austin3515

Ah yes, I remember it well...

This has been one of my favorite threads in a long time... I don't follow the math (I'm pretty sure it was all made up except that I felt I recognized some of it from high school algebra), but it was hilarious anyway. I went back and looked at it again. I'm thinking the algebra is all true but the equation was never "equal" in the first place. Did I get it?

BRB, I'm running out to Staples

That's it, thanks! (3) Anti-abuse provisions. This section and §§ 1.401(k)-2 through 1.401(k)-6 are designed to provide simple, practical rules that accommodate legitimate plan changes. At the same time, the rules are intended to be applied by employers in a manner that does not make use of changes in plan testing procedures or other plan provisions to inflate inappropriately the ADP for NHCEs (which is used as a benchmark for testing the ADP for HCEs) or to otherwise manipulate the nondiscrimination testing requirements of this paragraph (b). Further, this paragraph (b) is part of the overall requirement that benefits or contributions not discriminate in favor of HCEs. Therefore, a plan will not be treated as satisfying the requirements of this paragraph (b) if there are repeated changes to plan testing procedures or plan provisions that have the effect of distorting the ADP so as to increase significantly the permitted ADP for HCEs, or otherwise manipulate the nondiscrimination rules of this paragraph, if a principal purpose of the changes was to achieve such a result.

If Tom told me 2 +2 was 5, I'd go buy a new calculator

Does anyone have a good template or article on BR&F testing for a match formula based on YOS that has a 1,000 hour/last day rule? Specifically, my question is, do I need to treat people who termed as not benefitting in the higher match rates solely because they terminated (with more than 500 hours). So in my case, the match increases after 5 YOS from 50% of 6% to 100% of 6%. If someone with 7 years terminates, do I need to treat them as not benefitting in the higher rate of match? Since it's coverage testing, I presume the answer is yes.

New client has been excluding pre-1/1/09 contracts for participant counts, but NOT the assets. This is a plan where the pre 1/1/09 contracts will push them over the audit requirement. Is amending the 5500's for the past 5 years the only option available? And presumably if we amend the past 5 years of 5500's to remove 40% of the plans assets that might be a red flag...

Can someone point me to the reg that was added to the final 401k regulations that essentially said "hey, no funny stuff--even if a literal interpretation of the regs says its ok, you can't monkey with stuff in such a way that it impacts the testing." I know in practice it can essentially be ignored, but I'm running an ADP test on net op and we have someone clocking in at 1,000 percent (they're deferring 90%, so 90/10 = 900% (she has 125 pre-tax premiums to boot pushing her over 1,000%). I'm just concerned this might be a situation where the IRS might employ this vague rule. I believe it was the IRS response to the bottom up QNEC, which smells like what I have here.

(ii) Under the alternative method set forth in this section, by contrast, an employee's statutory entitlement with respect to eligibility to participate, vesting and benefit accrual is not based upon the actual completion of a specified number of hours of service during a 12-consecutive-month period. Instead, such entitlement is determined generally with reference to the total period of time which elapses while the employee is employed (i.e., while the employment relationship exists) with the employer or employers maintaining the plan. The alternative method set forth in this section is designed to enable a plan to lessen the administrative burdens associated with the maintenance of records of an employee's hours of service by permitting each employee to be credited with his or her total period of service with the employer or employers maintaining the plan, irrespective of the actual hours of service completed in any 12-consecutive-month period. I should have read it first. I think this paragraph closes the loop for me. I assume others agree?

What I am missing is a clear link between the language of 410(a) (which clearly references the max as 1,000 hours in 12 months) and the use of elapsed time to determine OE's. So for example, if 410a said "if the Plan counts hours, then 1,000 hours in 12 months and if the Plan uses elapsed time, then 12 months" I would have no concern. But it doesn't say that. I'm just surprised that there isn't something clear in the regs that makes this easy to figure out.

Why can I? I certainly like that position. Is it clear anywhere that I can use it for this purpose?

It doesn't of course, I'm merely demonstrating that a common assumption (e.g., if you let an OE in the test who doesn't belong, the testing would only be hurt) is not necessarily true. I have seen lots of TPA's base their exclusions on DOH and DOB alone.

I still have the same "risk" that Susie Q who has been with the company for 5 years as a 10 hour a week employing, deferring 90% of pay will erroneously be in the "main" test.

This is the definition of "year of service" found in 410(a). I don't think it defaults to my plan's definition of service.

