document language, redux

[Guest cbclark]

I posted a while back about my document issue: is a 401(k) plan document prohibited from having safe habor language and APD/ACP language? No nibbles.

Now my question is: do any of you know anything about a National Office Internal Guidance directive from 2002 that flatly prohibits both language variations in one document? Thanks.

[K2retire]

I've seen approved documents both ways. Some systems assume that if you select SH, you should not select a testing method. Others assume that you must select current year testing with SH.

[Guest cbclark]

Thanks. I guess my main issue is that I have never had a reviewer tell me the language had to come out because the "benefit was not determinable" and then cite the 2002 internal guidance. If the employer has to give a safe harbor notice every year to retain safe harbor status, where is the "benefit" not "determinable" but of course if I want to get my client a letter I gotta push this particular rock the way the reviewer wants.

[Guest Sieve]

I'm not familiar with the internal directive you mention. But, new regs were issued after 2002, and doesn't the following requirement from Treas. Reg. Sections 1.401(k)-1(e)(7) & 1.401(m)-1©(2) say the same thing: "Similarly, a plan that uses the safe harbor method . . . is not permitted to provide that [ADP/ACP] testing will be used if the requirements for the safe harbor are not satisfied".

I think you can have language for both in a plan, but then you'd have to adopt an amendment indiciating which one you are using for the year. That's what Corbel does with its IDP volume submitter (not prototype style).

[Guest cbclark]

Thanks. I agree that you can't have the ADP/ACP test if you fail to comply with safe harbor; if that happens you are just in a world of hurt. Although you have to have the ADP/ACP language present in the plan to conduct the tests if for example you eliminate the SH match midyear, which you can do. Some level of internal inconsistency there, but I can deal with it. I agree that you should have an amendment in place that says which you are electing each year. The Corbel VS specifically says if you are contemplating a safe harbor some day go ahead and click all the options on the checklist because otherwise to add the safe harbor later you would basically have to restate the plan. All of which says to me that the plan can and should have both language options....

Anyway I would be all fine and dandy with amending the plan to state this plan is safe harbor until it is not, and the ADP etc is not triggered until the SH is not elected. But that won't work. For this one plan, the reviewer wants every reference to ADP etc amended out. The langauge can't be in the plan at all, ever, until the SH is not elected. Then we will have to amend and add all the language back in, a total pain in the derriere in my opinion. Other reviewers, if they have even been bothered by the presence of both sets of language, have said, oh just send an amendment that says all these sections are not yet triggered.....So I am irritated with the official inconsistency! And would like to see the secret handshake document issued by the National Office...but it is secret so I can't see it.

[Guest Sieve]

cb --

I believe that you can access Quality Assurance Bulletins, issued by EP Determinations, somewhere on the IRS website. Those are internal Memos describing how EP will administer certain EP issues. Perhaps the issue you are addressing was in one of those QABs--and you should be able tio get it, if that's what it is.

I'm looking at a hard copy of a QAB right now (QAB FY-1004 No. 5, dated 7/6/2004) describing which provisions can be incoporated by reference in a document, and, interestingly, it says "ADP test generally may be incorporated by reference" except for certain provisions (like definition of compensation, curent/prior year including 3% or actual for current year, and a few others). Maybe you can weasel a change by eliminating the specific ADP/ACP language but keeping an incoporation by reference provisions which is triggered only if SH is not used.

Or, you could trade your reviewer and a third round draft pick for a more-seasoned reviewer . . .

[Guest cbclark]

Would that I could trade in the reviewer! I had his/her supervisor on the telephone, and this person was just as intransigent...I was informed, emphatically, that all the other plans that had gotten letters from other reviewers should not have gotten letters. Oh well. I guess dozens of reviewers are all incorrect and these two are the only correct ones in the bunch. Not.

Thanks for the QAB idea. I will see if that gets me anywhere. I don't know why I am being so stubborn about this, but I am! Maybe the idea of parsing out hundreds, well I exaggerate, many ADP etc references is getting on my nerves.

[rcline46]

Why don't you use a pre-approved document from one of the many vendors - then the reviewer could not make any changes. So - withdraw the application and submit on a pre-approved document.

[Guest cbclark]

Oh that would be too easy....I have frogmarched many of the plans onto a pre-approved document but there are a few special cases where I could not win the battle. So as much as I would like to pull it and redo it (except for the missed deadline of 4/30/2010 for pre-approved plans) that so is not going to happen! Appreciate your idea tho.

[Earl]

I did this on a takeover a while back.

The plan was audited because of the unresolved back and forth regarding disputed integration provisions in a IDP that I withdrew.

The auditor told me the IRS wanted to be sure that the disputed provision was never used.

So if you withdraw a plan prep for an audit.

[Guest cbclark]

WOW. Just wow.

Thanks for the information.