austin3515

So that's it - pay lost earnings and you're good to go? Barely a slap on the wrist? I have to say it seems very bizaar that the ADP test is not imposed. I always thought it was whenever you didn't follow the SH rules..

No matter what, the Plan is due that 3%. No 2 ways about it. Now, if the company goes bankrupt, the Plan has to wait in line with all of the other creditors. I dare say I have/had a plan in this sad situation, but alas you cannot get water from a stone. What does it mean? 1) Don't panic until December 1st or so, which is a long way from today. You have 12 months after the PYE to fund the Safe Harbor in order to avoid ADP/ACP testing. Maybe there's a 415 issue, but if memory serves, contributions mandated by the plan are not subject to the 415 issues that come with people who terminated during the prior plan year. 2) On December 1st, if the money won't be collected, run the ADP/ACP tests and correct if necessary. If the Plan happens to get audited, I'm not sure what they could do. The SH regs specifically planned on this eventuality by mandating ADP/ACP testing if the contribution is not made 12 months after plan year end. So because the regs tell you what to do in this situation, if you do it, I would presume the plan should not be disqualified. The only thing that would be problematic in my opinion would be if the owner was taking a big salary. Now the DOL on the other hand, would probably give you a very very hard time. They would tell you you're violating every fiduciary rule there is, but that's their job - to make sure the money gets into the plan. I suppose they would say (perhaps correctly) that you can't ignore paying the plan and instead pay your vendors every single time. And I think it's very possible that an employee would call the DOL and complain which could very realistically result in an audit.

From the EOB: The regulations issued on December 29, 2004, provide that, if a short plan year is created by plan amendment, the ADP and ACP safe harbors is available if both of the following conditions are satisfied: (1) the plan year immediately preceding the short plan year satisfied the 401(k) safe harbor rules (i.e., the plan already must be a safe harbor plan when the plan year is changed to create a short plan year), and, (2) the plan year immediately following the short plan year also satisfies the 401(k) safe harbor rules. See Treas. Reg. §§1.401(k)-3(e)(3) and 1.401(m)-3(f)(3). If the plan year immediately following the short plan year is also a short plan year, then the safe harbor requirements must be satisfied for at least the 12-month period following the end of the short plan year (unless the exception for plan terminations, as described in 2.c. below, applies). According to the EOB, the conservative approach is to amend the plan year BEFORE the short plan year begins. So your short plan year be from 1/1/2011 through 9/30/2011. But that is based on one Treasury officials remarks at an ASPPA conference, and Sal definitely felt there was room for interpretation. Especially considering the only two requirements set forth in the regulations COULD still be satisfied if you made 1/1/2010 to 9/30/2010 your short plan year.

Plan was set up in the 60's w/ a special effective for 401k of 1/1/2007. If the plan is being restated, is it necessary to continue to indciate the special effective dates for the 401k feature? I've always looked at those fields in the prototype as a way to create one document today that can have certain features kick in tomorrow, but that it's not necessarily necessary to memorialize until the end of time.

We're using the 5500 Code 2T for default investments, along with codes 2F and 2G. Relius keeps kicking out a validation error on this saying invalid entry. Are other people using code 2T in this way?

I'm guessing this is the contribution section of the document. It refers to "amounts." IT doesn't refer to how those amounts will be allocated. I would be shocked to learn of a plan with a determination letter that says pretty much the employer can allocate however they want... That being said, I think even if that was all the language there was in the document, that still isn't enough leeway to declare differnt match rates for different groups of people. You did say each division has different language, and I'm not sure what you mean by that, so perhaps you are covered in this regard. Failing coverage for a match means you have to fix the failure, and unfortunately, the only correction there is to make a QNEC to enough people to bring the ratio percentage to 70% (or perhaps your Average Benefits test will work better). The people you bring in get the ACP for the NHCE's who are eligible for the Plan. You might be better off declaring a nominal match (don't be obnoxious about it) to get them benefitting for coverage. But you'd have to run the numbers to see what works better...

We need to do a money purchase plan document, although we do not sponsor a MP prototype. What do other people do? Are there services out there that will allow you to utilize a Corbel prototype that some business has adopted, and will just charge per document. For example, it was not cost effective for us to adopt our own MP prototype, nor a Volumen Submitter "check the box" document, since we only have a handul of plans that need those. And I don't want to use those really nasty IDP documents because they're so hard to work with...

I've gotta stop reading these things so quickly. Terribly sorry

"My parents went away on a weeks vacation, and, they left the keys to the brand new porsche..." OK, now for something relevant... From 1.410(b)-3 Similarly, an employee is treated as benefiting under a section 401(m) plan for a plan year if and only if the employee is an eligible employee as defined in §1.401(m)–5 under the plan for the plan year. From §1.401(m)–5 Eligible employee —(1) General rule. Eligible employee means an employee who is directly or indirectly eligible to make an employee contribution or to receive an allocation of matching contributions (including matching contributions derived from forfeitures) under the plan for all or a portion of the plan year. For example, if an employee must perform purely ministerial or mechanical acts ( e.g. , formal application for participation or consent to payroll withholding) in order to be eligible to make an employee contribution for a plan year, the employee is an eligible employee for the plan year without regard to whether the employee performs these acts. 1) Is Division 3 benefiting? Since there is no money to allocate, no one is eligible for an allocation of matching contributions. If your interpretation suggests otherwise, note the following: NO ONE RECEIVED ANY MONEY. Based on this basic issue (emphasis added), I have a hard time concluding that anyone is benefitting in Division 3. 2) You;re correct that BRF testing is required for Divisions 1 and 2. Since there is no form,ula for Division 3 it would not be subject to BRF testing. It would however, affect the regular coverage test. 3) You didn't mention an ACP test. Of course, if you go against my sound advice and treat Division 3 as benefitting, you of course have a LOT of zeroes in your ACP test...

