austin3515

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.

But on a PT document, everyone in their own group limits the number of allocation groups you're allowed. So based on gross pay, each participant could be in their own allocation group if the operational intent is to use only bonus. But hey, maybe a VS document would work? Definitely aggressive no matter how you slice it...

I would say yes, but there's one thing that's sticking in my head. And that is that the employer has total discretion to allocate bonuses however they want, and therefore can allocate PS however they want, which might be argued to violate the requirement that the allocation of contriubtions are definitely determinable. But if my contrarian view has no basis, then you should be fine!

I'm not sure it was clear what advice you are giving your client, but the issue seems to be perfectly moot. As was made pretty clear in the very first post, catch-ups MUST be matched for a SH Plan. So whether deferrals are catch-up or not, is irrelevant. All that matters is whether or not it's 401k, which obviously it is. So it needs to be matched. So I presume your advice to your client was "make sure all 401k gets pulled into the match calc, whether catch-up or otherwise." I think some of the discussions above are very very interesting when you talk about a REGULAR match that is funded during the year. It seems to me that excluding catch-ups from the match could have some very bizarre consequences.

Plan has two entities adopt the Plan. Both entities operate fast food restaraunts. The ownership is similar in both plans, and is considered a controlled group after attribution. One has a modest profit and the other has a modest loss. Is it safe to assume that each different entity represents its own "trade or business"? What concerns me is that thye are both fast food restaraunts that are therefore in the same business (they are even operating the same franchise). Is this one "trade or business"? Does the fact that it's a controlled group make it "one trade or business"? If they are "separate trades or businesses" my interpretation (and apparently the EOB's) are that I can ignore the losses based on the following site. My interpretation is tha tthis holds even both adopt the same plan (they could, after all, have created two plans and there should be no dispute at all). From 401(d): A trust forming part of a pension or profit-sharing plan which provides contributions or benefits for employees some or all of whom are owner-employees shall constitute a qualified trust under this section only if, in addition to meeting the requirements of subsection (a), the plan provides that contributions on behalf of any owner-employee may be made only with respect to the earned income of such owner-employee which is derived from the trade or business with respect to which such plan is established.

"talks about someone deferring who was not eligible because of age or service or not passing an entry date. I can't find where any excluded class is mentioned. " If memory serves this provision of EPCRS is in the context of a self-correction. I think what Sieve is saying ??? is that if you submitted this to the IRS under the VCP, they would most likely approve it.

If the HSA is done through an after tax-deduction, it should be completely ignored (I'm told these deductions are not always done through a 125 plan). The employee might as well be writing you a separate check for the HSA amounts. If the HSA is provided by EMPLOYER contributions (i.e., similar to employer paid health insurance) it should also be ignored. Neither one of these would be affected by any "normal" definition of compensation.

Let's say you just want to make a plain vanilla plan amendment to (let's say) add hardship distriubtions, or change the plan's eligibility? When does such an amendment need to be signed? Or perhaps more to what I'm looking for, is there a good write-up somewhere that goes into when various amendments need to be signed? Before implented, by the last day of the plan year, etc., etc. Has Corbel done this??

You're not forcing the catch-up for 2009; that's a done deal. You;ve got $4,000, since that's what you exceeded 402g by. There is no way to get the full 5,500 for 2009. I'll wait to hear from others on how they feel about going over 54,500.

ADP and 402(g) is only one way to get a catch-up; there's a couple more, one of which is going over 415. So as soon as you go over the 415 limit, you get yourself a catch-up contribution. So in a calendary year plan, someone defers $10,000 and you make a profit sharing contribution of 44,500, total additions are 54,500, and $5,500 of 401k is reclassed as catch-ups.

Wow, very interesting question... BUT, you would not get the full catch-up limit for 2009 for sure, because the 402g/401a30 was only exceeded by $4,000. Other than what I've pointed out, I can't see any problems. Catch-ups are NOT counted for 415 purposes. If you were running an ADP test, you could clearly have the full 11,000 (5,500 per year) excluded from the test. Why not 415 as well? I'll be curious to see what the outcome of this is!

