austin3515

Hmm.. So let's say you have a plan that matches 300% of the first 3%, so the total match is up to 9% of pay. In that scenario, it would be unusual to have to exclude any match because the "representative matching rate" provisions. As an example, if only ONE NHCE defers the full 3% and no one defers anything else, the maximum match allowed in the test is 5% of pay, and the other 4% would be disregarded? Is that basically what you're cautioning? I had absolutely never thought about it before. Fortunately, I don't think I've ever seen a match quite that generous, but you never know...

I would recommend talking to an ERISA attorney before going anywhere near there. It is not nearly as straightforward as "adding a new investment option." And the fiduciary liability goes up exponentially for the trustees.

I was suggesting that to do such a thing would be ridiculous... So it sounds like you agree with me - no match, no coverage, no ADP test?

People, please. No one int heir right mind should suggest doing an -11(g) amendment to correct a coverage failure in the match portion of the Plan when there is no match made. that's just ridiculous, and it is NOT the same thing at all. We'll just argue our way out of it by saying there is no match "plan" if no match is made. No match "plan"= no coverage test.

LEt's say, theoritically, you don't pay this $3 penalty. Let's say further that the IRS hunts you down and threatens all sorts of nasty things if you don't pay the $3 penalty plus the $1.50 of interest plus the $2 of penalties. Wouldn't you just pay it then? Also, I've heard the IRS say publicly that they will NOT pursue trivial amounts like this. As you can imagine, they lose money processing a $3 penalty tax return. There is no formal deminis amount, but I personally won't due one for less than $100 (I warn clients of the risk of course, which I believe to be extremely low). Based on GBurns answer, I'm sure he'll recommend that I be ex-communicated from the pension industry for such a void of principals...

We wanted to talk to someone about it, as we are considering doing this in-house to cut-out the expensive middleman (i.e., recordkeeper), particularly on small plans. We use relius for admin work right now.... Please send me an email if you would be willing to talk to us.

Believe it or not the answer is no. Absolutely no distinction is made between a reduction or a suspension. They both blow the safe harbor.

Got a multiple employer plan. Most of the employees from ONE of the employers were let go. So, the question is: Do apply the partial term rules at the "employer/controlled group" level or at the plan level. I would have to assume it is the employer/controlled group level, but thought I should throw this out there.

Boy, I'm not too concerned... Personnally, I wouldn't do anything other than you've already done. I just can't see this being a big problem. No one was hurt, it's fixed going forward, it's much more related to a failure to complete a little bit of paperwork than anything esle. OK, if you got audited, maybe the auditor would give you a little bit of a hard time... I think i's take the chance,

I just want to be perfectly clear about one crucial point: If you discontinue the safe harbor nonelective, or the SH Match for that matter, there is NO TH exemption no matter what. Therefore, if any of the keys defer/receive 3% of full-year pay or more, then the full 3% THM is due, despite the fact that those contributions were made before they knew they would discontinue. Put it another way, there is absolutely no relief (in the case of a SHNEC), and probably a severe detriment (in the case of a SHMAC) to discontinuning the SH in a top-heavy plan if the above situation applies. I assume everyone agrees, but its so shocking I wanted to make sure I wasn't alone... Once again, small business gets royally screwed by the top-heavy rules, and will be forced to terminate their plans (as the only means of limiting the top-heavy contribution) despite the relief afforded to the mega-corporations of the world... If I ever get to the senate, this will be my top priority...

What if the plan terminates as of January 30, and Mr. Big had been paid $245,000 in January. Are you suggesting that the required pro ration of compensation--limiting everyone to 1/12 X $245,000 for that one month--would be a prohibited cutback? What if it were a 5% MPPP, $245,000 comp paid in Janaury, & then plan terminated--same question: is it a cutback? I think not. I hadn't thought of that... But I suppose it is the exact same issue. But for the record, yes, I do think that could be construed as a cut-back. OR, is there some explicit guidance that suggests your right to the full (a)(17) comp limit is not accrued until the end of the year? (I mean other than your analysis aside

Interesting... Let's look at this from a purely cynical perspective... I'm the owner of a business, and I know that I can pay myself at least $245,000 for the whole year. Absent these rules, I decided to give myself a bonus the day before the end of the 30 day notice period to get my comp up to the $245K. I get the whole SHNEC, while my employees get the shaft! I wonder if they could somehow limit the 401(a)(17) pro ration requirement to those individuals with the power to make that type of decision (i.e., key employees, or even just majority owners). If so limited, I would agree that the cut-back is justified. But to take away from the Mr. Big, the super-duper sales man employee, is clearly unjustified.

i.e., if there are no NHCE's, the union "plan" passes by default.

