My prototype plan document allows the employer to utilize a bottoms up QNEC to pass a failed ADP / ACP test.

I have a plan using current year testing. The plan allows for early entry into the 401(k) / match portion of the plan.

The plan fails the ADP / ACP testing for 2002 based on all eligible employees. I ran the testing using the "early participation" rule and the plan still fails the test.

My question involves how I allocate the bottoms up QNEC.

My plan document specify's I give the QNEC to the lowest paid employee. Can I assume that this would mean the lowest paid employee in the "early participation" version of the test?

In essense the lowest paid employee in one test is not the same as the lowest paid employee in the other test. The document is silent on the issue.

Any help would be appreciated.

A self employed person (SE) has three sole proprietorships (A, B and C), for which he gets three Schedule C's. Effective 1/01/03, he started a single 401(k) profit sharing plan covering A, B and C . Eligibility is immediate, but accrual rights require 1,000 hours and last day service. As required, service with one business entity counts for all entities. Only A has employees other than SE.

SE has income from A, B and C. It is now possible that SE might sell A by the end of the first quarter. Neither he nor any of the other employees will have 1,000 hours with A. However, he has hours with B and C and will exceed 1,000 hours when the three businesses are combined.

Question: When he makes the contribution for 2003, can his earnings at A (quite substantial, even for the 3 months or so) be included when calculating the contribution? The former employees will not have the required 1,000 hours. One problem I see is that some of the may have worked over 500 hours. If so, it seems that we have a coverage issue since the HCE will receive a contribution and the NHCE's won't.

Any advice would be appreciated. Thanks.

Prior to imposition of the IRS moratorium on cash balance conversions, a DB Plan obtained a favorable IRS determination on its conversion to a cash balance formula. The plan sponsor now wants to terminate the converted plan. Will the IRS issue a 5310 (termination determination) to this sponsor (assuming that all qualification requirements are met) or will the matter be blocked under the moratorium?

My issue is when is an employee considered terminated when applying a last-day requirement for matching contributions? For example, if there is a 401(k) plan with a plan year ending on 12/31 and a participant terminates on 12/20 ,and does not provide any further services beyond this date, but receives paid vacation time for the payroll ending 1/4 of the following year. Is this employee considered employed on 12/31?

I am having problems getting Relius to print my safe harbor contributions separately. All the "canned" reports combine the safe harbor contribution (SHNEC) into the EMPLOYER source. Has anyone else had any luck on this issue?

Is it necessarily inappropriate for an ESOP to retain the same valuation firm to value the stock and issue a fairness opinion as is retained by the majority shareholders for a merger of the companys ponsoring the ESOP? Assume the valuation firm is truly independent of the company and the shareholders. Aware of any cases, DOL audit, etc. where one of the issues is the use of the same valuation firm for both the majority shareholders and the minority ESOP?

Also, it is necessarily inappropriate in a merger to have the majority shareholders participate in an earnout, but not the ESOP -the ESOP is to be paid some sort of premium since it cannot participate in the earnout? The ESOP is being terminated in connection with the merger. Aware of any cases, DOL audit, etc. where an issue involves no earnout for the ESOP?

Any comments are appreciated. Thanks.

Is hypnosis for smoking cessiation or weight loss an eligible expense to be reimbursed from an FSA? If so what supporting documentation is required? If not, what reference can I use to explain the denial to the participant? Thanks.

I have seen replies on the message board stating that childbirth/lamaze classes are eligible for reimbursement from an FSA but for the mother only. What type of documentation is required? What reference is used to support this expense?

Thanks, jske

Does anyone have info on a Section 83 Plan- my understanding is that it is a type of non-qual plan

I've encountered the following situation:

Plan year - 10/1/01 - 9/30/02

ADP test for the above plan year has failed.

Plan was amended to allow for catch-up contributions beginning 10/01/02.

Since the ADP test failed and one of the HCE's has room to recharacterize his refund to catch-up, can his refund be recharacterized even though catch-up was not allowed during the plan year? Or because during 2002 catch up contributions were available, even though not in the plan year, must his refund be recharacterized?

Any help would be appreciated.

I need confirmation, please.

A holding company owns three separate companies (therefore these are all in the same controlled group of companies).

One company has its own 401(k) plan. This plan does not provide for any employer match. There are 130 NHCEs, and 10 HCEs.

The other two companies participate in a single multiple-employer 401(k) plan because these two companies are involved in the same type of business (separate and distinct from the third company). This plan provides for employer matches. There are 40 NHCEs, and 2 HCEs.

