EBP

Is this a 401(k) plan? If so, you need to look back to the employee's records since the company began or back to the effective date of the plan, if later, to see if the employee ever made deferrals. If yes, the employee may become a participant immediately. The rule of parity only applies to nonvested participants so isn't really relevant in a 401(k) plan. In general, an employer must keep employment records back to whenever is needed to determine an employee's benefit. See ERISA section 209, which states that an employer must maintain benefit records sufficient to determine the benefits due or that may become due to its employees. So practically speaking, that's back to the beginning of the plan. Of course, real life is another matter, but speaking from experience, benefit claims that come up after an employer has lost, archived, or otherwise no longer has access to employee records, and that go back many years are extremely difficult to deal with. (The ones where the original company doesn't exist anymore or has been bought and sold a few times can be particularly challenging.)

In my opinion, you need to have more to go on than "the market was down." Have the client or investment institution provide you with the rate of interest those participants would have received had the matching contributions been invested in their accounts (assuming participants give investment direction, those rates would likely be different for each participant). It's possible (although maybe not likely) that one participant was invested in a very conservative investment vehicle and had a small positive return. If all of those accounts had investment losses, the safest thing to do may be to not allocate interest on the late matching contributions (rather than reducing the matching contributions for the loss, although there may be validity to that argument). There's no requirement to allocate interest if there is none. We have done a few corrections where we did not include interest because of negative returns during the period of failure. We always document an EPCRS correction with a memo to the file that describes the failure; gives a detailed description of what we did to correct the failure, including the process, calculations, and other considerations, if any; and recites which sections of EPCRS we relied on in making the correction. And we attach any pertinent calculations or documentation (such as something showing what the interest rates were for each person). This is very helpful for the client to have in case of audit so they can show that they appropriately fixed an operational failure. It's also helpful in cases where there are personnel changes in a company and the new people are trying to figure out what their predecessors did.

And if the plan was first in existence no earlier than January 1 of the 10th calendar year preceding the year in which the application is filed, you may be exempt from paying a user fee if you meet the eligible employer requirements under Exemption From User Fee in the instructions to the Form 8717.

I agree with Lou S. We have often had clients adopt interim amendments after the plans were terminated (if they were still adopted before the amendment deadline). In most cases, it was because we didn't yet have all the guidance we needed or wanted to adequately draft the interim amendment at the time of termination. I'm talking within the same year as the termination. (We would not terminate a plan and then adopt an interim amendment two years later.) We always make sure to warn the plan sponsor that they must adopt the amendment and that it will be after the termination date so that they understand the importance of signing the amendment when we send it later. If you submit a termination application to IRS, they may require the plan sponsor to adopt an amendment post-termination to bring it up to date with current law provisions that they don't think have been included so clearly a plan can be amended after the termination date. I do not think a VCP application is necessary.

It's always safer to err on the side of the participant, especially since in most cases, the losses will be minimal and therefore the cost to the employer also minimal. Generally, it's a small price to pay to appease the participant and the IRS. But maybe your facts are different in this case. I would think that in general it would be easier to do an EPCRS amendment to let those employees in early and not worry about returning money or any investment losses. Just amend it and leave everything else alone. Much simpler and less time-consuming for everyone.

In order to use the safe harbor correction method in EPCRS Appendix A, ALL of the following conditions must be satisfied (conditions greatly abbreviated and simplified): 1. correct deferrals begin 2. notice is given 3. corrective allocations are made Since the participant has terminated employment, you can't satisfy #1, which means you can't satisfy #2 either. Since you don't satisfy all of the conditions, you can't use the safe harbor correction method.

Yes

This is a question every cycle. For the last restatement cycle, IRS allowed you to use a retroactive effective date OR the the first day of the plan year in which the restatement was signed. (We were told that directly by the volume submitter coordinators.) That was a little confusing. We mostly used the latter except for a couple of particular cases where there was a compelling reason to go back six years. When we had our nonstandardized plan approved by IRS for this cycle, they specifically said that the restatement effective date could NOT be earlier than the first day of the plan year in which the restatement was signed. In fact, we were required to add that as a parameter in the document. So, for calendar year plans, the ones we restated last year were effective 1/1/21 and the ones we restated this year were effective 1/1/22. We've found that for changes in the document that were previously covered by an interim amendment, there's no need for a special effective date in the restatement. For clients who are adopting new provisions in 2022, we add the effective date to the pre-approved language. IRS has said that adding an effective date to a provision is not considered to be a modification to the pre-approved language. For example, we have a client on a calendar year plan who is adding Roth deferrals effective 7/1/22. The restatement is effective 1/1/22 but we inserted a 7/1/22 effective date for the Roth deferral provisions.

It's pretty common for large plan providers not to have interim amendments or termination amendments ready to go at any time a client decides to terminate a plan. We've done a number of good faith termination amendments for other providers' pre-approved plans to bring them into compliance with current law before they terminate and we've had clients execute those amendments after the termination date as well. In fact I can't recall a time when such an amendment was available from the provider. Because we're a law firm that has its own pre-approved plans as well, we generally have some type of termination amendment template that we continue to update as guidance comes out and that we can individualize for another provider's plan. I realize it becomes more difficult when you're not the provider drafting the plans and it can be time-consuming to review the RA lists and draft language for an amendment. As Peter points out, the amendment won't have reliance regardless of who prepares it. And I'm guessing that's why the risk-averse large providers don't provide one.

According to EPCRS, it's eligible for SCP. We've done an SCP amendment for the required hardship withdrawal amendment for at least one of our inherited plans.

