austin3515

Based on the facts you've provided, I'm on board with you. Corbel's documents do allow you to use any 414(s) definition for ADP testing. Did you show him/her the site in the document that spells that out? I have no audits where this has come up.

http://www.dol.gov/ebsa/regs/fab2007-3.html I wonder if they saw my post? It's not much but it's something. at least it means we have plenty of time to figure it out! On December 20, 2006, the Department of Labor issued Field Assistance Bulletin (FAB) 2006-03 providing guidance for the Employee Benefits Security Administration’s national and regional offices concerning good faith compliance with the pension benefit statement provisions of section 105 of ERISA, as amended by the Pension Protection Act of 2006. In FAB 2006-03, the Department indicated, among other things, that, pending the issuance of further guidance, the furnishing of pension benefit statement information not later than 45 days following the end of the relevant period (calendar quarter or calendar year) will constitute good faith compliance with the requirement to automatically furnish pension benefit statements by individual account plans. Since the issuance of FAB 2006-03, it has come to the attention of the Department that many individual account plans that do not permit participants and beneficiaries to direct the investment of assets in their individual accounts may not be able to comply within the 45-day period set forth in the FAB. It is represented that many of these plans are profit sharing plans and the sponsors of those plans do not determine or contribute profit sharing contributions until after the sponsor’s business tax return is completed. Similarly, non-participant directed individual account plans sponsored by partnerships cannot make contribution determinations until completion of the partnership tax return. It also is represented that many such plans are dependent on securing third-party valuations for those assets that do not have a readily ascertainable value. Compliance with the 45-day good faith period, therefore, would appear to be impossible or very expensive for many of these plans unless the benefit statements were based on data from the end of the prior plan year. It is further represented that much of the required information is compiled in connection with the preparation of the plan’s Form 5500 Annual Return/Report and, accordingly, the time frame for furnishing benefit statements should correspond to the required filing of the plan’s Form 5500. In view of the foregoing, and pending the issuance of further guidance, the Department is providing the following additional guidance. Plan administrators of individual account plans that do not provide for participant direction of investments will be treated as acting in good faith compliance with a reasonable interpretation of section 105(a)(1)(A)(ii) of ERISA when statements are furnished to participants and beneficiaries on or before the date on which the Form 5500 Annual Return/Report is filed by the plan (but in no event later than the date, including extensions, on which the Annual Return/Report is required to be filed by the plan) for the plan year to which the statement relates. This guidance supersedes the guidance provided in FAB 2006-03 as it relates to the dates for furnishing pension benefit statements to participants and beneficiaries of individual account plans that do not permit participants and beneficiaries to direct the investment of assets in their individual accounts. Questions concerning this matter may be directed to Jeff Turner or Suzanne Adelman, at 202.693.8523.

Tell ya what, you run for Congress, and I'll vote for ya

One plan, one controlled group, one test. Note: One plan, 5 controlled groups, 5 tests (i.e., a multiple employer plan). Note: 5 Plans, One Controlled Group, up to 5 Tests, if each plan passes coverage, yada yada see my original post.

That's the best icon I could find for, "daggonnit I hate it when I say something stupid..."

My original post (over 2 years ago!!) is correct only if there are 5 plans (I can see I had assumed that in my post). My understanding is that if you have one plan, you have one ADP test. Everyone is tested together. Am I correct that all 5 companies are covered under a single plan? Retsructuring is available only for nonelective contributions.

Tom, I don't understand. Are you telling me that by following the terms of the Plan regarding how to handle an ineligible participant (close the account, return contributions, etc.), you could risk disqualification? Doesn't the favorable opinion/determination letter protect you from that sort of injustice?

I edited my post, as I now realize it was your prior employer that made the mistake, and not your current employer. You're current employer is on the money - your prior employer needs some training--this is a very basic question!! Nothing about 402(g) or the corresponding 401(a)(X) is based on a Plan Year. It is a calendar year limit no matter what the Plan year is. 415 on the other hand can go either way, depending on what the employer elects. However, it is almost always the Plan Year.

According to the EOB: In a 2002 ASPPA Q&A with the IRS, the IRS suggested that you could use accrual basis to figure the top-heavy ratio, but that Sal doesn't think this is correct because a few other provisions would be "rendered meaningless" if this were the case. Nevertheless, if you can get a copy of that Q&A and it helps you out of a jam, it seems like you have a pretty good basis for doing so.

Has anyone heard any rumors regarding guidance from the DOL on PPA statements? I know it was mandated by August, but they were very public about the fact that they were going to miss that deadline. But we at least had something (that FAB) on participant directed plans. Any word on some guidance for the non-participant directed disclosures on participant statements? In particular, I'm hoping there will be some help regaridng the requirement to disclose the value of each investment held. I've got some pooled plans with over 100 individual stocks/bonds!

Well if we're really going to be thorough: 1) Reasonable Classification Test: Not applicable 2) Nondiscriminatory Classification Test: Must be passed for each individual rate group, substituting mid-point for "facts and circumstances." 3) Average Benefits Percentage Test: Must be passed for the Plan as a whole (well, controlled group as a whole, really).

