Gilmore

Sorry to ask what I'm sure has been gone over before, but... We have a 401(k) plan with no service requirement for deferrals and a One Year of Service requirement for non-elective, in addition to 1000 hour requirement and last day rule. Profit sharing is cross-tested. The plan is not passing the ABT due to the increase in ees who are eligible to defer. I have been reading a lot of the threads with regard to restructuring the plan; we have no experience with this method with cross-testing and probably have some really basic questions. We are using Relius. Choosing the option to test statutory exclusions separately allows the test to pass. The right ees seem to be excluded, however is there anything that I need to watch out for? I also have a top heavy issue. I believe I read elsewhere that if I restructure the plan than those statutorily excluded need only receive the 3% contribution? The plan was previously amended to allow for the top heavy only ees to receive the gateway however the amendment did not mention anything about restructuring. Is a further amendment needed? Thanks very much for the assistance.

Great, thanks Mike.

Hi Pax, I just wasn't sure if the 'no comp' thing was always discussed with respect to HCEs, and if an NHC with no comp was treated differently. Can you be eligible to defer, that is met the plan's eligibility requirements, but not able to defer because of no comp?

On the flip side... What if a previously eligible non-highly compensated employee is not formally terminated but does not receive compensation for the year. Is the conservative thing to do to include that employee in the test, or is that too conservative? Would it make a difference if the employee was still receiving other benefits, like medical coverage? Thanks.

Thank you.

We have a plan that was effective 1/2/2002. The original document (prototype) was written such that the plan would use prior year testing and 3% assumed for the nhces. Now that the plan has been tested we find that the plan will fail ADP testing using the 3% but would pass with current year numbers. The ERISA Outline seems to indicate that an amendment to current year would be ok. The plan WAS amended effective 1/1/2003 to be a Safe Harbor Plan and the new amendment says the plan will use current year testing. The question is, should we do a separate amendment amending the testing method to current year effective 1/1/2002 or will the existing amendment suffice. Thanks.

Actually it is page 14.14 in the 2003 version and that is exactly what has led me to ask the original question. Having said that, if Mike and the others are correct, please allow another dense question... If the vested balance is 7k and the loan amount is 3k, does that make the total collateral 6k, meaning the 3k that is distributed and the 3k that must be available to allow the loan? Does that make the total collateral 6k and thus subject to spousal consent? Thanks again.

Ok, thanks for the info.

Blink, So I think you also answered my previous question... For spoual consent you would consider the entire account balance, vested and unvested?

And thus my confusion... When they refer to total accrued benefit does it mean just the amount of the loan, or the total of the account balance? In the ERISA Ouline, in the discussion of loans and spousal consent, the word 'total' is underlined as if to emphasize it is the entire account balance. Sorry to be dense.

Actually, that brings up another question which is a little unclear in my ERISA Outline... If the balance in the account is greater than 5k but the vested balance is less than 5k, is spousal consent required. Once again assuming that this is a defined contribution plan. Thanks.

Thank you for responding.

A 401(k) plan allows for loans and also allows annuities as a distribution option. Is spousal consent required if the loan amount is less than 5k, but the total account balance is more than 5k? Thanks.

Brian, thanks, the rollover is related. Mike, thanks, makes sense. I guess that's why they left the 5 year look-back for inservice withdrawals?

Sorry Mike, my sarcastic nature took over. Yes he is still employed by the employer, and is still the owner - - in service, huh?

Mike, I guess you find these rules confusing too.

Similar question: Plan becomes top heavy for 2003. The owner has a significant amount in his rollover account. Plan allows for distributions from rollover money. He takes a distribution in 2003 and reduces his account balance. Distribution is added back in for top heavy test for 12/31/2003, so the plan will most likely be top heavy again in 2004. But am I understanding the new rules correctly that the distribution would not be added back in for the determination on 12/31/2004 so the plan could possibly be not top heavy for 2005, or is that considered an in-service distribution that would be counted for the full 5 year look-back? Thanks.

We have called the number in Kirk's posting. They typically search using the Plan Sponsor's EIN. Response time was not bad. In one case the previous DL was issued prior to the date to which they can reproduce a copy of the letter, however the IRS rep was able to send a letter confirming that a DL had been previously issued and the date it was issued.

Congress will get the message that the code needs some simplification, they will start tinkering with things and goldtpa will have to get his Pension Answer Book out of the fireplace and Sal Tripodi will have to add three more volumes to his outline.

Jim401k That is kinda what I've been trying to say, although you've said it much better Jim. However, speaking as a small business owner, and one of the many who used his own retirement savings to get the business started, I would like to see permitted disparity and new comparability allocations stay intact.

I, for one, would not mind a little simplification. Have you tried to run a Top Heavy test under the new "simpler" EGTRRA provisions?

That is exactly what she said, Earl. And she also remembers when they did away with excess only plans.

My partner, who has been in the pension industry a lot longer than myself, says she recalls the same gloomy outlook when Safe Harbor 401(k) plans and Simple plans came along. Can the code be made so simple that pension professionals will be out of work? Or will the simplification lead to more complicated rules?

Does NIPA get involved in this at all?

Sometimes I wonder if we are the only guys not using Crystal Reports, but I was curious if there were any other firms in CA not using Crystal Reports and how they were handling the issue of no SSNs on participant statements. I'm wondering if this is going to be the thing that finally pushes us to break down and get Crystal Reports.