Does anyone have any info on possible ways to avoid sanctions arising out of the IRS crackdown on 412(i) plans? For example, we want to argue that the plan sponsor operated the plan as it was approved in the prototype opinion letter, and thus sanctions should be N/A. I have heard that some sponsors have been successful in getting sanctions waived based on that type of argument, but we cannot find anything helpful. Any leads, articles, etc. would be appreciated.

That depends on what they are assessing sanctions for. If the plan is operated in accordance with its document, the adoption agreement is properly filled out and the plan has an opinion letter, then the sponsor should have reliance on the document and not be penalized to the extent the operations follow the document.

However, aren't most of the IRS issues with 412(i) unrelated to the document? Purchasing policies with death benefits greater than the plan death benefits, purchasing policies with different features for the HCEs, selling policies out of plans as below market value, etc. I don't see that these sorts of things would be covered by the document's opinion letter.

Or not satisfying top heavy requirements.

Or contributing more than 415 would justify.

Get thee a very good lawyer with expertise in this area. There is at least one who advertises on Benefitslink.

I have seen CYA correspondence from 412(i) service providers discussing options for sponsors that would scare anybody away from ever going near these things, even as a fee-only service provider. The IRS has certainly gotten the attention of some who dwell in this area.

I hope that pushers of aggressive versions of these things got what they deserved. But certainly they should have good legal representation.