Word of caution: Do NOT underestimate how incredibly complicated it is to apply the catch-up rules to an off-calendar year plan, PARTICULARLY if you consumed some catch-ups to reduce an ADP refund. If you're response to reading this is "what's so complicated about it??" then you need to do some research!!

Great question... If he's an "earned income" person then you automatically get a true up since all income is deemed earned on the last day of the Plan Year. Of course, based on the fact pattern, it seems unlikely, considering the OP is the 401king

I think calling it a manipulation is unfiar - let's face, the owner got screwed here. Let's also remember that the other participants can only BENEFIT from this amendment. Personally, I was floored when I learned you couldn't make this change...

Agreed that the category "temp" would not be a permissible exclusion since the classification is based inherently on service. But let's the employee transfered to the mail-room, and mail room employees are excluded from the Plan. Regardless, loan payments must continue because repaying loan payments has nothing to do with accruing benefits/participating under the plan. Rather, the participant loan is an INVESTMENT of the Plan which the trustees have a duty to collect.

This has been discussed on the boards before. Although there is no de minimus amount, the IRS has said publicly that they lose money processing tax returns for, say $15. I've heard from other places that the "break-even" point is about $100. Also consider that the charge to prepare is likely over $100 by the time the form is completed, reviewed, filing instructions prepared, etc. and that the penalty and interest for failure to file a $75 tax are likely miniscule - as such, there is not a lot of risk to simply not filing for taxes of less than $100.

OK, so the individual in question contributeds $4,500 of Roth before terminating. He now wants to withdraw the balance when it is worth just $3,000. So I just want to make sure everyone agrees that he will not be able to deduct $1,500 of LOSSES on his 1040 - or would he? Seems unfair that he would only get taxed if it made money...

ADP test includes ONLY people eligible to defer. As for a cite, I couldn't it find it, but this is a very basic concept. BTW, I'm assuming you want them in because most earn more than $100K, and so would help the test?

Tom, I would include him the ADP test, but I'm having a tough time tying that in to the question... I'm guessing including your example in the ADP test would lean towards accruing the match through the 4/22/09 payroll? I had a feeling there wouldn't be a clear-cut consensus on the issue... I feel comfortable that the a pay-DATE after the notice period ends is out (suggesting the final match pay-period is 4/15/09). For example, couldn't a participant elect to discontinue their 401(k) on 4/21/09? Because they certainly could discontinue their deferrals on 4/21/09 (under most docs anyway), I'm not sure I agree they accrue anything at all DURING the pay-period. I believe it only accrues on pay-day, when they actually have it withheld from pay. Certainly the DOL regs on plan assets would back me up! PS, the effective date of my amendment would be 4/17/09.

OK, so the SH Match discontinuance notice is sent out 3/18/09, and there are weekly payrolls. 30 days later is 4/17/09. There is a pay-date on 4/15/09 and 4/22/09. Which pay-date is the final pay-date for the SH Match? I vote for 4/15/09, because the 30 day period expires on 4/17/09, so it's OK to discontinue the match after tha date (i.e., to have no match on 4/22/09). So to confirm, any pay-dates after the 30 day period need not have any SH Match.

Just confirmed with Corbel that to continue with reliance you must solely amend the document to check/ucheck boxes and fill in permissible blanks.

To be more specific: In a non-standarized plan, could I amend the Plan under -11(g) to add in the lowest paid non-benefitting Participant?

OK, so I know there is no prohibition on having a -11(g) amendment add the lowest paid NHCE to the allocation first, and so on until coverage testing is passed. My question is, are there any additional restrictions for -11(g) amendments on prototypes in terms of reliance on the pre-approved document? Or would this be OK?