Eligibility for PS & Safe Harbor 401(k) Contribution is Year of Service, dual entry

Eligibility & Entry for 401(k) Deferrals is immeidate

Plan is Top Heavy

Any way to avoid providing TH minimum and/or Gateway minimum to Participants only eligible to make deferrals? Can we somehow disaggregate the Plan?

If Top Heavy 3% is unavoidable, anyone buy the argument that the Gateway minimum is 5% of 0 for the otherwise excludable employees, because we exclude pre-entry compensation for the Employer Contributions?

Has anyone had any experience with an Incorrect Form 5558 and can advise on the best way to handle the situation?

We prepared an extension for an 11/30 PYE and sent to the client; of course, their auditors prepared a "corrected" form listing the plan as a 12/31 PYE and extension deadline of 10/15/06!!!!

Will this date issue cause a problem with the IRS/DOL? Can we just put a copy of the correct 5558 on the 5500 when we file it, or do we need to send a reasonable cause letter?

I've never had this happen before, fortunately!

Thanks for any suggestions.

Vicki

I have an ER who contributed a promissory note to its retirement plan. The promissory note is now in default. The ER wants to terminate the plan and distribute to the participants a pro rata share of the (defaulted) promissory note.

1) Can an employer distribute, pro rata, a defualted note (let's assume the note qualifes as a "qualifying employer security" although I doubt it does); and

2) Could the participants roll that pro rata share into an IRA?

Thanks to anyone who can help in this matter. The porposed distribution of a defaulted note seems crazy. Any thoughts?

Can someone confirm that a 5500 is not required for a ps plan with one participant until the assets reach over 100,000? Also, what happens when there are two participants, does that change the filing requirements.

I think this is a fairly interesting situation. I'm pretty sure I handled this as would be standardly done in the industry but maybe I am all wet. We had a transfer plan that had a match formula based on years of service. Per 1.401(a)(4) regs, non-uniform match is a benefit, right or feature. I performed a current availability test on the match and it failed for several years. The client determined a reasonable business classification to give certain people additional match to make the current availability test pass. We filed VCP since we were outside of the correction period of 9 1/2 months. After several discussions with the IRS agent regarding whether or not the client did an ACP test (they did) and whether or not this was really a demographic failure, the IRS sent the VCP back saying the submission is ineligible under EPCRS. So in the eyes of the IRS, if the match is tested in ACP, no further testing is needed. However, whenever I file these tests on schedule Q for Form 5300, the IRS has never come back saying the testing is not needed or the testing methodology is incorrect.

You would have handled the same as me, yes or no?

Thanks!

First year of plan is a short plan year 2/1-12/31. Plan has 6 mths entry requirement w/ entry dates of first day of plan year and first day of 7th mth of plan year. If an employee has met the requiremetns and would come in on the first entry date, is the entry date 2/1 or 1/1? Plan uses compensation from date of entry so I need to decide if I only want comp from 2/1 or 1/1. I don't know why I'm getting myself confused on this issue. Thank you.

SH 401(k) plan has 3 month eligibility and SH is given to all who are eligible. The plan sponsor wants to change eligibility to 1 year and do it mid-year. This would prevent some recent hires from entering the plan in the next few months of 2006 and push them back to 2007. Is this permissible?

I tried some research and couldn't find anything definitively prohibiting it, but yet I remain unconvinced that is correct.

I am a producer who is looking to build the 401k part of my business. Is anyone familer with a company that sells leads of companies who are looking to change providers?

Here are the facts.

1. Plain vanilla profit sharing plan covers two 414-related employers.

2. For reasons (i.e., multi-state tax planning) explained to me that if true are valid business reasons, client wishes to get the employees of one of the employers completely out of the plan, so that the departing employer will not maintain a 401(a) plan. I am told that spinning off and setting up a clone, separate plan won't accomplish what the client wishes to accomplish. Let's assume client is correct; I'm not sure he is, but let's assume he's correct.

3. We can spin-off the piece of the plan attributable to the departing employees and terminate the spun-off plan. However, that will result in full vesting of the departing employees and all or most of them are HCEs, whereas the remaining employer has a fair cross-section of HCEs and NHCEs.

Will the spin-off termination, which must result in full vesting of the spun-off employees, be an amendment that is discriminatory on account of timing? Client is not willing to fully vest the employees who will be left in the plan.