Sure, but I wouldn't mind splitting if I could because it would help. Per my OP, they used elapsed time for everything precisely because they cannot track hours. Perhaps it could have been misread. My question is, for purpose of determining who is an OE, is my only option to count hours (which is something the client cannot do).

1.410(b)-7©(3) (on testing otherwise excludables separately) I have a client who has no good way of knowing how many hours someone worked. Everything is done using elapsed time. Therefore, they have no idea who has and who has no satisfied the "greatest minimum age and service conditions permissible under 410(a). Therefore, if I simply assume everyone is full-time, it is possible that I will be including OE's in my "main test." Example: Susan works "about" 10 hours a week and contributes her entire paycheck to the Plan. She should not be in the main test. In other words, one cannot assume that the testing would always be hurt by this assumption. We're talking about hundreds of employees, so please don't say "I thought they didn't track hours" Is there anything that says I can use some alternative method of determining who has not met "the maximum age and service conditions under section 410(a)?"

I disagree. If the fiduciaries hired an investment professional to map the funds to like funds, and the notice says "your fund has been mapped to a fund with similar objectives and characteristics" the onus is not on the participant to determine that it was a true statement. The participant may assume that the statement is true. I'm not saying that he did the right thing by throwing out the letter (although it would be easy to blame this on sending it out in the service providers envelope), only that it is immaterial because it is reasonable to assume that he would not have acted any differently if he had read the notice. I'm not lawyer but I've read these types of arguments before.

I'm sorry, was this a sarcastic statement? In case it was not, my answer is simple: There is enough money in a potential settlement for the attorneys to get paid. And the loss was a direct consequence of someone else's decision. But even if he had read the notice he would have reasonably assumed that a good faith effort was made to map his investment to a like fund... The threshold on this is quite high though. If it wasn't it would be too much of a deterrent from participants defending their interests. Mind you, he's not alleging that he was invested in Fund A for 10 years, the market went sour, and now Fund A lost him 6 figures and that is the basis of his claim. And Fund A to boot is rated with 5 stars, and btw, the S&P 500 went down proportionately. That's when I could see an issue with the plaintiff paying defendants fees. Simply finding the for the defendant is not even close to having plaintiff pay defendants fees.

All of you are referring to chances of success. But jpod's comment here is why this could easily make it to a trial. If this were a QDIA notice that was thrown in the trash, I still think someone would get sued (let's face, it someone always sues after a 6 figure loss that was based on someone else's decision as a general rule). So in this case, the case is even more compelling. I have seen QDIA lawsuits as I mentioned that always find for defendant, but this should be a better case for the plaintiffs than that.

Lou S. read my mind. This guy was talking about a deferred comp plan. Are your "employees" highly paid executives? Based on the fact that your description of your plan surpassed even my ability to describe a 401k plan (note my designations!) it would not surprise me! Much was lost in translation in any event, if Lou S and I are correct.

I would love to get my chance to call the press if the IRS challenged an amendment expanding the availability of a 401k plan. I just get giddy at the thought of it

Kevin C, I don't know, he's saying that the original fund was a precious metal fund, so I could see where even mapping would put him into a dissimilar fund. Merciless, we'd all love to know what that notice says!

I think it is something different. I believe Merciless was invested in a stable value fund. He was then default enrolled (after being sent a QDIA Notice, that is a notice describing how your money would be invested if you did not provide any NEW elections) into a target date fund. Do you have a claim? Anyone can make any claim they want and many in your situation have. However, the courts have tended to provide deference to the DOL's endorsement of this precise arrangement. What was done to your account (assuming I guessed right) is not only permissible, but the DOL has ENCOURAGED it. Bottom line is there are a flurry of lawsuits over this very matter, and everyone I have seen has been in favor of the defendant (assuming they sent out the notices and can prove it). Some peple might look at this say "ok good, so default enrolling into a target date must be the best way to go." I disagree. I think mapping into like funds will be much less likely to get you sued in the first place. Can anyone figure out then why the mutual fund companies prefer these transactions to result in a default investment of a target date fund that they manage? But as I said, the DOL wants it this way too.

I'm definitely more on the systematic side (I cant imagine not looking at the document first, then eligibility, then the ADP test, for example). I'm still not convinced that it would be better for me!

(A) stock possessing at least 80 percent of the total combined voting power of all classes of stock entitled to vote or at least 80 percent of the total value of shares of all classes of stock of each of the corporations, except the common parent corporation, is owned (within the meaning of subsection (d)(1)) by one or more of the other corporations; and