Gilmore

Ok, I've done a bit more research and discovered that the catchup limit applies for the calendar year in which the plan ends. So for the plan year that ends 2/29/2004 the catchup would be $3000. I'm assuming than that we could give the participant an additional $3,000 in profit sharing so long as he only defers $13,000 during the 2004 calendar year? The effect of all this being to shift the additional deduction for the employer to the fiscal year that ends 2/29/2004 rather than waiting until 2/28/2005's fiscal year?

A participant defers $12,000 during the 2003 plan year, 12/31/2003 year end. The participant is eligible for catch-up, also allowed in the plan doc. Now that the plan year has ended we are working on the profit sharing contribution. Can the participant be provided a $30,000 ps contribution and have $2,000 of deferrals recharectorized as catch-up? Assuming of course that all of this passes non-discrimination testing. To add a twist, suppose the plan year ended on 2/29/2004. Assuming again that the partipant deferred $12,000 during the calendar year ending 12/31/2003. The 415 limit is now $41,000. Assume also that the participant defers the same amount each month so that the amount of deferrals for the 2/29/2004 plan year is also $12,000. If the answer above is "yes", that additional ps can be made with the deferrals being recharectorized, what is the amount of catch-up available now that we are in a new calendar year? $2,000, $3,000, $5,000? Thanks!

Thanks Mike. For now the manager at Company B is a long way from the HCE dollar limit, however should things change I may revisit this question again with you regarding the ABT. Thanks again.

Two companies are owned by the same one individual. Both are maintenance companies and as such employ mostly lower paid workers with a handful of higher paid managers, no one reaching the HCE dollar limit however. Company A employs a total of 131, including the owner. Company B employs 30, none of whom are HCEs. The owner prefers to have two separate 401(k) plans, despite the fact that each has the same provisions, contributions, etc. Each plan excludes participation by any employees except those of the adopting employer. Am I thinking of this correctly?: Company A passes coverage with or without Company B. Without company B the NHCE ratio would be 130/160. Company B would pass coverage because, while the NHCE ratio is 30/160 the HCE ratio is 0/1. Since the plans cover all the employees of the employer (Company A and Company B) separately I am assuming that I cannot use answer 3d on Schedule T? And that I must show the ratio test for each plan? To take it one step further, if the manager of Company B does reach the HCE dollar limit and becomes an HCE, Company B will not pass coverage without Company A. The Plan would now benefit 1 of 2 HCEs and 29 of 159 NHCEs. I'm thinking I now need to aggregate the plans for coverage and also ADP testing? Thanks for any clarification.

Thanks!

A property management company maintains a 401(k) plan. As part of the agreement between the management company and the property's owners, the management company has the responsibility to employ, supervise and direct, and fire all employees of the Property. In addition, the management company determines the actual number of employees that the property will need. In some cases the employees are named employees of the management company. In other cases they are named employees of the property's LLC, partnership, etc. In all cases they are again, hired, fired, and directed by the management company. The management company considers all of these employees as common law employees and thus able to participate in the management company's 401(k) plan. It sounds to us like they are all common law employees by definition, but the fact that some are employees of the property has raised some question. As always, thanks for any opinions.

Company X sponsors a 401(k) plan. In 2002 the company's stock is purchased by an individual, Mrs. A, who now becomes the sole owner. Mrs. A's husband also is 100% owner of a similar business, Company Y. Company Y does not sponsor a plan. Company X uses a standardized plan document. First, does the coverage transition rule apply in this case, and does that mean that for coverage purposes Company Y's employees do not need to be considered for coverage purposes until 2004? Second, I have always been confused by the fact that the coverage transition rules do not relate to non-discrimination testing. Does this mean that regardless of coverage, the employees of Company Y must be included in the ADP testing for 2002 and 2003 if eligible? Which brings me to my final question...for plan purposes, is the date of hire for the employees of Company Y their date of hire at Company Y, or the date of the purchase (assuming the document does not allow any predecessor service)? Really appreciate some help with this one. Thanks.

Thanks!

Are there any rules, guidelines, etc. on when the first payment for a plan loan must be made? For example, within 30 days of the distribution, 45 days, any "reasonable date"... As always, thanks for any assistance.

Assume the participant was eligible in the past, made no salary deferrals thus has no account balance. Now for 2003 they are not formally terminated yet have no compensation (disability, leave of absence, etc). Is this employee still counted as a participant for 5500 purposes despite not being in the ADP test? If yes, any suggestions from other Relius users on the easiest way to exclude from testing and yet still show up in the participant counts? We usually code the participant as "Eligible-Not Participating" and run the test. Then change the code back to "Continuing to Participate" and run the counts. Wasn't sure if there was a simpler way. Thanks.

Thanks!

