Search the Community

A bit of a long shot here, but here goes: If a plan sponsor had a board resolution in place by the 2 1/2 months after the end of the plan indicating their intent to amend the plan, but the amendment itself has not been signed, can you reflect the "amendment" in the valuation"? Lets assume the board resolution is very clear on what should be changed in the plan.

I have a brand new start-up plan that started 1/1/19. The owner is just now calling me 12/11/2019 wanting to amend the plan to a SH plan because the company did well and he has extra funds to put to work (and not get taxed on). Obviously it is too late for that. And it is too late to change to SH for 2020. BUT... the owner is saying that his accountant, other attorneys and colleagues of his are saying we should be able to back date this and be able change the plan to SH for 1/1/2020 plan year. I can tell you that my Trust Co. and our TPA partner would never go for ever doing something like that. But since the feedback he is getting is that should be okay he thinks there should be no problem doing that, especially if each employee signs off that they received their SH notice. Thoughts/opinions on how to handle? His other question is something I do not know the answer to. He asked if he terminated his plan and went to another company and started a new Safe Harbor plan elsewhere - that would be effective for 2020 - would be allowed to do that??? OR if decided to terminate services with us and convert the plan to a new provider and changing it to a SH Plan - what are the dates and deadlines for that? Could he in fact do that and have it be effective some time in 2020?? Any feedback will helpful! TIA!

We have an existing 401(k) safe harbor plan with one year of service, age 21, quarterly entry dates. Plan Sponsor now wants to exclude certain employees from the Plan (a division of the Plan Sponsor) that would make current participants ineligible for the Plan. The Plan will easily pass coverage. I am sure that this can be done but have a colleague that says these employees will continue to be eligible even if now in an excluded class. Any thoughts greatly appreciated.

I have a client that implemented a Profit Sharing Plan at the end of 2016. The plan document was drafted with the addition of a 401(k) and Safe Harbor feature, to be effective February 10, 2017, as this was expected to be the first pay date from which deferrals would be withheld. The plan sponsor decided to switch platform providers late in the game, requiring all new contract paperwork, and the implementation process in still under way. Now, the expected deferral start date is May 10, 2017. Employees had previously been provided with an SPD and Safe Harbor notice referencing the February 10th date as the date on which they could start deferring. I did not think that we could amend the effective date of the deferrals that was already in a document signed prior to the end of 2016, which left me thinking that this was a deferral failure that was going to be corrected within three months and so I only needed to provide a notice to the employees (there is no match). Questions: 1) The notice requirement under EPCRS for the deferral failure must reference deferral percentages that were to be withheld. Enrollment meetings have not occurred yet so no deferrals have been elected. So, am I going about this all wrong - is this not the way to correct? 2) Is it possible to just amend at this point to change the effective date of deferrals and safe harbor to be May 10, 2017 with no additional notice or correction for the employees? The thing is, I am sure that this happens ALL the time with start-up plans. For a multitude of reasons, the plan may be delayed in getting set-up and ready for deferral submissions or enrollment meetings are delayed. 3) What do you do in this situation where deferrals don't start on the effective date referenced in the plan document? Thank you so much!

I have a db plan(actually db/dc combo) under audit. The agent is suggesting an amendment is required which would increase the db benefits for two nhces. I strongly disagree with the agent's assertion. Is there any harm in arguing why I think the agent is wrong(in other words is the worst case the IRS will just say we are right and you must amend?).. The plan is a good bit overfunded(350k) so the additional benefits(about 45k in value )would not be a hardship and would not create any current contribution liability but why should the ees get a slight windfall if it is not justified?? It is not really fair to the other ees in the combo.. A second question is whether plan audit related fees are properly payable from the plan or are they settlor type in nature?? thank you for any comments...

Say that an ERISA attorney has a plan sponsor adopt a volume submitter plan that has just enough modifications to it to support a determination letter request (intentionally), but not enough to render it an individually designed plan. Then, some time after receiving the letter, there is an an amendment, but not to the modified content. Is the plan sponsor eligible to apply for a new determination letter? We are seeing lots of imaginative ways to get around the usual restrictions on getting a determination letter on a pre-approved plan or an amendment to an individually designed plan.

