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Group: In reviewing a client's ESOP Plan docs adopted 2013 the employer excludes leased employees from participating. However, then I read the payroll and employee census and see a leasing company was the employer of record and issued W2's in the leasing Co name. At the time of adoption there were approximately 22 employees including 2 HCE. IRS has begun to audit the plan and we have already received IDR's asking about the leased employees. My research thus far is as follows: Under TEFRA 1982 Tax Equity and Fiscal Responsibility Act (TEFRA) Public Law 97-248 to curb certain abuses, the 1982 TEFRA act promulgated a law that leased employees are not subject to the same pension rules if the leased employee is covered by a plan maintained by the leasing organization that allows for immediate participation, full and immediate vesting, and employer contributions of at least 7.5 percent of the employee's salary. In other words, Leased employee are subject to employer/plan sponsor pension rules if lease Co doesn't allow immediate participation , full and immediate vesting and employer contributions at least 7.5% employees salaries. Then under TRA of 1986 public law 99-514 seemed to modify the 1982 law by adding the following: Additionally, IRC§414(n)(5)(A) states that the safe harbor provisions do not apply if leased employees constitute more than 20 percent of the recipient's nonhighly compensated workforce. Q: To prevent the plan from being disqualified is there any argument that the leased employees are under control and direction of plan sponsor and the leasing company doesn't provide a money pension plan with immediate vesting and participation? (I may be getting the rules confused) The '86 law seemed to remove the safe harbor and no other work around to prevent disqualification. Q: Would the result change if instead of leasing company there was a PEO? Any cases or other treatise to review for my research would be greatly appreciated. Thank you

Group: Client's ESOP is under audit. Along with a number of affiliated entities. Due to health reasons clients' former TPA resigned in early 2021 and a new TPA was hired. The auditor has inquired about an alleged $22k contribution in the plan year under audit (2018). However, the 5500 does not reflect any contribution. I can't seem to reconcile where the former TPA came up with the $22k of contributions. Nor can I reconcile plan stock forfeitures. We have already informed the auditor that a former TPA prepared the annual reports and 5500's. and are working with the new TPA. I'm well aware that the taxpayer/client may still be held liable for any record keeping fines/tax assessments notwithstanding errors caused by the former TPA. Q: Would you inform the auditor that there were no contributions and the auditor's report inadvertently stated that there was a contribution? This does not change the participants share account values. Also state that the taxpayer is in process with new tpa to amend the report to properly reflect no contributions. Thoughts and comments appreciated.

Group: Plan sponsor adopted an esop in Nov 2021. I'm told they have 200 participants. I note they fall into a large plan. Q: I've read that since the adoption date falls late in year (for short year) they don't have to file an independent audit until the following year (12/31/22 y/e)? I couldn't find a cite on the website where I found this information. Is this accurate? Anyone have a cite they'd be willing to share? Q: How is it decided if the audit is performed as limited scope? Does the IQPA? Plan sponsor? Thoughts and comments appreciated. Thank you

Group: New client is in initial stages of audit of Esop. In reviewing her businesses 2013 ESOP Plan Document I noticed there was no Adoption Agreement prepared for client at time. Or at least none the client could find. And no restated esop documents. There are corporate resolutions and an SPD. Its my understanding that the former TPA (who I'm told was a volume submitter) at the time assisted in drafting clients esop documents. I thought it would be easy to contact them but I don't believe they're still in business. It seems a little late in the proverbial game to draft an adoption agreement corresponding with the provisions of the plan document. As part of our IDR disclosure to auditor would you give copy of old ESOP Plan Document with explanation that the TPA is no longer around to obtain a copy of any adoption agreement? Thoughts and comments appreciated.

Group: Clients 401k has been audited and the TEGE Dept had found 3 errors of the 401k plan. The irs is still in process of issuing its sanctions amount. Q: As the 401k Audit itself only related to tax years 2017 to present, isn't there a SOL for any sanctions outside of the 3 year SOL? Assume no consents to extend were signed Q: If the errors are solely with the 401k plan administrator and outside of the control of the owners themselves, is there a way to determine how the IRS will determine sanctions? One determination is that a participant was never issued RMD's over a period of 3 years. In your experience what amount of sanctions does the IRS usually assess? Thoughts and comments appreciated. Thank you

Group: In general, can a taxpayer/ESOP (retirement plan) who is under audit, still voluntarily self correct matters they deem need correcting? We believe a former ESOP advisor failed to give basic advice on paying off an ESOP note in a timely manner. The TPA allocated stock based on an assumption that the ESOP note was proportionally paid. ie. 20% of note paid in yr 1 and TPA allocated 20% of stock. Also, a former employee of the ESOP TPA may have failed to account for one terminated employee. However, client ESOP is under audit and I'd like to have client file voluntary self-correction with Dept. of Labor and/or IRS EPCRS. Anyone ever been successful in voluntary self correcting while under audit? I note a taxpayer usually wants to make the correction prior to an audit. Thoughts and comments/resources/cases appreciated. Stay Safe. Warmest...

