austin3515

I'm starting to come around to ya now after reading the ERISA Outline Book. It sounds like Congress is actually on my side, but the treasury has decided to ignore congress' intent (see page 4.20something of the 2004 ERISA Outline Book). I still think it's stupid. Not that that means anything...

But I could start a new plan, and start making new employer contributions, under a new more restrictive vesting schedule, right? Does anyone disagree with that statement?

Right, but those are things that the IRS has said specifically that just having two plans won't solve the problem?

Sure, but gosh it's fun to talk about this stuff...

And I read that too... Thanks!

None that I can think of except politically; if you told your ee's they might be pretty peeved. You can terminate/amend a plan at any time you want, so before it even exists oughta be okay...

Does the use of the term "trade or business" put the kabash on any of this? We can all see right through what's really happening. The "business" includes the management company because every business must have management. I could see if they were paying an unrelated 3rd party, but everything here is coming back to the same guy... The additional tax deduction generated from this scheme (thereby making it possibly subject to the avoidance penalties) would be the PS contribution itself.

To make slightly more clear, there is no such thing as a "solo 401(k)"- that is to say the Code and the regulations do not define such a plan. They do define, for example an ESOP, or a SEP. The only distinguishing characteristic between a solo 401(k) and any other 401(k) is the number of employees covered under the plan. The terms solo-401(k), individual(k) plan, are all marketing names.

Although I'm sure it happens, why would they? The employer should be able to change the vesting schedule however they see fit at any time (assuming the vested benefits are not decreased of course, and all other rules related to changing vesting). How can you protect a benefit that doesn't exist??? I think an overriding concept that most of the IRS espouses is that if you can do it in 2 plans, why not let them do it in one plan (i.e., restructuring for nondiscrim, or testing based on otherwise excludables, or new comp plans for that matter with separate allocation groups)? So if you could start a new plan and accomplish your goal (which I can't believe anyone would dispute), why not let them do it in the current plan?

Tom (or anyone) - Why can't you exclude terminees with < 500 hours? I hadn't heard that before. I'm assuming this applies exclusively to the employees not covered by the Plan?

Are the safe harbor requirements still met? We already know the answer is yes, so amend away! Let's hear what the others have to say though...

Although it's true that your key could leave catch-ups the Plan w/o triggering a THM, you better make sure that you don't have a THM because the key made contriubtions in the first place in excess of the catch-up limit, even though they were refunded. I just went through the top heavy regs and didn't find the answer. Maybe the ERISA Outline Book?

I'm going to correct myself: Page 14 of the 2003 5500 instructions: "A separate Form 5500, with box A(2) checked, must be filed by each employer participating in a plan or program of benefits in which the funds attributable to each employer are available to pay benefits only for that employer's employees, even if the plan is maintained by a controlled group." Based on this I have changed my response. Because even members of a controlled group would file a separate form, certainly unrelated employers would file a separate form if they met that requirement. Even though Box A(2) indicates that the plan is a single employer plan, when it is not, it seems that the instructions are telling you to indicate that the Plan is a single employer plan if the stipulation in that paragraph is satisfied. Unfortunately, I don't think that it's easy to determine whether or not this test is met. It is likely not as easy as looking at a report, but rather gets into the nitty gritty of some legal document somewhere... You learn something new every day...

This post was responding to the fact the Plan does require a true-up each quarter... I think we all agree that if the Plan says match on a pay period basis with no true-up, then you do no true-up...

Do you have any references to support that? My understanding is one plan document, one plan, one 5500, etc. no matter the number of unrelated employers or what their relationship is, if any. Remember, all of the ownership rules and controlled group rules are all in the IRC, not ERISA or the DOL Regs. I agree that commingling of funds is not the issue. I'm no expert on PEO's but I think that logic will hold in that environment as well. But regardless, that is not the situation here. In fact, just because you have adopting employers doesn't mean you have multiple employer plan in the first place. You need to have two separate controlled groups (not simply two adopting entities). For example, a 100% owned subsidiary participating in the parent company's plan does not a ME Plan make. That may be known here, but I wanted to clarify.

If you don't true up on a YTD basis each quarter, your defeating the purpose of the true up in the first place. I.e, the biggest issue is people maxing out before year end at the 402(g) limit. If they max out in the 4th quarter (as most would) and you do the true-up for just the 4th quarter, you're gonna leave a lot on the table.

Line I of the 5500 asks you to check a box if this is a multiple employer plan. Schedule T asks you to file a Schedule T for each "employer". So anyone who says each ER files their own 5500 is definitely mistaken. Further, the DOL could care less if there were 2 or 1,000 employers in a plan. Figuring out who the "employer" is is an IRS issue. The DOL wants to know how many people are in the Plan. When adding up all of the employees of all of the "employers" if you've got more than 100 you've got an audit (subject to the 80/120 rule). In fact, if you had two separate plans with 70 unique participants each, and one employer, you would have no audit requirement because neither plan breaks 100. As a former public accountant who specialized in retirement plan audits I can tell you that I did a few audits for ME plans, all filed one 5500, and none of them would have needed an audit without counting all of the employees of all of the employers. None of the ERISA attorneys involved, nor the TPA's, seemed to have any issues. The TPA firm I work for now handles this the same way.

