austin3515

Once you throw othenr contributions in the mix, the design based safe harbor evaporates. QNEC's must pass (a)(4) as well (i.e., there is nothing excluding them from the non-elective portion fo the plan).

I think I had mentioned earlier though I have little or not actual experience with the subject matter, so I have no idea if it's leagal or not. But if it was legal, and they could permanently hold the money, you bet they would. That's exactly what they did in the 403b market. Even the clients that hate TIAA (and some do) are totally and competely, and irrevocably STUCK for this very reason. But of course, in TIAA's defense it was borne of a different era altogether. As a practical matter, I have a hard time believing a 401k would be banned from investing in such a product.

TIAA-CREF, as an example, has many plans that are all individual contracts. They built their system to be able to run reports that look just like John Hancock (ie., trust level, participant detail reports). I assume they are not the only ones who know how to do this - especially if they were able to pick up a 1,000 life plan!

But what about this: A plan funded solely through an insurance contract is not required to have a trust, and threfore, there might not be a trustee. At the risk of suggesting I have any on-point experiences, could the rule I just provided lend some credibility to the insurance company's position?

Did you conclude that I was suggesting that the employer impose a blackout? I'm not quite sure where I suggested that my advice was to lock people out of their accounts. What I was trying to convey was that if the RECORDKEEPER locks people out for more than 3 days from making investment elections (which is common) that you have a blackout and require the notice.

Two people, HCE and NHCE. -Plan is integrated at taxable wage base. -NHCE terminated (no break) and does not qualify for a contribution. -Plan is failing ADP test and a small QNEC would pass the ADP test. As it turns out, the QNEC would allow us to pass the average benefits test as well. The question is, do I have a nondiscrimination problem, in light of the fact that I need to pass (a)(4) testing with and without QNEC's. I maintain that I have a design based safe harbor allocation, which is being adhered to, and is therefore stil in tact. I failed the ratio percentage test but passed Avg. Benefits. I am only yusing Avg. Ben. for COVERAGE, not for (a)(4) testing, and to the best of my knowledge, I am not required to pass coverage with and without QNECS. So am I OK? OR does that fact that NHCE is getting a nonelective contribution (i.e., the QNEC) that is less than HCE's mean that I now need to satisfy rate group testing? Sometimes when you finish writing a question, you change your mind about what the answer is... And in this case, I think I just convinced myself that I do indeed have an (a)(4) problem because QNEC's are not exempt from (a)(4) testing. Thoughts?

It's not uncommon to lock people out for two weeks BEFORE liquidation. I know of at least one major vendor that commits this unspeakable attrocity. Sure, some of the best will do what you suggest, but I think the ones on the older chasse's are much less able to turn this around in a day. But in Bill's example, clearly there would not be an investment blackout, and probably not one on distirubtions or loans either. But if there is even a shadow of doubt, with penalties of $1,100 per day per participant, the good advice is to take the extra 20 minutes and disclose what exactly is going to happen. Edit: Please let us know your exact situation in terms the timing of lockout/liquidation. If it is one of those vendors that does lockout before liquidation, I think it will be important to memorialize that it does indeed take place in these boards for all those searchying in the future!

Kevin C - Imagine the followign "hypothetical" situaiton: Plan notifies vendor they are leaving to trustee directed Vendor puts plan into blackout for a week during deconversion Duyring that week, the DOW tanks 500 points You didn't do a black out notice. This is not a position I would like to find myself in... I seriously doubt the DOL would agree with your interpretation.

A lot of times during deconversion, thre is a period of time during which participants cannot change their investments. Since this is the definition of a blackout, you would definitely need the notice.

(EDIT to add heading: Excruciating Minutiae Question) Why does otherwise excludibles even come into play? She was not eligible for the profit sharing component of the plan? So for example, if I had this plan on Relius, RElius would not include her in the test, even if I chose not to disaggregate.

Because you can impose a limit on deferrals that applies only to HCE's or a gorup of HCE's (such as a limit applicale only to the owners). For example, there's a lot of talk about limiting owners/key employees to $1 of deferrals so the Top Heavy Minimum will be essentially nothing, but the owner can still defer the 5,500 of catch-ups. So for example, if there is an HCE deferring $16,500, and the HCE limit will be 5%, and the owner only makes $100,000, you might impose a limit of 5% of pay. That way, the HCE can defer 5,000 in the ADP test, PLUS the $5,000 of catch-ups. Without the plan imposed owner limit of 5% of pay, had the owner deferred $10,000, the refunds would have gone to the non-owner HCE first. Not sure if that is what you are trying to accomplish, but if it is, then you're welcome

Anyone know if this amount is reported on the K-1, and if so, what is the code?