A terminating plan must be amended to comply with current law. Even if the plan is up-to-date, as a best practice, we always do a termination amendment. Then there's no question if the IRS comes along later. At a minimum, the amendment indicates the termination date, says that no employees become participants after the termination date, says that no more contributions will be made with respect to compensation received or service performed after the termination date, and that all participants are 100% vested as of the termination date. For plans terminating in 2020, 2021 and 2022, the termination amendment must also include SECURE and CARES updates. And counsel should provide the amendment.

To clarify rocknrolls2 response, you don't need to do any interim amendments to the money purchase pension plan before it is merged into the profit sharing plan. The updated language in the profit sharing plan will also apply to the money purchase pension subaccounts in the merged plan as applicable. You don't say if you're talking about a pre-approved plan merging into another pre-approved plan but I'm assuming that since you refer to the Cycle 3 restatement deadline. Since the Required Amendment lists apply to individually designed plans, I don't think you need to worry about checking those if you're talking about pre-approved plans. We also did a number of these mergers years ago when MPPPs were no longer needed to increase annual contribution amounts.

There is no DOL fee associated with filing under VFCP. You should be able to ask for a waiver of the excise tax in the VFCP application. If waived, no excise tax is due and therefore, no 5330 is required.

See EPCRS, App. A, section .05(9)(a) for the special safe harbor correction method for employee elective deferral failures that do not exceed three months. The failure can be corrected without a QNEC if the conditions are satisfied. According to the DOL, the DOL calculator can only be used if you file under VFCP. If you don't satisfy the conditions for the safe harbor correction method and you need to calculate the earnings rate, EPCRS is clear on the earnings rate to use. Assuming the plan allows investment direction, EPCRS (App. B, section 3.01(3)) says to use the rate applicable to the employee's investment choices for the period of failure. Most of the time, this is relatively easy to get from the investment provider. For administrative convenience, if most of the affected employees are NHCEs, you can use the rate of return of the highest-performing fund for the period of the failure. And if the employee failed to make investment choices, then you can use the rate of return for the plan as a whole.

Another possible consideration - does the fact that the investment adviser is retired mean that the adviser still keeps up with the current market in the same way as she did before retirement and is therefore still qualified to evaluate investments and give advice? Does she still have access to all the resources she had before to evaluate investments? Generally speaking, it seems to me that an investment adviser needs to be "in it" full-time to give good advice. This is one of the main reasons that the typical plan committee member hires an adviser - because the committee member is not able and doesn't have time to evaluate investments full-time. I think of my uncle, who is a retired financial adviser, who does not even give investment advice to his kids because "if the market goes up, the advice was good" but if the market goes down, the advice was bad and they'll be looking for someone to blame. If he's not getting compensated, he doesn't want to take that risk.

I'm missing where the EOB says no ACP testing, even if it passes easily.

Yes. You can use elapsed time.

What Zeller said. Perfectly acceptable correction under EPCRS.

I would think that the nonelective contribution would factor into a "fully-informed decision," too. Are you saying people will remember that 3% but would forget about the match? No. The participant doesn't need to do anything to get a nonelective contribution. He does have to defer a certain amount to get the match. If the participant doesn't know what the match is ahead of time, he may not elect to defer enough to get the full match. Knowing what he has to defer to get the full match may influence his deferral decision.

So that employees are able to make a fully-informed decision about deferring for the upcoming year based on the match. Yes. For this reason, we continue to issue safe harbor notices for all of our clients, whether they are making safe harbor nonelective or matching contributions.

EPCRS App. A .05(5)(a) applies. You are not eligible for the safe harbor correction method contained in App. A .05(9)(b), which says that "in order to use this safe harbor correction method, the Plan Sponsor must satisfy the following conditions:....(ii) Notice of the failure...is given to an affected participant not later than 45 days after the date on which correct deferrals begin..." So calculate the 50% QNEC plus earnings, make the QNEC for the participant, and move on. It shouldn't be a lot.

Long time reader - first time post. We have a profit sharing plan that terminated and is in the process of distributing assets. Unsurprisingly, there are several unresponsive participants, as well as one missing participant. We are reviewing options for disposition of those account balances. We have completed the IRS/DOL requirements for searching, sending certified letters, etc. Under the DOL safe harbor, the preferred method of distribution is to roll over account balances to IRAs the employer establishes for the missing/unresponsive participants. In the past, we have used Millenium Trust (MT) for such rollovers. In 2017, the PBGC expanded its missing participants program to include defined contribution plans. We are considering whether this is a good or better option than IRA rollovers and are wondering if anyone has used the PBGC program for a defined contribution plan. If you have used the program, do you have any thoughts on or experience with their process? And why did you choose to use it instead of IRA rollovers? If you haven't used it, did you consider it? What were your reasons for not using it? Here are some pros and cons we've considered: IRA rollover - Pros: well-known and well-used provider, purports to comply with ERISA safe harbor, participant can contact IRA provider and choose among investment alternatives or roll over to another plan/IRA Cons: must send notice to participants at least 30 days before transfer, not sure how safe the safe harbor is PBGC program - Pros: no prior notice required (probably a good idea to notify participants, but not necessarily before transfer) Cons: program is new and unknown, there's only one investment option for participants (participant would have to take distribution, presumably in cash, and roll over to IRA to invest differently and also come up with the mandatory withholding amount out of the participant's own funds if the participant wanted to roll the entire amount), no rollover option (as far as we can tell) Another consideration is fees. MT charges fees to the participant, while the PBGC program charges fees to the plan sponsor (and the PBGC fee is lower than the IRA fees). Presumably, a participant could argue that the plan sponsor chose the IRA provider because the plan sponsor didn't have to pay any of the fees. But the plan sponsor could argue that they chose the IRA provider because it satisfied the DOL's safe harbor. Thoughts on pros and cons?