Thanks for the information. I guess it just "feels weird" to let participants in who do not benefit.

A Plan requires last day employment to receive matching contributions (no hour requirement). A number of participants terminate during the year so that the match now does not pass coverage. The Plan uses a Fail Safe to correct coverage. None of the participants added back under the Fail Safe rules made salary deferrals. Is it just the number of participants added back that matters, or would a contribution (QNEC?) need to be made for the added back participants? As always thanks for any insight.

Thanks very much for the reply.

A Plan operates for the first several plan years as a calendar year plan with a 6 month wait. To make things easier administratively (enrollments, etc) they set up dual entry dates of April 1 and October 1. Later the Plan is amended to a one year wait. If the entry dates remain April 1 and October 1 is this now a violation of the statutory entry? As always, thanks for any insight.

Thanks for the link.

We have a client, here in California, who is interested in adding automatic enrollments to his Plan. I remember reading that there is an issue in California regarding the legality of automatic enrollments and whether the state law is preempted by ERISA. Has there been any further guidance in this area? Is there any one here in California with automatic enrollments in their plans? As always, thanks for any suggestions.

Thanks R.

We have a situation in which a participant who was eligible in the prior plan year was granted an unpaid leave in the prior plan year. This person was not "officially" terminated until after the start of the new plan year. The census received from the client indicates the EE's term date with $0 comp earned for the plan year. Without modification of some type Relius will include this person in the testing. Reading up a bit on a participant with $0 comp it appears the most conservative approach is to not include this person in testing, especially if they are an HCE. Has anyone run across a similar situation, and what is the best method in Relius for removing this person from testing. Thanks for your help.

Thank you all very much for your information. I believe we will provide the participant with the top heavy minimum and use her full year comp for testing purposes. Thanks again!

Tom, Thanks for agreeing that it is an interesting scenario. And I appreciate your response because I know you are also well versed with Relius. Our opinion was that the participant should receive the top heavy minimum (based on full year's compensation as you say) since it would be greater than 5% of $0 comp. Relius however, will not let us run discrimination testing with $0 plan entry comp. Which than brought us to our next question, if her plan entry comp is $0, what is her allocation percentage for testing purposes? I believe we would normally be comparing her top heavy minimum to her plan year compensation, which again is 0. Any thoughts? Thanks.

Hello, I was hoping to get some thoughts on the following scenario: A cross tested profit sharing plan's eligibility requirements are 1 year of service, 1000 hours of service and monthly entry. The plan year runs 11/1 to 10/31. The Plan also requires 1000 hours and employment on the last day of the plan year to receive an allocation. The Plan is Top Heavy. The Plan uses compensation from date of participation for allocation purposes. An employee is hired 9/25/2002. On 7/1/2003 they receive an unpaid leave of absence for surgery and do not return to work until November, after the plan year has ended. They did earn 1000 hours of service from 9/25/2002 to 6/30/2003. Their plan entry date is 10/1/2003. Due to the leave of absence they do not have any compensation from date of participation. First question is, if the employee is on an unpaid leave on their plan entry date, do they still become a participant in the plan? Second question, if they are considered an employee for plan entry than is it logical to assume that they are an employee for the last day requirement and thus are eligible for an allocation? Third question, if questions one and two are true, and the participant has no comp from date of entry, and the Plan is Top Heavy, are they due a top heavy contribution? Finally, for nondiscrimination testing, if provided a top heavy contribution, how is the allocation percentage calculated if 414 comp (from date of participation) is 0? Sorry for the length of the question, and thanks for any help.

Hi, Was hoping someone would not mind reviewing the term "stacked match", or perhaps pointing me in the direction of where it may have been discussed earlier. I've heard that it is possible to have a Basic Safe Harbor Match, a discretionary 4% of comp match, and an additional fixed match of no more than 6% of comp, which can be used to get an owner, or anyone else with similar comp and def to the 415 limit, all of which retains Safe Harbor status (ex. no Top Heavy concerns). We have done some enhanced Safe Harbor Matches, but nothing to this level. Is this possible, how does it work, and what are any possible pitfalls? As always, thanks in advance for any assistance.

R, Thanks for responding. Yes, the original two shareholders now are the sole owners of their own individual corporation. It is the two new corporations that own the partnership 51% and 49%. I'm assuming the only income that the corporations earn is the income from the partnership.

I'm not sure if this is the right forum for my question, but here goes... Our client was a corporation owned by two individuals, 51% and 49%. They have changed the entity to a partnership. The partners are individual corporations. Each corporation is owned by one of the original shareholders of the original corporation. One corporation owns 51% of the partnership, the other 49%. The only income of each new corporation is the partnership income. My question is, are these three entities related? We would like to continue the current plan but are not sure if the two corporations can participate in the partnership's plan as related employers. Thanks.