austin3515

Sounds like their funds have gone up 50% over seven years - not 50% each year. That sounds pretty average actually (<7% per year, after the affects of compounding).

Yes. The Tern with <500 hours rule doesn't apply to 401k plans. This assumes that the employees have met the statutory eligibility requirements (i.e., 1 year w/ 1,000 hours, etc.)--if they have not they would be otherwise excludables.

B/C wife has involvement in husband's business, spousal excpetion is void in 2007, and you got one controlled group in 2007. So if she has employees in 2007, they need to be covered by the Plan, or the Plan won't pass coverage. Although your ADP limit will be zero based on current year testing (assuming the soon-to-be-former employees won't contriubte), you could use prior year testing and the husband AND the wife could both contriubte 5% or more (if they're over 50). By the way, if they have any minor children, you got one controlled group in 2006 too! That's because the kid owns 100% of both businesses. A wholly unintended, yet undisputed interpretation. Is it enforced? That's a different question...

No can do, for the same reason that CocaCola and Pepsi can't do it for their plans...

I guess it could be a year or two, huh?

Do we know yet whether the ability to send balances of "lost participants" in termed dc plans will only be available to Plans terminating after a specific date? Or will the opportunity be available for all terminated plans, even if terminated in the past (or near future)?

Thanks Cliffy... -Norm

Sounds like your bigger problem is a fiduciary one. How could that be a prudent investment?

I'm pretty sure the OP was referring to regular automatic enrollments, where the participant can opt out if they want to. I would think you could apply it to everyone, but I just have never looked into it...

By the skin of your teeth, there's two controlled group's. Assuming the son is over 21, he's not attributed his parent's ownership only because he doesn't own MORE than 50% - he owns exactly 50%. OTherwise the son would have owned 100% of both Companies! But such is not the case and therefore, the 80% common ownership test is failec (i.e., no one owns 80% of both Companies). So have fun with two 415 limits!! With respect to 5500 reporting, see page 3 of the 5500 instructions which answers the question quite plainly. You'll note the answer depends on whether or not they are incorporated.

Those regs have not been updated in a long time. The debate still continues. You should check the ERISA Outline Book, as there are at least a couple of pages dedicated to it. I can tell you that Relius (from Sungard Corbel) doesn't even give you the option to use plan entry dates - rather, it applies the so-called "18 month rule."

I just looked in the regs and don't see that mentioned anywhere... Are you sure that's the case? I know there has always been debate whether you had to use the Plan's entry dates or the statutory maximums, but I wasn't aware that it was settled?

Does everyone agree on what comp is used for nondiscrimination testing? Isn't that the more important question? I'm not sure 2004 pay can be used to test it. If someone else knows for sure, I'd be curious.

Your plan document should have provisions about changing vesting--you can't just eliminate, is my recollection.

Ahh, but often the most important question is the one that is not asked. Such is the case here! While everything 401kadmin has said is true, what he did not mention is that you are basically guaranteed a 415 violation, as for 415 limitations, this contribution is NOT a 2004 contribution - that would have been due 30 days after the extended due date of the tax return. Since that date has come and gone, this is a 2005 contribuion for 415 purposes. So for example, if any terminated participants have zero or little comp in 2005, any contriubtion could cause a 415 violation.\ Not sure how this impacts nondiscrimination testing, but check that out too! Plus, how could you prove that the contribution is really for 2004, and not 2005? The timing of deposit in the Plan Document has likely already passed.

You can limit it to 10 months. If you're using a VS or IDP, the Plan can be written this way; with a prototype, be careful because the Doc might have already made this decision for you, or worse - it might be ambiguous!

