Paul I

Here is some information from the DOL about retrieving forms earlier than 2009: If you are unable to find a filing that you believe has been submitted, please contact the EFAST2 Help Desk at 866-463-3278. Form 5500 Bulk Image service provides bulk downloading of filed Form 5500 Annual Returns in PDF Format. This service is intended to be used by developers who would write scripts to automate the downloading of files. For plan years 2008 and prior, this service includes the images (including forms, schedules, and any attachments) of the filing. For 2009 and later plan years, this service provides the images (attachments) and populated facsimiles (forms and schedules) of the filing. For access to the Form 5500 bulk image service, email foiarequest@dol.gov with the subject "EBSA Form 5500 image service request" and provide your contact information in the body of the email.

I am not an attorney, but I do have a recollection that the issue came up with a client many years ago of whether a former participant is entitled to plan disclosures. With a little research, I found the case - Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989). Part of the results included (edited for relevance here) 2. A "participant" entitled to disclosure under § 1024(b)(4) and to damages for failure to disclose under § 1132(c)(1)(B) does not include a person who merely claims to be, but is not, entitled to a plan benefit. [The] definition of a "participant" as "any employee or former employee . . . who has a reasonable expectation of [having] a colorable claim to vested benefits. Moreover, a claimant must have a colorable claim that (1) he will prevail in a suit for benefits [.] This view attributes conventional meanings to the statutory language, since the "may become eligible" phrase clearly encompasses all employees in covered employment and former employees with a colorable claim to vested benefits, but simply does not apply to a former employee who has neither a reasonable expectation of returning to covered employment nor a colorable claim to vested benefits. Congress' purpose in enacting the ERISA disclosure provisions -- ensuring that the individual participant knows exactly where he stands -- will not be thwarted by this natural reading of "participant," since a rational plan administrator or fiduciary faced with the possibility of $100-a-day penalties under § 1132(c)(1)(B) for failure to disclose would likely opt to provide a claimant with the requested information if there were any doubt that he was a participant, especially since the claimant could be required to pay the reasonable costs of producing the information under § 1024(b)(4) and Department of Labor regulations. I leave up to our BL legal colleagues to provide input on whether or how this case may be applicable to this situation.

This does look like language from the ASC Adoption Agreement. @ratherbereading if you look in the Basic Plan Document on page 33, you will find there are 4 different methods to allocate a Targeted QNEC. The language gives a fair amount of details for how each method works.

The true-up is a contribution that results in the participant receiving the match promised under the plan using the match formula. If the participant has been given more match than due using the match formula, that is an excess amount and should be removed from the participant's account. There is no need to create a new term ("true down") to describe the situation.

When a loan is considered offset and the consequences of how the loan offset is treated can get complicated. I suggest reading through the examples in § 1.402(c)–2(g)(5) I believe that if the Loan Policy says the loan will be due and payable upon termination of service, the rules in § 1.402(c)–2(g)(4) will govern and the loan will be offset upon termination of employment. One complication to note is if the loan offset is within 12 months of the date of termination of employment, then it is a qualified loan offset which give the participant the ability to rollover the loan offset by the time the participant files their tax return for the year. If the loan offset is not a qualified loan offset, then the rollover must be done within 60 days. Warning - working straight through all 7 examples in the reg is hazardous to mental health.

