austin3515

Put another way: -If you work 1,000 hours and are eligilbe for the DB Plan and the DC Plan you get the 5% THM in the DB Plan. -Otherwise, you only get the DC top-heavy minimum if you are entitled to it under the DC rules. Sometimes things make more sense when you get a chance to write them down in your own words. Did I get it right?

I have a DC/DB combo, and we're providing the 5% Top-Heavy Minimum in the DC Plan. Who gets it? Is it only people who work at least 1,000 hours, regardless of their termination date? The eligiblity for both plans is identical. So for example, I can tell you that anyone eligible for the plan, who was employed on the last day of the plan year gets the THM in a regular DC Plan. Is there a similarly straightforward rule for the 5% DC/DB THM in the DC Plan?

Yes, I'm sure your deferral only clients would appreciate that political movement...

Perhaps you don't have a clients who run small businesses?

Oh there's still plenty of work to do. Half our plans are safe harbors and exempt from all this stuff, and we still find plenty to keep us busy.

Interesting... What about if the memo field on the check said something like "Austin Power's 401k"? Owners of small employers tend not to fill out enrollment forms for this sort of thing.

Bird - The ADP Test covers your concerns. AT least in my opinion. IF participation is so good that the owner can put away $16,500, doesn't that address your concerns? Put another way, which concern in particular is not addressed by the ADP test? What is so terrible about a small business owner having a 401k plan with no employer contributions? I mean is the guy a piranha of society just because he can't afford to have a 3% of pay contribution for his staff? If he's bleeding cash, and just trying to say afloat, but still wants to put away 3% of his own pay for retirement (or maybe it's his kids, or the CFO who want to), is this behavior that needs to be punished? Oh and by the way, often times plans are top-heavy simply because a) the owners has been in the plan for 20 years, b) the owner chooses to employ his or her family. Why should these kinds of companies be on such an uneven footing with a brand new start up with 10 employees? Neither has any employer contribution, yet it is the 20 year veteran employer who is being "punished" for having such a discriminatory plan. Yet it's the same lousy plan that a lot of American companies sponsor. Yes, I know, he can do an IRA, and yada yada yada. The point is, he should be able to sponsor a 401k plan and save inside the plan.

Amen.

"I am not debating the theory behind TH." Boy would I love to see the candidates go to head-to-head on this... Name one argument in favor of this rule.

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.