I'm not sure whether participant directed brokerages exonerate you from fiduciary liaibility. I think it makes it worse? If 99.9% of people get put into the fund corresponding with their retirement date under the Plan (i.e., age 65) they're still better off than 50% of the participants investing in the money market fund for 30 years (an extreme example of course, but I've certainly seen plans very highly leveraged into the money markets). I'm just against participant-direction of investments in most cases. I think it's asking too much of participants, and I think a lot participants would agree. Alhough there are no punitive damages, you're market is every baby boomer. So what you lack in margin, you make up for in volume... But your argument does bring me some comfort, and I hadn't considered it. As far as I can tell there are no good answers to this!

http://www.reish.com/publications/article_...m?ARTICLEID=475 Frankly, I like the idea. I've always believed that people, who may well be experts at whatever it is they "do", more often than not are bad investors. I have a public accounting background, I took finance classes in college, and I still am a very poor investor (although due more to a lack of diligence on my part than anything else). What chance does a factory worker for whom English is a second language have at navigating the Wall Street Journal? Is it prudent to require them to navigate on their own? I don't think so. If I was a fiduciary, as Reish recommends, I would default everyone automatically to the life style fund corresponding to their retirement date (don't even give them the chance on the enrollment form). If they want to change later, that's their perogrative but I bet most will stay put (as does Reish). Maybe don't even give them the option to shift out. This is an improvement from 10 or 15 years ago when all the funds were pooled and invested with one set of objectives-at least with a lifestyle fund, the objectives are specific to your age, which should be the most important factor. I can't think of a solution that meets the practical and prudent objectives as handily as lifestyle funds. As the article suggests, no one complies fully with 404© (the requirements are extensive and extremely costly), so alternate solutions are advisable. I once read that all of the class action lawsuit lawyers who won billions on the tobacco settlements are gearing up for their next bigg initiative - helping "disenfranchised" baby-boomers get their due from "careless and imprudent" fiduciaries. Quotations denote my guess at the language they'll be using. I'd be scared stiff about this if I was the fiduciary of a self directed plan where the participants were not savvy investors. Better make sure you have a good fiduciary policy!

I know that for ADP testing, the union people must be tested separately (i.e., the ADP test must be passed when considering only the union HCE's and NHCE's). I'm not sure if there is a similar requirement for general nondiscrimination testing and design based safe harbors. If there is, because the owner is a union employee, he would need to be included in the testing and therefore, there would be much more limited benefit from starting a plan just for the owner.

I think he just wants to use $205K of comp and not some lesser amount for the ADP testing. As for the safe harbor plan and 98-52's requirement for a 3 month plan year, the point is that people need to have the opportunity to defer for at least three months.

If they don't define "actively employed", I think the client has a reasonable intepretation. Active employment seems to indicate ongoing services, which by defintion, is not occuring in a leave of absence. I would pay more attention to the Plan's definition of Leave of Absence though. If it doesn't say they will continue to be treated as actively employed, I think they're case is pretty solid. Just giving them credit for at least 501 hours doesn't mean they're treated as actively employed at year end. How about recommending a "clarifying amendment" that LOA's at pye are excluded?

Is there by any chance an "Other" option for the caluclation of the match? What would the implications be of amending the prototype to add this a) for the plan sponsor?, and b) for the TPA whose prototype is adopted? I know it reduces reliance on the opinion letter, but are there more practical issues as well? The biggest thing to watch out for is 414(s), which discusses a discriminatory definition of compensation. For example, let's say the owner (and only HCE) just takes straight compensation, while the employees receive a hefty amount of bonus at year end depending on whether or not they meet targets. The definition of comp would llikely not meet 414(s), which in and of itself is not a problem - it just means you need to pass the ACP test using gross comp (including bonus). That may or may not be a problem.

Two conflicting view points: 1) Don't you have until the last day of the Plan Year to retroactively amend? 2) Wouldn't it be a prohibitted cut-back of benefits because the right to the benefit accrued on 1/1/? Participant communications should be given the heaviest weight in my opinion (and to the best of my knowledge, the courts seem to agree), so I would go with answer #1... It seems that this is nothing more than an administrative oversight. You could take the position that the Plan was amended before year end, as evidenced by the revised notice, and that 401(b) allows you until the end of the year to get the document in line...

Tom - I think I may correct you, if I dare, only because I researched this extensively recently. You CAN integrate a QNEC with SS, simply because there is nothing to say you can't (unlike a SHNEC, which is right in 401(k)(12)). BUT why would you ever want to, because you must pass 401(a)(4) with and WITHOUT QNECS, so if you offset your integrated contribution with the QNEC, you no longer have a safe harbor, oh and by the way because only NHC's get the QNEC, you won't pass the rate group test (absent cross-testing). My research included a question to TAG Data, who are usually pretty thorough...