PS allocation compensation for the last 2 years...

[Karoline Curran]

Hello! I have a plan who did not included bonuses in their compensation for the last 2 years. There are 5 owners and 1 non-owner.  Too late to do anything about it now?  Their allocation is comp-to-comp. Can I make up the difference in what they got and what they should have gotten, so they can claim on their taxes this year as long as that, and their 8/31/2018 contribution, don't exceed the limit? Thank you in advance!

[Jim Chad]

You are required to do what the says.  If the plan excludes bonuses, you may not count them.  If the plan includes bonuses in comp, you have to use them.  I would suggest you talk to a Third Party Administartor or ERISA counsel to find the legal way to correct this.  Common sense is not enough.  You need to obey the letter of the law as well as the spirit. of the law.

[Tom Poje]

I don't think 415 is an issue.

this is a corrective contribution, putting the plan in a position it should have been had the error not occurred. e.g. let's suppose one of the person had a bonus in 2017 and quit in 2017 so had no comp in 2018. if you provide the make up contribution in 2018, since he has no comp in 2018 you would have 415 problems if worried about 2018.

the closest language I can find under EPCRS is under the one-to-one correction method for ADP failure.

"and is treated as an annual addition under § 415 for the year of the failure for the employee for whom it is allocated"

[Karoline Curran]

I ended up giving it to our compliance department since I didn't want to tell them the incorrect thing.  They may be able to retroactively amend the plan to exclude bonuses.  This is a profit sharing only plan by the way.

Thanks for the responses!

[Karoline Curran]

 

1 hour ago, Jim Chad said:

You are required to do what the says.  If the plan excludes bonuses, you may not count them.  If the plan includes bonuses in comp, you have to use them.  I would suggest you talk to a Third Party Administartor or ERISA counsel to find the legal way to correct this.  Common sense is not enough.  You need to obey the letter of the law as well as the spirit. of the law.

Thanks Jim -- I work for a TPA as a plan administrator -- we have ERISA counsel so I gave it to them.

[BG5150]

If you are going to try to correct under EPCRS, there are precious few things you can remedy with a retroactive amendment.

[Karoline Curran]

22 hours ago, BG5150 said:

If you are going to try to correct under EPCRS, there are precious few things you can remedy with a retroactive amendment.

I'm leaving it up to your compliance department!  A plus of having one!   :)

[BG5150]

2 hours ago, Karoline Curran said:

I'm leaving it up to your compliance department!  A plus of having one!   :)

My compliance department?  Where do I send the invoice?

 

;)

[Karoline Curran]

16 hours ago, BG5150 said:

My compliance department?  Where do I send the invoice?

 

;)

Lol!! Ooops BG!! OUR compliance department!  :)