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Top heavy


Guest Sieve

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I'm sure these answers are easy (especially for TPAs), but I'm also sure it won't be easy for me to find the appropriate regs:

A) Calendar year plan. ADP fails for 2008. Return to HCEs occurs in February, 2009. Does that mean that TH for 2009 is based on account balances as of 12/31/2008, including any excess contributions made during 2008 (and not returned until 2009)?

B) Same facts as B. When calcualting for TH in subsequent years, is the 2009 distribution of excess contributions added back in for purposes of determining TH for 5 years (rather than 1) (pursuant to IRC Section 416(g)(3)(B))?

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Assuming this is NOT 1st year of plan...

A) Yes.

B) Remedial Distribution are counted as in-service distributions for future years.

My post reflects materials used for ASPPA DC-3 Test, as I recall.

Having braved the blizzard, I take a moment to contemplate the meaning of life. Should I really be riding in such cold? Why are my goggles covered with a thin layer of ice? Will this effect coverage testing?

QPA, QKA

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It's just that I have a TH plan, with old ADP returns added back in, at 60.1%. The essence of "exceeds 60 percent".

And now it's all your fault . . .!!

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Thanks rcline46. I think Sieve was ready to hip check me; especially since I prefer the Penquins! Could we be looking at 2 cup for Mario's team? :P

Having braved the blizzard, I take a moment to contemplate the meaning of life. Should I really be riding in such cold? Why are my goggles covered with a thin layer of ice? Will this effect coverage testing?

QPA, QKA

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rcline -- The 60.1% was as of 12/31/2008, for 2009--so, unfortunately, it's too late for what you suggest. In any event, how can an -11(g) amendment make a retroactive change if there is not a 401(a)(4) or 410(b) failure in the first place? And how would such an amendment impact TH as of the end of that prior year?

Below Ground -- All us good goalies stay away from being in a position to have to give a hip check--it's unsafe for our well-being. It's much easier to slash someone's ankles while they're planted in front of the net facing the other way or give them a nice upward chop between the legs with the goalie stick. BTW, put your money on the 'Hawks to unseat the Pens this season.

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This has been argued in many threads. Both items.

401a4-11g nowhere states it is used ONLY for correction of testing failures. (Oct 15 is deadline).

Many of us believe, after a presentation at ASPPA a few years ago, that you really can include accrued contributions in Top Heavy. And since the 11g amendment is now a required contribution, although not a true 412 contribution, sort of like a SH contribution, it should be counted.

Be Brave!

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Rcline46 - Thanks for that insight. I was not aware.

Sieve - When I coach I sometimes play goalie (not well), and am very much aware of the deceitful nature of the guy between the posts. Blackhawks? Why such a "dark horse, long shot"? Sort of like the Cubs, right? :lol:

Having braved the blizzard, I take a moment to contemplate the meaning of life. Should I really be riding in such cold? Why are my goggles covered with a thin layer of ice? Will this effect coverage testing?

QPA, QKA

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rcline -- It may be worth a try. But, how do you square that approach with -11(g)(2) & (5) (i.e., retroactivity for 401(a)(4) & 410(b) only)? The plan already passes coverage. (I'm starting to search for prior strings re: TH & -11(g).)

Below -- You, too, a goalie? And you admit it? Politely, they call goalies "a breed apart" (the title of a goalie book)--normally, of course, they call us crazy. The 'Hawks are young & fast--very young and very fast--and hit hard. If they can only find a goalie . . . wait, perhaps you or me could fill in ably! Cubs?--not quite (at least yet): you only have to go back about 50 years (to '60-'61) for a 'Hawk Cup (they beat the Wings, and I think I was at the game).

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BG -- You correctly point out that there are rarely rounding rules in the regs (although they are mentioned in 1.401(k)-2(a)(3)(i) & 1.401(m)-2(a)(3)(i)). But, I can't really determine how serious your suggestion is. Do you believe that TH does not occur until the percentage is at 60.5? Is rounding 60.09 to 60 an argument that I can make with a straight face? How about 60.44?

