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?

Local company was recently sold by a large Fortune 500 company to a small Europe-based owner. The legacy 401(k) plan provider gave employees a 2 week notice that the plan assets must be rolled over to a qualified plan or IRA, or will face a lump sum distribution.

Is 2 weeks a legally acceptable timeframe for this type of action? Also, what unique consideration should be given regarding plan sponsorship of a new plan when it is an overseas owner?

We are down to an April 8th deadline and trying to come up with adequate alternatives (IRA's, SEP's, new K plan, etc.). Any thoughts appreciated.

A participant is 64. He is a new enrollee to a Roth 401(k) plan. If he defers to the Roth in the plan, for the first time at age 64, when can he remove his money without the penalty (a tax free distribution). Is it at age 69?

Has anyone done a communications campaign for their plan on the topic of company stock diversification that they would be willing to share? Our plan has a high concentration of company stock and we'd like to take some measures to cut this down.

We're also looking at potentially instituting limits to company stock in each participant's account. Does anyone have a similar policy in place?

A parent company owns 51% of a smaller company. They qualify as an affiliated services group (ASG) under 414(m). May the subsidiary’s employees participate in the parent’s 401(k)? If so, would the 401(k) plan be a multiple employer plan?

I've read on these message boards that a 401(k) sponsored by a parent company for its controlled group or ASG would not constitute a multiple employer plan. However, I have not found any justification for that.

Though the parent is considered the employer of all the employees of the ASG for testing purposes, 414(m) does not seem to pertain to 401(a), which states that qualified plans are for the exclusive benefit of the employer’s employees. (In the health benefits world, their health plan would be a MEWA because they would not be a single employer.)

Thank you for your help in advance.

Plan has investment options in mutual funds and they also have a stable value fund option. The mutual funds are offered through one of the large mutual fund companies and the Stable Value Fund is managed by a separate investment company. The company that manages the Stable Value fund does not file as a DFE. This Stable Value fund used to be invested totally in a GIC from 1 large insurance company. That insurance company provided Sch. A info and everything was fine. During the plan year the GIC assets were transferred to this other investment company and the fund became the Stable Value Fund, which has investments in a number of different GIC's and other stable assets.

The question is now how do we report this Stable Value Fund on the 5500. We have the Sch. A info for the investment for the time it was still invested at 1 insurance company. But, after the assets transferred to the outside investment company we are unsure how to show this on Schedule H (what line) and also are not certain if we need to complete a Sch. D and also obtain information from all of the GIC's that the fund is invested in. As mentioned the Investment Company does not file as a DFE and they also do not receive any insurance info from the GIC's. Most of which are investments through other investment companies. Any opinions on what to do are appreciated.

Is it possible to convert a cash balance plan to a 401(k) plan?