austin3515

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...

I would 1) Prorate the k1 2) Use actual deposits for the 401k deposits made. This is important because you don't want to match 401k for the owner if the 401k was made after the SH Match was eliminated.

So Tom - SH Match Plan in a fast food chain. 20 out of 120 people eligible choose to defer (4 of them are the owner and family who max out k every year). During the Plan Year, $4,000 of forfeitures occurred from some old profit sharing money. They can't be used to reduce the SHMatch, so your position is that the Plan (which is top-heavy) now has to allocate out $4,000 to 120 people, which by the way blew your top-heavy exemption, and now the plan must allocate a 3% top-heavy minimum? If what you're saying is true, than the above scenario is inevitable for many plans across the country, isn't it? Should we discontinue our top-heavy plans with the safe harbor match as a precaution against this clearly devestating possibility? I know you are only interpreting what others have said above, but it is so potentially earth shattering an interpretation it just seems like it shouldn't be possible...

That's my point, though? So it makes perfect sense to rely on it? If anyone out there does not believe it is OK to use forfeitures to offset the SH, please let us know!! Tom, did I read into your comments correctly that perhaps you might believe we cannot use forfietures for safe harbor contributions?

But since we have a favorable opinion letter regarding the language, would it not be prudent to rely on that opinion letter?

Corbel's prototype very clearly states that employer contriubtions can be used to offset safe harobr contriubtions. In fact, in order to avoid the top-heavy minimum, this absolutely must be an option (especially for SHMAC plans).