austin3515

Point well taken

Match to which the participant was never entitled to do should have been forfeited.

Are they obtainable?

We just got our 2008 EOB, CD version, but all of the text is giberrish. Anyone else run into this? Were you able to fix it?

Includible Comp is basically defined as wages "includible in gross income." Can someone tell me if there is a good resource out there for what this means? Without some sort of a good resource, you would need a CPA to get some work done!! I was disappointed in the level of detail in the EOB on this topic. Although my primary request is to find a good resource, in particular I am looking into ST sick-pay paid by a third-party, but included on the participant's W-2.

I think we will eventually have a de minimis level of taxes. I have heard that $10 tax payments are a thorn in their side - It costs them about a $100 to process each form so its a big loser for them. Not to mention, the TPA needs to charge about $100 to process it on their end (letters, sign here stickers, etc.). This should in no way be confused with the actual correction of the late deposit.

Thank you for asking this quesiton. It just so happens that I am running an ADP test tomorrow with this very thing. 1.401(k)-2 (6)(iv)(D) (D) Special rule for prevailing wage contributions. Notwithstanding paragraph (a)(6)(iv)(A) of this section, qualified nonelective contributions that are made in connection with an employer's obligation to pay prevailing wages under the Davis-Bacon Act (46 Stat. 1494), Public Law 71–798, Service Contract Act of 1965 (79 Stat. 1965), Public Law 89–286, or similar legislation can be taken into account for a plan year for an NHCE to the extent such contributions do not exceed 10 percent of that NHCE's compensation.

1) Yes. You can always use a 414(s) safe harbor definition of comp. You can use one 414(s) for a match, a second for profit sharing allocations, a third for ADP testing, a fourth a(4) testing, you get the idea... 2) The definition of comp for determing HCE's and keys is prescribed by statute, so every qualified plan uses the same one. Its 415(something or other). 3) See my answer to 2).

Earl - That's one of the best stories I've ever heard! Thanks for that gem...

For what its worth, I come to the exact same conclusion as Belgarath.

I tried to take it, but the security on these boards is mighty tight... I did however keep a copy (it was awesome, so thank you).

Anyone have a good board resolution I can borrow/steal to remove a trustee?

Relius won't give it but she should get it. "actively employed on the last day" says what it says. If the person was in their working on 12/31 they were active. The EOB agrees (last time I checked anyway). In fact, I've heard people go so far as to suggest that if 12/29 happens to be a Friday, if someone worked on 12/29 they should get the contribution. This might be a little too generous... Curious to know if others have seen this...

But in your third paragraph, the HCE deferred the full $20,000. How do you not see that this is a HUGE advantage over a calendar year plan--that is IMPOSSIBLE in a calendar year plan.

Sure. That would be pretty rude if it could only increase your refund!

My head is spinning at about 1,000 rpm's. Generally, I learn from these boards, but I know less today than I did yesterday. Does anyone have a link to clear explanation of how this works, like a Corbel/TagData/McCay Hochman article?

I don't have time now for in depth analysis of the regs, but I will be looking into this more for my 3/31/08 plan year client... The only thing I will say is that if you are right, I'm going to find any plan I can that has an age 50 owner and ADP troubles and amend them to a fiscal year plan ASAP. Because through all of this legalese if you're telling me that the owner can still defer $20,000 every year, even though the ADP test is failed (assuming refunds are < CU Limit), then that is a safe harbor plan without the high contributions (ok, and w/o the TH exemption, but you get the idea).

Forget that for a moment: Do you not agree that if someone can defer 20,000 despite failing the ADP test that the failing the test is of zero consequence? I would suggest that it is returnable under some combination of 402(g) and 414(v) because you used $8,000 of catch-ups in 2006 - $3,000 to exceed the ADP limit, and $5,000 to exceed 402(g). Does nobody else see it this way???

My well thought out response is this: I disagree. Would it sway you at all if I told you that I spoke to Derin Watson on this very issue, who affirmed my position (he would not conclude that the regs were in error, just that my intepretation of the regs was off a little). But without a doubt he indicated that letting someone defer the full $20,000 even after failing the ADP test was a double counting of catch-ups.

I should point out that in practice, I am only allowing one catch-up limit per calendar year for each participant. In other words, I'm limiting people to the full $15,000 PLUS $5,000 LESS Catch-ups consumed in ADP testing. So if $3,000 was consumed in ADP testing, calendar year deferrals are liminted to 17,000 (because only $2K of catch-ups remain).

I beg to differ. While I agree that that is what the regs say, I still think it is an error in the regs that leads to this conclusion. Applying this dictates that this lucky HCE received two catch-up limits. We all agree that the ADP test was failed, and he averted refunds to the tune of $5,000 by reclassifying them as catch-ups. Now, you are suggesting that he should be able to exceed 402(g) AS WELL AS the ADP limit by an additional $5,000. How is that two separate limits can be exceeded by the full $5,000 in one calendar year? The answer is simple: A math error in the regs.

Forget my example. Everyone (but me) seems to think that if you fail the ADP test for the 9/30/06 plan year, and reclass all of your refunds as catch-ups (to the tune of $5,000), that you should be limited to $15,000 of 401(k) for all of 2006 (i.e., $10,000 of regular 401(k), plus the $5,000 of catch-ups that were used up during the ADP test. But in Sal's example, the failing HCE still gets to contribute the full $20,000, which in my opinion is based on the math error in the regs that I set forth above. This is despite his failing the test and consuming catch-ups to avoid refunds. In what way is this particular HCE adversely affected? Unless my calculator is broken, he is completely indifferent to failing the test.

For anyone who has the 2006 EOB, turn to page 11.275 (paragraph (3)). Correct me if I'm wrong, but that participant contributed the full $20,000 in calendar 2006. So either Sal and I are both wrong, or y'all are

401k Max = Calendar year. The only reason plan year is relevant is to determine the amount of the refund reclassed as catch-ups. By the way, the formula I referenced from Kevin C is straight from the regs.

You say: 401(k) Max - (YTD 401(k) – **YTD 401(k) treated as catch-up**) + Catch-up Max – **YTD catch-ups used** But I say what you say could also be said as this: 401(k) Max - (YTD 401(k)) + Catch-up Max Why do I say this? Because (and I've said this before), the two terms enclosed in asterisks are certainly one and the same. Further, because the first parenthetical statement is begins SUBTRACTED, that means that the first **ed term is being added to the 401k max. Because you are later subtracting the exact same amount, the two terms cancel. I'm pretty sure I went through an example before, but who can keep track. You'll need to tell me where my math is flawed before I'll concede defeat.