We have a 401(k) Plan with three doctors, each has Schedule C income (no W-2 income). There are other employees (paid via W-2) that participate in the plan.

It is our understanding that because this is a Title I plan, the 401(k) deferral deposit deadline applies to the self-employed individuals as well as the employees. So, if one of the doctors didn't defer the maximum during 2006, (s)he can't fund the additional deposit now in order to get to the max for 2006 (even though it's still before the due date of his/her tax return). If the deposit is made now, it's considered a "late deposit" and is subject to the 15% excise tax, "lost earnings" calculation, VFCP submission, etc.

Are we correct in our assumptions? All of the regs I can find regarding the timing of deposits for self-employed individuals imply that the plan is not subject to Title I (in which case they have until the due date of their tax return to make the deposit). Where can I find this this in the regulations?

Any input would be greatly appreciated.

Thanks!

Can anyone point me to any cases where an employer held to tried to hold a TPA responsible for top-heavy contributions when the TPA failed to inform the employer that the plan failed the top heavy test?

I'm not sure how to handle this situation, any thoughts? On 2/12/07 a participant paid for dental services for which she did not actually incur until 3/5/07; however, she terminated her employment (no COBRA) on 2/16/07. Should i reimburse? Thank you.

2 unrelated companies. Company B acquired Company A.

Plan A had a 10% match and Plan B has a 50% match. Plan A merged into Plan B on 4/1/06.

We are testing 2006 on an aggregated basis, for the entire year, for ADP/ACP/410(b).

Does the BRF test have to be done on a full-year basis also, with the overall match rate for those from plan A being pro-rated? Or - Do we put everyone from Plan A in the 50% match rate, because that is what they have in the new plan? Before the merger, plan A would not have had a Benefits, Rights & Features issue.

Takeover plan has a series of funding deficiencies being reported and corrected in 2007. Deficiencies being newly reported-prior errant Schedule B's being amended.

The 5330s will be filed in 2007 for 4 years-the deficiency will be corrected by 9/15/07. We're expecting upon filing of 5330s that interest and penalties will be automatically be assessed (beyond the intiial 10%).

Any suggestions for proactive action in anticipation of this?

I don't think that the initial 10% can be avoided but what about interest and further non-filing penalties?

Unique situation (I hope). Regular board members may remember prior discussion of this situation. The cleanup is now in it's final stages.

Thanks for any suggestions.

After 10% and then 100% taxes have been assessed pursuant to 4971(a) and (b), respectively, what lien priority does IRS have with respect to those liens?

I found literature discussing the IRS's position that it is entitled to administrative priority in bankruptcy proceedings. Some Circuits have accepted this while others haven't.

Has anyone heard anything recent about this?

Employer currently relies on an ADP/ACP safe harbor by making 3% non-elective contributions to its 401(k) plan. It would like to switch in 2008 to the new auto-deferral safe harbor created by the PPA, using annually escalating matching contributions with a 2-year vesting schedule. Per the current safe-haror rules, employees vest immediately in the 3% non-elective contribution. Will Employer run afoul of the post-Heinz regs on changes to the plan's vesting schedule if it imposes a vesting schedule on the new matching contributions? Section 411(a)(10) and the applicable DOL regs do speak in terms of "employer contributions," but one could argue that there's a difference between a non-elective contribution and a match.

[Edit] One more thing: the plan currently contains boilerplate allowing Employer to choose between safe-harbor non-elective contributions and safe-harbor matching contributions and stating (as is required) that either would be fully vested when made. Employer has never made a safe-harbar matchin contribution. So a related question would be whether the new PPA matching contributions would have to be treated the same as the safe-harbor matching contributions for which the plan currently provides. If so, the upshot would be that nobody using the current safe harbors could switch to any version of the PPA safe harbor that incorporates a vesting schedules--surely that wasn't the intent?

Thanks for any insight.

Suppose the employer accrued a discretionary profit sharing contribution for 2005 (showing the contribution on their statements), but failed to make the contribution prior to the tax return deadline and even worse, did not deposit the contribution by 12/31/2006 for the 2005 plan year.