But are you also puzzled by the paragraph I highlighted? I agree with your conclusions about "Why all the extra info" if there is no change required, but of course if I don't have to go through and change all my templates for this I would be quite happy..

Did anyone esle see this Relius technical update regarding 2010 SE Calculations? http://www.relius.net/News/TechnicalUpdates.aspx?ID=555 Included in the article is the following sentence, which seems to suggest that the rule change can be igored, but the balance of the article runs through how the calculations should be run... Anyone have any insight?

Bt you could impose such a limit on owners

While perhaps Bird's interpretation is just as (if not more reliable than mine, I would contend the 3rd party sick pay is usually so small, and 3% of that number is therefore VERY small, the best course of action would generally be to include it. In favor of my argument though, I do find it sort of hard to justify NOT using W-2 wages, if that is the plan's definition of compensation. In toher words, using an insurance company to provide sick pay shouldn't be a back door to avoiding a safe harbor contribution (as an example).

Since most plan's use W-2 as the defintion of wages, ST disability (sometimes called TP Sick Pay) is included in the plan's definition of compensation (i.e., because the STD is reported on the w-2. Because it is no different than a normal sick day, it would not be a fringe benefit, and therefore would have to be speciically excluded. No word on how 401k works on that, but if shomeome for example is SH Eligible, the amounts should be included.

Anyone have a standard distribution form in Spanish that they might be willing to share?

The key words in the document are "projected" and "anticipated." So if new information changes the projection, then what they anticipate as necessary I do believe is subject to change. I woulodn't change it every month, but my document does not appear to mandate the number of times they run the projection. Bottom line is the document gives the flexibility and the outcome, as demonstrated by the facts here, is quite desirable. So why not adopt some reasonable method and consistently apply it? I have a big plan on prior year testing, and we do this calculation once a year, about 2 or 3 months into the plan year, and we adopt limits that we project will pass. If the test does NOT pass, no big deal, because it was a good PROJECTION. That does not negate the catch-up status of anyone's contributions, as they DID exceed a valid plan imposed limit - oine that was imposed operationally.

Our document (corbel 401k prototype) says "If during a plan year it is projected that the aggregate amount of Elective Deferra;s tp be allocated will fail the APD test, then the administrator may automaically reduce the deferral percentage until it is anticipated that the ADP test will pass." My interpreation of that (I believe from the EOB), is that it is a plan imposed limit. Therefopre, anythiong over the plan imposed limit, which in your case was 5.42% is indeed a catch-up, and may be excluded outright from the ADP test. The key here is that the document must give the plan admin the ability to impose an administrative limit necessary to pass the APD test,. If I must, I will dig out the reference in EOB

I am fortunately one of those dorks who is able to check the accuracy of the caluclations (I created a very cool little spreadsheet, that I'm quite prod of!). And I totally agree "garbage in garbage out". So be careful about what comp is, who is in the test, are catch-ups caluclated correctly, etc. But as to whether or not Relius is correctly imputing disparity on an EBAR, I for one would be comfortable presuming that what relius says is correct. Do you need to know the rules, sure! But that doesn't mean you have to be an actuary (IMO). (Oh, and I never use SSRA (you would need an actuary to know when to do that , and I also only very very rarely get into banding).

You only need to be an actuary to understand the logic of why formulas were written the way they were written. But once someone else writes the formulas (or, as did Relius) writes a report that runs all the acutarial calcuations, you don't need to be an actuary. Now to zero in on the best set of assumptions, etc. ok, I'll give you that,. But, IAF 8.5pre, 7.5 post works out pretty darn well

Stidying for the ERPA exam and cannot figure this out... The RAP ends on the last day of the plan year that includes the later of the dates on which the amendment is being "Adopted" or "Effective", OR the due date of your tax return, etc. Can someone give me a scanrio where the last day of the plan year including the effective date or the adoption date of the amendment would be LATER than the due date of the tax return for the plan year which includes the adoption or effective date? It just seems impossible to ever not be subject to the due of the employers return provision... I'm sure it's got something to do with a fiscal year end plan, but I can't think of the scenario. I suspect if someone told me whne this applied I might be able to understand this nonsense a little bit better! (edited for some inaccurate language)

If you use relius, there is a way to export the tables. Don;t know it off the top of my head, but if you ask them, they will be able to help.

Does anyone have anything to add to this? I have a prospect asking questions about this exact thing. They would not draw any fees on the account, however, there does of course appear to be an inherent conflict of interest. Would this always be a prohibited transaction, or are there ways around this?