austin3515

Since every plan I've ever seen a document that didn't require whole percentages, apparantely everyone on the planet agrees that requiring a minimum deferral of at least 1% does not create something beyond a ministerial act. In fact the basis for limiting deferrals to whole percentages is perfectly reasonable in my opinion, since it improves the odds of accuracy and the difference between 3% and 3.5% is miniscule. LEave them out of the ACP test? Let's admit we're in bizaaro world witht his plan design in the first place. So if by some stroke of incredible coincidence, this plan was able to pass coverage, I dare not be so bold as exclude all those zeroes from the ACP test. So just out of curiousity, are you taking the position that these people WOULD be benefitting, and that deferring 4% is purely ministerial? Remember, the individuals deferring 2% DID complete an enrollment form, but are not getting the match... At a minimum, I would consider the 4% deferral requirement an additional allocation condition, which again would suggest a coverage problem. I too agree that there is a BRF issue, but I think the coverage issue is paramount.

Yes you can, you can only not do this in an ACP safe harbor - 401(k) (1.401(m)-3(d)(2). Since the rule stated above applies only to safe harbor plans, the implication is that you CAN have increasing rates for non-safe harbor plans. NOW, accoridng to the 410(b) regs an employee is treated as benefitting if they are treated as an eligible employee under 1.401(m)-5, which defines an eligible employee this way: 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. Since deferring 4% is not a purely ministerial act, I'd say you have a coverage issue, and this a no go unless you can demonstrate it passes coverage. Of course, if at the end of the year you fail coverage, you can amend the plan to pass coverage, except that such an amendment needs to be the exception, and quite frankly, I just don't see how this is not going to present a problem since anyone not deferring at all would have to be treated as not benefitting.

Anyone have a good write-up on the stimulus bill as it affects 401ks? Just got a call from a client regarding the "penalty free withdrawal" provision that seems to have made its way into the bill.

If no one is over by much, I would either: a) Short an upcoming deposit b) Transfer the over-deposit to the forfeiture account. Assuming you're talking about "small dollars" (I don't dare define "small"), you have my permission to correct this way If the balances are larger, and your going with option b) I would still do the same thing, only adjust for gains/losses.

I think QDRO answered step 2 - step 1 is, does the plan have separate allocation groups for each partner? If the answer is no, then there is no way at all pull this off. If the answer is, yes, then go to step 2

Amounts refunded due to a failed ADP test are still counted as annual additions. So beause he already did $15,500 of 401k, he "only" gets $30,500 of PS.

I would never suggest you should put anyone in a 401(k) plan that doesn't want one. I'm suggesting that the benefit of the owner is not always the sole determining factor (nor should it be).

Shame! Many small employers (I dare note say most ) have these plans as a tool for recruitment and a desire to help employees save for retirement! Personnaly, I would never take a job with an employer that wouldn't do this for their employees.

Without a doubt, Safe Harbor Match calced each pay-period must be funded quarterly, but I believe it is limited to that specific type of a match.

Take a look at a similar post which as of right now is immediately below this one! Courtesy of BTG. http://www.irs.gov/retirement/article/0,,i...tml#termination I was having trouble with the link, so here it is: When can an employer terminate a SIMPLE IRA plan? Other than initial establishment, SIMPLE IRA plans are maintained, or not maintained, on a whole-calendar-year basis. Once started for a year, a SIMPLE IRA plan must continue for the entire calendar year, funding all contributions promised in the employee notice. An employer may terminate a SIMPLE IRA plan prospectively, beginning with the next calendar year, after the employer has informed employees that there will be no SIMPLE IRA plan for the upcoming year. Example: If in 2007 an employer decides to terminate its SIMPLE IRA plan as soon as possible, the employer must inform employees within a reasonable period of time before the 60-day election period ending on December 31, 2007, that there will be no SIMPLE IRA plan for 2008. For 2008 the employer may establish and maintain another kind of qualified plan for its employees and, if this other qualified plan is not operative in 2009, re-establish a SIMPLE IRA plan for 2009.

Let's say the employer is not dissolving but just in bad financial shape, and looking to cut costs. Can the SIMPLE IRA be terminated mid-year?

Absent something in the document that makes it due sooner, I would think (generally) the tax due date would be the only relevant date. So if you usually make your match a week after payroll, and one pay-period you make it two weeks later, you're still OK. Or if management decides to fund the match once a month, also OK. In EPCRS though, I believe that if you accidentally omit an eligible employee from getting the match, if the match would have been funded each pay-period that you need to give them lost earnings. Can anyone confirm? So I wouldn't go so far as to say lost earnings are NEVER needed.

