austin3515

That's correct. That would only work if the match provision never existed and the match was all of a sudden added. I'm not sure who designed the plan but we've just discussed is why you should never ERVER use PY testing with a discretionary match. However, as Blinky the Three Eyed Fish brilliantly points out you can always switch to current year testing whenever you like (there's restrictions and complications on changing from CY to PY.), provided the amendments are made in a timely manner (a plan amendment is required to switch testing methods). So if you're testing a 12/31/03 plan, it may be too late (in fact it probably is), and you're back to the orignal problem. Also, you do not need to use the same method (i.e., CY/PY) for match and deferrals. So you can switch the match to CY, and leave the deferrals on PY testing.

In a multiple employer plan, must one employer provide a contribution to an employee transferred to another employer during the year if the Plan has a last day rule? Similarly, if a plan has an annual 1,000 hour of service requirement, must each employer consider hours of service with all employers. The only guidance I have found relates to service within 410(a), which relates exclusively to initial eligibility. That indicates that employers are treated as one employer with respect to 410(a). No such information on allocation conditions though. Specific sites would be terrific. I know that the Plan document should be specific, however, I'm wondering if there is a specific rule on this matter. Thanks for your help!

I have a client that is a temporary staffing service and has a profit sharing plan with a decent amount of money. That plan covers all employees including the temps (if they meet the eligibility requirements). Effective 1/1/04 they are adding a 401(k) Plan which will exclude all of the temps and any HCE’s. They needed to do a separate plan because they didn’t want the temps to know about the 401(k) Plan. For a multitude of reasons (primarily communication) they really couldn’t roll it out for them. All of the 401(k) money will be employer directed. They want to invest all of the money in the existing brokerage account (i.e. for the profit sharing plan) to obtain “economies of scale” on the investment side. Page 36 of the Schedule H instructions reads as follows: “If the assets of two or more plans are maintained in a fund or account that is not a DFE, a registered investment company, or the general account of an insurance company under an unallocated contract, complete parts of I and II of Schedule H by entering the Plan’s allocable part of each line item.” An ERISA attorney pointed that out to me, and said that doing what we want is okay. My question is this: The profit sharing plan has an audit requirement while the 401(k) plan does not. The 401(k) Plan will be a very small portion of the assets. Are there any insurmountable complications with respect to the audit? My assumption is that limited procedures would need to be performed on the 401(k) Plan, since the commingling necessarily has implications for both plans. Anyone seen this before? Anyone have any thoughts? The TPA will be tracking everything as if it was one plan anyway, so all of the information will be segregated at least in total, and then the investments and investment income can be allocated out pro-rata based on ending balances. All other amounts will obviously relate specifically to one of the Plans. Any help on this would be greatly appreciated!

WDIK - With respect to your first provisions, the "last day" simply refers to WHEN the year of service will be creditted. It does not specify that employment is required on that date in order for a YOS to be creditted.

With a name like qualified plan, how can you dispute? I mean it's not even his middle name, it's his full name!

Rather, these determinations generally must be made solely with reference to the number of hours (or other units of service) which are credited to the employee during the applicable computation period. This right after the first bolded excerpt. What exactly is the DOL saying here then? When I see words like "MUST" and "SOLELY..." I don't know... Also, I've looked at a few documents and NONE require employment at the end of the 12 month period. They only say the computation period commences on the first day of employment.

http://www.dol.gov/dol/allcfr/Title_29/Par...2530.200b-1.htm (b) Rules generally applicable to computation periods. In general, employment at the beginning or the end of an applicable computation period or on any particular date during the computation period is not determinative of whether the employee is credited with a year of service or a partial year of participation, or incurs a break in service, for the computation period. Rather, these determinations generally must be made solely with reference to the number of hours (or other units of service) which are credited to the employee during the applicable computation period. For example, an employee who is credited with 1000 hours of service during any portion of a vesting computation period must be credited with a year of service for that computation period regardless of whether the employee is employed by the employer on the first or the last day of the computation period. It should be noted, however, that in certain circumstances, a plan may provide that certain consequences follow from an employee's failure to be employed on a particular date. For example, under section 202(a)(4) of the Act and section 410(a)(4) of the Code, a plan may provide that an individual otherwise entitled to commence participation in the plan on a specified date does not commence participation on that date if he or she was separated from the service before that date. Similary, under section 204(b)(1) of the Act and section 411(b)(1) of the Code, a plan which is not a defined benefit plan is not subject to section 204 (b)(1) and (b)(3) of the Act and section 411 (b)(1) and (b)(3) of the Code. Such a plan, therefore, may provide that an individual who has been a participant in the plan, but who has separated from service before the date on which the employer's contributions to the plan or forfeitures are allocated among participant's accounts or before the last day of the vesting computation period, does not share in the allocation of such contributions or forfeitures even though the individual is credited with 1000 or more hours of service for the applicable vesting computation period. Under certain circumstances, however, such a plan provision may result in discrimination prohibited under section 401(a)(4) of the Code. See Revenue Ruling 76-250, I.R.B. 1976-27. With respect to the latter bolded item, this is why I contend that retroactive effective date demands the participant became a participant on 1/1/03 (ie., this section does not apply because he was employed on the day he was able to enter the Plan).