This is from the IRS Correction Program, called EPCRS, Section 2.07. I think SCP is avaialble. Doesn't fit perfectly, but boy it sure is close!! (3) Early Inclusion of Otherwise Eligible Employee Failure. (a) Plan Amendment Correction Method. The Operational Failure of including an otherwise eligible employee in the plan who either (i) has not completed the plan’s minimum age or service requirements, or (ii) has completed the plan’s minimum age or service requirements but became a participant in the plan on a date earlier than the applicable plan entry date, may be corrected by using the plan amendment correction method set forth in this paragraph. The plan is amended retroactively to change the eligibility or entry date provisions to provide for the inclusion of the ineligible employee to reflect the plan’s actual operations. The amendment may change the eligibility or entry date provisions with respect to only those ineligible employees that were wrongly included, and only to those ineligible employees, provided (i) the amendment satisfies § 401(a) at the time it is adopted, (ii) the amendment would have satisfied § 401(a) had the amendment been adopted at the earlier time when it is effective, and (iii) the employees affected by the amendment are predominantly nonhighly compensated employees. (b) Example. Example 27: Employer L maintains a § 401(k) plan applicable to all of its employees who have at least six months of service. The plan is a calendar year plan. The plan provides that Employer L will make matching contributions based upon an employee’s salary reduction contributions. In 2007, it is discovered that all four employees who were hired by Employer L in 2006 were permitted to make salary reduction contributions to the plan effective with the first weekly paycheck after they were employed. Three of the four employees are nonhighly compensated. Employer L matched these employees’ salary reduction contributions in accordance with the plan’s matching contribution formula. Employer L calculates the ADP and ACP tests for 2006 (taking into account the salary reduction and matching contributions that were made for these employees) and determines that the tests were satisfied. Correction: Employer L corrects the failure under SCP by adopting a plan amendment, effective for employees hired on or after January 1, 2006, to provide that there is no service eligibility requirement under the plan and submitting the amendment to the Service for a determination letter.

Beli3eve it or not, Roth deferrals woudl be treated the same way as traditional deferrals fort hat particular purpose. So even if Sue made Roth 401k, you still use 45,000 for comp. I think the IRS should clarify this eventually, but according to the EOB, this is the most logical conclusion based on the structure of the regs. We looked into this a lot when running ADP testing (i.e., if we were running the test using net comp, were we allowed to reduce comp by Roth 401k as well, and the answer was yes (though more guidance would be appreciated).

Because it sounds like you know what you are talking about, I'll presume that the 410(b)(6)© grace period has expired? How about a bottom-up -11(g) profit sharing contribution to get the average benefits test to pass (assuming you meet the nondiscrim ratio percentage threshhold)? If the NHCE's are young, some profit sharing for them might do the trick to pass the average benefits test. Not sure how far back you are going with this (-11g deadline is 8.5 months after year-end) I may be speaking out of turn, as this would be quite aggressive, but it might be worth asking an ERISA attorney... The Bottom-up restrictions do not apply to profit sharing contributions - only the ADP test...

No, the er contributions don';t become a "plan asset" until they are deposited. The only reason that 401k becomes a PT is because the DOL regs specifcially state that 401k becomes plan assets "as soon as it can be segregated." If the employer stilll has the money it's account at that time, it using plan assets for its own benefit. But as I saidf the case law is very clear on this - outstanding Employer contributions are not plan assets until they are deposited. The only exception to that (I'm told) is in rare circumstances where the document specifically states that they become plan assets when due, but I'm also told that is really only in multiemployer plans.

We've never broached the topic in the past with anyone; and I hadn't even considered the RK limitations. I was more focused on the inability of our clients to stop withholdings when the loan is done, let alone reduce the loan payment in 2 years! Glad to hear I am not alone...

If someone wants to refinance for the max proceeds available, then generally they do not get a new5 year term. Btut there is an exception whereas the OLD loan balance can be repaid down to zero in the original 5 year term, and the new loan proceeds can be amortized over a full 5 year term. The number one complication here is that the payments need to DECREASE after the original balance is paid off. Is any actually doing this? Or is this just being ignored?

Well sure, that sounds discriminatory... But I was assuming the owners need to work for a little while (months??) before having enough business to hire employees...