I think I know the answer, but would like to confirm.

Employer who sponsors a top heavy plan is a member of a controlled group with another company. Some employees work for both entitities.

For the top heavy plan, is the 3% based only on 415 compensation from the employer who sponsors the plan and not on combined comp from both members?

P.S. The plan passes coverage including the the other members employees and the document excludes compensation from the other controlled group member in the regular definition of plan compensation.

If anyone can confirm, I would great appreciate it!

Thanks

I have looked at the Puerto Rico plan threads on these boards, but have been unable to find the answers to the following questions. What are the requirements for qualification under the Puerto Rico tax code? Do you need to submit one qualification application, or do you need to submit periodically (as with the IRS)? Is there are form for a qualification application?

We are having trouble locating some primary authority on the following issue.

Can a government money purchase pension plan make in-service distributions to participants who have reached age 70.5 (if the plan so provides)? We wanted to see if anyone else has any thoughts on this issue. (Our thinking is that such a distibution would be permissible and would not be a prohibited in-service distribution).

TPA has Client X which maintains a qualified plan subject to ERISA. For 2001, the Form 5500 was not filed. The IRS has issued a notice to Client X imposing a penalty of several thousand dollars. Client X has not received a notice from the DOL. If Client X files under the DFVC program, will the IRS penalty be abated?

I have medical practice "A" as a client and "A" maintains a 401(k). Last year the doctors of "A" created their own separate practices. Each doctor receives $40,000 from "A" as well as receiving a K-1 for their own practice. They have not updated the plan docs to reflect the CG/ASG rules, and do not think they have any intention to.

The attorney who drafted the plan says that I can't use the income from the K-1s since they have not updated thier plan to reflect the new entities. The doctors obviously want me to use their K-1s as part of their income so they can get a larger profit sharing contribution.

I am leaning with the attorney since the new practices have not adpoted "A"s 401(k), eventhough they are a CG/ASG. All of the employees are in "A", the doctors are the only employees in their practices.

In addition if I use both incomes, I would assume that I would have to reduce the K-1 income but not the W-2 income.

Thanks

An employer has discovered that one of his employees provided false information (ID, SSN, etc) and is an illegal alien. After the discovery the employee was terminated. The employer sponsors a discretionary profit sharing plan. The illegal alien received allocations in the plan.

In a way, this is somewhat of the reverse of an otherwise eligible employee not having received a proper allocation and the plan sponsor's taking corrective action to provide benefits that the employee should have received.

Does that fact that this person provided false imformation that resulted in his employment and coverage require corrective action to reallocate his account balance to the legal employees who would have otherwise received the allocation or is the plan required to distribute the benefits ?

Thanks,

Thomas Pritchett, CPA

An employer has discovered that one of his employees provided false information (ID, SSN, etc) and is an illegal alien. After the discovery the employee was terminated. The employer sponsors a discretionary profit sharing plan. The illegal alien received allocations in the plan.

In a way, this is somewhat of the reverse of an otherwise eligible employee not having received a proper allocation and the plan sponsor's taking corrective action to provide benefits that the employee should have received.

Does that fact that this person provided false imformation that resulted in his employment and coverage require corrective action to reallocate his account balance to the legal employees who would have otherwise received the allocation or is the plan required to pay him the benefits ?

Thanks,

Thomas Pritchett, CPA

Does anyone know of a source to obtain these table values?

I have a Plan that requires 1000 hours for a participant to receive an allocation (integrated PS) for any given year. I am getting a warning that I am failing the "Special" ratio percentage test because I have more than 30% of my NHC Group that is only receiving a 3% TH contribution and not the full contribution since they only worked 700 hours during the year.

Assuming that my document would allow it, do I need to ensure that some of these "not benefiting" participants receive the full contribution vs. just the TH 3% minimum that they are currently receiving? If I test the Plan under the 401(a)(4) General Test and pass, is this sufficient?

Any thoughts would be greatly appreciated - I reviewed the 401(a)(4)-2(b)(4)(vi)(d)(3) Regulations and "surprisingly" become more confused.

Thanks

RDS

Law firm is a partnership owned by two partners - Partner A-50% & Partner-B 50%.

Partner A also owns 100% of P.A. which is an S-Corp.

Partner B also owns 100% of P.A. which is an S-Corp.

Non-Partner C owns 100% of P.A. which is an S-Corp.

Non-Partner D owns 100% of P.A. which is an S-Corp.

The Partnership sponsors a safe-harbor 401(k) plan which is treats all four S-Corp.'s as affiliated employers. The safe harbor is a 3% non-elective.

