austin3515

The sad truth is you really can't terminate, or at least you probably shouldn't. I have an old MP plan that we're not terminating for one reason - the surrender charges are obnoxious. And since it's one contract, you can't divvy it up in IRA's. So you either pay the surrender charge, or keep going. IT would be inteesting to know if you could "terminate" the plan, allowing peoipl to close out everything other than the GIC. My plan had only the GIC in it...

OJ, Assuming the document provides that the loan is due immeidatley on termination of employment (which most documents do), then apply what I said. We have one plan out of hundreds that's written that particular way, because really, who wants to collect loan payments from terminated empoloyees.

When somoen incurs a distributable event, like termination of employment, the loan is offset. That means is treated exactly like a real distribution from the plan. It's reported as a real distribution on a 1099 (NO Code L), and it's reported as a distribuion on the 5500 (not a deemed distrbution). The loan is considered repaid, because the participant's account was reduced (i.e., offset) by their outstanding loan balance. Remember, the participant loan is part of their account balance, so making the loan go down to zero does mean something. Think of the pooled accounting days when the loan was just a part of the pool of assets. Johnny had a statement saying he had $50,000 in the Plan, and Johnny also had a loan out for $5,000, which was not broken out separately on his statement. The $5,000 loan was an investment under the plan just the same as any other mutual fund. So when he terminated, and his account was reduced (i.e., offset) by $5,000, and he only got paid $45,000, it's a lot easier to see how this is considered repaying the loan. A loan deemed distribution is a loan that was treated as distributed for tax purposes only. So for example, a $60,000 loan would be a deemed distribution. The loan is still outstanding, and must still be repaid, even though the entire amount was taxable. Also, the 60K will continue to be counted in future a max loan calculations. Compare this with above, where if the participant was rehired, the "old" loan would be ignored.

I WISH I had head a full head of gray hairs (preferrable to no hairs on my half way balded head...) I know, my avatar can be misleading...

At the risk of splitting hairs, he met the eligiblity requirements as of the end of the 12 consecutive months following his rehire. He ENTERS the Plan on 4/21/10.

Disregarding service under the rule of parity applies to PARTICIPANTS only, not employees. Check the language on disregarding service, you'll note that it specidcially talks about disregarding the service of a Participant. So the service would NOT be disregarded. Everything else PlanMan says is on the money. The Corbel document says (I believie because it is required) that you must work 1,000 hours in 12 consective months. That is all it says. Very common confusion, in fact I had this question come up just lack week. I looked it up in the EOB and what PlanMan and I say is waht Sal says. This is not an opinion - it is a fact Not sure who wins the bet, but congratulations to one of you!

Does depositing the Safe Harbor after 12 months plus interest preserve the top-heavy exemption?

More specifically, you're looking for amounts in Box 14A of the K-1.

I think it should be shifted over to elective deferrals. 401k over 402g is post-tax money in a qualified plan, same as Roth (i.e., because it was not deducted on the 1040). When withdrawn that money is taxed 2x. There shouldn't be a special exception to doulbe taxation for the Roth money. The only way to make sure the participant pays their fair share of taxes twice (ha ha) is to transfer it to 401(k).

Do the relative value disclosures apply to money purchase plans?

Have you been hacking into my network and reading my self employed deferral election form? Don't forget my favorite one, "just enough 401(k) such that the plan WON'T be considered top-heavy" But yes, formulas are 100% acceptable.

There's a third kind of Affilliated Service Grooup called Management Group, which you should look into as well then. I don;t think that one applies either, but just to be thorough. Regardless, you're question is really a tax/legal question, not a retirement plan question. Is Person A the common law employee of Corporation B? If so, then he must get a w-2, and pay payroll taxes on his pay from Corp B (as does Corp B). This situation of course supports that no ASG exists. I would assume this is the most correct treatment. That being said, there are lots of situations where these "management" corps are set up just as your describing (i.e., Pay A's comp through Corp A). Why they are able to avoid the payroll tax issue that I've described above is a legal/tax question. If anyone knows the answer, I would be intrigued.

If A just happened to have a consulting gig with a client, and that service is totally unrelated to the staffing service and there's really no connection, than there wouldn't be an ASG--at least not an "A-Org". It could also be a "B-Org" if for example the two employees are answering A's phones and preparing A's bills, etc., but that doesn't seem likely (because it seems like a simple consulting gig).

One would hope that would have come up in the OP...

Unless it's an Affiliated Service Group, no. So for example, if Person A is a Doctor, and Corp B is owned 50% by Person B (the other Dr.) and the the two B employees are the nurses working for Dr.'s A and B, and Corp B pays Corp A for Person A's services then you probably have an ASG. Of course, the ASG rules for attribution are a little tricky but I would assume that under my theoretical fact pattern you would have an ASG. And the 50% threshhold is relevant only for 415 limitation purposes. Interestingly, as long as you don't cross into the CG/ASG rules, even if you went over 50%, contributions to a simple IRA would not count towards the 415 limit. From the EOB: Note that IRC §415(k)(1) does not include a SIMPLE-IRA plan as a defined contribution plan which is subject to §415, so contributions to a SIMPLE-IRA are not annual additions and are not limited by the defined contribution compensation limit. That's actually a great plan-design tip for this situation in the right circumstances...

I too have a hard time finding fault with two plans (both of which satisfy coverage) applying a 414(s) definition of compensation and have that be treated as not satisfying 414(s). I get where you're going with this but based on the logic I've set forth, I have a hard time believing anyone could find fault. I was intrigued to learn in an earlier post regarding depositing SH beyond 12 months after the end of the plan year that a SH plan CANNOT apply the ADP test. Those provisions were removed. The ADP requirements in a SH Plan are to be satisfied through the SH contribution. Anything that goes wrong is an operational failure. To apply the ADP test would require a retroactive amendment to plan and would need a VCP submission. In your case, if you failed coverage, you would correct that failure through a -11(g) amendment and provide QNECS, etc to correct. Here's the link... http://benefitslink.com/boards/index.php?showtopic=45280

You couldn't do it permissively,it would have to be mandatorily (if that's even a word)... OF course the outocme is the same (I'm being a little facetious) but the point is you are required to disaggragate (SP??) the usion / nonunion folks. Also, because both plans cover a key employee you are required to aggregate both plans together for top-heavy testing, incluidng the union portion of the plan. So for top-heavy you mandatory AGGREGATION. Presumably, this is a good thing...

As an aside, if funded more than 12 months after the end of the plan year, are you including lost interest on the amount until funded?

When should the trustee prohibit a participant from taking a distribution? Trustee knows an employee is about to be divorced, but no QDRO has been received, etc. OBviouly, participants who know a divorce is coming would have a significant incentive to close their accounts before a divorce...

This paragraph of the reg specifically says it will NOT be taken into account. I would read that to mean if it was funded late, it is assumed not to be made. Out of curiosity does anyone else come to the conclusion that no ADP test is required? (h) Additional rules —(1) Contributions taken into account. A contribution is taken into account for purposes of this section for a plan year if and only if the contribution would be taken into account for such plan year under the rules of §1.401(k)–2(a) or 1.401(m)–2(a). Thus, for example, a safe harbor matching contribution must be made within 12 months of the end of the plan year. Similarly, an elective contribution that would be taken into account for a plan year under §1.401(k)–2(a)(4)(i)(B)( 2 ) must be taken into account for such plan year for purposes of this section, even if the compensation would have been received after the close of the plan year.

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?