MWeddell

If the plan was amended to allow for the 3% contribution, one can't retroactively get rid of the feature due to 411(d)(6). Depends what's in the amendment, but the client is probably obligated to contribute the 3%. In other words, I agree with the above post.

See Treas. Reg. 1.410(B)-6(d)(2)(i)(penultimate sentence) for the proposition that when an employee switches status from union to nonunion or vice versa during a plan year, one breaks the employee's data into two records, testing one as union, one as nonunion for the appropriate portions of the plan year. This probably is incorporated into the 401(k) and 401(m) regulations through their incorporation of the 410(B) regulation's definition of plan including the mandatory disaggregation of union from nonunion employees.

1. I agree that this is reasonable although not expressly covered by the IRS notices. 2. Yes, semi-annual match with true-ups can satisfy the safe harbor rules. 3. No additional guidance. Like you, I'd be comfortable with this change although the IRS notices do not expressly address this situation.

Sure, if the plan permits after-tax contributions and one or more highly compensated employees make after-tax employee contributions, then 401(m) testing is required. Nothing in your post indicates why this shouldn't be the conclusion.

Yes, it would fail coverage. There's no solution in the regulations: you'd probably need to review IRS Rev. Proc. 2001-17 for how to fix it.

That's right, you don't aggregate them for ADP/ACP and you don't aggregate them for 410(B) coverage testing (with the limited exception that one aggregates them for an average benefit percentage test if that's part of your coverage testing).

Yes, those are plan imposed limits. Note that the proposed catch-up regulations require the participant to exceed the limits for the whole year regardless of whether the limits are enforced over a shorter time period such as every pay period. For example, early in the plan year the participant contributed 10%, but now wants to contribute 15% pre-tax plus some catch-up contributions. Too bad, he/she can't contribute catch-up contributions for this year during the same plan year.

John, let me respond by talking about what sounds like an analogous situation rather than directly addressing your question. I have a client with a match formula of 50% on the first 5% of pay deferred to the plan, but everyone is guaranteed a 1% of pay contribution regardless of how much they contribute. While this may be communicated as a single matching formula, it's actually a combination of both a matching and a nonmatching contribution. To some extent the contribution varies depending on what an employee defers, and to some extent it doesn't. In my client's situation, we split the contribution into a 1% allocation to everyone meeting the 401(a)(4) safe harbor and a match requiring ACP testing of 0% on the first 2% of pay and 50% on the next 3% of pay, although there may be other ways to split the contribution between matching and nonmatching.

IRS guidance on the various discrimination testing questions arising from corporate m&a activity and plan mergers is sparse, so there may be one than one possible answer to your question. Other posters may answer this question differently. That said, my opinion of the best answer to your question is that the individual in question is an HCE for 2001 based on 2000 compensation earned while he was an employee of Company B. In situations where there was a stock purchase and/or Company A acted as plan sponsor for Company B's plan, the best interpretation is that you've merged the two controlled groups into a single controlled groups and must honor the compensation history of both Company A and Company B. An analogous situation is that service must be recognized under Code Section 414(a), so it makes sense to also say that compensation history must be honored. Because this was a stock purchase, I would have reached the same conclusion even if Company B did not have a 401(k) plan.

Let's at least state the easy case: if the DRO is clearly drafted to give the alternate payee to right to defer distribution until such point in time as the participant would be required to receive a distribution, then the plan must honor that provision of the DRO. Such a provision does not give the alternate payee greater rights than what are enjoyed by other participants so the order cannot be rejected as failing to be a QDRO because of such a provision.

This is a violation of the plan document, which the IRS regards as a disqualification problem. The correction should comply with Rev. Proc. 2001-17, most likely the Self-Correction Program portion if your client is eligible for it. Retroactively amending the plan to raise the 15% limit probably won't work because the availability effectively was not available to all employees even if it now is amended to claim that it is. Probably refunds are in order to put the plan and participants in the position they would have been in if the error had not occurred.

It might also refer to an optional method of using the calendar year for HCE determinations for plans that use a plan year other than the calendar year.

It probably requires that it be tested as a benefit, right, or feature because the match is not currently available to all employees eligible to participate in the 401(m) portion of the plan. However, sounds like it should pass fairly easily unless your plan is just barely passing 410(B) testing to start with or there's an extraordinarily high level of turnover, plus if the test passes easily then you might be able to run it only once every 3 years.

I've drafted plan documents where the ADP or the ACP is reduced, whichever one minimizes the number of employees receiving corrective refunds. If ADP is reduced to a point where associated match must be forfeited, then the document should be drafted so that the match is forfeited simulatenous with running the ADP / ACP / multiple use test. Otherwise, as Tom suggested, you run the tests, then you forfeit the hanging match, and you've essentially overcorrected the situation.

I came to the same conclusion as KJohnson last year when researching this for a client: it's the amount of the hypothetical interest that is subject to the excise tax.

I've never heard of this being done. To avoid having the loans treated as taxable distributions, they must have level amortization. Level amortization would be hard if not impossible to preserve if two loans are combined so you've got one payment amount and one end date.

Prior to EGTRRA, plans limited compensation to $170,000. Now, they limit compensaiton to $200,000. This doesn't sound like a retroactive cutback to me. It might violate the requirement that a plan have a predetermined allocation to change it once an employee has satisfied all of the conditions necessary to receive an allocation. However, by analogy to how the IRS treated the removal of family aggregation language in 1997 after the Small Business Jobs Protection Act of 1996 made this language unnecessary, the IRS might give employers relief for retroactive changes.

If an employee could have received a match contribution during any portion of the plan year if the employee had contributed a sufficient amount, then the employee must be included in the ACP test. If instead the match was allocated based on the employee's status on the last day of the plan year, then it sounds like the employee could not have received the match and you must exclude him (or her).

After reading maverick's response, I think he's right: it's Business Insurance that I'm recalling that has the annual rankings.

KevinP, read Internal Revenue Code Section 72(t) for the rules about the 10% early distribution excise tax

I have also received favorable IRS determination letters on plan documents where the allocation formula for the match was not definite. However, that says more about the IRS review process than it does about what's in the IRS's own regulations.

The amount can be discretionary, but the plan document should state a predetermined allocation formula. Treas. Reg. 1.401-1(B)(1)(ii). For example, the plan might state that the match is a discretionary amount allocated in proportion to elective deferrals made during the plan year not in excess of the first x% of each participant's compensation. In that case, you'd have to fill in what x is to have a definite allocation formula.

I believe Pensions & Investments magazine has an annual ranking of employee benefits consulting firms by annual revenue. Perhaps it is also on their web site.

The rate of matching contributions is an "other right or feature" and age and service conditions are disregarded only for "an optional form of benefit or a social security supplement." Therefore, one does not disregard the age and service conditions when testing whether a match rate passes benefits, rights, or features testing.

cgodfrey, considering posting your question in a new thread rather than a reply to this one. There is a rule in the 401(k) regulations that says that an employer (with few exceptions including matching contributions) cannot make other aspects of an employee's compensation package contingent on whether or not the employee elects to make 401(k) contributions. However, that rule only applies to 401(k) elective deferrals. In general, an employer is free to consider the cost of benefits when deciding how much employees should be paid.