Can a safe harbor 401(k) plan that intends to meet both the ADP and ACP safe harbors allow employee after tax contributions?

In a mid-year asset sale where a portion of a profit sharing plan is spun-off to an unrelated buyer that results in no severance from employment, does the 401(a)(17) limit need to be prorated? Seller is making contribution to its plan on account of service prior to closing (so 10/12ths of the accrual), and the Buyer is contributing to a mirror plan for the post-closing accrual (2/12ths).

Plan failed their 2011 match-only ACP test (but not their ADP test). One HCE is affected. Do they receive a distribution of the excess or is the money treated as a forfeiture (individual is 100% vested).

Thanks

409A subsequent deferral rule says:

1. The subsequent deferral election must be made at least 12 months before the originally scheduled payment date;

2. The subsequent deferral election may not go into effect until at least 12 months after the election is made; and

3. The new payment date must be at least five years after the originally scheduled payment date.

Don't rules 1 and 3 make rule 2 superfluous?

Are there any situations where subsequent deferral is revokable / revoked within the 12 months after it was made?

If a person is terminated prior to 12 months after making subsequent deferral, is the subsequent deferral still valid (in situations where there is no specific separation related deferral election)?

I think I know the answer but I'm hoping.

Does everyone distribute a $15 RMD?

If a Plan Year begins 12/31/11 when must the 2011 AFTAP be signed? September 1, September 30 or October 1?

Here is the situation...

Client has a MPP plan with an ER contribution of 2%. In the MPP plan, they also have a matching contribution of 3% if the employee contributes 2.5% to the 403(b) plan.

The plan is part of a larger controlled group and Average Benefits testing is required. Would the pretax deferrals in the 403(b) plan need to be included in the ABT test? I am including the ER contribution and the match in the ABT test.

Am wondering if anybody has some practical advice for administering plans in light of the State Taxation of Pension Income Act (STPIA) or Pension Source Act, etc. Specifically, small deferred comp plan administrator has distributions that stretch over 10 years and thus are arguably "retirement income" for STPIA purposes. Plan has historically only had a few participants retire and none have relocated. Plan is now facing situation where participant has retired and relocated to a new state that has no income tax. Does the company have to examine the factual situation (e.g., residency, time of move, new state's income tax requirements, etc.) and make a call as to whether or not to withhold and report state income taxes or can the company simply have a policy of withholding and remitting applicable state income taxes to the original source state (and home state of the company) and put burden on participant to seek a refund of those amounts if applicable?

I have a client that wants to be nice to the little guy.

Sponsor Wants a regular match formula of say 25% up to 6%

Then for every participant that defers at least 1%, they want to give a minimum match of $500.00

Note: Eligibility is one month, Match requires 500 hours/ last day.

Potential for HCE owners family members to fall into the minimum $500.00 match.

So someone that works 500 hours at $10 per hour - earns $5000 for year year a defers 1% or $50.00 would get $500.00.

Someone with less than 1% would just get the 25% match.

I can see where this might become a problem if any HCE's fall into that category.

Any suggestions??? Anthing discriminatory - if the ACP test passes?

Thanks

Pat

ADP test fails and just $2,000 is reclassed as catch-ups (leaving $3,500 "available"). The IRS came out once before and said that if the test is failing you can still use shifting, but now you must shift for both HCE's and NHCE's, because the "plan is passing right at the passing percentage." See questions 15 and 16 of the attached.

The question is, can we shift elective deferrals over to the ACP Test in order to increase the amount reclassified as catch-ups, thus avoiding the need to shift any HCE deferrals?

Shifting___ADP_Test_Failed_IRS_Q_A.pdf

The minimum FSA contribution limit effect December 31, 2012 is $2500.00. However while reading though the IRS notices for 2012-2013 changes I came across a section titled " What Contributions are Subject to the Limits" in this section it states " Non-elective employer contributions to a health FSA generally do not count towards this limit". Does this mean if an employer is contributing $2500.00 to and employees FSA as Flex Credits for the 2013 plan year, the employee may also elected $2500.00 salary reduction contributions?.

