I have a SH plan that allocates a 3% QNEC and a fixed matching contribution of 100% of the first 6% deferred. The plan year is calendar. The plan wants to eliminate the fixed match, but will continue to contribute the 3% SH QNEC.

My question is will the plan still be SH with regard to the ADP test due to the fact the 3% SH QNEC will continue to be contributed. Or will the plan be subject to both the ADP/ACP test because the the plan was amended mid-year?

I haven't had this happen to me since the late 90's, and I can't remember if this is allowable, and the 401(k) answer book didn't address the issue:

Informed client that their 401(k) Plan become top-heavy for 2011 and that no deferrals should be made in order to avoid the 3% required non-key employer contribution. Received the payroll files yesterday and all of the owners deferred $16,500 during 2011 (plan passes ADP testing, so this is not an issue). Owner does not have the cash to make the 3% top-heavy contribution. In addition, the plan was amended 1/1/2011 to allow collectively bargained employees to participate in the plan.

Two questions: (1) May the owners remove the deferrals from the plan (as a mistake of fact) to avoid the top-heavy minimum? And (2) must the collectively bargained employees share in the top-heavy allocation, if the owners decide to fund the minimum?

Thanks for any replies!

Assume an employer enters into an employment agreement with an executive that is adopted January 1 of Year One. It promises the executive an annual base salary of $200,000 for each of Year One, Two, Three and Four. It does not mention the employer's right to pay less, or to reduce the salary, in its discretion (although it retains the right to terminate him without cause).

1.) Does that promise constitute, as of January 1 of Year One, a "legally binding right" to $200,000 annually with respect to Years Two - Four? The regulations provide that a right is not legally binding if the employer can unilaterally reduce the related compensation after the employee has performed the required services - - - that does not seem to apply here (i.e., the employer could not reduce the compensation once the employee had performed the services in Years One - Four).

2.) If it constitutes a legally binding right, does that mean the employer cannot decide, for example, to pay the executive only $100,000 in Year Two, while shifting the resulting $100,000 shortfall to Year Three (i.e., paying $300,000 in Year Three)? Would that constitute an impermissible re-deferral?

Thanks.

Ok almost everyone is familiar with The Retirement Equity Act of 1984. Its intent as stated in writing was, "to ensure a stream of income to surviving spouses of plan participants who die before reaching retirement age". Plug it into a search engine, you will get a lot of hits back. But REA included the Earliest Retirement Age provision, which was later added to ERISA. So a survivng spouse has to wait until the participant would have reached the plans earliest retirement age. Legal? Absolutely! Inequitable? Absolutely! Heck even the US Senate agreed that a survivng spouse of a plan particpant should not have to wait until the deceased participant would have reached retirement age. Yes I know REA established protections that were not in place before. So my question to all of you out there is, Has this Earliest Retirement Age provision ever been defeated?

A company with an existing PSP wants to start a SEP so that it can contribute to one specific employee who's not eligible for the PSP yet. Would all employees be eligible to participate in the SEP or can you just specify a class of employees to be eligible (e.g., owners' spouses)? All other employees would get a comparable allocation in the PSP. The PSP has a 1 year eligibility requirement while the SEP would have a 6 month requirement. There would only be 2 employees who would qualifiy for the SEP but not for the PSP. If most employees cannot be excluded from the SEP, would it be possible to 1) have those two employees waive participation from the SEP, and 2) not contribute to the other employees in the SEP since they would be getting comparable allocations in the PSP? I imagine you would have to combine both plans to do the crosstesting (since the PSP is a new comparability plan). All help is greatly appreciated.

Employee is going on unpaid FMLA leave. Employee wants to keep coverage for himself while on leave but wants to drop coverage for his spouse.

Is this permitted under the cafeteria plan rules (or required under the FMLA)? Or is it not consistent with and on account of the change in status?

Thanks.

http://en.wikipedia.org/wiki/Federal_Insur...butions_Act_tax

I found the attached site and the information under "self-employed people" pretty good - mwyatt & masteff were probably saying the same thing in my related post and I thank them for their time and input .

Assume a group health plan complies with the ERISA regulations and properly denies a claim and subsequent appeal.

What options are available to the plan and/or participant if new evidence is discovered (post-appeal) that would have impacted the outcome of the decision?

It would seem that the plan may want to reopen the appeal in order to be fair to the participant. On the other hand, it would seem that the plan could be inviting trouble with by reviving a claim that has been properly moved through the claims and appeals procedure-- especially if it involved a claim that would trigger stop-loss reimbursement.

Any thoughts would be appreciated.

I am confused as to how to complete Form 8606. I have no previous IRAs and do not qualify for a Roth IRA contribution. However, I made a non-deductible IRA contribution of $5,000 for 2011. Shortly thereafter i converted $5,020 it to a Roth IRA. I know $20 is taxable and seems as though in Part 2: #16 on the form should be $5,020, #17 should be $5,000 and #18 being the $20. Do I even need to complete Part 1? If so, it just doesn't seem to work out following the instructions. What am I missing?

