austin3515

Am I the only one who doesn't think this is much help at all? You still need to decide by 3/31 and we're working our a$$es off to get ADP tests done... Also, did anyone else notice a lot of grammar mistakes in the most important section? "For plans (other than governmental plans and certain non-electing church plans), plan amendments reflecting the plan’s method of compliance with the requirements must be adopted by the end of first plan year ending on or after March 28, 2005." I think maybe the intern wrote this one...

Can you paste a link?

forfeitures for expenses are not allocations, so I'd say your out of a THM situation...

There shouldn't be any issues with ADP or coverage because you can still test based on otherwise excludibles I.e., disaggregate those who have not met the minimum age and service requirements of 410(a), ie. 1 YOS and 21 years old). The only time there's ever an issue with that is if a 5% owner gets hired (i.e, that's the only way you get an HCE as otherwise excludible).

You never HAVE to aggregate two separate plans for nondiscrimination testing. You may if you want to. So if each plan passes coverage without considering the affects of the acquisition (I forget the exact free-pass requirements), then each 401(k) plan would run the adp/acp test separately.

Best practice is to forfeit, and use it next year. That is unless the amount due to other participants is greater than what these 2 were overpaid.

Check it out - Open a checking account in the name of the Plan. Deposit the PS contribution to the checking account, then cut the checks to the participants for the ADP excess. Then cut checks from the checking account to each individual brokerage account for their PS contribution. That way 100% of the contribution is deposited. IT shouldn't matter what bucket the money is in - ie., the plan only defines the trust, not the bucket within the trust. This works for me, but I'm curious to see others thoughts.

I would explain to the client that if the owner performed service, he is in the test, and the THM's are required. Then ask them to determine if he had any hours or not, and then to let you know in writing. I should point out that I don't own a TPA shop. Perhaps I wouldn't be so cavalier if I did?

IMHO, the definition of too aggressive varies from client to client. Some clients are willing to accept risk tomorrow to leave 1,000's in the Plan. I don't think it's "pre-funding-a-year's-deferrals-to-accellarate-the-deduction" bad. I think you could at least defend yourself IF the IRS questioned it. Don't know if you'd win the argument, but again, some client's may find it's worth the risk. I do agree with what jquazza said, but I also don't think you'd be asking the question if it was that off the wall.

1) MAtch counts towards top heavy 2) Any matching contributions are disregarded when allocating out the profit sharing contribution EXCEPT that participants eligible for the top heavy allocation only may receive a reduced allocation or no allocation if they have already received the minimum through matching contributions.

Some Plans will make you wait until you complete a year of service. MOST say anyone who satisfied the requirements (or does it say former participants?) come in right away. Can you type in what your document says about rehires? Otherwise we're all just guessing...

That is why no one in their right mind uses prior year testing with a discretionary match... Luckily, you can change to current year testing at any time which might not be a bad idea. I just did some research and found that the IRS has never forbid amending the plan now for 2004's test...

Now that Tagdata has endorsed, you I just might tout your name! Kudos to you for having the most creative name on the board. Funny they didn't say "would you get your answers from Tom Poje, author of the nondiscrimination and answer book..." or Kirk Maldonado of the "Maldonado letter.."

Gotta read the plan's provisions on rehires. It is possible that he is immediately, or he may have to wait a year. The Plan should be specific on this.

Yes, you would need to recalculate vesting, and yes if they forfeited too much, you would need to make them whole. With IRS correction procedures (rev ruling 2003-44) you need to make a "full correction" which means you need to go back to day 1 oft he Plan to make people whole. You could probably debate how many years to go back though, but it should be at least 3 (i.e., years still open for audit). If it's a smaller plan, without a lot of distributions, I'd go back as far as possible.

"So does it matter if the definition of YOS violates ERISA?" Your kidding, right?

I don't know... Elapsed time means the amount of time elapsed from hire date to termination date. Under elapsed time, I think they should have three years (i.e., just over 3 years of service between DOH and DOT). I don't think you can require a complete calendar year. What's more if you look at the DOL regs on creditting service I'm, just about certain you will find that you cannot have a last day requirement for purposes of creditting a year of service. In eligibility, you can require employment on the entry date to enter the Plan, but that's it. The year of service can still be creditted on the last day of the Plan Year, but it can't be conditional upon employment. I'd check out the DOL regs...

The IRS...

As a TPA, we apply to sponsor a prototype, and the opinion letter is addressed to us, as the TPA?

If they were on a prototype document with the old TPA, wouldn't they have to adopt the current TPA's plan? I thought once the TPA whose prototype you adopt is no longer in the picture, you can't rely on the opinion letter?

1) yes, but it's on the lost earnings, not the full amount of the deposit. A BIG difference. Earnings is essentially determined based on the greater of the underpayment of taxes rate in 6621(a) (published quarterly) or the best performing fund (assuming you don't want to calc. earnings separately for each participant). 2) The excise will not be waived. Although I'm sure the IRS wouldn't be too happy about this is far and away a DOL issue, and it should be corrected as described in the DOL's VFCP, and not the IRS correction program.

I'm with DTROM, it's because of the ambiguity that you need to shoot for the 3/28 date. As the old addage (sp?) says, better to be 10 minutes early than 2 minutes late... Hopefully Corbel will get an answer from the IRS and soon!

Shoot! I just read Corbel link and I now walk away with my tail between my legs...

IRS Notice 2005-5 says you don't have to process anything until 12/31/05, and if you don't and that is contrary to your plan, you won't be treated as in violation. So don't do anything after 3/28/05 until you decide what you are going to do. Are you guys aware of this provision in the notice, or am I missing something?

Assuming your a calendar year, you don't have to amend until 12/31/05. IT says so right in the IRS Notice. Why are you saying amend sooner? Because the IRS allows you to defer making the mandatory distriubtions until 12/31/05, and the amendments not due until then, you have until then to make up your mind. Of course, no matter what, no more mandatory cash-outs, they must be rollovers post 3/28. Or am I missing something? Won't be the first time, so please do tell...