EmpbAF

Hi -- I have a client that has failed to implement participant deferrals into a state 457(b) plan that the employer participates in. My understanding is that, since there is limited opportunity to submit corrections to the IRS under Section 4.09 of EPCRS, and Reg 1.457-9 provides that governmental entities have until the first day of the plan year that begins more than 180 days after the IRS notifies them of the failure to correct their plan failures, practitioners interpret that to mean that corrections for 457(b) plans can generally follow those prescribed under EPCRS for qualified plans. So in this case we would corrective contributions for the participant's missed opportunity to make a contribution/invest (e.g., 50% of missed deferral) as under EPCRS. Is that understanding correct? Thanks!

We have a client that is setting up a deferred compensation arrangement and wants to exclude from the Change in Control benefit any transactions between family since it is a closely held company. I think for 409A purposes this is not problematic because they only further restrict the 409A-acceptable definition of a CIC, rather than expand it. It seems to me that, within a family, if a person is treated as owning any interest owned by the person’s spouse, children, grandchildren or parents, then (for example) a child who purchases stock from his parent would not trigger a Change in Control, because the child is already deemed to own the interest under the 318 attribution rules. I cannot find any guidance that explicitly states that, though. Has anyone dug into how this works? Thank you!

Thank you to everyone who commented. I really appreciate it.

They want to avoid employees jumping in and out of the 401(k) plan. The HCEs are allowed to participate in the NQDC, so they prefer some stability there.

I would distribute https://www.irs.gov/retirement-plans/401k-plan-fix-it-guide-elective-deferrals-werent-limited-to-the-amounts-under-irc-section-402g-for-the-calendar-year-and-excesses-werent-distributed#:~:text=The limit on elective deferrals,of–living adjustment table.)

Hi -- I have a client who has elected to exclude highly-compensated employees in order to avoid potential nondiscrimination or coverage issues due to some idiosyncrasies with their population. Due to one-time variation in bonuses, as well as the upcoming jump in the HCE threshold for 2023, we anticipate a few individuals may drop down into non-highly compensated employee pool. Would an exclusion for "employees previously designated as HCEs" or employees making over a certain dollar amount be permissible? Do you all think the former would violate the "definite written program" rule? Thank you for your thoughts!

I appreciate the comments and thoughts very much. Thank you everyone!

Hi -- we have a company that terminated its pre-approved 401(k) plan very recently. The plan timely adopted the Cycle 3 restatement, but did not adopt the interim amendments prior to the termination. The resolutions do reserve the authority of officers to execute any amendments necessary to effectuate the termination, and the assets have not been distributed yet. Section 7 of Rev. Proc. 2016-37 provides that: Notwithstanding Sections 5 and 6 of this revenue procedure, the termination of a plan ends the plan's remedial amendment period and, thus, generally will shorten the remedial amendment period for the plan. Accordingly, any retroactive remedial plan amendments or other required plan amendments for a terminating plan (that is, plan amendments required to be adopted to reflect qualification requirements that apply as of the date of termination) must be adopted in connection with the plan termination regardless of whether such requirements are included on a Required Amendments List. It doesn't say that the amendments absolutely have to be adopted prior to the termination, just in connection with it. So I am wondering if we can make a reasonable argument that the interim amendments can still be adopted in connection with the termination if they go ahead and adopt them now? The resolutions adopting the amendments would of course reference the provisions from the prior resolutions and the Rev. Proc. Or do you all think we should not risk that and just do VCP? There are some timing pressures that make VCP not desirable. Thanks for your thoughts!!

Hello -- A client with a profit-sharing plan adopted a restatement of its pre-approved plan document by the April 30, 2016 deadline but implemented a retroactive effective date (2015). I submitted a VCP application seeking approval of a retroactive effective date. In addition to the limits on retroactive amendments under Internal Revenue Code Section 401(b) and applicable regulations, the pre-approved document itself states that the effective day must not be earlier than the first day of the Plan Year (here, a calendar year) that the restatement is adopted. I know that the remedial amendment cycle allows retroactive amendments for "disqualifying provisions" but my understanding is that those provisions have their own effective dates, but the plan as whole should still have an effective date as of the year of adoption. The VCP agent said that there was no issue because the restatement was adopted by the April 30, 2016 deadline and within the two-year window provided in Announcement 2014-16, but he also could not provide an authority as to the overall retroactive effective date. So I'm not sure I agree, but I don't want to belabor the issue either. I mostly just want some assurance that if there is a subsequent audit of the plan, that agent won't disagree with this agent. Does anyone fall on one side or the other as to this analysis? Thanks so much!

You're amazing! Thank you!

Hi -- I am trying to prepare a VCP application regarding corrective contributions. I found a relevant summary of the IRS's Summer 2011 Retirement News for Employers newsletter that appears to be prescribe the correction approach, but it is no longer available on the IRS website. Any idea how I might access this old guidance? Thanks!

Hi, I wanted to bump this question to the top again. I have a similar situation with a client. Does anyone have any insight on whether the lack of notice of the new spouse affects anything? And if not, is the correction simply to pay the current spouse and try to recoup the money from the children?