@Peter Gulia your question highlights what many do not consider when hiring a search firm or launching a search for good addresses and for missing participants. A participant with a bad address or who is missing is still a participant with an interest in the plan. Plan fiduciaries are charged with acting in the interests of participants, and plan fiduciaries should have an understanding about the steps to be taken once an address or a missing participant is "found". I use quotes because, while the initial search results often are successful, a significant percentage of the initial search results are only the beginning of what can be an involved and tedious process. Notably, most search firms offer different levels of search services. The basic search scans publicly accessible databases. The next level of search scans databases where the search firm has privileges to access the data (and commonly the search must pass a level of scrutiny that they have adequate security in place for managing the search results and have made representations about how the search firm will use the data). The results are communicated to the plan sponsor or a plan service provider. Many of the search firms offer a service where they will send a generic letter to the individual's address that the search has found and provide information in that letter about who the individual should contact. This contact may be someone at the client, or possibly someone at a service provider for the plan (for a fee). If the individual initiates contact, the client or service provider should have sufficient information about the participant to be able to validate the contact. The plan fiduciaries should be mindful that the search firms are service providers to the plan. If the plan contracts with the search firm directly, then the plan should have service agreements in place that cover the scope of services and fees. Given that the expenses of resolving a bad address or finding a missing participant may be disproportionately greater than the value of the participant's benefit of the plan, some plan fiduciaries set parameters for adjusting the level of search services for different groups of participants. That being said, what happens next when these initial efforts do not reestablish contact with a participant and there is reason to continue to pursue the effort, often leads to much more complicated scenarios. For example, the search may reveal that the participant: is deceased and may or may not have designated beneficiaries, is incarcerated, may have legally changed names, has moved outside of the US, has been declared missing or deceased, or many other situations that are not limited by any stretch of the imagination. The larger the plan, the greater the likelihood of these circumstances coming up. These are topics that can take us far beyond the original post.

@Peter Gulia If it understand correctly, plan fiduciaries are considering removing funds from the plan's investment menu and implementing a brokerage window because some of the participants want to continue to own those funds. Removing a fund from a plan's investment menu typically is a result two situations. One situation is when very few participants choose to invest in a fund and the fiduciaries wish to replace the fund with a one that will be attractive to more of the participants. This may be a very good reason to put in the SDBA to allow these few participants to continue to invest in their favorite fund. The other situation is when a fund in removed for noncompliance with the plan's investment policy statement. This has the potential to draw a complaint from a participant that continues to hold the fund in the SDBA and then experiences extensive losses in their account. (I have seen this happen with mutual funds that focus on an industry sector.) This touches on the topic of what is the responsibility of the fiduciaries to inform participants if the fiduciaries have knowledge that something is amiss. Hopefully the fiduciaries at least would communicate to employees the reasons why funds are removed from the plan's investment menu and could counter the complaint with that communication.

My personal opinion is the tasks listed in your last 2 paragraphs are the minimal requirements for the plan fiduciaries and for plan reporting. There are certain participant behaviors within the SDBA that can be detrimental to the participant's accounts. For example, most mutual funds offer varying share classes of the same fund and each share class has a different fee structure. A participant may be able to invest in a share class of a fund available in the plan's mutual fund menu that has the lowest fees, but the participant invests in the same fund in the SDBA in a class with higher fees. A fiduciary may discern that this is happening by comparing the assets held in the SDBAs against the funds in the investment menu. If this reveals that participants are paying the higher fees, the fiduciary may want to provide at least some notice or educational material to participants pointing out how to evaluate fund expenses. Another example is when participants trade in funds that have fees for short-term trading. Typically, funds that have these fees apply them when shares held less than 30 days. Participants who behave like day traders can rack up fees solely based on their trading frequency. There should be reporting about these fees that could alert the fiduciary that trading frequency is an issue and, again, the fiduciary may wish to provide some education. While a plan fiduciary may not be held accountable for a participant's mishandling of their assets, some may argue that a fiduciary knowing these behaviors are occurring creates an obligation for the fiduciary to act. As a reaction to this notion, some plans ask participants to take a test about the fundamentals of investing before they are allowed to have an SDBA.

The original post dealt with 415 compensation and your post references 414(s). Not a big deal since 414(s) generally includes the 415 definitions and more. Note that there are multiple 415 definitions and this is an example where the treatment of fringe benefits get murky. One 415 definition includes "Medical or disability benefits as described in IRC Sections 104(a)(3), 105(a) and 105(h), but only to the extent that these amounts are includible in the gross income of the employee. Treas. Reg. 1.415-2(d)(2)(iii)". Another definition excludes "Medical or disability benefits as described in IRC Sections 104(a)(3), 105(a) and 105(h), but only to the extent that these amounts are includible in the gross income of the employee. Treas. Reg. 1.415-2(d)(2)(iii)" as long as taxable NQSO and moving expenses also are excluded. You may want to decide what you would like to see included or excluded and then browse the available definitions of compensation to see what comes closest to an acceptable definition.

