khn Posted April 29, 2014 Posted April 29, 2014 A plan converted to a us at the end of 2012. A large forfeiture balance ($200k+) was part of the conversion but we haven't been able to get any detail on what it consists of from the prior recordkeeper. The plan was using forfeiture funds throughout 2013 to offset their match as per the plan document but still has some funds left over. They have a large match coming up this quarter and would like to use the remainder of forfeitures to offset the match and zero out the account. Can that be done as a self correction method? they are hesitant to allocate to participants without good historical records, they'd like to use up the account and be clean going forward.
BG5150 Posted April 29, 2014 Posted April 29, 2014 pad your bill! QKA, QPA, CPC, ERPATwo wrongs don't make a right, but three rights make a left.
khn Posted April 29, 2014 Author Posted April 29, 2014 Do you forsee any issues because the forfeitures will be used in 2014 but may be left over funds from 2013 and 2012? it would literally be impossible to accurately reallocate forfeitures back to participants from those years because we don't have good records. I'm thinking this is the best way to self-correct and don't want them to have to file for VCP if this would be acceptable.
BG5150 Posted April 29, 2014 Posted April 29, 2014 Does EPCRS even address the forfeiture/suspense account directly? Do you think you could self-correct? How long has it been going on? Significant errors cannot be SCP'd after 2 years (I think). Could this be considered insignificant? Section 8.02 gives some parameters to consider. QKA, QPA, CPC, ERPATwo wrongs don't make a right, but three rights make a left.
John Feldt ERPA CPC QPA Posted April 29, 2014 Posted April 29, 2014 Was it a transfer of excess assets from a terminated DB plan? If so, it can be allocated just like an employer contribution over a period not exceeding seven years. you'll need to know when it got there.
masteff Posted April 29, 2014 Posted April 29, 2014 Semi-recent informal guidance on pages 4-5 here: http://www.irs.gov/pub/irs-tege/rne_spr10.pdfPer EPCRS: "The last day of the correction period for an Operational Failure is the last day of the second plan year following the plan year for which the failure occurred." So you're open to self-correct on monies forfeited in 2011 or later that should have been used up in 2012 or later.Based on what records you have, is it within reason to conclude that the balance in the forfeiture account on 1/1/2014 consisted of monies forfeited in 2011 or later?Frankly speaking, unless you're certain they were open to self-correct for the amounts used in 2013, why is the 1st quarter of 2014 different?My personal opinion which is not based on anything formal is that the IRS isn't going to slam them after the fact for taking an extra quarter to reduce the forfeiture balance in a manner permitted by the plan document. Kurt Vonnegut: 'To be is to do'-Socrates 'To do is to be'-Jean-Paul Sartre 'Do be do be do'-Frank Sinatra
ESOP Guy Posted April 29, 2014 Posted April 29, 2014 pad your bill! You give that advice a lot. Should your client's be worried?
BG5150 Posted April 30, 2014 Posted April 30, 2014 pad your bill! You give that advice a lot. Should your client's be worried? Nah. The money is coming from the forfeiture account! QKA, QPA, CPC, ERPATwo wrongs don't make a right, but three rights make a left.
ESOP Guy Posted April 30, 2014 Posted April 30, 2014 pad your bill! You give that advice a lot. Should your client's be worried? Nah. The money is coming from the forfeiture account! Well, as long as it isn't real money just forfeiture money then it is ok.
BG5150 Posted April 30, 2014 Posted April 30, 2014 pad your bill! You give that advice a lot. Should your client's be worried? Nah. The money is coming from the forfeiture account! Well, as long as it isn't real money just forfeiture money then it is ok. I know, right? QKA, QPA, CPC, ERPATwo wrongs don't make a right, but three rights make a left.
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