austin3515

Small (but very important modification/expansion) is that the TH exemption is still maintained with discretionary and fixed matches above and beyond the basic SH match provided they satisfy the ACP safe harbors described by JFKBC (as he/she also pointed out). This infamous idea is referred to as the "triple stacked match" and is really quite cool IF no one defers. The problem with it is that sometimes employees change their minds and before you know it you could have a BIG MATCH if your not paying attention (i.e., if discovered early enough they can all be discontinued mid-year)!

Of course, a discretionary match cannot exceed 4% of pay. In order to do this 200% of 6% the match would need to be written into the document, which would eliminate the benefit of hindsight.

Mike Preston, reflagging per your request!

There was a big DOL official (Kristen Zarwinski??) right next to Scott, and she did not say a word re his answer. I too agree though that its primarily a DOL issue, regarding protection of assets, etc. But I still feel pretty good about the answer nonetheless. After-all, the Plan is adequately protected via the security agreement.

At the Northeast Benefits Conference I asked Scott Falwell (or something like that, he runs the EPCRS program), and asked "If a participant can no longer afford loan payments and forbids the employer in writing from continuing payroll deductions, may the employer stop the deductions?" His response was yest "but blah blah blah" (the blah blah blah being all of the obvious issues regarding taxes, max loan calc on future loans, etc.). It has since occured to me as well that the act of disccontinuing loan payments simply puts the loan into default as a violation of the terms of the promissory note. Just because you have an agreement doesn't mean both parties are necessarily required to follow its terms--however, the terms of the agreement have implications for the failure of either party to abide by the terms (in this case, it would be the Plan's eventual loan offset upon a distributable event--of course taxation occurs "immediately"). I think further that it would be an abuse of the employer's position to disregard the aforementioned request. So I think you could say I have turned a complete 180 on this one. Of course, I now have justification for what I wanted to do all along. So that's a good thing But I do like the requirement of a written letter from the participant forbidding future loan payments.

Except that ERISA trumps those laws. Another example of an incredible lack of guidance in a situation that arises quite frequently. Also, TAGData indicated in a Q&A on their site that QDRO and I are correct (though admittedly as someone who is not an employer, it is very easy for me to say this). LAstly, I should point out that if a participant is eligible for a hardship distribution, they can request this in the form of a loan offset, thus potentially solving the problem.

Though its difficult, imagine if your bank said, "oh forget it, I know you're down on your luck so just forget about the loan I gave you." I know it stinks, but what are you going to do? Who decides whose tale of woe is bad enough?

If its incorporated into the promissory note (which is at least where we have it in our loan paperwork), than it ceases to be voluntary when they sign the note. It's not an administrative convenience at that point--it's a contractual obligation.

I agree w/ QDRO 100%.

You're on my Outlook calendar...

The following also occured to me an hour ago. I was struggling with the justification for that first bolded sentence regarding disregarding the catch-ups for the 06 (a)(30) limit. BUT, we're essentially doing the same thing when someone does $20,500 of 401(k) (in 07) and also goes over 415 by the same $5,000 in a calendar year plan. I've never felt that was getting two catch-up limits. I realize now that the same logic applies (or at least it is being applied by the IRS in these regs). I sure do hope Mike Preston weighs in on this