Plan is a safe harbor plan, but allows for after-tax. Plan ues the "prior" year testing method. When running the test, can we include and not include the match in the ACP test to achieve the best results.

For example,

2009 testing: HCEs AT only compared to 2008 NHCE AT only

2010 testing: HCEs SH Match & AT compared to 2009 NHCE AT and SH Match

2011 testing: HCEs AT only compared to 2010 NHCEs AT only

It would be eaiser if the plan changed to current year testing. Which we are working on!

Any thoughts would be greatly appreciated!

An employer with 2 employees has a profit sharing plan and a money purchase plan. The owner was cutting costs by doing everything in-house for the last umpteen years, so neither plan has been restated for EGTRRA, GUST was also done late, and the 415 limits have been exceeded each year for many years now (10% in one plan and 15% in the other: overall 25% of $245,000).

The IRS just sent a random audit letter regarding ONLY the money purchase plan.

This employer is now willing to pay whatever it takes for someone to help him and admits to having handled the plan poorly. The PS and MP plans are not combined for 401(a)(4) or 410(b).

Under section 4.02 of EPCRS: If the plan or Plan Sponsor is Under Examination, VCP is not available.

Under section 5.07(2) it explains what is meant by Under Examination, and it says the plan is considered to be under examination if it is aggregated for 415.

I don't think the PS plan can be submitted under VCP now, due to that language.

Agree?

When you look at how section 402A was amended by the Small Jobs Act to allow in-plan Roth rollovers, it seems that Congress amended the rollover section to include these conversions in the exemption from the 10% tax but forgot to amend the qualified distribution section to include the rollovers as a contribution for starting the 5 year clock. I see that the IRS is clear the plan must have a Roth provision to allow in-plan Roth rollovers, but presumably a participant does not have to have a designated roth account in order to take advantage of this new law, right? Has anyone seen or heard anything from the IRS on when the clock starts if a participant does a conversion and has never made a designated roth contribution?

We just took in a plan that was described as a 401(k). However, under the terms of the document, there are no pre-tax deferrals. The participants are allowed to make discretionary after-tax contributions. These after-tax contributions are then eligible for an employer match which is not discretionary - the amount is specified in the document.

Our group spends most of our time doing DB plans, but this does seem like a money purchase plan to us (even though the lawyers say it isn't). Any thoughts?

Thanks.

an 8 participant 403(b) has not been following the plans eligibility rules for several years. plan doc has no service/age requirement, so immediate eligibility. However, sponsor has been making participants wait for one year to enter the plan on a uniform and non discriminatory basis. I understand this is a VCP case and they are aware of it. My question is....would you think the IRS/DOL would allow the sponsor to go back and amend retroactively to install the eligibility(1 YOS) they were actually using OR is it more likely that they will have to go back and make up the 6% employer contribution to all employees they had excluded? The plan has an effective date of 7/1/05. Sponsor has been contributing 6% irregardless of whether the participant actually deferred since plan inception.

Thanks a heap!

Are students (of a plan sponsor university) excludable employees for 410(b) coverage testing purposes when testing matching and other employer contributions? I find no support in the Code or regs for this, but I've read uncited commentary indicating you can exclude students and disregard them for coverage testing purposes.

I understand they are excludable for universal availability, but don't find the same exclusion for employer contribution testing.

Thanks

I have been having lots of questions this year concerning what is included in compensation and what is excluded. This particular plan uses 3401(a) as their plan definition of compensation. Can someone tell me what types of compensation is included in 3401a comp? Would education reimbursements or relocation expenses be included?

Does anyone have a chart of the different types of compensations and what in included in each?

Thanks

Hi,

My peers and I have had a discussion as to whether a person who sits on a board of directors for a corporation is considered an employee under the defenition of an employee with respect to a qualified retirment plan, e.g. 401(k) plan. Would such a director, if his/her only responsibility to the corporation was to serve on the board, not be considered an employee under a qualified plan and be considered excludable for coverage testing purposes similar to an independent contractor, or would such a director be considered an employee, and if excluded from participation, need to be considered as non excludable for coverage testing?

Thanks,

What a mess.... An eligible participant elected to have a dollar amount deferred each pay starting in September 2011. The sponsor deposited the $ amount each pay into the deferral account of the participant. In January 2012 (after all January 2012 deposits have been made) the sponsor realizes that the payroll company never withheld any $ from the participant's pay. The W2 will show no withholding for 2011. How do they correct this?

What types of governmental plans may implement automatic contribution arrangements?

Sponsor has a floating interest crediting rate with a 4% floor. Assuming that the floating rate is in compliance with the market rate of return rules(e.g. Treasury Bond rate), can the 4% floor be reduced or removed? What are the ramifications? This would require a 204(h) notice, right?