"In reliance on advice of prior counsel, a client engaged in what has turned out to be multiple prohibited transactions, with a 4975(a) tax due of around $200,000. Client has corrected the prohibited transactions, so no second-tier tax is involved.

[1] Does the IRS have any discretion to not assess the full 4975(a) tax? I know the IRS has discretion not to assess a second-tier tax, and discretion not to assess penalties for failing to file 5330s under IRC 6651(a). I know the client can apply for an individual exemption with the DOL, and that the DOL has the discretion to reduce penalties under ERISA Section 502(l)(3) for reasonable cause.

[2] Is there any IRS discretion or other statutory or regulatory basis to reduce the 4975(a) tax? What are the client's options if the $200,000 tax would be an extreme hardship on the taxpayer by using up essentially all of their savings and other assets?"

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Regarding the point made in this article:

https://www.sidley.com/en/insights/newsupdates/2022/11/us-dol-proposes-self-correction-of-delinquent-contributions-and-loan-payments

1. The sponsor would submit an electronic notice form on the EBSA website, after which the self-corrector would automatically receive an emailed acknowledgment. The sponsor must complete a retention record checklist, including signing a penalty of perjury statement, preparing or collecting certain documents, and providing the checklist and required documentation to the plan administrator.

Can someone please call the DOL and explain to them what 'self-correction' means?

"Plan sponsor has an employee who wants to be excluded from the plan due to religious reasons. Eligible employees receive the 3% SH and a small PS. It is not workable to exclude him by job definition or class, location, etc. Very strange and I will tell the sponsor he must participate. Maybe use the beneficiary designation to assuage his objection to the plan, whatever that might be."

"An employee stopped working for a company for a certain period of time, was kept on payroll such that he's not officially terminated from the company. Would you consider his termination date to be the day he/she stopped working for them, or the date he is no longer on the payroll? I'm thinking the latter."

"An IRR is a rollover within a retirement plan to a designated Roth account in the same plan. Question is, do we code the 1099 code 'G' and then use the taxable box to create the tax liability to the participant converting OR do we use code '2'? I have read this is IRA to Roth coding only."

"I just heard from the partners of a plan sponsor that they could barely fund the 3% for 2022 and want to eliminate the 3% safe harbor for 2022. It is not a 'maybe' safe harbor. Most of our SH plans have the 3% hard-coded in because it is easier to deal with as opposed to an amendment each year.

They are probably stuck for 2022, which is fine. But they then will ask me if they have to fund for themselves -- 2 partners in a partnership. My answer has always been 'yes' in this situation, so as to follow the plan document, but that, if they want to take that chance and simply have insufficient funds, they must at least fund for the non-HCEs. Any way to get out of the safe harbor for 2022 at this late date?"

"Fee Example: a TPA quotes $15k to $20K for TPA work for a plan year for a new client, not knowing what the records will look like. The plan sponsor signs an engagement letter agreeing to the fee range. Time tracked to complete the year ends up being $12,000. Is it ethical for the TPA to bill $15,000? Can a client demand to see time entries?

I think we all know recording exact time doesn't happen. Many small things go un-logged into time/billing. This would be a case where the TPA fee is paid by the plan sponsor not from plan assets."

"We've received 3 letters from plan sponsors in the past week saying that their Form 5500-EZ plans were filed late, with huge penalties. But all three 5500-EZs were filed on time. Has anyone else had plan sponsors receive these letters? We tried to call the IRS and got a message that 'due to high volume' we should 'call back tomorrow.'"