To all those who participated in that ridiculously long exchange from a month or so ago, I hope this helps conclude it. I think there were a few who were in fact saying this, but I now know why, and I took a good deal of time to lay it all out. I hope it helps (it certainly helped me clear my head). I painstakingly read through EOB on this issue and here is what was missing, at least for me (from Example 5 of 414(v) regs) (the bolded entry is what inspired this post): (v) Even though Participant E's elective deferrals for the calendar year 2006 have exceeded the section 401(a)(30) limit, Participant E can continue to make elective deferrals during the last 2 months of the calendar year, since Participant E's catch-up contributions for the taxable year are not taken into account in applying the section 401(a)(30) limit for 2006. Thus, Participant E can make an additional contribution of $3,400 ($15,000 minus ($16,000 minus $4,400)) without exceeding the section 401(a)(30) for the calendar year and without regard to any additional catch-up contributions. In addition, Participant E may make additional catch-up contributions of $600 (the $5,000 applicable dollar catch-up limit for 2006, reduced by the $4,400 ($1,000 plus $3,400) of elective deferrals previously treated as catch-up contributions during the taxable year). The $600 of catch-up contributions will not be taken into account in the ADP test for the plan year ending October 31, 2007. SO: ADP test at 3/31/08 plan year is failed, resulting in $5,000 of refunds to be distributed. Participant is over age 50 so the amounts are reclassed as catch-ups. As long as the participant made at least $5,000 of 401(k) for 2008, those amounts are disregarded for calendar 2008's (a)(30) limit. SO the participant can make $15,500 of 401(k) for the remainder of 2008, calculated as follows: Line 1) (a)(30) limit for 2008: $15,500 Line 2a) 2008 Calendar Year To Date 401(k): $5,000 Line 2b) 2008 Calendar Year To Date 401(k) reclassified as catch-ups, and therefore disregarded with respect to the 2008 (a)(30) limit: $5,000 REMAINING contributions for 2008 = Line 1 minus (2a minus 2b), OR $15,500 minus ($5,000 minus $5,000) = $15,500. Therefore, for all of 2008, the participant can make the full $20,500 in 401(k). THE CATCH For the 3/31/09 plan year, the full $15,500 in 401(k) made from 4/1/08 to 12/31/08 is included in the test, in addition to any 401(k) made from 1/1/09 to 3/31/09 (which to be consistent we will assume is the same $5,000). So the full $20,500 is included in the test because the 2008 catch-up was consumed in the 3/31/07 ADP test. This of course means his ADP refunds will be higher in the following year because refunds are in descending order, starting with he who hath contributed the most. This is dead-on consustent with EOB, at the bottom of page 11.283 of the 2008 version if anyone wants to review. THE ONLY REMAINING QUESTION What if the participant made no 401(k) from 1/1/08 through 3/31/08? Are there any 401(k) contributions to be disregarded? The answer would appear to be no. Line 1) (a)(30) limit for 2008: $15,500 Line 2a) 2008 Calendar Year To Date 401(k): $0 Line 2b) 2008 Calendar Year To Date 401(k) reclassified as catch-ups, and therefore disregarded with respect to the 2008 (a)(30) limit: $0* *The intent of this adjustment is to disregard deferrals actually made. Note that for (a)(30): (taken from 1.414(v)-1©(3): with respect to elective deferrals in excess of an applicable limit that is tested on the basis of the taxable year or calendar year (e.g., the section 401(a)(30) limit on elective deferrals), the determination of whether such elective deferrals are treated as catch-up contributions is made at the time they are deferred. Since no deferrals were actually made, I have a hard time seeing a case for entering $5,000 here (which would effectively increase the (a)(30) limit for 2008). The purpose of the adjustment is to disregard deferrals actually made; since there are none, there is nothing to disregard. Therefore, if there were no actual deferrals made from 1/1/08 through 3/31/08, then participant has solely the $15,500 limit for 2008.

If Mike Myers only knew the joy he brought to these boards...

Geeze... I found the same site, and EOB agrees, no pro ration. My only question is where the heck did I see this? I know I saw it somewhere! We use the Corbel docs and in the prototype it does say the following after the "period for determining matching contribution:" "any compensation or dollar limitation used in the determining the match will be based on the applicable period." That seems to imply there was at least a requirement at one time. Was this change relatively recent? Was it part of the final 401k regs?

Little known gem: What you are really supposed to do when benefits are calculated in a period of time less than year is divide the max comp limit by the number of periods in the year. That figure is the max comp for the particular period regardless of what happens in the other periods. So for example assume the match is calced quarterly. Max comp for each quarter is $57,500 (225K/4), even if in Q-1 he/she earns $100,000 and Q-2 he/she earns $10,000 (comp for Q1 is $57,500 and for W2 its $10,000). I can find a site if I must...

Right now we need to data enter expense ratios for all of the funds we use (we are an RIA) in our various. We get all of our performance data from Principia, but we cannot download expense ratios for some crazy reason. Does anyone know of a good solution to obtain downloadable expense ratio information?

Done done and done. I got similar answers from other reputable sources.

We're amending our prototype for the 415 regs. I know we need to send a copy of the amendment to our clients, but does it need to be copy of the EXECUTED amendment? Or can it simply indicate "/s/Austin Powers" to indicate that the original is on file in our office?

The regular match is NOT a QMAC. Its just a regular match that is made which does not blow your safe harbor. So assuming your document allows hardships from your regular matching contributions, hardships are okay.

Thanks MaryMM! There is no way you can discriminate in favor of an HCE IN a qualified plan through something that takes place OUTSIDE the plan. As long as you operate the plan in accordance with its terms, your OK in my book.

Well of course in a discretionary PS plan like this one, the point is moot. But let's its allocated out to remaining participants. Again, though, obviously the money should have been forfeited, blah blah blah. So in my plan, the employer could excercise its right to declare a lower contribution than it might have, yada yada yada... I'm really more focused on the fact that the partner did fund his entire contribution from his own capital account, and the uniqueness related to that. Hey I broke 1,000 posts! Do I get a certificate or anything????

So I have a client who (without my "permission") paid out a terminated partner as though he was 100% vested when in fact his PS money was just 60% vested. I explained that this was wrong and they said, "that's ridiculous, it's money that came out of his pocket" which is true inasmuch as it was a reduction directly to his capital account. I told my client that it was really an excellent question and I would look into it... Has anyone ever run into this before? I have a theory that the appropriate way to handle is obviously to forfeit the nonvested portion but perhaps increase his capital account by the amount of the forfeiture. Any cites (though unlikely?) would be appreciated...

You can only use non-safe harbor for non-401k.

Bear in mind that unless something has changed that I am not aware of, prototypes MUST use the safe harbor statndards for both events and needs with respect to 401k money.

Got a non-profit with both a 403b and a PS plan. We want to combine the two plans under the 403b to halve administration costs (sort of) and still be exempt from the ADP test. Can you Merge a PS plan into a 403b? Or do I have to terminate the PS plan (and trigger full vesting) and allow participants to rollover?