Not Funding Safe Harbor for 2010

[30Rock]

Does anyone have any creative suggestions for an employer that cannot afford to fund the 3% nonelective for 2010? They are going out of business in 2011 and terminating the plan. They state they cannot afford to fund it for all participants for 2010, and want to know can they just not fund for the owners? I have suggested they file with the IRS under EPCRS and have IRS review their corrections. Has anyone found any other options? What will the IRS do if the employer fails to fund, or fails to fully fund?

Thanks!

[John Feldt ERPA CPC QPA]

For a client who went into bankruptcy (which involved closing their doors, not a restructuring bankruptcy), the bankruptcy trustee suggested that the participants' safe harbor contirbutions be funded by forfeiting a portion of the owners' accounts (the owners agreed to this as well). They filed a 5310 with a copy of the court order that suggested the SH be funded as such. The IRS replied in less than 3 months and approved the method.

If your client is not bankrupt, it seems less favorable that the IRS would allow this, but you can certainly try. You will certainly need IRS approval.

[30Rock]

Did the IRS make you submit under EPCRS?

[John Feldt ERPA CPC QPA]

No they did not, I am guessing that was probably because of the bankruptcy.

[30Rock]

Does anyone know if this question was ever asked during any of the ASPPA IRS Q&A sessions?