Group, Taxpayer received DOL inquiry and IDR for its ESOP and 401k plan right before Covid. As I began coordinating with service providers, Covid pandemic hit. Of the almost 100+ IDR requests I had only received a handful. The investigator provided us with an extension until end of May. I note the DOL Notice 2020-01 doesn't provide any relief for enforcement actions at this time. I may not be looking in the correct Govt website or other forms of guidance for relief. Anyone know if the Dept of Labor will allow enforcement actions to be suspended while businesses (and my taxpayer/client) are still dealing with the pandemic? Thoughts and comments appreciated. Thank you

(I originally posted this topic in the VEBA message board, but was not able to get much input. I'm hoping someone will see it here, and provide advice/guidance) I have a WRAP document that lists the following plans in Exhibit A as being part of the WRAP: Group Health Plan - A Group Health Plan - B Group Health Plan - C Group Dental Plan Group Basic Life Plan Group Voluntary Life Plan Group AD&D Plan Group LTD Plan This is a large plan (10,000+ participants). The Group Health Plans are funded through a VEBA trust. This results in the plan needing to file Schedule H and have an IQPA audit the plan. The other plans (Dental, Life, etc.) do not flow through the VEBA (but they are part of the WRAP). The employee portion of the premium is withheld and remitted to the applicable insurance companies as would be done in a fully insured plan. As far back as I can see (10+ years), the Form 5500 Schedule H and the auditor's financial statements have only reported assets and activity related to the VEBA trust. My understanding is that they audit the plan as a whole, but the financials only cover the Trust. The question has come up this year as to whether or not that is the correct way to prepare the Schedule H and Financials. Should the other plans be included too? I do not believe it would affect the "balance sheet" portion of the Schedule H because the fully-insured benefits would have a net-zero affect, but it would affect the "income statement". Any help or advice is greatly appreciated.

Have a plan that began in February of 2013. They are just a tad over 100 eligible participants. The IRS website says that "Pension plans with fewer than 100 participants at the beginning of the plan year are eligible for a wavier if they meet the conditions for an audit waiver under 29 CFR." Then right below that it also says "Under the 80 to 120 Participant Rule, if the number of participants covered under the plan as of the beginning of the plan year is between 80 and 120, and a small plan annual report was filed for the prior year, the plan administrator may elect to continue to file as a small plan." The plan did not file in the previous year so does that mean that an audit is required or do you still get a waiver because you have not crossed the 120 participant threshold? A little confusing any direction is greatly appreciated. Thanks, Hal

I understand that filing Form 5500 begins the running of the statute of limitations for an ERISA Plan IRS audit. A governmental DB plan, however, is not subject to the Form 5500 filing requirement. Any leads on what starts the running of the SOL for a governmental DB plan?

For a one-person plan eligible to file 5500-ez or 5500-sf but with total assets under $250,000, what tolls the start of the statute of limitations? It probably would not get audited unless part of a bigger audit, but it might require keeping plan records far beyond the three year period normally in place.

Consider this scenario: An employee-benefit plan's administrator (the plan's sponsor) and the independent qualified public accountant disagree about a point of accounting for the plan's financial statements. The administrator considers its knowledge of accounting superior to the IQPA's knowledge. The IQPA threatens to issue an adverse report. The administrator says "bring it on." The administrator does not fear that checking the "adverse" box at Schedule H's part III would trigger an examination because EBSA and IRS both have open examinations, with teams of examiners using office space in the plan's sponsor's headquarters. Also, the administrator does not fear the IQPA's explanation because the administrator confidently believes the IQPA is wrong. Beyond widening and intensifying the open examinations, is there any other unwelcome consequence that results from checking the adverse box and attaching the report that explains the IQPA's reasons for its adverse opinion?

When a plan does a dependent eligibility audit and does not receive supporting documentation it requests for participants it now assumes may not be covered, what are the rules for removing a covered person or their beneficiary? What documentation can a plan request?

I have a company that manages multiple restaurants. Until 2012, they had one plan (#001) covering all of the restaurants and the plan was considered a small plan for the audit requirement. In 2012, they set up multiple smaller plans (#002 - #005) based on the particular location of the restaurant that the employee worked at. So, at 12-31-12, there was a significant amount of "transfers out" to these new plans. The new plans all have the same EIN (just successively numbered plans, 001..002...003, etc.). Each of the plans have an identical plan document and operate under the same plan provisions. This isn't a controlled group issue because the plans all have the same EIN (one employer). I can't locate anything in the regulations that address the audit requirement in this particular situation. It seems that they broke the large plan into smaller plans to keep from having the audit each year. But substance over form says that these plans are essentially one plan... Has anyone ever come across this issue? If you can help shed some light on this, I would appreciate it. Thank you.