We have a Davis-Bacon/Prevailing Wage 401(k) Safe Harbor Plan. The DB/PW contribution for the year offsets the employer's liability for the Safe Harbor. This Plan also allows participants to take hardships from the DB/PW (QNEC) source. I wasn't involved in the design and couldn't persuade them otherwise. The prior TPA appeared to be recharacterizing the DB/PW amount that was equal to the 3% Safe Harbor for participants that qualified. While I've never encountered it in practice, I speculate that this was done because of the different distribution restrictions that are imposed on the Safe Harbor (not available for Hardship).

So, by using an offset, does the DB/PW amount that offsets the Safe Harbor need to be subject to the same distribution rules as the Safe Harbor or is the full DB/PW amount available for hardship, even though some of it is satisfying the sponsors Safe Harbor Contribution obligation.

Does anyone have any idea how you test a plan that is part of a controlled group for part of a year?

For example, Company X, Company Y and Company Z are part of a controlled group. They each have a 401(k) plan and they are tested together for 1/1/04 to 12/31/04. But on 8/1/05, Company X is purchased by an unrelated employer - so they are no longer part of the controlled group on 8/1/05.

For 2005 testing, would you:

a) Test X, Y and Z together from 1/1/05 to 8/1/05. Test Y and Z together from 8/1/05 to 12/31/05. Then test X separately from 8/1/05 to 12/31/05?

b) Text X, Y and Z together from 1/1/05 to 12/31/05 - but only testing the comp and contribs of X from 1/1/05 to 8/1/05. Then test X separately from 8/1/05 to 12/31/05?

c) other options?

Thanks for any help.

The following paragraph appears in LRM #94 for Cross Testing in a Profit Sharing

For plans with only one or two eligible NHCEs, the allowable number of NHCE allocation rates is one. For plans with 3 to 8 eligible NHCEs, the allowable number of NHCE allocation rates cannot exceed two. For plans with 9 to 11 eligible NHCEs, the allowable number of NHCE allocation rates cannot exceed three. For plans with 12 to 19 eligible NHCEs, the allowable number of NHCE allocation rates cannot exceed four. For plans with 20 to 29 eligible NHCEs, the allowable number of NHCE allocation rates cannot exceed five. For plans with 30 or more eligible NHCEs, the allowable number of NHCE allocation rates cannot exceed the number of eligible NHCEs divided by five (rounded down to the next whole number if the result of dividing is not a whole number), but shall not exceed 25.

Would you include this in a Volume Submitter plan or just M&P?

Would a provision in a 457(f) plan that allows a participant to change the payment/vesting date result in a lapse of the substantial risk of forfeiture?

Rollover_Memo_no_name_pre_1107.docAnybody see anything wrong with the attached memo to employees regarding FSA/HSA rollover? Group has a grace period for FSAs.

I'm looking into a retirement plan and is not sure an IRA or a 401k will better suit me. I work for myself and own a small salon business. I don't want anything too complex. I'm not too sure the difference between tax deferred and tax deducted and all other tax related terms. I appreciate any help with my situation. I've researched and learned a little about each one between the traditional and roth, but still hasn't help me lead to an answer.

Thank you in advance,

~Jen

Since my company has no plans to offer a Roth 401(k), I thought I could achieve nearly the same thing by:

1. Contribute $15,000 to a regular 401(k)
   
2. Convert $15,000 from my regular IRA to a Roth IRA
   

I waited until the end of the year to be sure that my Modified AGI remained below $100,000 (excepting the conversion amount). And, knowing that I'd owe more income taxes, I made plans to make an estimated tax payment for 2006 on 1/15/07.

As I worked through the number with TurboTax 2006 (which is available now, although subject to additional updates), I discovered two things that I didn't anticipate:

1. The converted $15,000 raised my MAGI high enough to partially reduce my maximum contribution to my Roth IRA for 2006.
   
2. My income tax withholding for 2006 is slightly less than what I paid in 2005, so I'm potentially liable for a penalty for underpayment.
   

I'm going to try using the annualized income worksheet, and if that doesn't help -- request a waiver. Hopefully, since I was only a couple of hundred bucks short, the penalty won't be large.

But, my real question is: did TurboTax correctly forecast the reduction in what I can contribute to my Roth IRA this year (aside from the conversion)? Or did i enter the wrong code in box 7 of the 1099-R? I used "2": early distribution (except Roth), exception applies.

Or is there something else that I need to do, so that the amount converted from regular IRA to Roth IRA is not added to MAGI, when determining the amount I can contribute to a Roth IRA?

Can someone explain to me the same desk rule...

Thank you

An ineligible employee (not highly compensated) was alowed to withold and make contributions into plan (no employer match). This was done by an agreement with the owner at the time of hire. Neither were aware of the violation. The employee then left the company and rolled over their money into a IRA. Now the plan administrator has caught the error. What are the options for correction, or do we need to do anything since the employee is terminated?

Can an employer limit administratively what pay is used for deferrals? That is, can the sponsor say that deferrals are not permitted on overtime, bonus pay, sick or vacation pay for time not taken or other segments?

Pay for TESTING is not limited in the document. In fact testing is on total pay.

Searching on RIA Checkpoint turns this up in the Pamela Purdue / Qualified Pension and Profit Sharing Plans which points to a regulation under 401(a)(4), but I am looking for any other reference.

Thanks all.

Are they retired on the last day they work or one year later?