@RatherBeGolfing raises some of the operational issues that the client must understand fully and be able to set the expectations of participants on how the SDBAs will work inside the plan. Ascensus and Schwab each have a lot of experience with SDBAs inside plans and they also have links to share data electronically. While that sounds wonderful, there remain complications for recordkeeping the plan. One of the bigger challenges stems from allowing multiple contribution sources to be invested in the SDBAs. There is potential for a contribution source to be pre-tax or Roth. Each source may have differing in-service withdrawal provisions, differing vesting, differing loan availability and other variances in features. When recordkeeping a plan that uses a menu of mutual funds, each transaction be it a contribution, distribution, exchange, dividend, new loan, loan repayment... can be labeled with a plan account (deferral, NEC, match, rollover, ...) and the mutual fund in which the transaction occurs. When there is what @RatherBeGolfing termed "shadow posting", the recordkeeping treats the SDBA as if it is a single investment. The identity of the mutual fund is lost. When recordkeeping with a menu of mutual funds, the price per share of each fund is known after market close and before market open. Depending upon the frequency in which the market value of the SDBA is sent to the recordkeeping system, the "price" of the SDBA investment may not be known within the menu of mutual fund's time frame. The plan should not allow participants to grant trading privileges to brokers or financial advisers that are not approved by the Plan Sponsor. Allowing participants to choose advisers of their choice is a recipe for chaos, and could lead to questions over who is controlling the investment of plan assets. The plan audit should not be dramatically impacted by the SDBAs. Schwab and the trustee both should be issuing reports that include all of the detail needed by an auditor with experience auditing SDBAs. The Plan Sponsor should vet the auditor to confirm that the auditor does have this experience of the cost of the audit could skyrocket. I share @RatherBeGolfing's concern about who is providing compliance services although my concern is driven more by the competence of who is providing the services rather than by having SDBAs as an investment option. Note that the proposed arrangement for the SDBAs is relatively simple compared to some of the plans I have recordkept. For example, this arrangement: uses only one brokerage firm and participants do not get to open an account at the brokerage of their choice' restricts investments to mutual funds and participants cannot invest in stocks, bonds, CDs, ETFs, ETNs, gold, annuities...; does not allow trading in options; does not allow investing in assets that do not have a readily determinable value such as real estate, LPs, private placements, art... The advice to the client is to know the details, prepare written policy (including dos and don'ts), and communicate clearly to participants. Some plans go so far as to have a participant sign a representation that the participant understands the policy.

This may help clarify things: "Announcement 2014–16 Issuance of Opinion and Advisory Letters for Pre-approved Defined Contribution Plans for the Second Six-Year Cycle, Deadline for Employer Adoption, and Opening of Determination Letter Program for Pre-approved Plan Adopters The Service will soon issue opinion and advisory letters for pre-approved (i.e., master and prototype (M&P) and volume submitter (VS)) defined contribution plans that were restated for changes in plan qualification requirements listed in Notice 2010–90, 2010–52 I.R.B. 909 (2010 Cumulative List) and that were filed with the Service during their second submission period under the remedial amendment cycle under Rev. Proc. 2007–44, 2007–2 C.B. 54. The Service expects to issue the letters on March 31, 2014, or, in some cases, as soon as possible thereafter."

What they can or cannot do and how much can be allocated to each member depends upon how the LLC is taxed. Is the LLC taxed as a partnership, S-corp, or C-corp? Since you mention guaranteed payments and did not mention W-2s, I would guess taxation as a partnership. On the other hand, distinguishing between compensation and profits suggests that taxation as a corporation is a possibility. Guessing and not knowing could be the reason there have been different answers.

@ScottCPFA there was a time when the loan interest on loan repayments to the plan was tax deductible (as was credit card interest paid and various other interest payments). For the most part, the only interest repayment that has remained even partly deductible is mortgage interest. If the current situation is a bur under your saddle, it would be a relatively simple calculation on a spreadsheet to show that the interest repayments are artificially high. The agency who most likely would be responsive to you would be the DOL since they would view it as a prohibited transaction. Good luck!