Thank you!

Stacey M...

The minimum FSA contribution limit effect December 31, 2012 is $2500.00. However while reading though the IRS notices for 2012-2013 changes I came across a section titled " What Contributions are Subject to the Limits" in this section it states " Non-elective employer contributions to a health FSA generally do not count towards this limit". Does this mean if an employer is contributing $2500.00 to and employees FSA as Flex Credits for the 2013 plan year, the employee may also elected $2500.00 salary reduction contributions?.

We are a public institution that is generally exempt from the non-discrimination rules applicable to retirement plans. However, the "University Availability Rule" for elective salary deferrals to 403(b) plans applies to public institutions.

We have been told by a 403(b) plan provider that this rule is to be applied at the plan level. By that they mean all employees (with some exceptions not important here) must be allowed to make an elective salary deferral to the 403(b) plan, but that certain investment options may be restricted to a group of less that all employees.

Is that a correct interpretation of the Universal Availability Rule?

Thanks,

Ken Davis

Univ. of South Alabama

Hello everyone!

A 410(b) nondiscrimination testing question I was hoping someone might be able to weigh in on.

Employer has a retirement plan that allows for 401(k) and profit sharing. Employer has a wholly-owned subsidiary with a separate plan (not sponsored by Employer), which is another 401(k) plan. The two plans have to be aggregated under 414, but the two companies operate entirely independently. When tested, the employer fails 410(b) average benefit testing. The subsidiary passes.

1. We plan to make a corrective amendment allowing for an increased allocation. Does this allocation have to be made to the employer plan, or the subsidiary plan?

2. Do the profit sharing contributions of the employer plan have to be considered in some way (in respect of the allocation or otherwise)?

Possible new client, no signed engagement requested a copy of your plan document, adoption agreement and the related IRS determination letter. Has anyone everyone had such a request.

I am not able to find the phone forums on the IRS site since it has been "improved". Can anyone provide a link?

Also, I heard a speaker from the IRS say that they had a description of what "disqualifying a Plan means" on the website. Has anyone seen that and could you provide a link?

Thank you.

If an employee is hired on July 1, 2012, would the statutory requirements mean he would first become eligible on January 1, 2014? or July 1, 2013?

I always thought you look at the first twelve moneys (7/1/12-6/30/13) and if they work 1,000 hours then they would enter on 7/1/13. But our testing software (Relius) calculates their entry date to be 1/1/14.

If the employer's contribution for a tax year exceeds the maximum deductible amount, is there anything that precludes the actuary still reflecting the entire contribution on the Schedule SB? These are contributions made after the end of the plan year but before the minimum funding deadline. I'm just wondering if the actuarial certification actually speaks at all to the maximum deductible amount.

Dog

I don't deal with many plan loans, let alone ones that are as blatantly wrong as this one. Any advice is appreciated.

Small 401(k) plan. One of the owners took a $9,000 loan in January, 2011. Never paid any of it back. When asked about it now, he really had no answer. He doesn't think he can now pay it back and would prefer to simply be taxed on it. He is age 65.

(1) Can he simply not pay it back, pay taxes on the $9,000 (plus the loan interest)?

(2) As long as he is employed, doesn't he have to pay this back? Even if he is subject to taxes, he is still required to pay it back, right? And if he does, that makes it an after-tax contribution, in a plan that does not allow for after-tax contributions. Problem?

(3) Correction has to go through EPCRS as well, I believe.

Any comments on the above are welcome.

Thanks

Rev Proc 93-42 requires annual testing for 410(b) with the caveat that the snapshot day must be reasonably representative of the coverage throughout the year. What if the last day snapshot is not a reasonable representation? For example, I have a plan that was amended 11/1 to let in additional employees who were previously excluded. As of 12/31, the plan will pass the ratio percentage test.

However, had I performed the test on 10/31, they won't pass. It doesn't seem right that I can just test on 12/31 and say everything is fine when in truth there were 10 months during which some employees were excluded.

I can't find any guidance to explain how to do the testing in the year of a plan amendment that affects coverage.