'If you have the ERISA Outline Book, see Chapter 2, Section 3, Part III., 3c. (2002 edition). Probably didn't move in the 2003 edition. Sal says "In fact, the employee does not even have to be employed on the last day of the computation period to receive credit for the year of service."

Not a 401(k). I'm basing the question on what I read in the ERISA Outline Book (and in the DOL Regs as follow up). Both indicate that you do not need to be employed at the end of the computation period. In fact, both indicate that you cannot consider whther or not they were employed at the end of the computation period. Ordinarily this is not an issue because the entry date is typically AFTER meeting the eligiblity requirements. If the employee is not employed on the entry date, the Plan can provide that the employee never becomes a participant. But alas, in this case, there are retroactive entry dates. Therefore, the employee is creditted with a year of service on November 14, 2003. Plan Entry is retroactive to January 1, 2003, and he WAS employed on that date! Please rebut as I always thought you both are saying was the case. Thanks!

Calendar year Plan requires one year of service with 1,000 hours of service for eligibility, and 1,000 hours each plan year for an allocation. There is no last day requirement. Entry Date is retroactive to first day of plan year in which eligibility requirements are satisfied. Hire Date = November 15, 2002. Termination Date = September 30, 2003 Employee works more than 1,000 hours total for the employer (and so during the 12 consecutive month period beginning on his hire date). Am I threfore correct in saying that the employee became a participant on January 1, 2003? Also, the employee worked more than 1,000 of his total hours during calendar 2003, and so he should therefore get an allocation? Am I mistaken anywhere?

Effective date of the Plan is 1/1/00. Employer executed an "ad hoc" amendment to provide a one time contribution to all participants employed on 12/31/99, provided they have met the Plan's eligibility requirements as 12/31/99. The contribution is based on compensation as of 12/31/99. Can a plan have such a contribution before the effective date of a plan? It seems to me that this is an effort to circumvent the requirement that a plan must be executed before the end of the year. Has anyone seen this before? Are there any PLR's either for or against this, or regulations? I did find this: §1.401(b)-1. Certain retroactive changes in plan See the last sentence. (a) ... Section 401(b) does not permit a plan to be made retroactively effective, for qualification purposes, for a taxable year prior to the taxable year of the employer in which the plan was adopted by such employer.

That;s exactly where I saw it too!! That's why I love thse boards!

Can anyone tell me if the DOL was quoted anywhere as saying that the fact that certain TPA's or investment companies refuse to accept (or charge additional fees for) more than 1 deposit per month should not factor into the analysis of when participant contributions can be segregated. I think they also said that the fiduciary should reevaluate a relationship with a company that precludes the ficuciary from fulfilling his or her responsibilities. Any help would be great.

Three separate controlled groups in one Plan. The entities are related only through a common ancestry--i.e., a portion of a company was acquired, and two other divisions were spun off and are ownd by two totally unrelated parties. Does each of the 3 separate employers need a fidelity bond covering the Plan?

How long should records be retained related to the 401(k) Plan? I'm not asking about the reporting stuff, which I know is 6 years, but the information used to calculate contribuions: 1) Payroll records 2) Employee Election Forms 3) Quarterly valuation reports 4) You get the idea. Thanks,

You can always terminate the Plan, just not retroactively. (I suppose unless there are no withholdings from 10/1 until the day the resolution/ammendment is effective.) But the match from the first nine months is already accrued so you can't eliminate that. Don't forget all employer contriubitons are 100% vested if terminated.

If a client agrees to pay employees the cost that would have been incurred under a health insurance plan, had the employee elected to be covered by the employer, can that compensation be excluded from compensation for purposes of benefit accruals? I know the definition of compensation can be anything, as long as not discriminatory, but is this something that has been seen by other people? I don't see any direct references in the plan document to such a provision. Thanks

Shoudl a sponsor obtain a board resolution for its profit sharing contribution? Are there any requirements out there regarding how to prove the intended contriubion, other than looking at the actual deposit.

That makes a lot of sense. Thanks!

Can a sponsor require employees to fill out a form affirming the fact that they do not want to participate in a 401(k) Plan? The point would be to prevent that employee from coming back and suing for not being offered the Plan. Any technical references would be ideal. Thanks

I just saw somehting that indicated that IRAs are not subject to the anti-assignment rules. Can husband roll into an IRA and then give the money to wife - i.e, roll into her IRA? Thanks, Appleby. I tend to think your right, but we heard of someone who somehow pulled it off without a QDRO. I know not everyone follows the rules, but I'd just as soon hear if there is another way. Thanks,

Husband has a 401(k) Plan with a previous employer. Husband and wife are in the process of a getting a divroce. Wife wants to receive a portion of husbands account balance as a rollover without obtaining a QDRO in the interest of accelerating the process. Is there any way to do this? Is there a loop hole for married people that one spouse can roll to the other spouse's account?

I also found in the "available on a resonablyu equivalent basis" definition of the DOL regs that you should employ the same criteria as a commerical lender. The Equal Opportunity Crecit Act or soemthing like that prohibits not providing loans on the basis of age. So there are two laws which I think are being violated by even considering age here.

I had an interesting question from a client: Is there any rule prohibitting a loan to a participant who is 63 (only 2 years from Normal Retirement), that will not be repaid in a time frame that can reasonably be expected to be repaid. (for example, over a period of 20 years, long after the employee will retire).

Nothing is more certain than death and taxes that's for sure. I totally agree with all of you. I'll let you know the resolution