austin3515

I thought we "proved" that it will never work? Whoever has the highest comp will be in a rate group all on their own, that rate group will have the highest allocation rate, and no NHCE's will be in there, because none of them earn more than the TWB (okay maybe a few do). So therefore, the rate group will never pass (absent cross-testing, assuming gateway is satisfied).

To clarify then, this plan design does not work and will never work? Isn't it a little scary that a nonstandardized prototype could so easily violate the design based safe harbor requirements? There must be a ton of plans out there with the same problem, no? Thanks Tom, as always!

http://www.ssa.gov/pubs/10035.html The link above indicates that 85% of the payroll taxes are allocated to OA insurance and 15% to Disability insurance (i.e, 6.2 x .85 = 5.27% = OA insurance). 401(l)(2)(A)(ii)(II) clearly states that it should be the rate attributable old age insurance, or 5.7% whichever is greater. How can we use the 6.2%?

Just put a call into Corbel for support. I'll let ya know what they say.

I know you can't but I can't find it in the Code or the Regs. For example, 401(k)(12) clearly states that the SHNEC's can't use integration. Further, 1.401(l)-(1)indicates that contribtuions described in 1.401(k)–1(g)(3) are not eligible for integration, but this defintiion does not include QNEC's? I'm driving myself nuts trying to find it...

Smashing...

Blinky (or should I say Jack McCoy? Don't you have to object first?), I agree with you, but it seems that there should be a special exception carved for this situation--i.e., it's a safe harbor formula to integrate at less than 100% of the TWB, so there should be a way to get imputing disparity to equalize everyone's rates if the integration level is less than 100%. But the point is moot because there is no such exception that I am aware of...

Here's my math (my example is a 6/30/03 PY): Owners Wages: 115,000 Integration Level: 87,000*70% = 60,900 SHNEC Contribution for owner: 115,000*.03=3,450 PS Compensation for Owner (w/Integration) = 115,000 + (115,000 - 60,900) = 169,100 PS Contribution for Owner = 169,100*2%=3,382 Impute Disparity on Owners PS: 1) 3,382/(115,000 – 50%*87,000) = 4.73% 2) (3,382 + 5.7%*87,000)/115,000=7.253 Lesser = 4.73 Plus 3% SHNEC, total allocation rate = 7.73% for the owner. All other NHCE’s (who for simplicity all earn the same amount). Total Wages: 30,000 Total SHNEC: 900 Total PS: 600 Imputed Disparity: Allocation rate is 5.7% or less, so 2% x 2 = 4% Plus 3% SHNEC = 7% allocation rate for NHCE's Therefore, the Owners rate group will fail because no NHCE’s benefit. I think we all agree that the whole point of imputing disparity to a formula integrated at 100% is to give everyone the same allocation rate, so I won't go through the math on that piece of it. In this example, it just so happens that the gateway requirements seem to be satisfied so I could use cross testing, but let’s assume that I CANNOT. I would like to think that the imputing disparity rules are adjusted if the integration levels are less than 100%, but if they are, neither me or Relius seems to be aware???

For not reading carefully enough you are forgiven... For giving the answer I didn't want to hear, now that is another story altogether...

So basically, under this scenario my plan is not in compliance with 401(a)(4)?

3% SHNEC to all people eligible for 401(k) plus a 2% regular profit sharing contribution, integrated with SS but at 70% of the TWB. The owner and sole HCE is the only employee over the TWB. He earns $115K, with the TWB at 87K (i.e., integration level is ~61K. For the latter formula, you must have worked 1,000 hours during the Plan year. According to the ERISA Outline Book, if there are different allocation conditions for two independent design based safe harbor formulas, the design based safe harbor is not valid and rate group testing must be performed. The ERISA Outline Book goes on to say that if the additional PS contribution passes coverage on its own, then the rate group test will be passed (i.e., there is just one rate group). When I run the rate group test it fails. The reason being when permitted disparity is imputed to his allocation rate, it assumes the integration level is $87,000. Because the integration level in my example is at 70% it's as though the plan is "super integrated." This results in the owner having a higher allocation rate than everyone else. I already verified that if the integration level was 100% then then his allocation is the same as eveyone elses and the rate group does pass. Am I missing something? OR are the ERISA Outline Book, and Relius both wrong???? What am I missing??? Is there an adjustment to imputing disparity when the integration level is a fraction of the TWB?

Thank you K Johnson...

Often times temp agencies will provide an employee on a temp-to-hire basis. The idea is, see if you like the employee, if you do, go ahead and hire them. The question is, what is the date of hire and when do you start tracking eligibility? Vesting Service? Is it the day the payroll transfer? Or the date the employee first performs an hour service? Any references to court cases or official documents would be great, although I'm curious to know what everyone's thoughts are.

Does anyone know where we can get the text of obscure PLR's???

Is there a recommended best practice? For example, should a letter be sent demanding repayment? Should it be sent to a collections agency? Etc. etc...

I just saw the posts two or three topics down that is exactly my question... http://benefitslink.com/boards/index.php?showtopic=26064

Participant directed plan, where loans are treated as participant directed. Participant is full-time, drops down to part-time, and now the loan repayments cannot be supported by his pay, so his payroll deductions must stop. My only question is what is the fiduciary's responsibility to pursue collection of this amount? Should they sue the participant for collection? Force them into bankruptcy, etc.? The Plan stipulates that discontnuing payroll deductions is an event of default.

RButler, that post was awesome... Thanks!

Awsome! What happens then if the employee's pay is no longer sufficient to cover the loan repayments? Reduce the net pay check to zero? Or a deemed distribution? Talk amongst yourselves...

I'm not sure that that changes the answer? The problem that I have is that the people have signed a loan and cannot afford to repay it. I guess the overriding question is what is the trustee's obligation to collect the outstanding balance? Surely it's different than a bank trying to collect a mortgage, no? Is it really that different from when someone terminates employment?

Participant takes out a new loan, and payments are via payroll deduction. For whatever reason the participant now believes they cannot afford to repay the loan. In fact they send a letter to the Administrator saying "cease all loan repayment deductions from my paycheck." Where I come from, if the participant says stop withholding something, you must stop withholding (with a few exceptions). What do you do? Stop withholding? If so, aren't we creating a back door for early distributions? If not, how can you deny a participant's request to cease withholding? What if they sincerely can't afford it? Medical bills, etc.?

Because the plan has a last day rule no one has yet accrued a benefit, and you can therefore amend the Plan to change the defition of comp in a way that decreases allocations. Do a search on terminating Money Purchase plans/merging into PS plans, and you will see a lot of discussion on this question.

A plan that does not require spousal consent obtained spousal consent for a plan distribution. Three interesting twists: 1) The participant also happens to be the owner/sponsor of the Company. 2) The participant forged the spouse's signature 3) He is now getting a divorce. He has obviously already spent the money and wants to avoid the court saying something along the lines of, "well obviously the spouses consent was required... as such fork over half of the dough." I'll settle for thoughts on the legal effect of obtaining a spousal consent when not necessary. Any thoughts?

http://benefitslink.com/boards/index.php?s...t=0entry59164 I just found this post, which is quite informative...

I tried both and I still come up with nothing?? Any suggestions on a recommended search?