2 plans - one is under audit

[John Feldt ERPA CPC QPA]

An employer with 2 employees has a profit sharing plan and a money purchase plan. The owner was cutting costs by doing everything in-house for the last umpteen years, so neither plan has been restated for EGTRRA, GUST was also done late, and the 415 limits have been exceeded each year for many years now (10% in one plan and 15% in the other: overall 25% of $245,000).

The IRS just sent a random audit letter regarding ONLY the money purchase plan.

This employer is now willing to pay whatever it takes for someone to help him and admits to having handled the plan poorly. The PS and MP plans are not combined for 401(a)(4) or 410(b).

Under section 4.02 of EPCRS: If the plan or Plan Sponsor is Under Examination, VCP is not available.

Under section 5.07(2) it explains what is meant by Under Examination, and it says the plan is considered to be under examination if it is aggregated for 415.

I don't think the PS plan can be submitted under VCP now, due to that language.

Agree?

[ETA Consulting LLC]

I agree. It appears as if the IRS contemplated this exact situation when they wrote the procedure.

Good Luck!

[frizzyguy]

You'll have to ask your client after the audit how much money they saved by moving admin in-house.

[Guest BED]

John:

But is it not only under audit for the 415 issues where it is aggregated? I do not think it is under audit for the late amender issues unless it is aggregated for 401(a)(4), 401(a)(26), 410(b) or 403(b)(12).

Bryan Daum