Any other ideas?

Sole-Proprietor sponsors a "uni-k" for himself, in order to make an elective deferral and also benefit from the 20% deduction for profit sharing. As of today, the sole-proprietor has not made any elective deferrals for 2005. Can the sole-proprietor still make an elective deferral for 2005? The profit sharing portion is still allowable, as the Form 1040 has been extended to 10/16/2006.

Any replies would be appreciated.

DC Plan is terminating in '06. Gust prototype with the following "snap on" amendments: 1) EGTRRA, 2) 401(a)(9) post-EGTRRA, 3) cashout/rollover 4) Final (k) and (m) regs. Does this plan need to be entirely restated prior to termination? Does it make a difference whether you plan on submitting a 5310?

We do require it on our forms, but is there any legal requirement that a plan sponsor sign a participant termination distribution form?

We are working on trying to streamline the process and other fund groups seem to be moving toward electronic and not requiring plan sponsor signature, so just wondering. One fund group actually has phone distributions, so we are thinking that there must not be an actual requirement for this signature?

I am just trying to get a feel as to what other firms are charging participants to get a lump sum payment (rollover or cash payment) from a participant directed DC plan after they terminate service with the plan sponsor.

Thank you in advance for any input!

I have a SHNC 401(k)plan where there are 2 entry dates and compensation prior to plan participatin is excluded, according to the plan document. When giving the SH 3% contribution, can I exclude compensation prior to participation? The plan is top-heavy so I was assuming the 3% had to be over the entire year but I was told that this may not be correct.

Assuming I can give the SH3% on the half year comp, if I do a NC allocation then, do I need to make up the difference to bring the cont to a full year 3% first before doing the NC allocation?

Hope this all makes sense. Thanks!

I think this is a fairly interesting situation. I'm pretty sure I handled this as would be standardly done in the industry but maybe I am all wet. We had a transfer plan that had a match formula based on years of service. Per 1.401(a)(4) regs, non-uniform match is a benefit, right or feature. I performed a current availability test on the match and it failed for several years. The client determined a reasonable business classification to give certain people additional match to make the current availability test pass. We filed VCP since we were outside of the correction period of 9 1/2 months. After several discussions with the IRS agent regarding whether or not the client did an ACP test (they did) and whether or not this was really a demographic failure, the IRS sent the VCP back saying the submission is ineligible under EPCRS. So in the eyes of the IRS, if the match is tested in ACP, no further testing is needed. However, whenever I file these tests on schedule Q for Form 5300, the IRS has never come back saying the testing is not needed or the testing methodology is incorrect.

You would have handled the same as me, yes or no?

Thanks!

We have a couple of plans that want to amend their document to allow for automatic enrollment as of January 1, 2007. Per the regs, the current employees could avoid the automatic enrollment by making an affirmative elections "during a specified reasonable period ending on the January 1 effective date of the amendment". Does any one have any language to provide notification to the employees of this change? Our document provider does not and when the plan is amended, there is no Summary of Material Modification provided, nor does the SPD address this. I am hoping someone has already built this document and I can modify it to fit the client. Thank you.

When there is no QTA involved, and a previously terminated (sponsoring co. has dissolved) plan provides for J and S, can assets be escheated?

In this case the ppt is unresponsive to delivered mail.

All plan assets were dist'd, except to this ppt.

Is there any definite guidance out there?

An employer allows rank and file employees to pay insurance premiums through Cafeteria Plan and also to participate in flexible spending plan and dependent coverage.

Physicians, whether they are considered key employees or not, are not allowed to participate in the Section 125 plan.

The corporation (C corp) pays the cost of insurance coverage for the physicians. These and other "physician specific" expenses are deducted from the share of compensation which each physician receives.

Does this allow the plan not to take the physicians into account when doing their discrimination testing?

When a company has both a safe harbor 401(k), using employer match option, and non-safe-harbor 401(k), for ADP testing of non-safe harbor plan, are the NHCEs in safe-harbor plan included using the amounts deferred in the safe harbor plan or are the safe harbor employees excluded? Thanks in advance for comments.

When doing a IRA to IRA rollover how do you determine 60 days from receipt? How does the IRS know the date you received the IRA?