Ok, I know this one has been covered before, but I am not certain it has been addressed in the following manner. Regarding mid-year amendments to SIMPLE IRAs, the IRS has provided some guidance in the form of an LRM (2005 LRM) and a 2012 Newsletter suggesting that a mid-year amendment is not permitted. However, what isn't clearly addressed is what portion of the code/regulations the IRS is relying on to come to their conclusion as well as what the consequences would be. My thoughts are as follows: Since SIMPLE IRAs are governed solely by IRC 408(p) and Notice 98-4 (the LRM and Newsletter to not qualify as code/regulations), and Notice 98-4 clearly states that an employee must be provided with annual notices (e.g. summary description and right to defer, including right to select financial institution if applicable) prior to November 2 of each year; a mid year amendment affecting the information required to be in such notices would result incorrect notices having been provided and thus, not meeting the notice requirements. That being said, my understanding is that the consequence would be a $50/day penalty (pursuant to Notice 98-4, Q&A section G). Beyond that, I am not aware of any additional consequences formally provided in the code/notice. The SIMPLE IRA fix it guide addresses the situation and simply provides that a reasonable correction should be made. As a result, it would seem to me that if a sponsor was willing to accept a $50/day penalty and make reasonable corrections (depending on the situation), a mid-year amendment could be made. Is there anything I am missing or any other portion of the code/notice for SIMPLE IRAs that I haven't considered that prohibits mid-year amendments? Thoughts are greatly appreciated.

We used the 436 IRS model amendment for a client. That client filed a determination letter upon terminating the plan. The IRS sent an inquiry asking for the amendment that was adopted to be amended to remove the incorporation by reference to the definitions in Sections 1.436-1(j)(1-9). I looked at that section and there is no explained definition. Where can I find that?

We are amending our plan to allow unforeseeable emergencies as permissible payments. Does anyone happen to know whether, after the amendment, a participant can withdraw amounts from before the amendment? Or does the amendment only allow payments of amounts deferred after the amendment? Does it matter if the emergency occurred before or after the amendment? Any guidance would be greatly appreciated. Thanks.

Employer has an existing severance pay plan covering all employees for both involuntary and voluntary separation from service. Plan does not qualify for 2 /2 separation pay plan exception because it pays on voluntary termination as well as involuntary. Lump sum severance benefit is service-based and terms comply with 409A. Plan also provides that employer will pay COBRA premiums (again for ALL employees) for the period used to determine severance (and this is always shorter than COBRA continuation period). They now want to eliminate the health coverage continuation premiums and instead pay an additional lump sum benefit at the same time as the existing lump sum benefit. Not trying to get out of paying employees, but want to make it easier to administer and they envision that the company may stop offering health insurance altogether as it winds down operations. The medical coverage should be exempt from 409A - meaning it isn't deferred compensation because it is a nontaxable benefit (or in the alternative, qualifies under the Medical benefits exception for separation pay plans that limit reimbursements to the COBRA continuation period. So I am thinking that eliminating this benefit and replacing it with a lump sum benefit would not be a substitution of deferred compensation that would result in an acceleration because it wasn't deferred compensation in the first place. Any one see any problems with this approach?

Are corrective amendments permited with a safe harbor plan? I know you can't amend a safe harbor plan (expecially after year end) but what if you have a situation where you need to - does that take you out of safe harbor?

We are terminating a defined benefit plan which has been submitted to the PBGC and the the 60 day period has expired. We are not submitting plan to IRS. Client has determined that cost of providing annuities is too expensive and now wants to amend the plan to allow lump sums elections. Pursuant to PBGC instructions, as long as we are not taking anything away, a post termination amendment is ok. However, my understanding is that the IRS has taken the position that once the termination date is past, the plan cannot be amended other than to implement required interim amendments. Can anyone comment on whether or not this is the case and possibly provide a citation?

Is there a discrimination issue with freezing a CB plan where the only HCE/Key has fully accrued benefits, and the other participants have not? It is a small plan, just a handful of participants, and the owner won't receive any additional benefit accruals, so any contributions will really be going towards the other participants. No accrued benefits would be cut back, but I feel like freezing the plan would disproportionately affect the NHCE since they would be the ones losing out on the possibility of future accruals. But I seem to think that it doesn't matter, since the plan could terminate, in which case the result would be the same. I apologize in advance, my knowledge of cash balance plans is obviously very limited. Thoughts?