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Well, that's the benefit of reading the whole thing, Emily1991, vs. just reading the snippets in these posts. :)

I think we all agree that is correct. I think the issue raised by jpod was that if the individual had been hired in 2017, so only had partial year comp, would you be able to annualize or would you be stuck with 2x actual 2017 W-2. Could make a big difference if individual had been hired late in 2017.

All one needs do is show a list of company stock cases to the FIDUCIARY - and tell them that whether plaintiffs were successful or not 1) mounting a defense is incredibly expensive; and 2) they are PERSONALLY liable as a FIDUCIARY. The next question invariably is "how do I resign as a fiduciary?"....

I got in hot water with a corporate patriot when I revealed my bias against company stock as a investment option in a retirement plan. When questioned, I said that there is nothing wrong with that company's stock or company stock in general in a plan, but the company should not push the stock on employees. I heard from some friendly employees that the patriot was giving thought to firing me. About three months later Enron blew up, and Enron was close to that company's home in ways that cannot be described here. I heard after that about how the patriot had mumbled a concession to the friendly employees that my comment was not such an outrageous insult after all. A company with its stock as an investment option in a retirement plan is automatically in the danger zone. What is said about investment in the company stock should be limited to what ERISA and securities law disclosure rules require. Embellishment only increases the risk.

Perfect, thank you all for your quick response. That helps clarify for me. I appreciate your patience. I read thru the responses earlier...but it just wasn't clicking for me:) This lets me know that catchup is required to be separated for the current year testing only. Enjoy the rest of your week...you have been very helpful. Much appreciated, Linda A.

Yea. Well, we've had auditors "require" us as a service provider dealing with an abandoned plan to "certify" that we visited last known address. We've done "drive by's" but under no circumstances would I ever allow anyone on my team to get out of their car. We have actually had a DOL agent, though, make a personal visit to an elderly beneficiary of a deceased participant (abandoned plan) - who thought we were scamming her. She threatened him with her cane (true story!) - and thought his "badge" was dime store bought.

The minimum distribution requirements have absolutely no impact on determining what can go into a plan. They only impact the timing of what needs to come out.

What part of "theft" is unclear?

I have never heard of "diligent search" being interpreted, even by the DOL, as entailing a personal visit to the last known address. Sounds like the kind of request that ought to be bumped up to the auditor's supervisor.

You seemed to have missed an important detail that would necessary for an accurate answer; what does the plan say with respect to the use of forfeitures? Good Luck!

Yes you could write a DC plan document that way. In fact a very large number are that way. The forfeitures simply reduce the cost to the employer. For example forfeitures are $13k and the Profit Sharing contribution (or match due) is $25k many plans would say the employer needs to only put in the remaining $12k. Obviously the $13k of forfeitures plus the $12k deposit equal $25k. But you could write the plan such that the employer puts in the full $25k and they employees get the $13k also. I am ignoring things like 415 for purposes of this discussion. And to now give you more answer then you wanted you can write a DC plan to give the plan administrator all kinds of discretion. It could give them the option to use the $13k above to pay fees or not, then reduce the employer's contribution for example. Lastly, the other thing forfeitures are used for in a DC plan that MIGHT like a DB plan is they are used to restore people who forfeiture in the past and if their balance needs to be restored upon rehire that almost always comes from current forfeiture. Such a restore increases the benefits due in a DB plan so it needs to be funded and as you say all funding is forfeitures or contributions- ignoring earnings of this conversation.

It is a PT only if correctable and, at some point, corrected. What you are describing comes closer to theft.

True. Do you think in such a case you'd be stuck with the prior year's W-2 or could annualize? I would think in that case you could probably annualize, and maybe the use of term "equivalent" instead of "equal" would help.

The previous year could have been a partial year; e.g., executive hired in the middle of 2017, then fired without cause in 2018 and his/her employment agreement says severance is 2 years' compensation. Stranger things than that have happened.

