austin3515

Thank you both for your responses, but perhaps I was unsuccessful at pinpointing my question: As a TPA, what actions do you take to ensure that the Plan Administrator is not aware of any divorce proceedings, especially considering that the Administrator may not put two and together that the distribution should be questioned. For example, do you add a clause to the coverletter? Do you add a field to the form to have the participant certify that he/she has no knowledge of a pending QDRO? Etc. etc... I should have mentioned that our QDRO procedures put a hold after a verbal communication - not the QDRO itself.

What do other TPA firms do to ensure that a participant requesting an in-service distribution or a loan is not being taken after the administrative "hears" that a participant is going through a divorce? Although most administrators will recognize the issue and a flag will go off, it's possible that the flag won't go off. Any recommendations? Or do you just process the distributions so long as the Plan Administrator doesn't mention anything...

If you can terminate the Plan altogether why can't you kick a few people out?

No deduction. 404(a) applies, which requires that the deposits be made before the filing deadline, or extensions thereof.

What is meant by "provide the notice." For example, would posting the notice in a central location satisfy the notice requirement?

Owner of a business gets a windfall of cash after closing a big deal. He wants to set up a DB plan to shelter the income from taxes. Participants in the Plan will be himself, his son and two employees. Here's the catch: He has cancer and will likely not survive beyond a year or two. Can he set this plan up under the optimism that he will survive the cancer? Take it as a given that the intent is to shelter the income for his heirs.

Thanks Tom - But I'm not 100% comforted, because the key question is can the participant choose between a contriubtion and a paycheck, and that was not included in the fact pattern. The facts outlined in this Q&A are tantamount to a bonus program - you either get a bonus, or you do not, is how I read the facts. Thanks,

Anyone have any examples of the IRS finding that one person allocation groups resulted in a deemed CODA?

I don't know but I sure am surprised that after 9/11 they didn't add "directly affected by a disaster area" to the list of deemed hardships, or something like it. Maybe they will soon...

Restructure the Plan's into two component plans: Plan 1: Employees getting SHNEC only, Plan 2: Employees getting SHNEC and integrated contribution. Both are design based safe harbors. Plan 1 and Plan 2 must pass coverage independently. Another chapter is closed...

Somethign with the game "telephone," right? Is that how you get them to repeat whet they said??? This thread is falling apart...

You have a way with words... Purple Monkey Dishwasher????

But don't you think that this has to be a common oversight? Isn't it troublesome that a prototype can have such a treacherous 401(a)(4) pitfall?

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...