N is a wholly owned subsidiary of M on every day in 2005. Both M and N sponsor 401(k) plans--these are two separate plans. Henry works for N and draws $115,000 in pay from N in 2005 (Henry does not work for M).

In 2006, M and N constitute a controlled group of corps until November 2006 when M sells N to V (an unrelated corporation). Coincident with the sale of N to V, M hires Henry. From November 2006 through December 31, 2006 Henry is paid $10,000 by M. Henry is eligible to participate in M's 401(k) plan now that he works for M and does so, contributing $5,000.

As of November 1, 2006, M and N cease to be members of a controlled group of corporations. M still needs to perform an ADP test on its plan.

Is Henry an HCE with respect to M's plan for the 2006 plan year? Henry has never been an owner of M or N. Did Henry have pay in excess of the HCE pay limit in 2005 (the lookback year)? If, for this purpose, the "employer" is the M/N controlled group, then the answer is "yes". If, instead, the "employer" is only M, then the answer is "no".

I need help quick!!! Thanks so much.

I am completing the testing on a brand new plan - 2006 was it's first year. On 8/2006 two employees signed up for deferrals but never had it withheld. There is a payroll to payroll match.

What happens here? Does the company have to make a match because they missed the deferral? What if the amount is too big for a one time contribution for the participant and they don't want to make up the deferral, does a match still need to be made?

ok... let me know if any of what i believe is correct

I've got a 401(k) safe harbor plan with a new comp that is top heavy...

a) Since the plan is TH, i must give a top heavy minimum to plan participants who did not work 1000 hours, but are there on the last day of the plan year... (the contribution allocations provision says 1000 hours and last day of plan year)

b) since the plan is safe harbor, i must give either a match or a nonelective contribution to all participants whether they are active at the end of the plan year.

c) in order to pass the gateway for the NC, i must give the minimum of 1/3 of highest HCE rate or 5% to all active NHCE participants and all NHCE participants in category a or b

am I close at all?

Also, a plan document can't classify the safe harbor match or nonelective contribution as an elective contribution can it?

Do i have to use either a or b in the nondiscr testing?

ok... let me know if any of what i believe is correct

I've got a 401(k) safe harbor plan with a new comp that is top heavy...

a) Since the plan is TH, i must give a top heavy minimum to plan participants who did not work 1000 hours, but are there on the last day of the plan year... (the contribution allocations provision says 1000 hours and last day of plan year)

b) since the plan is safe harbor, i must give either a match or a nonelective contribution to all participants whether they are active at the end of the plan year.

c) in order to pass the gateway for the NC, i must give the minimum of 1/3 of highest HCE rate or 5% to all active NHCE participants and all NHCE participants in category a or b

am I close at all?

Also, a plan document can't classify the safe harbor match or nonelective contribution as an elective contribution can it?

I haven't filed one of these in a long time...PS Plan had limited partnership investment which was sold in 2006.

Schedule K-1 shows net short-term capital gain of about $5K, net long-term capital gain of about $1K. Ordinary business loss was $125, and other income $994. Do we exclude the capital gains, and therefore have less than $1k to report?

Thanks,

There is a big, HUGE, prize (i.e., my everlasting gratitude) for any one on here who can come up with a reason why participation in a multiple employer 401(k) plan is better than a single employer plan, not including economies of scale, vesting credit, and one Form 5500. Thanks, THANKS, T-H-A-N-K-S!!!

Employer fails ADP test.

Employer issues excess contribution refunds to HCE's.

Refund checks have been cashed.

The employer now wants to use the QNEC provision in their plan document to raise the NHCE average to pass the test. They use the current year testing method. Is this an option if refund checks have already been cashed? Can the HCE's send that money back to the plan?

Due to growth (ie now over 25 employees), the client is no longer able to allow contributions to their SARSEP. They are working towards establishing a 401(k).

Q1 - Can deferral elections for the SARSEP be automatically carried over to the 401(k) or must the client get each employee to make a new election?

Q2 - If the 401(k) is retroactively established (say in April) back to January 1st, can amounts already withheld from 2007 payrolls (ie Jan & Feb) be treated as contributions to the 401(k)? Does the answer change if Jan contribs have been funded to the SARSEP but Feb contribs have not?

Q3 - Can amounts already withheld (and funded) from 2007 payrolls be treated by the employees as contributions to a traditional IRA (treating them similar to "disallowed deferrals" (see form 5305A-SEP pg 4)), subject to the limits on traditional IRA contributions?

I have a plan that we took over from another TPA. It looks like the PS plan was merged into the MP plan, although I see no documentation to support this (and there should be, right?). However, there is a "profit sharing rollover" source with a vesting schedule attached to it (not 100% vested). Participant with 20% vested PS rollover $ has 5 yr BIS and so the non-vested $ is forfeited. The document states that forfeitures are used to reduce ER contribution, but there are no PS contributions to reduce. The ER is only making MP contributions. Can the PS forfeiture be used to reduce the MP contribution?

