austin3515

One day?? You get a gold star by any measure, Miss Mary Mac Mac Mac (I just couldn't resist .

In-Service distribs are the 5 years. All others are one year.

I think a plan that covers only a sole owner, or only a >50% owner and his/her spouse would be exempt from ERISA. Actually, the isntructions to the 5500 do get into this (under Who should File), because plan's not subject to ERISA need not file a 5500 (though they might need the EZ form). Interestingly, if they were all partners unincorpoated, I believe the answer is different.

Yes for the ADP test - only 401k contributions can be recharacterized as catch-ups.

LSULLIVAN - The HCE's should have received a check personally - it is their personal money. The BUSINESS should be depositing the funds.

Pay-Date rules. Plus (generally) this is more likely to let someone defer (assuming the pay-date is later), and when it's that close I just can't see the harm in letting someone in one pay-date early. Now maybe Mike Preston will chime in and tell you that risking disqualification of the plan isn't worth that one measley paycheck, but in my opinion, you should be okay. Sorry Mike, I couldn't resist

Well if it was wait and see, participants could not make an informed decision regarding what level of deferrals would be appropriate. Is that enough information to answer your question (okay, it MUST be the nonelective)

Yes, for certain purposes (assuming the document is amended): Yes, for eligibility to make 401k contributions (which was your question); Yes, to allocate profit sharing and/or matching contributions; No, for nondiscrimination testing (including the ADP test) UNLESS the plan's definition of comp. satisfies 414(s) ratio test (because the definition is not a safe harbor), which, if we're talking about a VERY small percentage of pay for the employee group as a whole, should not be a problem. The implications are pretty broad as far as PS contriubtions go if the definition of comp is not 414(s) (i.e., reate group testing is required, etc).

IT;s not like a TPA to say such a thing. I bet 10 to 1 that the ADP test in question is the calendar 2005 test. If refudns were not made by 12/31/06, then as a condition of not being disqualifed, a special contribution is made to the employees in an amount that is equal to the late refunds. Sort of a "penalty" for missing the distribution deadline.

Just that I'm comfortable based on a literal reading of the regs that this falls well within the line. The only grayness is the 0% limit, in my opinion. But I am omfortable by the "catch-ups are elective deferrals too" argument. Plus the fact that an example was in the proposed regs (which I did not know) and then removed with no explicit explanation and/or prohibition is a tacit confirmation that we (me and TP and Bird) are on the correct side of the line.

No one has suggested that a limit can be placed on catch-up eligible participants. The limit is being placed on HCE's. The fact that some HCE's are also catch-up eligible is a coincidence. And Mike, just so we're all clear, assume the document limits HCE's to 5% of pay. You're position also includes that if a sufficient number of NHCE's are also limited to 5%, that such a plan design would be allowable? Or have I misunderstood your concerns with respect to BRF's?

Don't blame me, I'm just a free-lance poster Tom Poje's the one who gave my argument credibility!!

I love how good plan design is an "end-run." By that rationale, testing by otherwsie excludables would also result in discrimination. The point being that both the 0% limit on HCE's and testing by OE's are clearly allowable by law.

The question is, does it ever actually happen. I have never seen it in 7 years, and I find that strange.

Regarding TP's last paragraph, I would like the record to note that this is exactly what I speculated the requirement to mean (See post #12).

He says this can be done in black and white, I even provided the cites. So just to be clear, you think is Sal is wrong on this?

I've found 2 or 3 major providers NOT asking for WP-4's. Anyone esle agree that they're out there?

Thre Questions: Q1: If a participant wants more than 20% withheld from a eligible rollover distrbution, or more than 10% from an ineligible rollover distribution, are people getting a signed WP-4? Our forms have always provided for the regular defaults, but we often get participants who want to do the right thing (i.e., withhold appropriately), and most of them end up not following through with the WP-4 and just go with the defaults. Q2: Can any provide me any sort of logic for why the government wants to make it so hard for participants to have their taxes adequately paid via withholding??? Q3: I've seen many providers forms allow participants to request more than the minimum withholding without requiring the WP-4. Have others seen this too? The more I think about it, I can't help but wonder if this is just not enforced. What IRS agent would care that a participant had MORE than the minimum withholding withheld? I mean, the government gets their money quicker and the risk that they'll never get it dimishes? What is the story? Any thoughts or, even better, knowledge on the subject?

