it talks about rolling over a loan offset. The offset is the lump sum distribution of the outstanding balance of the loan. The participant can roll it over by paying the amount of the offset to the rollover account by the appropriate deadline.

No (maybe). In the DC plan, 1.416-1 M-7 does state that you cannot use the rule reducing the TH minimum to the maximum key contribution rate if the DC plan is being aggregated with a DB plan for coverage or nondiscrimination testing. However if your DB plan is frozen then (presumably) there were no accruals and so no testing would be required. So the plans are not being aggregated and you can reduce the DC TH minimum to 0. On the DB plan, if no key employee benefits during a given year, then the year is not counted in determining the employee's years of service for purposes of determining the TH minimum. So if their benefit satisfied the TH minimum in the previous year, then it should still satisfy it in the current year, provided that their high 5 year average comp hasn't increased. If the DB plan provides for TH minimum benefits under the DC plan, then I'm not sure. My feeling is that it's probably not required, since the purpose of allowing the DB TH minimum to be provided in the DC plan is to replace the minimum accrual, and if no accrual would be required for a given year then the corresponding contribution should not be required either.

It would depend on the document, but most that I've seen have language saying that a participant who terminates with 0 accrued benefit is deemed to have received a distribution of their benefit. In that case, I think you would be ok, since once they've been paid out you're done with them.

I think it would cause issues with 401(a)(26), specifically the prior benefit structure would not pass.