Can the employer still deposit and allocate the profit sharing contribution for 2005, even if they cannot deduct it. If yes (however unlikely), should they make up earnings for such a late deposit?

My thought is no, a contribution made after the end of the plan year can only be considered as made for the prior year if it is deducted under Section 404(a)(6), or is it is required by the plan document.

What do you think?

Employer with 401k plan fails ADP by over 4% and refunds were made.

The average deferral percentage of the NHCE's was .70%.

Currently participation requirements are age 21, 1000 hrs in 12 month period and Jan 1 and July 1 entry dates.

Employer wants to do an open enrollment May 1 to encourage additional enrollments from the NHCE's with the inducement of a 2% match.

How do you test when the eligibility changes mid stream considering that employees leaving the company before May 1 would not be eligible and that deferring participants terminating prior to May1, would not get a Match whereas those eligible after May 1 will get a Match?

A company has 11 employees. 2 are 50% owners. The rest are HCE's. Plan allows 401k and profit sharing contributions.

The owners want 44k for themselves between 401k and profit sharing. If the plan is not top heavy, obviously due to high 401k participation of the non key HCE's, what is the minimum contribution to the non key HCE's?

Roth 401(k) contributions held in a trust as part of a qualifed plan has the same protection from creditors as traditional 401(k) contributions, correct? This is spelled out in ERISA.....is it Title I?

Someone outside the office begs to differ

Thanks

I think the answer is "no", but I thought I would check with the experts out there.

If an employee is terminated effective immediately, but his employer pays the employee for a month after his termination (ie: severance), does the month after the termination count towards the employee's service?

Has anyone seen language that would exclude a KSOP arrangement from the requirement to provide quarterly statements for the non-directed employer contribution of the ESOP if associated with a self-directed 401k? The ESOP and k provisions are in the same document.

Client undercalculated lump sum distributions from its defined benefit plan. They have recalculated the accrued benefit (with an interest adjustment on the "make up" amount) but are not sure how to handle the cash out issue (e.g., if the prior lump sum paid in 2003 was $4,000 (and was cashed out) and the corrective allocation is $1,500, is the new amount subject to the automatic rollover rules or would it, in the aggregate with the prior lump sum, be considered to be in excess of $5,000). Just curious how others may be handling this as I don't see it specified in Rev. Proc. 2006-27.

Does anyone know how to export vested percentages to an excel file in a format acceptable to Nationwide Insurance? The DER approach will not work because it needs to be in rows by person and source.

Does anyone know if the enhanced PPA DB deduction limt for 2006 and 2007 (150% of CL less assets) overrides the old FFL?

I know that the DB deduction limit for a sole prop is 100% of earned income less SE tax. Is this merely in a private letter ruling, or has it bene codified? Client is asking me for the citing.

Also, does this apply just to the DB deduction, or to deductions for all plans? For example, if 100% of earned income less 1/2 SE tax is $200K, and DB contribution is $190K, can client ad another $20K 401k, or is he limited to $10K?

Employers A and B are members in a controlled group. Both have separate 401k plans and separate recordkeepers. Employer A's plan passes coverage using average benefits testing with ratio % barely above safe harbor. Employer B's plan passes coverage easily w/ ratio above 70%.

It has just dawned on one of these employers that they could pass ADP and ACP testing if they permissively aggregate the two plans.

As the employer A recordkeeper, I asked them to send us a copy of the other plan document and noticed some plan differences such as different vesting, different deferral election limit, one has an early retirement age, one has an inservice provision and only one allows for auto rollovers.

Since we're exploring permissive aggregation, it would appear the plan would become subject to BRF testing.

The way I understand BRF, it appears the tests on these differences pass simply because both independent coverage tests have a ratio % greater than the safe harbor. That is, we don't have to do anything special for benefits, rights and features.

Is this correct?

Hello,

I was wanted to convert my $3000 in my rollover IRA into my Roth IRA. I was wondering if that would be considered part of my 2007 contribution limit of $4000, or not? Do conversions count as contributions?

Thanks!

Was wondering what potential land mines we may encounter in freezing the current 403b annuity plan and starting a safe harbor 401k? Any thoughts?