Non-Partner C is no longer affiliated with partnership. Leave on March 31, 2004. Does he have to receive safe-harbor non-elective for 2004? If yes, is it based on his W-2 compensation from his S-Corp. for the period 01-01-2004 to 03-31-2004? He does not get paid from the partnership.

Line 7b says "retired or seperated participants receiving benefits." For a 401(k) plan, does this mean we should be listing only those people who are recieving annuity payments? If a person is retired or seperated, has an account in the plan, but has not taken a distribution, shouldn't they be listed on the next line, 7c? (other retired or seperated participants entitled to future benefits).

I ran a 5500 Count report on Relius and it is plugging numbers into both lines, but I think they should only be on line 7c, as this plan does not have annuity payments.

Your thoughts? Thanks!

We rarely recommend to clients that they exclude bonuses from allocation

compensation unless we are fairly confident that the 414(s) compensation

nondiscrimination testing will pass each year. However, in the case of a

Safe Harbor match plan (or a deferral/match plan for that matter), I'm

thinking that even though compensation is defined as ALL compensation, the

plan could result in discrimination another way. The Datair prototype

document has a specific option for allowing participants to defer on their

bonuses. There are 3 options: (1) deferral on bonuses is permitted, (2)

deferral on bonuses is not permitted and (3) a special election will be

made. We have typically asked our client which option works best for their

situation and the way they handle the logistics of paying bonuses. BUT, if

the plan is also a safe harbor MATCH plan with no "true-up" provision, match

calculations are made each payroll period, and the client selects #2,

couldn't this result in discriminatory operation of the plan? (yes, we asked Datair and the initial take on it was "no")

Do you actually have to perform a top heavy test each year? For example, before we do a Profit Sharing calaculation for a client, we need to know if the plan is top heavy or not. My client said, "Oh no, we're not top heavy." I asked if she did one, she said she hasn't done one "in a while."

What are the consequences of not documenting a TH test each year. The plan is obviously not top heavy--one key ee, bal $150,000, non-keys, $2.1MM, but there is nothing actually showing the calculations.

(We did get something in writing staitng the plan isn't TH)

The audit firm doing the annual audits of our DB plan and our 401(k) plan is telling us that they must have the completed 5500's in hand before the can issue their final audit reports. Is this truly a 'requirement'?

It is causing us a problem because we would like to present the audit reports to the plan trustees at a meeting in May, but the TPA's will not be able to complete the Form 5500's on such an early schedule.

Any insights appreciated.

If the ADP test fails and refunds are made, can the test be recalculated and any margin between the NHCE ADP and minimum NHCE ADP be shifted to help pass the ACP test.

For example if on recalulation the HCE is 5.5% and NHCE is 4%, can 0.5% be shifted to the NHCE ACP?

I haven't been able to find a prohibition unless the proposed regulation anti-abuse rules would squash the idea.

It has been a big year for failed tests.

Could anyone refer me to a calculator for an IRA RMD? Secondly, how is it calculated if person has been taking out small monthly amounts for five years and will now be turning 70 1/2. What beginning account balance is used and what start date? He needs to make sure he's taking out enough with the minimal distributions he's been taking annually. Thank you in advance for any help you can provide to me.

Fact pattern:

* 4 participant plan - Ee A is owner, Ee B is wife of owner, Ee C and D are staff

* Contribution allocation requirements are last day of employment and 1000 hours

* Safe harbor is 3% nonelective

* Plan is top heavy

* Ee C and D terminate during the year with more than 1,000 hours; each receive 3% safe harbor contribution but not the profit sharing contribution

Is there a requirement to disaggregate the profit sharing allocation from the safe harbor nonelective contribution when testing for coverage?

Thanks for your help!

Treas Reg 1.401(a)(31)-1 A 16 states the following:

A plan will not fail to satisfy section 401(a)(31) merely because the plan does not permit a distributee to elect a direct rollover of an eligible rollover distribution in the form of a plan loan offset.

My questions is....If you do not have to offer a direct rollover option for a loan offset, do you have to meet the 402(f) notice requirements?

How are others handling this? Do you send a notice and give the participant 30 days before offsetting? (I realize you should give the participant a reasonable amount of time after termination to repay the loan, but I am wondering if you have to provide the notice as well)

Thanks!!

Our fully insured dental and fully-insured HMO have said that they do not enter into Business Associates Agreements with the sponsors of the plan

why would this be?

I have an owner who is 74 years old. He just established a cash balance plan effective 1/1/03.

The question is whether he has a required minimum distribution due by April 1, 2004. My actuary is saying that since there was no accrual on 12/31/02, there would be no RMD for the 2003 year (which would be due on 4/1/04). I can not find a cite that backs up this assertion.

Can anyone explain and provide some authority? Thanks so much