1.401(k)-1(a)(3)(iii) iii) Rules related to timing—(A) Requirement that amounts not be currently available. A cash or deferred election can only be made with respect to an amount that is not currently available to the employee on the date of the election. Further, a cash or deferred election can only be made with respect to amounts that would (but for the cash or deferred election) become currently available after the later of the date on which the employer adopts the cash or deferred arrangement or the date on which the arrangement first becomes effective. (B) Contribution may not precede election. A contribution is made pursuant to a cash or deferred election only if the contribution is made after the election is made. © Contribution may not precede services—(1) General rule. Contributions are made pursuant to a cash or deferred election only if the contributions are made after the employee's performance of service with respect to which the contributions are made (or when the cash or other taxable benefit would be currently available, if earlier). (2) Exception for bona fide administrative considerations. The timing of contributions will not be treated as failing to satisfy the requirements of this paragraph (a)(3)(iii)© merely because contributions for a pay period are occasionally made before the services with respect to that pay period are performed, provided the contributions are made early in order to accommodate bona fide administrative considerations (for example, the temporary absence of the bookkeeper with responsibility to transmit contributions to the plan) and are not paid early with a principal purpose of accelerating deductions. iii) Rules related to timing—(A) Requirement that amounts not be currently available. A cash or deferred election can only be made with respect to an amount that is not currently available to the employee on the date of the election. Further, a cash or deferred election can only be made with respect to amounts that would (but for the cash or deferred election) become currently available after the later of the date on which the employer adopts the cash or deferred arrangement or the date on which the arrangement first becomes effective. (B) Contribution may not precede election. A contribution is made pursuant to a cash or deferred election only if the contribution is made after the election is made. © Contribution may not precede services—(1) General rule. Contributions are made pursuant to a cash or deferred election only if the contributions are made after the employee's performance of service with respect to which the contributions are made (or when the cash or other taxable benefit would be currently available, if earlier). (2) Exception for bona fide administrative considerations. The timing of contributions will not be treated as failing to satisfy the requirements of this paragraph (a)(3)(iii)© merely because contributions for a pay period are occasionally made before the services with respect to that pay period are performed, provided the contributions are made early in order to accommodate bona fide administrative considerations (for example, the temporary absence of the bookkeeper with responsibility to transmit contributions to the plan) and are not paid early with a principal purpose of accelerating deductions. Support for treating them as profit sharing: 1.401(k)-1(a)(5)(ii) (ii) Treatment of elective contributions as nonelective contributions. Except as specifically provided otherwise, elective contributions under a nonqualified cash or deferred arrangement are treated as nonelective employer contributions. Thus, for example, the elective contributions under such an arrangement are treated as nonelective employer contributions for purposes of sections 401(a) (including section 401(a)(4)) and 401(k), 404, 409, 411, 412, 415, 416, and 417 and are not subject to the requirements of section 401(m).

Found it! 1999 ASPPA Conference Q&A w/ the IRS 59. In a 401(k) plan, does 401(a)(17) preclude the following: A. A earns $300,000 annually. He enrolls in 401(k) calendar year plan in August, after earning $175,000. He defers $10,000 in the balance of the year. B. A earns $300,000 annually. He participates in a calendar year 401(k) plan making monthly deferrals of a flat dollar amount of 1/12 of $10,000 in 1998, even though his pay exceeded $160,000 before he was done making elective deferrals. C. Same as 2, but deferrals are a percentage of pay (3.33333%). IRS answer: We believe that all three scenarios should be ok. This will be discussed additionally from the podium. http://www.asppa.org/archive/gac/1999/99irsq&a.htm

That's not true. I can't cite any regulations/notices for you, but they're out there. I'm sure someone will have it handy!

Anyone know of an insurance company who will sell a fidelity bond covering a Puerto Rico plan?

I suggest that not working anymore should satisfy any reasonable definition of termination - even if the termination is a result of a stock acquisition.. After all, the term is not defined anywhere.

I think he means nonelective contribution. If you want to max out the owner, you definitely want to use 401(k). You should usee the SH 3%, so you satisfy most of the TH, and if you want to x-test, it will count towards the gateway. I guess if you wanted the SH match, you could use an integrated allocation, but you might still need to kick in extra for the THM. There is absolutely no way to max out the owner with no 401(k) and no contributions for the ee's other than a SH match...

Excerpt from sited reg: unless plan provisions THAT SATISFY THE RULES OF THIS SECTION are adopted before the first day of the plan year and remain in effect for an entire 12-month plan year. I submit that hardship distributions can be eliminated as they are not required to satisfy this section. So too can eligibility be changed, as there are no special time of participation requirements for a 401(k) Plan. I don't think this statement means that you can;t amend your plan all year - you just can't amend it to add a 1,000 hour condition on the safe harbor, or add a vesting schedule to it, etc.

Jeez, I would think your client's deserve the benefit of the doubt! A specimen sounds like a perfectly reasonable request to me...

You've got a better chance at complying with the law if you do the opposite of TransAmerica says. You're on the money. Sounds like you're aware too that your top heavy exemption is blown in the plan design you're describing.