I do not anticipate any problem arising from the fact that the one company does not make any ER match when the ERs participating in the multiple employer plan do make ER matches.

Am I fooling myself?

Here is the situation:

Company A has 2 divisions- all employees are covered in the 401k Plan sponsored by A.

Company A sells one division to an unrelated company in a asset sale- the employees of that division will become employees of purchasing company.

Suppose that unrelated company has its own 401k Plan.

1) It seems these employees would have a distributable event and the same desk rule would not apply (assuming the Plan is amended for EGTRRA). Agree or am I missing somthing?

2) Are there any options to prevent this from being a distributable event?

I have a client who is on a bi-weeekly payroll cycle. Her first payroll cycle is January 3, 2003 and the next payroll cycle is not until January 17, 2003. She has sent a claim to our office for reimbursement for a surgery scheduled on January 8, 2003. The claim has all the information needed for reimbursement, including date of service, provider's name, and total expense. She is telling us that she needs the full amount up front to pay for the surgery

After reviewing the plan document, we found no exact answer as to when we can pay for the expense. So we are wondering if we can we reimburse her for the expense on January 3, 2003?

Can anybody suggest an on-line resource to learn more about the concepts of restructuring a plan to test components? Thanks!

I have a government sponsored 457. I also have a Roth IRA I opened myself last year. I make $50,000 per year and my wife does not work.

Can I contribute $6,000 to the Roth IRA (My $3,000 and Her $3,000 allowance) or does she need to open a Roth as well?

If I open a Roth IRA for her, can her Roth contributions be deducted on our taxes since she is not working?

Thank you.

Participant is age 78 and Final Average Pay for 3 years is $50,000 in 2002. Late retirement in the plan is the greater of The Actuarial Equivalent of the NRD benefit and the Benefit calculated at Actual Retirement. The Act Equiv bft in 2002 is $51,000 and the actual retirement bft is much lower. The Actuarial Equiv bft in 2001 was $47,000 (immaterial to this example, but it does show that last year the Act Equiv bft was less than the 415 limit). Therefore, her bft is $51,000. However, since I cannot exceed the 415 limit of 100% of 3 year pay (which is the $50,000 number above), I believe that I need to provide her with a Suspension of Benefits notice as described in IRC Sect 411(a)(3)(B) and further explained in DOL Reg 29 CFR 2530.203-3(a)(4). Also, the client only allows for in-service withdrawals to participants over age 65 and working less than 40 hours a month.

Questions:

1. Do you agree that a Suspension of benefits notice needs to be issued to this participant?

2. If so, does anyone have a sample notice that may have covered this type of occurrence?

An employee (A) currently enrolled in our fully insured health plan asks for a special enrolment of four children (X-Z) that are the children of her spouse.

The employee's children are already enrolled (employee with children rate). The "new" children are her spouse's (B) children (married approximately 3 months). The spouse is a part-time student with no insurance (to add him would increase their premium so they did not do it).

Now - the spouse's ex-wife © has asked the court for an order making the employee's spouse (B) responsible for insurance and medical expenses. The ex © says she can't afford the premium cost and is dropping coverage for the X-Z children.

This announcement came when it was too late to add the children during open enrollment.

Is this a special event for our plan? :confused:

Here's a question that has me chasing my tail just a bit. Any help would be appreciated.

A sponsor establishes a safe harbor 401k plan. The investments are participant directed. The investment provider for the plan uses front-end loaded mutual funds with a 5.7% load. If an individual participant agrees to make a minimum contribution to the plan the load is reduced to 4.7%.

The only participant who can reasonably make contribtutions at the required level is the owner of the company. The owner is the only HCE.

The load reduction is not a written provision of the plan and is provided soley by the investment provider.

Question: Is this load reduction a "benefit, right or feature" of the plan which is subject to the effective availability test?

Where do you include the son of the president of the company in these calculations? The rate groups are as follows: president, all others. I know that the son gets the same contribution % as all other NHCE's but do I treat the son as a normal employee when it comes to testing? or do I pull him up into the HCE group for testing purposes? If I force him to be tested then they don't pass cause the kid is only 23 and most of the other employees are over 45. My predecessors didn't give him any contribution...is that correct?

Makes a huge difference to the prez's contribution where I include him as the population base is fairly small. I buy off on theory that spouse gets treated in same classification as prez for testing purposes, but his child too?

For a 401(k) plan when determining top heavy determination do you have to add back to the ending balance the prior 4 years plus current year distributions, pre-EGTRRA rules?