Sorry, but I'm going w/ Sal on this one...

Q1a: With respect to the catch-ups not requiring top-heavy contributions, he sites whereever it says that a plan shall not fail to satisfy top-heavy by reason of making a catch-up contribution 1.414(v)-1(d)(3)(i), which states: Contributions not taken into account for other nondiscrimination purposes -- (i) Application for top- heavy. Catch-up contributions with respect to the current plan year are not taken into account for purposes of section 416. However, catch-up contributions for prior years are taken into account for purposes of section 416. Thus, catch-up contributions for prior years are included in the account balances that are used in determining whether the plan is top-heavy under section 416(g). Q1b: With respect to the ability to limit HCE's to a given percentage, he sites 1.414(v)-1(e)(1)(i), which states: An applicable employer plan does not fail to satisfy the universal availability requirement of this paragraph (e) solely because an employer-provided limit does not apply to all employees or different limits apply to different groups of employees under paragraph (b)(2)(i) of this section. However, a plan may not provide lower employer-provided limits for catch-up eligible participants. As I had mentioned before, my intepretation of this last sentence is that a limit cannot apply solely to catch-up eligible participants. IF that is not the interpretation then the immediately preceding sentence has no meaning whatsoever. Q2: The real question is who is a better judge of what the regulations mean - you or Sal? I mean, Sal very literally wrote the book on this stuff. Q3: Corbel's prototype has a field to apply a separate 401k contribution limit on the HCE's and I don't recall anything in any amendment that indicated such a restriction violated the universal availability requirements. I see no reaosn not to use a very effective and very legal plan design...

The EOB clearly indicates in Chapter 11, Section XII, Part E2 (2006 version) that having plan imposed limits apply to different groups of participants does NOT affect the universal availability requirement. It then goes on to say that HCE's could be limited to a lower percentage of pay. In Chapter 3, Section IV, Part C.1.b.3, he also indicates that catch-up contributions are excluded from the determination of a key employee's contriubtion rate. So the only conclusion (if you trust Sal is that you can limit a key employee to 0, let them make their catch-up contributions only, and no THM is required.

We're discussing providing limits on owners, and not catch-up eligible participants. The fact that they are also catch-up eligible is a coincidence. Based on your interpretation of the reg, the employer wouldn't be able to restrict catch-up contributions of HCE's in order to avoid failing the ADP test. I think we would all agree that is not the case. It appears to me that the intent of this provision is that the sponsor should not be able to negate the catch-up contribution provisions simply by imposing additional limitations. AS an example, assume the sponsor said "catch-up eligible particpants may only contribute $10,500 for 2007." Therefore, after catch-ups, they still contribute the regular $15,500. Why might they do this? Perhaps to reduce matching contributions? Nevertheless, that's how I interpret the provision.

I think the question more specifally relates to participants NOT contributing, and no there is no law that says you need to get an election form back from them indicating they elect to make 0% in contributions. But as you mentioned, it is recommended.

non-spouse beneficiaries can either take a full distribuion of the inheritance w/in 5 years of date of death, or take distributions over their life expectancy. In that regard, the MRD rules are the same (as I understand it) regardless of whether the money stays in the plan or is rolled to an IRA, except for one thing. Most plan's provide that after death MRD's are full distribution after 5 years. However, if this is the case they can roll their money to an Decedent FBO Beneficiary IRA and take the lifetime distributions from the IRA. Either way, the moeny should be able to be withdrawn sooner - the IRS would be happy to tax it for you! I'm not quite sure if this answers you questions?

Your first paragraph has the dates a little skewed, so I'm not sure what you're saying there. But in your second paragraph, the answe yes, if someone exceeded the maximum allowable contribution of $15,500 during calendar 2007, yes they went over the 402(g) limit for calendar 2007. In the third paragraph the answer is yes for the exact same reason.