The reg says to use comp for the year preceding the year of termination, so you should have a full year and not have to adjust for raises or bonuses in current year. As to what "equivalent" means, I've always interpreted it as "equal" with maybe a tiny fudge factor. I think the DOL purposely avoided saying "equal" because it didn't want to have to explain exactly what they meant mathematically or suggest that absolute mathematical precision was required and even $1 over by some calculation would throw you out of the exception. But that is just a guess.

Just as an aside - we currently have a client under DOL audit where failure to timely cash out small balances is also an issue - and the agent wants the company to restore the fees taken from those balances - EVEN THOUGHT THE MANDATORY CASH OUT IRA PROVIDER WOULD HAVE CHARGED BOTH INVESTMENT LEVEL FEES AND A PER IRA CHARGE FAR IN EXCESS OF THAT WHICH THE PLAN DOES. In fact, almost half of the subject accounts would have been consumed by the IRA provider's fees by the time the audit is complete.... I file this under the penny wise, pound stupid category - and it applies to someone else's pennies.

The arrogance is compounded, I think, by the fact that if it's over $1,000 and you don't hear from the participant you must do an automatic rollover, and quite often the annual charge is going to be more than $28 per year.

I'd say no. See 1.401(k)-1(a)(3)(iii)(C).

Now that I have read the other two replies I guess I have seen plan documents that give you the option to make that compensation part of the prior year but I don't think I have seen anyone do it for the reason's Tom says.

this could depend on how you have filled out your document. for instance, the FT William document has the following option 15. Post Year End Compensation [ ] Determine Compensation using Post Year End Compensation NOTE: If selected, amounts earned during the current year and paid during the first few weeks of the next year will be included in current year Compensation. NOTE: A.15 will also apply for purposes of Statutory Compensation. ........... corbels document had the following for the final 415 amendment language 3.3 Administrative delay ("the first few weeks") rule. 415 Compensation for a "Limitation Year" shall not include, unless otherwise elected in Section 2.1 of this Amendment, amounts earned but not paid during the "Limitation Year" solely because of the timing of pay periods and pay dates. However, if elected in Section 2.1 of this Amendment, 415 Compensation for a "Limitation Year" shall include amounts earned but not paid during the "Limitation Year" solely because of the timing of pay periods and pay dates, provided the amounts are paid during the first few weeks of the next "Limitation Year," the amounts are included on a uniform and consistent basis with respect to all similarly situated Participants, and no compensation is included in more than one "Limitation Year." ................................................ so I guess if you want you could take all the W-2s for everyone and increase them by a few weeks, but then you really should back off the first few from the prior year because you wouldn't want to count comp twice. and do that every year. not sure that is worth all the trouble, but that is probably just me.

You don't need to read the regulations read the plan document. I have not seen a document that doesn't define compensation in a way that doesn't relate to the tax code. So the compensation is clearly 2017 compensation. Then go read the part of the deferrals. I am will to bet it tells you that you are deferring part of your compensation. 2017 comp makes it 2017 deferral. The guy who taught me this business told me 99% of all your answers are in the plan document and you rarely need to read the regulations. I think this is one of those times. The document will lead you to do thing on a cash basis not accrual. Sorry but you are over thinking this if you want to make this 2016 deferrals. For one thing you could end up with a possible 415 and other problems that make it clear making these 2016 deferrals doesn't make sense. What if this is the person's first check and you are allowed to enter and defer immediately? You would have their income in 2017 since it is almost certainly tied to W-2 wages in some way but the deferrals are in 2016. So the person has Annual Additions in 2016 but no comp so it is a 415 failure.

I don't know if there is an advisory opinion on point, but absent one I think it is safe to assume that if the individual worked the full year that year, you can use the W-2 Box 1 amount for that year, and if less than a full year you can annualize the W-2 Box 1 amount. It doesn't say "regular salary," or even "cash compensation;" it says merely "annual compensation." Besides, it's only a safe harbor, isn't it?