An employer maintains an ESOP plan as well as a 401(k) plan. Deferrals are made to the 401(k) plan and the ADP test passes. However, the contributions made to the ESOP fail the ACP test. Both plans have the same plan year and they both use the current year testing method.

Can deferrals to the 401(k) plan be shifted to the ACP portion of the ESOP plan? I read through the ERISA Outline book and it didn't describe the situation of 2 separate plans. And there doesn't seem to be any mention of this in the regulations.

Any idea's if this is permissible?

An employer has a Cafeteria Plan that allows them to salary reduce an employees pay on a pretax basis their cost of the health insurance. The employer realizes that they had been salary reducing the incorrect amount for 2006, and now want to charge the participants the difference. What type of issues will this present? Can it be done through the Cafeteria Plan? Any assistance would be appreciated. Thanks.

I want to buy a 2006 DC-1 Book from someone please email me at lray@vanfin.com

1) Particpant dies in 2005

2) Plan provides for life expectancy rule.

3) Non-spouse beneficary takes distribuiton purusant to life expectancy rule in 2006.

Do you agree that the non-spouse beneficiary can rollover the remaining amounts in 2007 (after taking the 2007 life expectancy distribution)? It seems to me that there is no need for any "transition relief" in this case (which based on an article today in BenefitsLink it doesn't appear the IRS is going to provide):

3/14/2007: No Transitional Relief for Rollover to Nonspouse, IRS Official Says (The Bureau of National Affairs, Inc.)

Excerpt: "The Internal Revenue Service made the decision not to provide transitional relief under Section 829 of the Pension Protection Act for years prior to 2006 regarding nonspouse beneficiary rollovers, an Internal Revenue Service official said March 9."

I know the plan will need to be amended to provide for non-spouse rollovers, but what is the amendment deadline. Is it 2009 with other PPA amendments with just operational compliance until then?

TPA failed to pay 77 year-old participant any of her RMDs.

As I understand, the correction method would be to pay her the amount owed plus interest and then get her current for 2007.

Would I be correct in thinking that she would not get relief for reasonable cause when she has to file Form 5329? And would any liability attach to the TPA (I am sure the participant will be upset when she learns she has to pay a 50% excise tax for the past 5 1/2 years).

How have any of you handled this?

Have a client that is asking whether they can declare a match for the 2006 plan year (ending 12/31) by 3/15 (tomorrow), have us post this as an accrual, then actually fund at a later time? Is this possible? If so, what is the latest they can fund the match?

Facts: Married couple

Income: Husband's earned income over $4000 under $8000

Wife's earned income $0

Question: Can a husband make a contribution to a Roth IRA of maximum amount (therefore $8000) for both him and his wife, even if his earned income less then $8000?

Thank you.

Yulia.

Would be interested in opinions regarding the correct "ordering" for a plan that fails an ADP Test which then results in the need to forfeit some matching contributions to the HCEs who get refunds of deferrals due to the failed test. The real question is how to properly run the ACP test in that instance.

It seems that some folks believe that you run the ACP Test without netting out any forfeited match and if it fails and if the refunds due to the failure exceed the amount of match to be forfeited due to the ADP Test refunds, then you are done. I believe that, as per the 401k regs, you must run the ACP Test net of the forfeited match and then, if it fails, make your refunds as necessary. The difference is in the amount of match that the HCE will ultimately receive either in the plan or as a taxable refund.

I also believe that if the match has not yet been made at the time the ADP test is run, you must calculate the employer match based on the deferrals NET of any refund required due to a failed ADP Test.

Do others agree with this procedure?

We have had a safe harbor 401k since 2004. At the time the plan was written, very late December 2004, it was inteneded that the one employee who was highly compensated not be included, at least not to the degree his compensation would dictate. We are trying to cut down the match for him.

The plan is not top heavy as the sole owner is third or fourth on the compensation list. We believe we can cut his match by re-defining compensation to exclude commission which is the bulk, but not all, of his compensation.

Questions are...

Can this amendement be done?

What form of notice needs to be executed?

What time lag between notice and amendment effective date must there be?

Thanks

If a QNEC for ADP/ACP failure is made by the employer's extended tax filing deadline, is the contribution tax deductible? Or must it be made by the original filing deadline without extensions?

A company has ceased doing business for all intents and purposes and one employee that terminated employment has requested an immediate distribution. Is an immediate distribution required? The trustee would like to wait until the expiration of one year before making any distributions in order to ascertain the employees' exact interest in the plan.