austin3515

1) Failed 414(s) on a safe harbor = ADP Testing. When we've excluded bonus in the past it's only when the bonuses are negligilble and affect HCE's and NHCE's alike. 2) There is only one definition of an HCE that is applied for ALL purposes.

1.410(b)-5(d)(5): Determination of employee benefit percentage. The employee benefit percentage for an employee for a testing period is the rate that would be determined for that employee for purposes of applying the general test for nondiscrimination in §§1.401(a)(4)–2, 1.401(a)(4)–3, 1.401(a)(4)–8 or 1.401(a)(4)–9... Based on soleley on the title it appears clear to me that they are referring to the CALCULATION of the EBAR, not the minimum amount that the EBAR should be. Then you read the manner in which it references (a)(4)-8, and it becomes more clear.

From the OP: Do we not all agree that no gateway is needed if cross-testing is used solely to pass coverage?

The gateway rules are under 401(a)(4), and the OP refrenced coverage testing failures. I didn't think the gateway applied if you were just running coverage testing.

We have a connection/friend who is an RIA. They are getting audited by the DOL. They had requested a listing of all of their qualified plans that they do work for, and she has selected a sample from that list. The DOL apparently knows that they are just the RIA. What could the DOL be looking for? We've never heard of these sorts of audits before... Has anyone been through one?

I say there's really three to choose from: Relius Relius Relius OK there;s others out there, Blaze is supposed to very very good too, and I've heard ASC is also top nothc. But if you want testimonial from someone whose used a package and ehard nothing but great things, then my vote is Relius.

My advice, PenChecks!!!

If he is buying it for display in his living room, it would be prohibitted transaction. Definitely a gray area. If it was on display in a museum, then probably it would be OK.

From Sungard's FAQ's on EFAST: May a filing signer use a Form 2848 (power of attorney) to authorize a TPA to sign a Form 5500 on his/her behalf? No. The Form 2848 does not provide authority to sign a Form 5500 on paper (for 2008) or electronically (for 2009). http://www.sungard.com/en/sitecore/content...faq_part15.aspx Other thoughts still appreciated...

This has been discussed before but we are getting renewed pressure from some clients to obtain a POA to signt he 5500. According to the 2848 instructions, a POA can only be used to sign a TAX return in a few isolated events, including absence from the country, severe illness, etc. Can anyone confirm whether or not the DOL has indicated spefically that this standard should also be applied to a 5500 even though it is not a TAX return? I have to imagine this is coming up all the time these days... (*By the way, we would never do this for our clients, but we would prefer to be able to come back and say it is not even possible).

An interesting point, I do see what you mean. BUT, let's say that the net pay was decrease in such a way that additional medical bills could not be paid. Or if it's tuition, and the employee was planning on allocating a portion of each paycheck to the tuition. Again, we have to have actual knowledge to the contrary. But you made an excellent point, I had not noticed that nuance before.

So I assume you are agreeing with me? (or at least indicating that I'm not way off base?) Because reading that, I question how a plan administrator could ever have actual knowledge to the contrary of that...

Here's my opinion. The regs are very clear that: a) You do not need to take a loan if it would increase your hardship b) You are allowed to rely on the representations of your employees for this "needs" portion of the test (assuming safe harbor standards are being used). SO, if the employee represents to you that the loan would increase the hardship, then it should not be required to make the employee take a loan first. Really, the only way we could possibly have "actual knowledge to the contrary" would be to get copies of their financial information, mortgages, credit cards, personal investment accounts, etc. Am I way off base here?

