Retroactive participation agreement

[hunter001]

It is my understanding that a multiple employer plan must have a participation agreement in place for all entities including the sponsoring plan. If the sponsoring entity does not have a participation agreement can this be self corrected or must it go through VCP filing.

[Larry Starr]

58 minutes ago, hunter001 said:

It is my understanding that a multiple employer plan must have a participation agreement in place for all entities including the sponsoring plan. If the sponsoring entity does not have a participation agreement can this be self corrected or must it go through VCP filing.

The question confuses me.  The original plan should have been adopted by the sponsoring entity, then the additional adopters sign on as additional adopters.  How could the sponsoring entity not have set up the plan, which means it would not have a participation agreements because it is NOT an "additional adopter" which is what the participation agreement accomplishes?

[hunter001]

Is my understanding not correct.

 

[hunter001]

Sorry, to clarify the relius prototype document reads "under a multiple employer plan if the lead employer will contribute to the plan for its own employees the lead employer should execute a participation agreement.

[justanotheradmin]

Did the lead employer allow it's employees to participate in the plan ( make deferrals?) but it never executed a participation agreement for itself?

 

[hunter001]

yes

[Larry Starr]

2 hours ago, hunter001 said:

Sorry, to clarify the relius prototype document reads "under a multiple employer plan if the lead employer will contribute to the plan for its own employees the lead employer should execute a participation agreement.

Ah... a document problem!  We do NOT use the prototype documents ever.  We use only the volume submitter plan docs, and the lead employer has to adopt the plan, and then the supplemental participation agreements are signed by each additional adopting employer.  So, in our circumstances, this could never happen.  But I understand your issue (though I wonder why the document is written that way; I would still think the lead employer just signing the adoption agreement would be equivalent to the volume submitter scenario, but it appears that is not true.  If I find some time this weekend, I will try to take a look at the prototype document language (assuming I can find it) and see how that works, only because I am curious.

[JackS]

I think the doc was intended for PEO's to provide a plan for it's clients.  Not all PEO's want to participate in a plan - why force them to - thus the document design.    If you have significant exposure for prior years, you can always file this under VCP.  From past conversions with attorneys who had a hand in that doc, i understood that the employer deduction is the biggest issue (if the PEO ee's and PEO itself made very large contributions without a PP AG, the deductions could be disallowed).  The compliance part of this is easily corrected.  Have the PEO sign a PP agreement.