"We submitted a VCP correction back in February, 2023 for a 401k plan that had about 60 missed deferral opportunities. We followed the recommended calculations to determine the MDO amount, the corresponding match and then the lost earnings. We deposited these amounts into individual participant accounts where the plan account balances are held. Its been 4 months and we have not heard back from the IRS. These affected participants are getting antsy, some of whom are terminated and want to take their money out now. We'd prefer to wait until the IRS says everything looks good. Checking whether everyone would wait until that final OK or would anyone move ahead with allowing distributions from these deposits (for terminees) since we feel we did an accurate job with the calculations."

"Has anyone applied for or engaged in a pre-submission conference with the IRS before filing a correction under VCP? If so, what was your experience like? We are considering applying for a pre-submission conference on behalf of a client and are looking for any and all insights and suggestions about application strategy, likelihood that the IRS will approve a request for a pre-submission conference, how the conference is conducted, etc. Thanks!"

"We have a plan sponsor -- an S Corp with 2 owners covered by a new plan. There are no other covered participants. I assume they are exempt from the ERISA bond coverage? Most things I read indicate plans covering only a single-owner (and potentially a spouse) or a plan covering only partners of a partnership (and spouses) are exempt."

"The facts as I know them.

• ESOP owned by an S Corporation was adopted and set up in 2013 by clients ESOP advisor. (no longer working with TP)
• The original sale of stock was 100% of corporate stock sold for $20k to the ESOP. (I'm not concerned about this $20k value, fyi) Promissory note, loan agreement, security agreement prepared and signed by Plan trustee.
• Terms state the note will be paid off over 10 years in a balloon payment.
• Client audited for 2013 and 2014 years. IRS issues no-change letter accepting all filed returns. (final notice issued early 2015.) The IRS during that audit didn't address or bring up as an issue the non-payment of the note.
• A 2nd audit ensued in 2018. The TP had not paid the ESOP note. The most recent revenue agent report states part of the rationale for disqualifying the plan was because the $20k note was not paid.
• TP is not in Court for this plan. There's a few other IRS issues that are defensible.
• The disqualification of the plan may result in a large tax for a number of reasons not germane to this inquiry.

Related to the $20k note, my initial argument (I haven't began much research just yet) is that since the TP was still under audit and the TP asked to pay off the $20k note as a corrective action, the IRS should have allowed the TP the ability to pay off said note. Even if the IRS didn't allow the payoff, the TP was still within the terms of the note. The IRS did not allow TP to pay off the loan.

Q: Are there no defenses available to a TP who (for one reason or another) did not pay the original ESOP note? even though the terms hadn't come due yet.

Q: Are having the terms of a 10 year balloon payment in violation of ERISA 4975? What's odd is I've represented other ESOP's where -- during an audit -the TP was afforded the ability make catch up payments for the original note on the sale of stock. Seems like the Govt -- which may have the right -- can be selective depending on what day of the week it is. There's no rhyme or reason to which TP's are afforded the right to make catch up payments.... Cases on point or any other regulations that may assist TP would be much appreciated."

"I'm aware of the requirements for the appraiser to sign and declare certain statements on the valuation report annually for an esop. An esop adopted in 2007 is under audit and the appraiser has passed away. One issue the IRS had brought up is that the appraisal didn't have a statement indicating they hold themselves out to the public and conduct appraisals for other plans. And that the appraisers identifying number which I believe would have included it's EIN were not provided as well. I've had other audits where these issues were not relevant. And the IRS didn't disqualify the plan. Since this Taxpayer can't call the appraiser to testify what is the solution to prevent disqualificstion of plan? Seems odd the Govt would disqualify a plan merely because an EIN wasn't stated on summary or appraisal itself. And that a court would disqualify a plan, depriving participants of their benefits, for such a minor error. If the irs does disqualify the plan my thoughts were to have taxpayer testify that the trustees were provided the appraisers' identifying number when they hired the company."

"We have a 401(k) that includes no pension source funds nor does it have any annuity distribution options. The plan document in the past required spousal consent to take a loan or distribution. I inquired about this when restating the document and was told the plan sponsor just liked the idea that the spouse would want to know when money was coming out. This was pre-daily platform. Now they are on a daily platform and they want things more automated and no longer want to require spousal consent. I believe since this was something they administratively opted to include in the plan but was not required, it would be fine to remove this requirement. I assume it is not be a protected benefit since it is not a required."