From the EOB, 2009. Shockingly, they're saying pre-2006 this would have been OK. I can't imagine the DOL would agree with that statement, but I suppose it is a moot point today, as I think we all agree that now BOTH the IRS and the DOL would not like this at all... And for the record, this would definitely be a PT, in addition to a violation of the new 401k regs. 1.e. Could forfeitures be used to reduce elective deferrals? IRC §402(e)(3) provides that "[f]or purposes of this title" (i.e., the entire Internal Revenue Code), elective deferrals under a 401(k) plan are not treated as employee contributions. In other words, they are treated as employer contributions. So, if the 401(k) plan contains language that provides for forfeitures to be allocated to reduce the employer's contribution liability, and does not specifically confine the definition of employer contributions for this purpose to matching contributions and/or nonelective contributions, is the employer able to use the forfeitures to pay for its elective deferral contribution liability? Regulations that took effect in 2006 address this issue directly. See 1.e.1) below. However, before those regulations were issued, there was no published guidance that precluded such an approach, so the IRS permitted forfeitures to be used in this manner. See the Q&A session at the ASPPA Conference in Washington, D.C., on October 25, 2004. 1.e.2) Use of forfeitures to reduce elective deferrals prohibited in post-2005 plan years. Treas. Reg. §1.401(k)-1(a)(3)(iii)© prohibits the contribution of elective deferrals made on behalf of an employee before the employee performs the services to which the elective deferrals relate (or before the compensation would have otherwise become currently available had the deferral election not been made). No exception is made for forfeitures that are allocated to satisfy the employer's contribution obligation with respect to elective deferrals. Note an exception for forfeitures applies for matching contributions (see 1.d.3) above), but not for elective deferrals. Thus, the allocation of a forfeiture to another employee's account to satisfy the employer's obligation to contribute the employee's elective deferrals would be in violation of §1.401(k)-1(a)(3)(iii)©. These regulations are effective for plan years beginning on or after January 1, 2006, unless the employer elects to apply them to earlier plan years ending after December 29, 2004. 1.e.2) Example. A 401(k) plan has unallocated forfeitures in the amount of $35,000. The employer has a contribution liability of $72,000 with respect to salary reduction elections made by eligible participants. The employer deposits $37,000 and has the remaining liability satisfies with the $35,000 forfeiture account. This would violate the regulations described in 1.e.1) above. However, for pre-2006 plan years, so long as the plan document allowed for forfeitures to reduce employer contributions, and did not preclude the application of such rule to the employer's elective deferral contribution liability, the allocation of the forfeitures in this manner was permissible.

Yeah but those increases are "hidden" so no one will ever know! (please read with the intended sarchasm which is a little hard to convery on a message board...)

There's no question it's a money saver if you only have to split into two plans. $10,000 is the low-end of what we're seeing for audit fees.

I could not find the site in the EOB. Any help would be appreciated...

This has been discussed out here before, but I am curious to know if anyone has actually split 1 plan into to two for the purpose of avoiding an audit. Has anyone actually done this? Has it ever been scrutinized by the DOL. I putlled this from TAGData, who pulled it from an ASPPA Q&A session. the question was raised at the 2000 annual ASPPA meeting, in the general Q&A session. The questions at this session were answered by Joe Canary, Scott Albert, Lou Campagna and Mabel Capolongo of the Department of Labor: Question 5: A 401(k) plan has 150 participants. The plan must file a full 5500 and have an audit by an accounting firm. Due to the cost of the audit ($10,000 or $15,000), my suggestion to the client is to split the plan into two plans, each with 75 participants. For 2000 there will be an audit. The plans could be split into two plans on December 31, 2000. Therefore, on January 1, 2001, both plans have less than 100 participants and no audit required. For tax qualification testing, they can be permissively aggregated. In fact, my plan is to administer as if it was one plan and just separate for 5500 purposes. Is my conclusion correct? Answer: This question raises issues of avoidance and evasion. It is not certain that you really have two plans for purposes of Title I of ERISA in this instance--even if there may be two plans for Internal Revenue Code purposes. In Advisory Opinion 84-35A, the Department stated it would consider, among others, the following factors in determining whether there is a single plan or several plans in existence: who established and maintains the plans, the process and purposes of plan formation, the rights and privileges of plan participants and the presence of any risk pooling, i.e., whether the assets of one plan are available to pay benefits to participants of the other plan. This Advisory Opinion also notes that the Internal Revenue Service has cited the existence or absence of risk pooling between funds as relevant to the determination of single plan status. See §1.414(1)-1(b) 26 C.F.R. §1.414(1)-1(b). In DOL Advisory Opinion 96-16A, the Department stated its position that whether there is a single plan or multiple plans is an inherently factual question on which the Department ordinarily will not opine in the Advisory Opinion process.