I am not an actuary but I do share several clients and have close working relationships with actuaries. One of the challenges is most companies who have a Defined Benefit Plan or a Cash Balance Plan also have a 401(k) Plan. One strength in all of the relationships is we work together with the actuaries to service the client. A big part of our role is educating the client about the differences between their DB/CB plan and their 401(k) plan. Clients struggle with the notion that a participant with an accrued benefit in a DB/CB plan does not have assets in the trust that essentially are earmarked for an individual participant and the participant cannot direct how the assets underlying the accrued benefits are funded. Clients also struggle with the concept of funding requirements ranging between a minimum and maximum funding level. They also struggle with the concept of a maximum deductible contribution. When working with the actuaries, we welcome their participation in discussions with the clients where we collectively explain the differences between types of plans. One task that we perform for the actuaries is collecting the data they need to do their magic. This includes collecting and validating census data, and confirming that the data the actuary needs to apply the service and compensation data is accurate. We gather and report to the actuaries asset information. We pay special attention to details that the actuary needs such as dates of deposits of contributions and dates of distributions. We will facilitate gathering participant elections concurrently for all plans. While we could say this work that we do is the actuary's job, not ours, we have found that having the client work with a single contact avoids a lot of confusion on the part of the client, payroll and their accountants. Yes, we do get paid for our efforts. To summarize at a higher level, we look at what it takes collectively for us and the actuaries to service the client's plans, we do the tasks that are well within our skill to do, and we defer to the actuaries on those services for which we are not qualified to do.

Yes. I have seen this scenario several times. I also have seen where the seller's plan was terminated after closing and participants received distributions. We filed a VCP and worked with the IRS to get the client what everyone agrees was a very reasonable solution.

@30Rock you can terminate the Company B plan before the sale but cannot distribute while the employees are still employed by the controlled group. After the closing, the Company B employees are no longer employed by the controlled group so you can distribute from the terminated Company B plan.

Start with a little housekeeping. Have you confirmed that the plan document restricts the hardships to the IRS Safe Harbors.? Keep in mind that preapproved plans had an Interim Amendment to update the plan to conform with final regulations, so look beyond the original Adoption Agreement to find what was elected in the Interim Amendment. (If the recordkeeper adopted the Interim Amendment on behalf of all of its clients, there should still be a copy of the amendment in the plan's document files.) Many of the Interim Amendments included some language like "for any other event that the IRS recognizes as a deemed immediate and heavy financial need Hardship distribution event under ruling, notice or other guidance of general applicability" which may provide so wiggle room for interpretation. Unless you are acting as the official Plan Administrator, it will be up to the Plan Administrator (who likely will value your input) to make the decision.

You are going to need additional information about Company B and the Company B plan. It sounds like the Buyer is buying the stock issued by Company B as a standalone entity within in its controlled group, and Company B is sponsoring a plan that covers only Company B employees, and no employees of any other company in the controlled group participate in the Company B plan. If all of the above are true, then Company B can terminate its plan before the closing date of the acquisition, Company B's employees would fully vest. On or after the closing date, the participants in the Company B terminated plan would be able to rollover their accounts to the place of their choosing including into the Buyer's plan. This would not be true if the Company B employees were participating in any way in the plan sponsored by another company within their controlled group. Also note that the Company B accounts could not be moved by an asset transfer or merger into the Buyer's plan, but would require the former Company B employees to choose to make a rollover into the Buyer's plan. It also is worth noting that a plan termination and the distribution of accounts are different events and it is the plan termination that must be done before the acquisition. The distributions will occur after all of the recordkeeping for the Company B plan is completed which will not happen until after the closing. This is one of those situations where one small slip up can turn into a widespread disaster. Given some of the nuances, the strategy for addressing the Company B plan should be worked out in detail before the closing date, and reviewed by legal counsel with experience with these situations.

SEP are excluded from calculating the $250K threshold because the SEP is considered an IRA. The 5500EZ instructions say to "You should use the total plan assets as listed as of the end of the plan year on line 6a(2) of this form to determine whether the plan(s) assets exceed $250,000. If an employer maintains one or more one-participant plans, the total assets of all one-participant plans combined must be counted towards the amount of $250,000." Since SEPs don't file a 5500 EZ, the SEP assets are not included in the determination.

You can get there. I suggest you start here https://www.efast.dol.gov/iFileLanding/Landing.html Be sure to read everything. There are a lot of steps which means there are lots of opportunities to get something not quite right. Unless there is a business reason for being in a rush, waiting for your reporting system to be available likely would be a better use of your time.

