I know that Relius will test separately for those HCEs and NHCEs who have not yet met the statutory minimum age and service conditions if a plan provides for more generous entry provisions. How would we get Relius to exclude only those NHCEs who have not met statutory minimums? 401(k)(3)(F).

My understanding was that a plan maintained by an affiliated service group is treated as one employer, the plan is a single employer plan (Prototype if they see fit) and tested (including ADP/ACP) as one plan.

Situation is this - 5 separate entities. 4 of the 5 constitute a controlled group. The 5th is not part of the CG but is part of an affiliated service group with the other 4 because one of the 4 is a management company and the client's attorney determined an ASG existed under the ASG management service organization analysis under 414(m)(5).

The client's attorney is telling them that even though a 5 member ASG exists, the plan needs to test (ADP/ACP) the 4 CG members separate from the non-CG member and the attorney is citing reliance on Proposed Reg. 1.414(m)-3©.

Doesn't appear to me that this is what that Proposed Reg. is stating ? Plus, those regs. were withdrawn, can they/should they be relied on?

A Safe Harbor 401(k) consisting only of deferrals and the safe harbor match do not need to test for top heavy. However, a S-H plan consisting only of deferrals and the SHNEC does not automatically satisfy top heavy.

Can you explain the rationale for this? Granted the SHNEC can be used to satisfy the t-h minimum but why subject the SHNEC plan to t-h testing, when the S-H matching plan gets the pass? Seems like more participants would be getting a minimum contribution under the SHNEC than under the matching method.

If I have a safe harbor plan that isn't ACP safe harbor because of after-tax contributions, then how do I complete the ACP test? Do I include just the after-tax or do I include the SHMAC as well? What if it's not ACP safe harbor because the SHMAC and/or a regular match exceeds the prescribed caps? Do I test only the match that exceeds the caps or the entire combined matching contributions? Please list any and all available options and site regs if you can.

I'm pretty sure I know the answer to this, but would like some verification.

A company with a 401(k) plan wants to amend it to allow for a discretionary employer contribution, subject to a vesting schedule. Is there any way the vesting can be based on years of service beginning on the date of the contribution, rather than total years of service under the plan?

In other words, assume the contribution is subject to a 5-year cliff vesting schedule. Do all participants who have 5 or more years of service at the time of the contribution have to be automatically fully vested in the contribution, or can the plan provide that, for purposes of vesting in this contribution, only years of service after the date of the contribution will be counted?

My client maintains a cross-tested profit sharing / 401k plan. The owner's wife, who receives comp. of about $30K, arranged to have a $12,000 401k contribution made in late December, 2003.

It turns out that this 401k deferral causes the plan to fail the general nondiscrimination testing, which is performed on a cross-tested basis (the ave. benefit prong). Note that the plan made 3% safe harbor contributions so as to automatically be deemed to pass the ADP test.

My question is ... what corrective action is available? Can a portion of the 401k deferral amount be refunded to the wife? Can a portion of the deferral be recharacterized as a 2004 deferral? Would it matter if the money was not actually deposited into the self-directed plan account until Jan., 2004? Note that the general test will pass if $7,500 of the 401k deferral is refunded or recharacterized.

Thanks for your help and input.

We amended our client's 401(k) plan for EGTRRA incorporating a graded vesting schedule for matching contributions as follows:

1 Year = 0%

2 Years = 0%

3 Years = 50%

4 Years = 75%

5 Years = 100%

Even though this schedule is more favorable then the standard 6-year graded schedule, would this schedule have to vest at least 20% in Year 2 to comply with EGTRRA?

A 501© client is offering a 403(b) plan to his employees under an ERISA plan and the plan currently allows elective deferrals only. 5500's have been prepared annually for the client, but it's unknown whether or not they've been filed. Is it possible to restate, or convert, this ERISA plan into a non-ERISA arrangement where the individuals have individually sponsored TDSA's? What are the consequences to the employer and to the employee if this change occurs? Thank you for your comments and opinions.

We have a client with 3 large pension plans. The 5500 auditor is KPMG. As part of their routine data gathering, they are requesting some odd things. Here is a sample:

1) pension calculations for retirees who commenced 30 years ago

2) employment applications to verify hire dates for persons who retired in the 1980's (some of whom hired back in the 30's and 40's)

3) copies of payroll reports from 7 years ago to verify compensation used in the FAE definition

Obviously, some of the information does not exist but the auditor does not seem to know how to react to unavailable information. Exacerbating the situation is that the client was spun off 2 years ago, and many of the personnel records stayed with the prior owner.

In virtually all other data requests I have handled, the information request was largely limited to things that happened during the year audited. Did the audit standards or rules recently change, causing auditors to have to "re-audit" old information that was possibly audited in some prior year?

A partnership has two partners and five employees. Partner #1 wants the partnership to establish a retirement plan, partner #2 wants no retirement plan.

Partner #1 has been told that he and partner #2 should dissolve the partnership and each of them should establish their own sole-proprietorship. The two sole-proprietorships would continue to operate the business as usual at the same location, same five employees, they would establish a joint checking account to collect fee income and pay operating expense, all income and expenses would be split 50/50, each would file an annual Form 1040 Schedule C. However, since the two sole-proprietorships would share the five employees and each would pay one-half of the employees' annual salary.... then each employee would be receive two W-2s each year (one from each of the two sole-proprietorships). This would then

allow the former Partner #1 to establish a plan for himself and the employees, but the eligible compensation for those employees would only be the salary that his sole-proprietorship pays them. Will this work? Does IRS and ERISA allow such a "shared employee" arrangement ?