Plus, they'll probably not tell them that they need to make a top-heavy contribution. After all, they didn't check "Yes" next to the box that says "were more than 60% of all assets allocated to key employees?"

Nope, the same max deductibel limit of 25% applies. Again, no more 401k available.

Yes and no. Yes, he can contribute to his own plan established for his schedule C. No, he cant do 49,000 since that is more than the maximum deductible of 25%. Becaise of the Self Employment gyrations, it would be close enough for this purpose (not for tax purposes) to say he can contribute 20% of his Schedule C. Because he's already done his 22K in 401k in the law firm, no sense in doing anything but a SEP. A SEP of course, is your only option since it's after 12/31.

Apparently if both of these speciic things are true: 1) If only annual payrolls and 2) Dual entry dates selected Relius assumes that the person worked 1,000 hours int heir first 12 months if they worked 1,000 hours in the plan year. Solution: Switch from Anniversary/Plan Year to Plan Year in Plan Entry Requirements in Plan Specs. Based on information obtained from Rleius.

Person was in Relius last year, coded as ineligible I have not computed entered. The hours are fine, so I don't want to mess with that... I even tried switchignt he Service creditted this year switch to Yes, so the "Service" years of service (which seems to drive eligiblity more than eligbility years for some reaosn) was still at zero! This is so annoying...

Version 14 SP Whatever is most recent. How do I tell Relius, "now listen to me! This person is NOT ELIGIBLE" in a way that Relius will understand? I have been trying and trying and trying and nothing will work. Plan has annual comp periods only. This person worked 1,000 in the plan year but NOT in their first 12 months.

What you're missing is that there are humans involved.

http://benefitslink.com/boards/index.php?showtopic=45053 Take a look at this thread where it was concluded (at least by me) that you can go up to $60,000 in additions because catch-ups are "DISREGARDED as 415 additions." And what you have here is $11,000 of catch-ups. I was very excited (in a pension geel sort of way) about this post as you seem to be on account of the fact that it is a fabulous year 1 plan design.

I suppose that's easier to administer. I've neve seen the option, but there's definitely somethign to be said for it. Remembering to do the 5 year forfeitures is not easy, and more improtantly, remembering that you already DID the 5 year forfeiture is not easy (and quite important!). I jump through hoops on the latter, and for takeovers, have to assume it was done in a prior year (unless the prior TPA's reports make it clear that it was not done)... Corbel only gives me two choices (5 breaks, or ealirer of 5 breaks/payout).

If the IRS rejected our plea and assessed a $15,000 penalty, my response would certainly include the outrageosness of the penalty in light of the fees associated with DFVC. I'm just afraid that if you offer it up, they may find it easier to take you up on your offer This is assuming of course the letters are ever read!!

We discovered a client who has not been filing their 5500-EZ's. We're not eligible for the DFVCP because it's an EZ. What have others been recommending? Filing the back forms and seeing if you get a letter? When people have taken this course of action, have they gotten penalty letters? I was thinking maybe attach to the filings a letter requesting forgiveness for the late filing as they were not aware of the requirement. It actually relates to the change in filing threshhold from 100K to 250K.

I'd be shocked if your adoption agreement says forfeitures occur at the time of distribution doesn't also provide that a forfeiture will ocurr after 5 breaks in service if no distribution is taken within that timeframe. Perhaps it's buried in Basic Plan Document, but it doesn't sound right to me that the two would not go together...

See what makes me nervous about you (for your own good) is that I believe what you means is they blow by the 401(a)(17) limit, relating to maximum compensation. Not the 415 limit relating annual additions. This is a pretty basic concept in retirement plans. No, I mean the partner's pro rata share of the contribution expense for all of the employees. Generally, the TPA is calculating that number for the CPA's, so the CPA;s generally don't have the dedution taken out when they provide us TPA's with the K-1'. This calculation is second only to New Comp / rate group testing as far as complexity... I'm not sure message boards are the rihgt place for an advanced plan design trainng session...

Earned Income is basically K-1 Box 14A net of 179. Reduce that by the employee cost (unless already deducted in arriving at 14A). We'll call this "Gross". Multiple that by .9235 and mu.tiple by that by 1.45%. Will call this Medicare Deduction. Now, take the SSWB, and subtract whatever W-2 income he had. If he had more than 106800 of W-2 income, you're done, no SS deduction. If he had, say, $50,000 of W-2 income, multiply .062 x (106,800 - 50,000), and we'll call that Social Security Deduction. OK, so now take Gross, Subtract the Medicare Deduction and the Social Security Deduction, and then deduct the cost of the Partner's contriubtion that will be deducted on his K-1, and that gives you his comp for plan puirposes. Of course, the Partners Contriubtion must be based on Comp for Plan Purposes, so every dollar of contriubtions reduces the comp, which then reduces the contribution, etc. Which is a fun little circular calculation which fortunately excel can handle... But the real reason I wrote this lentghy answer is because I wanted you to appreciate that this is actually a very complicated thing, and it sounds to me like you should get some help (no offense intended)...

So for cliff vesting, you would do 100%?

How low would you go? 5% vested? 10%? In the present situation, participant needs an 18% of pay contribution for a total of about $5,000.