FORMER ESQ.

Argue "mistake of fact" under Rev. Rul. 91-4 interpreting ERISA Section 403(c)(2)(A): The schedule C income was calculated incorrectly (i.e., there was a mathematical error) which caused the 27K contribution in error. Return the 27k minus the $600 (or whatever amount they can defer from compensation under the plan). Need more facts to paint a full picture, but this would be my first line of defense.

Lots of moving parts here. In summary, SH NEC and PS contributions were allocated for 2021 PY, and presumably a corresponding 404 deduction was taken for 2021, but the contributions have yet to be made. At this point, the only way to correct the late contributions is under EPCRS. The corrective contributions plus interest will be made. Question is whether the correction would be an annual addition for 2021, 2022, or 2023 (the year of correction). Under the 1.415(c) Regulations, if we assume that the employer's 2021 income taxes (with extensions) is due on October 15, 2022, then a contribution made by November 15, 2022 would relate to the 2021 limitation year. Likewise, a contribution made by November 15, 2023 would relate to the 2022 limitation year. There is no "double counting" of annual additions that I see in the 1.415 Treasury Regulations. EPCRS, however, says that the correction is an annual addition for the limitation year to which the "corrective allocation relates"--2021 no matter when the correction is actually made. Yes, EPCRS is giving you a freebie. But because you are correcting under EPCRS, its an annual addition for 2021.

I think you are on the right track. If the Plan will fail 410(b) for 2023 because it excludes Company A employees, the Plan should be retroactively amended to 1/1/2023 (not 7/2/2023) to have A adopt the Plan. This is because you are giving the Company A employees a corrective contribution (for a missed deferral opportunity) for the period 1/1/2023 to 7/1/2023. You cannot give a corrective contribution to employees without first making them participants, and they cannot participate unless Company A has adopted the plan. To answer your second question, all Company A employees who would otherwise be eligible to receive a SH NEC under the Plan if Company A had adopted the Plan as of 1/1/2023 should be included in your corrective contribution (missed deferral opportunity). Hope this helps.

The only testing issue I see is determining whether the timing of the amendment is discriminatory under 1.401(a)(4). I don't see this as an amendment to the formula that changes matching contributions, so I think Notice 2016-16 is not an issue.

BG5150: In my experience dealing with the DOL, they would look at this through the following lens: The ERISA fiduciary (Plan Administrator) "messed up" in this case--late contributions, etc... Plan participants should not have to "pay" for the fiduciary's mistake. In their view, this would not be a reasonable expense of plan administration. Others may have a different view, but this is mine. The answer is no.

The calculation of interest for DFVC filings is a settlor expense. How would this be different?

You are correct that the interest itself is a settlor expense, but so is the cost of calculating the interest (late contributions and missed deferral opportunity) and preparing the 5330. Not payable by plan assets.

Plan Doc: Thank you for your response, and my apology for the typo above: It should read "type" as opposed to "time", but I think you figured it out. Moving on to your specific question: Under your factual scenario (no plan termination but reduction or suspension of safe harbor matching contributions), I believe that 1.401(k)-3(g) provides your answer. The reduction or suspension is permissible if S is operating at an economic loss or the more likely scenario (the SH notice for S' plan had "maybe not" language). If so and assuming that the other requirements of 3(g) are met, such as notice, etc... the S plan would still have to pass the ADP test for that year. So, in the sense that you will not be able to preserve SH status for 2023.

Is B's plan a SH plan of the same time as S's plan?

It's prospective only. The 2022 unpaid RMD would be subject to the 50% excise, not the 25% excise tax or 10% excise tax.

I think consulting with an attorney on this specific issue is a good idea. Myself excluded, you can contact me directly, if you would like some recommendations based on where you are located. This is because I know of other ERISA attorneys around the country who have looked into this before in detail.

AlbanyConsultant: Non-union pay to union employees is surprisingly, in my experience, something that happens frequently. It presents an additional compliance challenge as Paul I alluded to: Mainly, to the extent these employees are receiving non-union pay, they cannot be excluded from the non-union plan's 410(b) testing, unless another plan exception applies (i.e., 410(b)'s statutory exclusions). In practice, this means that you will need to convert their non-union pay into hours of service for purposes of determining eligibility, benefits, etc... I have not found much guidance on how to do this, but one possible method is below: Example: if total W-2 compensation (definition of compensation under the plan) is $100,000, and the non-union portion is only $5,000, then about 5% of their hours of service (however that is measured under the plan) would be counted as hours of service for eligibility/benefits/vesting under the non-union portion of the plan. I am sure there are other methods, but the above is purely on my experience.

The question that Plan Doc is asking is not necessarily a 410(b) issue, although it is related. Rather, the issue is whether the eligibility classification (exclusion) for interns passes muster under 410(a). The argument being that the exclusion of interns could be seen as an indirect exclusion based on hours worked, which violates 410(a). I believe that the failsafe language you are referring to does work according to the IRS. Furthermore, I don't see how different eligibility criteria presents a BRF problem under 401(a)(4). If there is a "problem" with different eligibility criteria (assuming the criteria passes 410(a), then it will be "caught" under 410(b), not 401(a)(4) BRF.

It's correct that the CPA would have to confirm that the employment is legitimate. However, I hope that the CPA (for his or her own good) would seek legal counsel on this issue because applicable state laws on minimum employment age are not always clear cut.

Profit sharing contributions are not subject to ACP testing. They are subject to non-discrimination testing under 1.401(a)-4. Your last sentence is correct, though. If the PS formula meets a safe-harbor formula under the 1.401(a)-4 regs, then you pass.