It would make things a lot easier if the partnership remained in place and Partner #2 simply elected out of any plan. Does IRS and ERISA allow a plan document to state that someone who meets the eligibilty requirements of a plan ... can elect-out of participation ?

I guess it depends on the type of plan. This plan would be a PSP(discrtionary contributions) with a 401(k) feature.

Does anyone know how to obtain text of 1996 letter from DOL to Evelyn Petschek of IRS that, to my understanding, states that participation in EPCRS program by an employer offering a 403(b) program does not necessarily subject the program to ERISA? BNA, Lexis, and checkpoint do not have it. Is anyone aware of a website or other resource that might have it? Thanks.

Has anyone seen any information regarding the tracking of the basis in an IRA when after tax dollars are rolled in from a Qualified Plan. The 8606 and instructions don't seem to address the issue.

Thanks for any input.

A participant had a stormy relationship with

his wife and were constantly separating. He died

and she has come forward to claim a QPSA. However,

some coworkers believe they may have been divorced

prior to his death. She says they were not.

How does an admin effectively research this issue?

There is no record of a divorce on the county records,

but they could have done it elsewhere.

We have a corporate entity that is an instrumentality of a state government. The entity plans to "spin off" and become a stand alone 501©(3) entity; no longer an instrumentality of the state. What happens to the vested interests in the 415(m) qualified governmental excess benefit arrangement under its 401(a) plan? What happens to the excess benefit arrangement? We plan to put a 457(b) in place,but we can't rollover from the 415(m) arrangement into the 457(b) plan, can we?

A company has changed from an S-Corporation to a Partnership during 2003. In the first part of the plan year (1/1 to 12/31) the shareholders received W-2 compensation. In the second half of the plan year the shareholders will be reporting K-1 income. The K-1 earned income is going to be reported at a loss exceeding the W-2 compensation reported in the beginning of the year. IN order to determine the compensation for plan purposes, is the loss combined with the W-2 compensation and the sharholders have zero compensation for 2003 or do the shareholders have compensation in the amount reported on their W-2s?

Any help would be appreciated.

Jane F

Hello everyone,

I have searched the boards but could not find an exact answer so I am posting.

My mom has a 403(b) plan from her former employer of 20 years, a non-profit hospital. She quit that job either at the end of 1999 or beginning of 2000, and has been working for a private lab since August 2000. I believe she has a 401(k) with the new employer.

Can she rollover her 403(b) plan into a new 403(b) plan with a different provider, or to an IRA? Is there a penalty associated? Has she waited too long? By the way she will be 50 years old in July and she lives in Tennessee. My dad is a schoolteacher/coach who has taught for 31 years and is retiring in May - he is 53.

From what I tried to decipher of the IRC Sec. 403 (I'm graduating in May with my Bachelor's in Finance so this is fairly new to me), she should be able to rollover at any age to another 403(b) without penalty of any kind. But the real question is could she rollover into a 401(k) or an IRA and what would the associated penalties be (and would she want to?).

Most importantly, she did have a qualifying triggerable event (severance from employment), but that was in 1999/2000 and this is 2004 so does that matter?

Thank you in advance for your assistance, it is greatly appreciated.

Yours,

Nicholas Young

ps I can't add, the triggerable event would have been 4 years ago even though my title says 3 yrs.

I took out a 401k Profit Sharing Plan loan 5 years ago with my company for $10,000. I terminated my employment soon after and I was unable to payback the money for the loan. I couldn't get the rest of my money from the plan because their contract states that they can hold the money for 5 years after you terminate employment. All my statements up to this point stated my loan balance as $9,969.63. So what they did this year was charge me 5 years interest at 9.5 on the loan money and sent me a 1099-r that has a gross distribution of $13,921 on it for the loan. And another 1099-r that has the balance of the account $68,971.00 that I rolled into another 401k. This doesn't seem right. Why should I pay taxes on interest money I didn't receive. Can anyone explain this to me please.

Client is a partnership with two partners, no employees. It has always been our understanding that the partner's elective deferrals into their SIMPLE IRA can be made up to their tax filing deadline.

I have researched 29 CFR 2510.3-102. It says that deferrals must be submitted no later than the 30th calendar day following the month in which the participant contribution amounts would otherwise have been payable to the participant in cash.

However, since we have not yet determined what the partner's income is, what becomes the deadline for depositing the deferrals?

I have also read some prior posts, but am still having difficulty in determining when the deferrals must be made.

I was told that the "preamble to the DOL Plan Asset Regs" addresses this issue. I am having difficulty locating the preamble. Can someone please point me in the right direction. Thank you very much.

I have a plan that has always used a non-safe harbor definition of compensation. When we converted them to our company and restated their document we defined their compensation as a safe harbor definition of compensation even though this was not what they intended.

Three year have passed and it has jus now been discovered that they have been operating outside of the way we drafted their document. What is the appropriate fix here? If we go back and do a compensation ratio test for the past three years and they pass, is it necessary to file for a retroactive amendment though VCP or can an amendment be done going forward? And if an amendment can be done going forward is it necessary for the employer to do a QNEC for deferral and match that were not made on the excluded compensation pieces for the past three years?

When an employer changes from an LLC to an S corporation, what needs to be done with the plan document? There is only one employee who is the sole owner of both the LLC and S Corp.