OK Fine, so I'll amend the document to limit 401(k) for the owners to $.01. Are you happy with this plan design now? If so, we're literally debating over a penny.

But the reality is, a) this is an EXCELLENT plan design in certain situations b) There is an excellent case that it is legit. Also, Corbel's document (as an example) does not say "limit must be greater than 0%." which I think the IRS should have insisted on if this was going to be a problem...

Taken from EOB: Caution: example withdrawn from regulations. It should be noted that, when the catch-up regulations were in proposed form, there was an example exactly on point, where a plan set the plan-imposed deferral limit at 0%, but also included a catch-up provision. This example was absent from the final regulations issued under IRC §414(v). Treasury officials have not discussed the reasoning for removal of this example, or whether it represents a decision by the Treasury that a 0% deferral limit is improper, or that they simply didn't want to promote such a plan design by way of a regulatory example. Clearly, a plan could set $1 as the deferral limit and there would be no question it is acceptable, so setting a $0 limit shouldn't make a difference. Some would argue that with a $0 limit, the plan really doesn't have a 401(k) arrangement. But that argument fails to recognize that, even with a $0 limit, those employees who are catch-up eligible could make elective deferrals, so the 401(k) arrangement is still available, just not to all eligible employees. Personally, I'm comfortable with anything Sal is comfortable with. In addition, I am also comfortable withy any Tom Poje is comfortable with

10 to 1 the next paragraph says you should add back pre-tax defrrals under 401(k), etc. So you could either: 1) Start with box 1 and add back 401(k) deferrals and 125 contributions. OR 2) Start with medicare wages and add back 125 contriubtions (125 deferrals reduce Medicare wages).

Got it, Thank You!

Create a plan imposed limit to limit deferrals of owners to 0% of pay. If there was no 401(k) before, use PY testing, and then they can contribute 5% of pay PLUS $5,500. Then, on the first day of the next plan year, add the plan imposed limit of 0% on the owners.

Does anyone have a link to a good web-site that tells you when tax returns are due? (or in particular, the funding of employer contributions). My understanding is that they pushed back the partnership return due date to 9/15 for calendar 2008 tax years. Can anyone verify/send out a link?

It's not so much relief as complete and total elimination. Just signed into law yesterday - no RMD's for 2009. Somebody get me a tissue A 4/1/09 RBD is a 2008 RMD, and there is no elimination of 2008 RMD's. Same logic applies in reverse to 4/1/2010 RMD's, only in reverse.

Bird - I think one of the new rules for VS documents is that the sponsor can amend on behalf of its adopters - do you agree? That;'s my recollection from Corbel's EGTRRA Document class. I have a question though: What if we signed up to sponsor our own prototype, but just use the Corbel-sponsored VS check the box document. Would Corbel be responsible for executing snap-one regulatory update amendments (except that we would obviously need to be distributing copies to our adopters)?

We use documents from a major provider. As most of you know the differences between prototypes and the check the box volume submitter documetns have diminished signficiantly now that a) PT's can use cross-testing, and b) VS documents can have TPA initiated regulatory amendments. So if a) prototype has less flexibility than the vs (i.e., limitations on # of allocation groups), b) the pricincing is essentially the same, then why would anyone opt to use the prototype (other than branding). Or is branding the primary reason? Is there anything a prototype can do that a VS cannot?

Does anyone know where that table of permitted disparity factors can be found in an official format (i.e., for imputing disparity on an allocation rate)? I'm tlaking about the one that gives a disparity factor depending on the combination of the Plan;s NRA and the participan's SS Retirement Age.

I'll add another wrinkle - if, as Tom suggested, discretion is desired, then if the Plan is top-heavy, make sure the owner's/officers (i.e., keys) don't do any 401(k) until the decision has been made. If the any keys do more than 3% of 401(k) and then they opt not to make the safe harbor non-elective, then the top-heavy minimum will apply anyway, which is the same 3% of pay (basically), but the owner gets no exemption from the ADP test. Those dreaded top-heavy rules...

It seems strange to limit someone's 401(k) based on the prospect of a DISCRETIONARY contribution, just because you've always done one in the past. If the Plan has a fixed contribution, I couldn't agree more; but if its discretionary, I think it would be inappropriate to limit the deferrals.