We always start there, I should have mentioned... Occassionally, it's a plan ein/number issue, but as you point it is often wishful thinking!

Client insists that they filed their 2007 5500. IRS sends out a notice saying the filing was never received. The first thing we do is respond saying, no it WAS filed, and here is a copy of the filing. They then respond and say, you need to efile this 2007 return. What are people doing at this point? Fighting with the governemtn to convince them that it was filed? Or doing the efiling/DFVC program? At the end of the day, sicne this goes back 2 years, I can't see how anyone could say with absolute certaintly that it was filed (client does not have return receipts). I've been taking the cautious route saying that a known $750 is better than an unknown $15,000. Also, now that they are asking us to efile, I think we have less basis for then going back and using the DFVC.

The Corbel document that we use allows us to use the 20 hour a week exclusion, so we are using it. Because let's be realistic, the entire country is using the exclusion, ERISA or not. We wouildn't have alot of clients if we told them all they couldn't do this or even if we recommend the two plan design (which by the way is very clever!). Can anyone vouch for what the other major providers did in their prototypes? Corbel: included the option for the 20 hour exclusion TIAA/Ascensus: Did NOT include the option Anyone know what Datair or McCay Hochman did? I'm wondering if TIAA is the only one that took that "conservative" position.

I just wrote this explanation for myself because it helps me to understand things by writing about them. What does evreyone think about my conclusions? I wanted to write this from TIAA's perspective. 1.403(b)-5(b)(4) states (more or less) if any one or more people that work less than 20 hours a week are allowed to defer than NO ONE can be subject to this exclusion (by reference to some 410b section). Therefore, ERISA covered plans could be interpreted to be ineligible for this exclusion across the board because any employee who meets ERISA eligibility is allowed to defer, even if they work less than 20 hours a week. Therefore, because there is a group of employees who ARE eligible to defer in spite of working less than 20 hours a week (i.e., someone who goes from full-time to part time), then EVERYONE in that group must be allowed to defer (i.e., anyone with < 20 hours per week). Because the plan DESIGN violates this requirement, it shouldn't matter whether or not a plan actually has anyone in this situation. For example, even if a 401k plan has never used profit sharing, it still cannot include a 5 year cliff vesting schedule. It cannot include a 2 year eligibility period on 401k for mailroom employees, even if the plan doesn't have anybody working in the mail room.

This ERISA/403b Reg conflict aside, I just got off of a very lengthy phone call with a "BIG" name industry person (often gives seminars, etc) who is adament that a) if you're document states that people with less than 20 hours a week are exlcuded, and b) you let one out of 30 such people into the Plan, the correction is that you refund the one person - you don't make a contribution for the others (assuming the one person did not meet ERISA eligiblity). He's siting EPCRS, inclusion of ineligible employees which addresses this issue and references 403b plans eligiblity for the correction methods indicated. I didn't see it with my own two eyes, but he is convinced the IRS is completely way off on this.

This is sort of a continuation of a previous thread, but a different question... OK, so ERISA Plans say that anyone who works 1,000 hours in 12 months must be eligible for the Plan, even if they subsequently drop below 20 hours. The question is (assumign the plan is using the 20 hours exclusion), will allowing this ERISA eligible employee (who now only works 10 hours a week) automatically violate the 1.403(b)-5(b)(4) "all or none" rule? Maybe THAT's why the TIAA document doesn't include the 20 hour a week exclusion?

Thanks! I seemed to recall that there was something that prohibited this beyond just the obvious PT rules. Thank you thank you thank you...