MWeddell

If you don't receive satisfaction in any other way, there is a claims procedure in your Summary Plan Description that you can file. It'll be pokey but you will get a reply.

I hope the original poster wasn't still waiting for a response 14 years later.

Make sure the plan document does not impose an earlier deadline, especially if the document is custom-drafted.

Instead of requesting a private letter ruling, you might carefully review Treasury Regulation Section 1.401(k)-1(a)(3)(v) to make sure that the one-time irrevocable election does not have to be treated as a 401(k) cash or deferred election.

A plan's definition of disability may also affect vesting, forms of benefit payment, and whether there is a distributable event. I think you have to consider what is impacted in your client's plan and proceed carefully, considering both Treasury Regulation Sections 1.411(d)-3 and 1.411(d)-4.

Earlier legislative history included this paragraph: In the case of each of these types of plans, the proposal provides that the Secretary may by regulation provide for exceptions to the plan administrator's ability to rely on participant certification where the plan administrator has actual knowledge to the contrary. The Secretary may also by regulation adopt procedures to address misrepresentation. So it's hard to say exactly what is permitted without having received any Treasury Department guidance.

Here's an opinion on the other side of the ledger: (1) The administrative details are handled by third party administrators and payroll systems, so the burden does not largely fall on employers. Third party administrators handle participant communications. They'll figure how to it efficiently. This isn't rocket science compared to the rest of 401(k) plan administration. (2) The change increases the incentives for some business owners (not just those currently ages 60-62 but those in their late fifties who are soon entering that age band) to implement 401(k) plans. Pair those together and maybe Congress helped retirement plans with this provision. It's at least an opinion worth considering instead of assuming that everything is "woe is us."

If you have to perform an average benefit percentage test, you will have a divide by zero condition. That's not zero and it's not infinity; it is undefined. So your employer's policy seemingly is to include someone in the ratio percentage and nondiscriminatory classifications tests that mathematically is impossible to include in the average benefit percentage test. That seems inconsistent to me.

Depending on what your plan document states, it is possible that a QNEC or QMAC is allocated only to those employed on the last day of the plan year. The plan document should contain a definite predetermined allocation formula for QNECs and QMACs, although I have frequently seen plan documents that omit that formula and still have obtained favorable determination letters.

The employee was never eligible to make elective deferrals, so the employee is not included in the ADP and ACP tests assuming that there was no trailing regular compensation paid on 12/21/22 or later. There's no such thing as making a safe harbor contribution for a plan with an ADP test, so I'm confused about your facts. If there is a safe harbor nonelective contribution, it wouldn't be required by the safe harbor regulations, but your plan document may require it.

I don't believe I have ever seen a safe harbor notice signed. I tend to work with sponsors of large plans.

Yes, the Treasury Department changed the 411(d)(6) protected benefit regulations during the first decade of this century. For forms of payment made to terminated employees, if a lump sum form of payment is allowed to defined contribution plan participants, the other forms of payment may now be eliminated. Of course, see the regulations for details.

Also, the IRS' view (not codified in regulations) is that the nature of a defined contribution plan is that there shouldn't be unauthorized accounts (i.e. pots of money) not allocated to participants. Therefore, if there is a separate forfeiture account (rather than nonvested money recordkept in participants' accounts), it needs to be depleted as of the end of each plan year.

The plan asset regulations depend on whether the money is held in the trust, not whether it has been invested according to a participant's investment direction. If you have not violated the plan document, then you don't have a compliance problem. Note that the trustee repeatedly investing money in cash for a few days each payroll period will not comply with ERISA 404(c), so it may lead to employer liability.

I have several clients that make employer nonelective contributions each payroll period. The contributions are for a fixed percentage (not discretionary) and there are no allocation conditions once an employee is eligible for the contributions. It is no more error prone than allocating matching contributions on a per payroll period basis.

Generally, the answer is yes (and I agree with the preceding post). You still would want to be cautious about excluding temporary employees or anything similar that makes it look as if the plan is imposing an eligibility service condition greater than that allowed by Code Section 410(a).

Yes, you may disaggregate for testing purposes your 403(b) plan into a "plan" covering those who attained age 21 with one year of service (possibly using an entry date assumption) and those who did not do so. The main group would have a QACA and the < age 21 or < 1 year of service would be subject to ADP testing (and perhaps a few of them would have ACP testing). However, I don't recommend that plan design. It means that the timing of the auto enrollment must be when they enter the QACA "plan" not shortly after becoming initially eligible.

Yes, the employer could do this assuming the plan document was amended accordingly.

Yes, this is permitted. I don't know that there are any limitations on the initial defaulted employee deferrals. I suppose if your auto enrollment isn't uniform, then you would jeopardize your preemption of state wage withholding laws.

That makes sense. Thanks for the clarifications.

The only problem (of which I am aware) is when: - Plan document permits catch-up contributions to be made and defines "catch-up contributions" in accordance with the regulations. - Plan document specifies that catch-up contributions are not matched but allocates a matching contribution based on other elective deferrals. - Employee elects to contribute to a catch-up contribution source separate from his / her election to make other elective deferrals. - Matching contributions are based on what payroll initially thinks are and are not catch-up contributions, not based on what actually turn out to be catch-up contributions once the year ends and compliance testing & monitoring is performed. - There is no process to grant or remove matching contributions based on what turns out to officially be catch-up contributions. So just avoid any of those five conditions. I would counsel the client to calculate the match based on all elective deferrals including "catch-up contributions." I also like NOT having separate employee elections for catch-up contributions, although that change requires payroll programming, so it's less friction free. Others in this thread seem to be advising clients to not permit catch-up contributions to be made, which strikes me as a huge overreach. * * * * * It sounds like you are concerned about eligible employees electing to make "catch-up contributions" (as unofficially defined by payroll, not as officially defined in the regulations) before they have reached the 402(g) limit or any other legal or plan limit. This is a non-issue. If the eligible employee has not reached a limit, then the extra contributions that payroll thought were "catch-up contributions" are not actually catch-up contributions and your client has not violated the regulations.

There is a large difference in how the regulations define "catch-up contributions" and how everyone else frequently uses that term when payroll has a separate contribution source for catch-up contributions. It creates confusion.

Given that the April 1 and December 31 dates in Code Section 401(a)(9) don't depend on the plan year, I would be much surprised if any plan document provided for different dates merely because the plan year is not the calendar year.

Given that the plan is a 401(k) safe harbor plan, the definition of compensation used to allocation compensation must satisfy Code Section 414(s). This client has a major problem, at least if someone from outside the sales staff can receive commission compensation. A 414(s) definition of compensation, even one that satisfies an arithmetic test instead of a pre-approved definition, must be consistent for all employees. See Treas. Reg. Section 1.414(s)-1(b)(2). I would direct the client to work with legal counsel on this issue.

In short, yes, the non-U.S. compensation is part of 415 compensation.