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BG -- You correctly point out that there are rarely rounding rules in the regs (although they are mentioned in 1.401(k)-2(a)(3)(i) & 1.401(m)-2(a)(3)(i)). But, I can't really determine how serious your suggestion is. Do you believe that TH does not occur until the percentage is at 60.5? Is rounding 60.09 to 60 an argument that I can make with a straight face? How about 60.44?

I was kidding, hence the " ;) "

Is it possible to round the individual account balances to the nearest dollar and do your calculations with whole dollars? And the regs do say "60 percent" not "60.00 percent." Reading that very, very, very (did I say "very") liberally, it seems it's okay to round down. Again: ;)

Honestly, though, I think absent a successful amendment of some sort you are in a sucky position. :(

QKA, QPA, CPC, ERPA

Two wrongs don't make a right, but three rights make a left.

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I think the Regs say round to nearest hundreth. I don't know where, I just remember that being the case.

I like playing goal. Besides, I have no wind.

Last July 4th I did a really dumb thing. I was playing goal for some kids in the driveway at the big picnic for the 4th. Well, some 14 year old took a big slap shot and got me right in the eye. The same eye I had an implant put in for cataracts. That really hurt! All turned out okay, but it took about a day before I could see clear again.

We will watch your Hawks with anticipation.

Having braved the blizzard, I take a moment to contemplate the meaning of life. Should I really be riding in such cold? Why are my goggles covered with a thin layer of ice? Will this effect coverage testing?

QPA, QKA

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ADP/ACP regs says round to hundredths. Can't find anything in the TH regs. (410(b) regs also point to hundredths--1.410(b)-2(b)(2)(ii), Ex. 2--and safe & unsafe harbors are in hundredths.) So, that puts me at 60.10%.

And . . . just to be very clear (so the Red Wings gods don't strike me down): they ain't my 'Hawks, but I think they're the team to beat in the West.

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If it weren't for language saying "calculated to the nearest hundreth of a percentage point", and examples showing the same, then yours would be a very nice argument, indeed.

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  • 7 months later...
Guest Sieve

For those unbelievers out there (like Below Ground - see post #10) . . . I may not have properly predicted who would unseat the Pens (see posts #8 & 11), but I still think the 'Hawks will win the Cup. I should have bet the store.

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From 1.401(a)(4)-11(g)

(2) Scope of corrective amendments. For purposes of satisfying the minimum coverage requirements of section 410(b), the nondiscriminatory amount requirement of §1.401(a)(4)–1(b)(2), or the nondiscriminatory plan amendment requirement of §1.401(a)(4)–1(b)(4), a corrective amendment may retroactively increase accruals or allocations for employees who benefited under the plan during the plan year being corrected, or may grant accruals or allocations to individuals who did not benefit under the plan during the plan year being corrected. In addition, for purposes of satisfying the nondiscriminatory current availability requirement of §1.401(a)(4)–4(b) for benefits, rights, or features, a corrective amendment may make a benefit, right, or feature available to employees to whom it was previously not available. A corrective amendment may not, however, correct for a failure to incorporate the pre-termination restrictions of §1.401(a)(4)–5(b).

No where does it list top-heavy. Believe me, I love the idea, because it would apply to a plan that I am working on right now, but what is the rationale for triggering -11(g) merely becasue the plan is top heavy.

And are you suggesting that I can amend the Plan under 11(g) to, for example, increase allocations to all employees working in the Mail Room, just enough to bring the Plan below 60%?

Austin Powers, CPA, QPA, ERPA

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Guest Sieve

I agree with you, austin, and questioned the suggested -11g amendment approach based on the language you highlight (before the discussion moved to rounding & goalies & hockey). Your proposed amendment would work if made prior to year-end.

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