Rena Breeding

Can the employer change their mind on how to correct the testing? We are still within the Plan Year(2020) after the Plan in which we failed testing (2019). What if the HCEs return the refunds and the Employer makes a QNEC for the Non-Highly Compensated employees sufficient enough to pass testing? I thing this would be a viable option. Thoughts?

I have a new client referred to me by a CPA. Two TPAs ago, they were filing a Defined Benefit (DB) Pension Plan (Plan #001) and a 401(k) Plan (Plan #001 (should have been #002 based on effective dates)) for the same Employer/Plan Sponsor. The DB plan terminated and was distributed in 2016. A final 2016 filing was never completed. Filings for 2014 & 2015 were never filed for the 401K Plan. I'm thinking that we probably need to amend the filings for the 401k Plan as #002 (and plan document) to get the system cleaned up along with the 3 delinquent filings for the two plans? Would y'all agree? Thanks.

Yeah - I thought that they were SOL too. I'm grabbing at straws. I think they were just told to sign the new plan document and did not know one way or the other that the document was changed. I will ask them if they want to consider a VCP filing. Thank you both for responding and sharing your thoughts. R

A CPA asked me to review a client's ADP testing. They left one TPA for another TPA in 2018. The plan passed testing in the past because it used the "Top Paid Group" election. The new TPA omitted the "Top Paid Group" election in the plan document starting in 2018 and elected to use prior testing year's results. For 2018, the plan passed since it was using 2017 testing results. March of this year, the TPA refunded ALL deferrals for 2019 stating the plan failed ADP testing and the client did not know the checks were being issued. The checks were just issued and sent out. There was no discussion regarding QNEC or anything else. This might be a stretch - but under EPCRS (Rev. Proc. 2019-19), Section 6.02, is it possible to change the method that was used to correct the testing for 2019? Stating the principal to keep money in the plan? We'd ask for all the refunded money returned and the client would put in the $2,759.71 QNEC to the one NHCE who did not defer based on testing not using the "Top Paid Group" election. That would be $69,000 put back in to restore the accounts and the HCEs keeping their tax savings. We are definitely changing the Plan to have safe harbor in 2020 & 2021 forward. No one ever explained Safe Harbor to them - they are interested.