IF any of the rate groups is less than 70%, then the average benefits test must be passed. The reasoning is exactly the same as in coverage (i.e., you fail the ratio percentage, you need the Avg. Ben Test). After all, rate group testing relies on very heavily on coverage testing rules (some small differences, like the use of the mid-point in the nondiscrim. class. test). But based on you last post, you seem to be indicating that your plan (as a whole) fails the ratio percentage test - not just one of the rate groups? Three follow-ups: 1) What is your COVERAGE ratio percentage 2) Are you testing based on allocation rates or accrual rates? 3) For EACH of the HCE's, what is their rate group's ratio percentage? Or is 45% for each of them?

Convoluted? They must be included unless they can be excluded as a class (i.e., individual on payroll of a third-party) and still pass coverage.

Mike - does that mean you agree with me?

See the IRS definition of a common law employee in publication 560: http://www.irs.gov/publications/p560/ch01.html It says (among other things) "A leased employee can also be a common-law employee. " Here's the IRS Revenue Procedure on PEO's I referenced. See Section 3.02. http://unclefed.com/Tax-Bulls/2002/rp02-21.pdf Is there still any doubt out there?

The leased employee rules in 414 whatever are totally trumped by an individual's status as a common law employee (as I defined this above). So no, my answer is unchanged. 414 whatever doesn't even come into play with respect to common law employees (no matter whose payroll they are on). Has no one besides me ever worked with ADP's PEO program?? ADP does this the way I'm describing.

Whcih in turn effects eligiblity for deductible IRA contributions...

mjb: The arrangement is, Dr. has a medical practice and doesn't want to be bothered with payroll/benefits, etc.. So he finds an employee leasing company to place his employees on their payroll, their benefits etc. The leasing company has no relationship with the individual employees, in that the Dr. alone hires them, and the Dr. alone fires them, and the Dr. alone determines their compensation, and the Dr. alone determiens how they will go about their job. The leasing company's primary role is to process payroll. I don't care what this is called in any contract, I don't care who the W-2 comes from, I don't care if they participate in the leasing company's 401(k) plan. They are the common law employee of the recipient. Therefore, any new plan of the Dr.'s must include them in coverage testing. I just remember the word for this: Professional Employer Organization. Do a google search, and you'll find volumes of information of how the IRS forced all of these PEO's to be treated as multiple employer plans for the exact reason stated by ak2ary (i.e., the exclusive benefit rule). The ADP TotalSource is a giant PEO, and they provide the services I described in my first paragraph. I also know that they administer their plan as a multiple employer plan. This is all due to the fact the ADP "employees" were all the common law employees of the recipient.

mjb: These "leased employees" can certainly be covered under the leasing company's 401(k) plan. However, if the arrangement is as I suggested, the leasing company's Plan is a multiple employer plan, and separate testing must be run considering only the Dr.'s employees.

I respectfully disagree. An employee leasing agreement will ensure that employees get a W-2 from the leasing company. However, determining eligiblity under a retirement plan is based on your status as an employee under common law. As I stated before, if the relationship with the leasing company ends when the Dr. fires the employee, they are a common law employee. No contract language will change that. My brother-in-law is a true leased employee. He works for a company that specializes in private labeling products for companies in a number of industries. HE works on site at his sole client for years at a time and appears to be a regular employee (has an office on site, reports up the chain of command at the client, etc). However, if his client no longer wants his services, he will be reassigned to another client. What's more, the leasing company determines his compensation. Therefore, he is not considered a common law employee of the recipient. He is indeed covered by the leasing company's retirement plan. Nevertheless, his client must consider him when performing coverage testing, treating him as not benefitting, pursuant to the employee leasing rules. This arrangement is also common for IT employees. This is VERY important stuff. I don't profess to be an expert, but it is VERY easy to get VERY burned if you don't know the rules!!

If these employees a) are in fact working for the Doctor on a full-time basis, and b) the Dr. can hire and fire these people at his/her direction (at which point the employees relationship with the leasing company ends) then what you got is common law employees (as opposed to leased employees) for purposes of administering a plan at least. If a) and b) are present, and the participants are still included in the leasing companies plan, then they should be administering the plan as a multiple employer plan (that is applying all nondiscrimination testing separately to this Dr.'s employee, without regard to other clients of the leasing company). However, there is nothing to stop the Dr. from not using the leasing company;s plan, and setting up his/her own safe harbor plan (unless there is something in the leasing agreement to the contrary, which would be surprising). By the way, the only distinguishing factor between a solo 401(k) and a regular 401(k) is the number of participants. Solo 401(k) is a marketing term only.

I don;t think this is a GAAP question. It's a legal question: "Which plan owns the assets?" I just can't see a way other than pro rata.

410(b) coverage rules is all that applies. As long as the plan passes coverage, the indidual can opt out and this will not affect the safe harbor status. Consider a) having the participant's waiver notarized (seriously), and b) consider requesting a psych evaluation (kidding).

That's a perfect example of why you should never criticize someone's fees without knowing the whole story. While I still believe a) the audit requirement is determined independently for each plan, and b) each person's account will need to be "audited" in total because the assets are not "earmarked" for each plan, I have the following amendment to my prior conclusions: Assuming there are over 100 FBO accounts, $15K is a bargain. Take it and run, and count your blessings.

Also, if the owner earns less than $180,000 (45,000 / .25) then he'll be able to save more under a 401(k) plan, because of course 401(k) is not subject to the 25% deduction limit.