austin3515

LEt's say someone owns a Corporation. They pay themselves $10,000 a month, every month, and every net check is the same. They deposit $16,500 on June 30, but do not process it through payroll. So for example, the payroll taxes that should have been deposited on an extra $16,500 bonus check were never remitted. And the amount was not reported on their w-2. Obviously, the intention was to make it 401k, it's just that it never was withheld from payroll. Has anyone seen CPA's amend the W-2 in this case? If not, what was their explanation?

Nothing frustrates me more than reading these posts with no blame being placed on the rule itself. Sure the TPA made a mistake, but the reality is the TPA probably does a better job at this than ________. Half the time _______doesn't even tell them the THM is due after the end of the year. And let's face it, we all make mistakes. When this one happens, the consequences can be devestating. Absolutely devestating. Why should there be a rule on the books that literally cripples the unwary small business just trying to stay afloat? I swear I'm going to write a letter to my senator, and try to get thousands of people to sign it.

You could have terminated the plan effective 3/31/11. That would have been the only way to stop the bleeding. The only equivalent thing for big coroproations is minimum funding on DB plans. How many tax laws have been passed for relief on minimum funding over the years?? Dozens? Hmm... I wonder if the only reason that these crippling and stupid TH rules haven't been adjusted in 30+ years is because small business owners who can't afford a 3% of pay contribution also can't afford to make huge donations to campaigns (the way Fortune 500 companies can). Yes, I think that's it.

Plan uses TPG as of 12/31/2011. Plan uses PY Testing. There is an employee who made more than $110K in 2010, who is not an HCE in 2011 due to TPG. However, the Plan uses PY Testing./ If I repeal the TPG for 2012, will that allow me to reclassify the employee as an HCE in 2011? The person made no 401k so it would help my testing (i.e., as an NHCE with zero, it's dragging down my testing).

Bird, I believe that is straight from the regs. REgarding Trekker's point, there was a recent IRS Q&A where they said you could use an 11(g) amendment as opposed to increasing contributions to the active employees. It was an ASPPA Q&A.

You just blew my mind... Same with an hours requirement?? I know, we use a prototype (switching to VS for PPA), so we;'re stuck with the reasonable classification restrictions. Do you think that presnets a problem, or is it a reasonable classification to say people who are termed get one rate and people with less than 1000 hours get another, etc?

Plan is New Comp, using X-testing to get owners to max. PS includes last day rule; plan is also SHNEC. Plan is having trouble passing testing. There is a terminated employee with low wages. He's getting the SHNEC and therefore the Gateway Minimum. Plan says each employee is in their own group (subject to reasonable classification). This person is the only Janitor in the entire company, so reasonable classification is not an issue. How do you all feel about an 11(g) amendment to eliminate the last day rule, allowing me to drive the janitor all the way up to 16% of pay, while leaving everyone else at the gateway minimum of 5%? Something is rubbing me the wrong way about it; I just can't find the rules that say I can't do it.

Yes, and the answers are 1) Yes and 2) No. Although scenario 1 is a little funny because you indicated he has 125 hours today, and we want to amend today, but he is employed at the end of the year. How do you know today that he is employed on 12/31/2012?

Only if you're document sayus it is. I can't say why there is anything magical about the ADP test in this respect. The key is that it would have to be in the document.

TY (LOL)

I don't think so at all... Woudln't you agree you could prospectively amend the plan to exclude HCE's altogether?

It's worth a lot...

PS allocation conditions = none for actives, 500 hours for terms. Am I correct that we can amend the plan for 2012 (calendar year plan) as long as no one has worked 500 hours yet? We're going to change the allocation methods and the allocation conditions. My argument is that if you have not yet worked 500 hours, there is still a last day rule that applies to you if you terminated. So it is essentially the same as having a last day rule for everyone. (assume no retirees).

I think it's an allocation condition, and would need to pass coverage. I assume you have a DL? Otherwise I'm wondering if this is a permissible condition? I don;t know one way or the other, but curious if anyone else does.

Agreed; we love to disallow refinancings. In fact I've considering paying my clients to disallow refinancings...

As long as you have an opinion letter/determination letter, you should be OK.

Our Corbel document says you can limit ALL HCE's based on the same limit (can't pick and choose) but this administrative limit needs to target passing the ADP test. And yes, the limit does allow for catch-ups. So if you limit someonme making $245,000 to 5% of pay, they can contribute 5% of pay PLUS $5,500 and only 5% of pay is in the test. This is defintiely in EOB somewhere. I can find it if need be. It's a plan imposed limit AS LONG AS the document includes the kind of language I referenced above.

When the balance is that low the highest balance in the previous 12 months is a moot point, because the $50,000 limit is no where near an issue. In your examples, maybe the $50,00 limit will drop to $48,000, which is way higher than the 50% limit. Some plans will allow only one loan. If the Plan allows just one loan, then refinancing is the only option. If the participant is taking the max available, then the entire new loan must be repaid wihtin 5 years of the original loan. But the refinancing rules are more complicated than I care to get into... For example, if the new loan is small enough, then the participant might qualify for a new 5 year term.

Kevin C, Thank you thank you thank you.

Not one of your responses has addressed the question I have posed.

I'm familiar with the concept of overpaying for something. I'm not going to bother asking the same question a different way, because I just can't imagine making the question any more straightforward. I had requested that the assumption be made that the CPA's fees are reasonable. Or are you suggesting that the per capita fee can be anything as long as on a plan level the fee is reasonable? How about $500 a person (TPA fee = $1,500 and there are three participants)?? The fee is reasonable, but is it reasonable to do this? The point is at what point is it unreasonable solely because the per capita number is so high? I said I wouldn't reask the same question, but I guess I done did it anyway.

No offense, but really??

Assume for the sake of argument that the CPA's fees are dirt cheap, and very very reasonable. And we've done everything we possibly can to get the counts down to avoid the audit - mind you, this whole project is part of the plan to get out of an audit. Does the mere fact that the per capita fee is extremely high make it unreasonable? That is the question.

Terminating wouldn;t work, and they ahve more than 100 ee's so no SIMPLE's...

Out of curiosity, does anyone have a litmus test for determining whether or not a fee is reasonable? So for example, if the per capita fee for administration comes out to $250 a head (plan has a CPA audit), is that reasonable? Many people have accounts between $5,000 and $6,000 so this works out to be a hefty percentage of their accounts (north of 5%). In this situation, the sponsor WOULD send out a letter to the participant indicating that this fee is going to be assessed beginning on, say, April 1, and anyone who closes their account before this date will not be assessed the fee. My other concern is that this could be considered coercive. The client REALLY wants to get the counts down, which is why we are having this discussion. The crux of my question really is whether or not there is an quantitative guidance regarding whether or not the AMOUNT of the per capita fee is reasonable.