You left out the answer to the most fundamental question - is this a stock sale or an asset sale?

@30Rock there is set of administrative steps that a plan must take to administer the cash-outs properly. If the plan has in fact followed those administrative steps, that will help support a position that the plan was operating intentionally to apply the cash-out rules. You do not appear to have an issue with cash-outs for participants with vested balances of $1,000 or less. For cash-outs of vested balances that are over $1,000 and under the $5,000 (or $7,000 or some other lower limit), the plan should have sent a notice or letter to the participant and the 402(f) notice that the participant needed to take action before a specified deadline (typically at least 30 days). This should include an explicit statement that the balance will be rolled over to an IRA if the participant does not respond by that deadline. If these administrative steps are followed and everyone elects a direct distribution, there is no issue. If these administrative steps were not followed, then the plan has an operational issue regardless of what are the plan provisions. If nothing else, the plan should begin operating according to the cash-out rules. As far as any sort of correction, it is hard to overlook the fact that the participants received their vested account balance. These are not overpayments. It is hard to overlook that each participant had the opportunity on their own initiative to rollover the distribution to an IRA within 60 days. It is hard to overlook that participants who did not rollover paid taxes on the distribution. If any amounts were returned to the plan so the plan can make a rollover to an IRA, the participant would have to file an amended tax return to try to recoup the taxes they paid previously. It is hard to overlook that the amounts in question are relatively small. The plan should consider all of the above in formulating a "correction". None of this is intended to imply that the plan should brush aside the issue. The plan should acknowledge any operational error and take immediate steps to operate the plan correctly.

@Tom is your question coming solely from the standpoint of the plan document, or is it more from the standpoint of plan administration? From the standpoint of the plan document, I am not aware of any of the major Mass Submitter having issued a SECURE 2.0 amendment. From the standpoint of plan administration, several recordkeepers have notified their plan sponsor clients that they will apply default administrative decisions to the plans for which they provide recordkeeping services. The most common provision I have seen in increasing the cash-out threshold from $5000 to $7000. It remains up to the plan sponsor client to request an override of the default. If any clients have made affirmative, documented administrative elections of SECURE 2.0 choices, then these choices should have been clearly communicated to all employees. These communications technically are not SMMs given that an SMM discloses a modification to the plan documentation. Nevertheless, it is important that plan sponsors do communicate the changes to employees as if the plan was amended.

@metsfan026 your suggested approach of using a discretionary match is the simplest approach in terms of implementing and communicating to employees, and as you noted, assuming it passes necessary testing. There are many paths to getting to (or very close to) the desired result, and the more steps needed for a path to work, there is an increasing risk of introducing operational issues when defining eligibility for who gets the additional match or contribution, when they get it and how much they get. Part of the conversation should involve an assessment of the risks. For example, a match and a profit sharing contribution are tested separately for coverage (unless using ABT which has its own issues like the nondiscriminatory classification test). A starting point is to know (or have a very good estimate) of the number of HCEs that are in the new group. If there are none, use discretionary match approach and appreciate the simplicity. If there are very few HCEs in the group, consider the impact of excluding them from getting the one-time bump in the match rate. There may be ways to keep things calm with a bonus unrelated to the plan. If there are a lot of HCEs in the group, then get as complete a census as possible to be able to model the alternative paths. At this point, you need to let the client know of the potential complexity of the paths forward and that you will charge a fee for these services. Start with the discretionary match. If that isn't workable, try the profit-sharing formula (although if the match didn't work, this approach will likely have similar compliance issues). If neither the match or profit-sharing approaches aren't workable, likely it will be do to coverage, so consider the cost of adding in additional NHCEs who were in the new group but not deferring into the calculations. The worst case scenario is implementing an approach without considering the potential compliance risks and finding out after the fact that the plan fails a compliance test. The cost of correction will almost certainly exceed the cost of making an informed decision beforehand.

Here is a fact sheet that will give you details about how abandoned plans are handled. It includes information on how to contact the Abandoned Plan Program at the DOL. https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/fact-sheets/abandoned-individual-account-plan They determine if the plan is abandoned. If it is abandoned, they arrange for a QTA to wind down the plan.