My situation, 71 year old employee left 11-8-06 and doesn't want to take any money out. He is planning on coming back next summer for the busy season. If he does and I have paid his RMD by April 1st, I have caused him unnecesary taxes.

If I don't pay him (his health is not good) and he does not come back, I have missed the RMD.

Further question along these lines, If we are supposed to use the last day worked as retirement date, how will we spot the people who retire late December. I do the RMD's for all of my Plans long before December 31st. Do other people look at all 70 and a half people again during the first quarter?

I sure hope someone can give me a cite showing that I can wait until he is gone for a year. I haven't found anything under break in service rules yet, but I am still looking.

We set up a 401(k) plan effective 1/1/2004, filed a 2004 Form 5500 and Schedules (showing $0 assets at begininng and end of year), and filed a 2005 Form 5500 (also showing $0 assets at the beginning and end of year). There were 10 eligible participants, all of which worked more than 1,000 hours in each of those years.

It is our understanding that you are supposed to file, even if there were $0 assets, so we did.

We got a letter from the DOL on the 2005 filing asking for "clarification" (why was the "Trust" box checked on page 2 of the Form 5500, and please check your math on the Schedule I). We sent them a letter back explaining that there are no assets, but that there are plan participants. They sent back another letter asking for further clarification.

Has anyone ever run into this?

Any input would be greatly appreciated.

Thanks ;-)

Are you able to utilize non-prototype amendments with prototype plans? Let me explain: We took over an existing plan with a prototype document from the prior TPA (TPA changed; investment co. didn't). Client no longer receives amendments from prototype provider. Many of our clients are on a volume submitter plan with well-known national company (provided to client via us). We purchased the amendment from vol sub provider to use with our clients (not adopted at sponsor level; each employer must sign). Can this amendment also be used for our new prototype client? Assumptions: prototype doc has no language restricting use by other TPAs/we understand we cannot rely on the prototype's determination letter. Thanks.

If all employees are covered by both plans, what minimum benefit must be provided by the Cash Balance plan?

I have heard if you are doing a percentage of pay, then 3% is considered a meaningful benefit.

I have heard that if you are doing a flat dollar, then $1,000 is a menaningful benefit.

I have seen cash balance proposals that are allocating only a 2% of pay contribution to the rank and file employees with a 3.5% allocation to a profit sharing plan. (by the way I beleive this proposal didn't pass the gateway test)

I have been told there is an actuarial firm in California that will design a $100 flat cash balance benefit with the remaining required contributions coming in the form of profit sharing allocations.

I am concerned about 401(a)(26).

In the plan I am desgining, the owner is receiving a large enough allocation that I need to give at least 7.5% to the employees for the gateway, but i would rather give the majority in the form of profit sharing contributions to eliminate as much of the hypothetical interest credits as possible.

We will be drafting a new individually designed profit sharing plan for an employer with an EIN ending in "1" early next year. The plan will not be signed until March, 2007. When should this plan be submitted?

Must it be submitted off-cycle or can it wait until the next Cycle A years down the road?

Thanks for any help.

Hello Everyone!

This is my first post here, so thanks for having me. I used the search engine before posting this, and was able to come up with a few names of different software, and how certain people like them. A lot of the info I found was outdated though, and I really would like to know what people are thinking right now.

I don't want to just put their name out there, but we've been using software from a company for about five years or so, and up until maybe six months ago, they were great. The support was great, the program worked very well. I'm not sure if something happened internally there, but now we seem to be having almost daily problems with them. We're spending a LOT of manhours on the phone with them, and their tech people don't seem to know the programs as well as they should. There are about 5 modules of the the software that we are using, and they don't all blend seemlessly (as you would hope they would). They update the programs monthly, and it doesn't seem like the updates are beta tested before releasing them to the TPAs.

Anyway needless to say we're getting a bit frustrated, as the bottom line is, our clients are not as happy as we would like them to be. We feel like we work tirelessly to get things right and do a great job, but with the current issues we're having, it's becoming increasingly difficult.

So I'm wondering what you're using, and if you're happy with it.

We're a company that does Full Flex plans, offer debit cards to the participants, etc.

Thanks so much for your time and help! Happy Holidays!

JD

If a participant has a 5 year loan to be paid back quarterly, can he prepay the year's payments in January? (i.e $250 payment per quarter of 2007 but pays $1000 in January 2007, then doesn't make another payment until January 2008).

I recently came across a 401(k) plan that, in addition to allowing employee deferrals, provides that "each year, the Employer shall make Nonelective Employer Contributions to the Trust for each eligible Active Participant in an amount equal to 4% of such Active Participant’s Compensation." The plan contains no language designating itself as either a profit sharing plan or a money purchase plan. It contains none of the required provisions of a money purchase plan (QJSA, etc.), so the sponsor is apparently taking the position that it is a profit sharing plan. It has received a favorable determination letter.

I have always understood the basic difference between a profit sharing plan and a money purchase plan to be that a profit sharing plan provides for discretionary employer contributions and a money purchase plan provides for mandatory contributions computed as a fixed percentage of compensation. If my understanding is correct, why wouldn't the plan described above be a money purchase plan?

I know for a NC Rate group you don't include match or nonelective 401(k) contributions... but do you include them in the rate group for the dc part of a dc/db rate group?

Rollover_Memo_to_ee__s__pre_1107.docAnybody see anything wrong with the attached example of a memo to the employees regarding the new rollover option?

Thanks!