austin3515

"Catch-up contributions are not eligible for matching contributions" Are you positive? Becuase that would be extremely unusual... Allowing catch-ups to get the match really only affects this exact situation (generally)...

Tom, I had never heard that before - is that really how it works?? I thougth you paid 40% of the refund amount - so pay 160, forfeit 240. Am I blowing a basic concept?

LEt;'s back up though because if the plan matches catch-ups, then there would not be any orphan match, and the only reason for forfeiting would be that he is not 100% vested. So assuming the guys is 100% vested, you just run your ACP test and refund to him whatever the excess amount is.

Why are you forfeiting? Is it a) because the participant is not 100% vested in the match, or b) because you have "orphan match"? Either way, yes, you would adjust it for gains. I just wanted to make sure you were really supposed to forfeit it.

Accoridng to the EOB, that was a pre-2002 rule. 4.d.1) Restrictions on use of matching contributions in pre-2002 plan years. For plan years beginning prior to January 1, 2002, any matching contributions used to satisfy the top heavy minimum contribution must be separately tested for nondiscrimination purposes under §401(a)(4), and are not subject to the §401(m) nondiscrimination test (i.e., the ACP test) normally applied to matching contributions. Matching contributions that are not used to satisfy top heavy continue to be subject to the ACP test. This rule is prescribed by Treas. Reg. §1.416-1, M-19. Note that having to test the matching contributions used for top heavy purposes under §401(a)(4) usually does not present a problem because non-key employees are typically nonhighly compensated employees for nondiscrimination testing purposes. However, it is possible to have non-key employees who are highly compensated employees, so that any matching contributions used to satisfy top heavy minimums for these type of non-key employees could raise a §401(a)(4) testing issue. As for the remaining matching contributions that are not used to satisfy top heavy minimums, they will probably have a tougher time passing the §401(m) nondiscrimination test, because all (or most) of the key employees' matching contributions are still included in that test but less of the non-key employees' matching contributions are included. Thankfully, this whole problem goes away in post-2001 plan years with the changes made by EGTRRA.

I'm with you on the distribution one... What do you think about the forfeiture scenario?

Which I didn't do Any suggestions? I can easuly do the new 2010 form and file it, but now I have this bogus 2009 form out there? I guess I just wait until the letter comes in from the IRS?

No it doesn;t because you can't term a 401k plan and then start a new one in the same year because the distributions wouldn't be eligible for rollover. Plus, you blow your safe harbor for the year, and need to run ADP testing, plus you blow your TH exemption, and need to allocate top-heavys. And finally, the TPA and the financial institution can both be switched by the Plan. I cannot think of any reason to pursue this course, whatsoever. Use the 401k plan you already have, you can still do everythign you want to do.

Why in the world would you terminate a 401k plan only to start a new 401k plan in the same year? I won;t get into why this won't work until I have a better understanding of what the rationale was.

Tom - I agree that is another intereting question. Can't even pass average benefits, can I? But what do you think about the guy who forfeits his match - the very same match that satisfied THM. Would you agree that his THM is not satisfied and he needs the 3%? Sounds like a couple more questions for the IRS Q&A youi mentioned last week!

So you are convinced that if a non-key HCE gets the match refunded to him, that he is still entitled to the THM on top of the match he has already gotten from the Plan? Isn't that a bit of a windfall?

I agree with you on the forfeiture scenario, but not on the refund since in the latter the participant did receive a benefit under the Plan. but alas, what I'm hoping is that this is conclusively answered somewhere in the regs??

But the point is that his match satisfies the top-heavy minimum. Question is, does having it refunded and/or forfeited change that treatment?

Got a non-key HCE who is having all of his match refunded to him due to the 2009 ACP test (no NHCE's deferred). 1) Does he still need to get the top-heavy minimum? 2) Does the answer change if the non-key HCE is 0% vested, and therefore forfeits all of the match?

Accordng to the 2009 instructions "2010 Short plan year filers may not use the 2009 forms for filing They must 2010 forms schedules and instructions. Dear RElius: Thanks for the validation warning: "One or more of the plan year dates are questionnable, or the dates indicate a short plan year." Apparently it was the former and not the latter. But of course it WAS a short plan year so I thought this to mean the dates were not questionable and there was no issue.. Perhaps you should change the warning to "Hey stupid, this won't work!" Sincerely, Austin Powers

Why do I have a feeling the authors of the bill probably couldn't even answer the question?

I did that. I thought I was being clear, but perhaps not clear enough. And I can't delete it because it WAS filed. The errors of course only come back after it's been filed. Now I have to amend.

I was afraid of that; this is my first one...

Situation: Terminated Plan. Calendar 2009 was filed already and is filing received. All assets liquidated on 7/31/10, and a final 5500 was prepared for 1/1/10 through 7/31/10. In the Plan Info sheet I have the correct date ranges, and I indicated 2010 in the filing year. I used the 2009 form, because this was all done before it was possible to use the 2010 form. When the client signed, he received this error message. "Fail when Filing Header, Form Year does not match Filing Header, Plan Year Begin, unless the Filing Header Prior Year Indicator is set to 1." Anyone know what I messed up?

Plan was terminated effective 1/31/2009. What compensation period do I use for the ADP tesT? Just January, or full year pay? I cannot find anything on point...

http://www.sgrlaw.com/resources/client_alerts/974/ From that article: The PPA amended the minimum vesting requirements for defined contribution plans to require faster vesting of employer nonelective contributions for plan years beginning after December 31, 2006. Before the change, plans were permitted to maintain either a 5-year cliff vesting schedule or a 3- to 7-year graded vesting schedule; but under the amended Code Section 411(a), plans must provide for either a 3-year cliff vesting schedule or a 2- to 6-year graded vesting schedule.

And generally only if you let go more than 20% of the eligible employees. Also note that a 5 year CLIFF is no longer allowed. Not sure if this what you meant. IF your document says 5 year cliff stiill, you need to change it to 3 year cliff, and perhaps you may have under-paid some people since PPA was effective (1/1/08 or so? - not sure exactly...). Most restrictive now is 3 year cliff.

Only need to sign once as plan admin. See page 7 of the 5500 instructions, the "Note" at the bottom of the page in the right hand column. The section is entitled "Signature and Date."

I think you're suggesting that simply because he elected to make a monthly deposit of a fixed amount, even if the deposits were not actually made, you can still include them in the match. I woudln't do this if I were you. Personally, I would use only actual cash deposits made to the Plan. I guess you could make a case for your approach but I think it would be pretty risky...