austin3515

Joanne already indicated she was reducing the match appropriately. My only point is why rerun the testing if the results could only improve. Or were were you disagreeing with what I said about having the match paid to the HCE?

I would think only if you failed ACP the first time around... If HCE's forfeit match, it can only get better... Also, you know that if the HCE is partially vested, they actually should get the lost match directly to them.

I have a client with several late deposits of employee deferrals throughout two years. Can you attach a supplemental schedule to Form 5330 sumarizing all the PT's (and Schedule G to the 5500 for that matter) and reference this schedule on the Form? Otherwise, how would you handle 8 PT's in one year that weren't corrected, and 8 more in the next?? Because a PT is a new PT on the first day of each year (if not corrected), in year two you've got 16 PT's! I would need 4 separate 5330's! Any advice compadres?

I just thought if its unclear and defensible (because not specifically excluded), then go for it... But in retrosect I agree with you - they would surely be all over this..

If you answe that question on Schedule I as yes, you need to compelte both a Schedule G and a 5330. The DOL could easily catch you for not filing a schedule G, because its in the same form. It would take a little more effort for the IRS to catch you for not doing a 5330, but it would certainly not be hard for the IRS to get the information if they wanted it. Also, based on the reading of the new 5500 instructions it sounds like what would be included on Schedule I is the aggregate amount of deferrals - not the interest. So if your late deferrals each month were $100 and the poblem was for 5 months, the total on Sch. I would be $500, even though the prohibitted transaction reported on G and the 5330 would be $10. By the way, the penalty is 15% - You just lost $.50!

Why not take the opposite position since there are no regs - include him as an ADP of zero, thereby helping the testing results?

mistaken posting... sorry

How many employees are there? If there's 5 I would be more concerned. If there's several hundred I just think, absent any other pertinent info, its just not that big of a deal. No one can be perfect all the time. I think that the laws of statistics suggests that there are always going to be problems like this. For every one, like yours, that's found there's probably a dozen more that are not found. So the employee got a few extra bucks in an isolated administrative mistake. So what? Maybe I'm being to lax on this...

I agree. Remember, its worded "employed on the last day." If they received a paycheck for work on 12/31, they're employed in my eyes.

Technically yes. See Revenue Procedure 2002-47 and your plan document. Both should say what to do. But if you won't tell, I won't. If it's just one person, one time, I just don't see it as a deal breaker. Unless of course the person is an HCE or an owner or something like that, and it appeared to be discriminatory.

When you aggregate for coverage you need to aggregate for all non-discrim. testing. The original intention was to have one safe harbor plan and one non-safe harbor plan. Therefore, aggregating for coverage ruins my evil plan! As for otherwise excludables, we are aware of these rules. I didn't mention for simplicity's sake.

That's true, except the results for both the 401(k) and the match should be exactly the same. So there's techincail 4 tests in total. Coverage for match and 401(k) in Plan 1, and the same tests in Plan 2. I'm concerned that Plan 1 woon't pass coverage...

Plan 1 has 7 NHCE's and 5HCE's benefitting Plan 2 has 4 NHCE's and no HCE's Plan 1 coverage = 7/11 = 64% divided by 100% (5/5) = ratio percent of 64% - failing. The plan I was talking about is significantly more distorted than that (probably 25 or 30 people in Plan 1, and a couple hundred in Plan 2), so my only option is ABT, right? And f I can't pass the nondiscriminatory classification test without aggregating the Plans, the Plans are no longer effective, right? Also, these Plans have extremely low ADP/ACP test results and no employer profit sharing contribution. The owners always put in too much. Is the ABT test run before or after the ADP/ACP corrections? I hope after! Thanks for all the information so far!

Got a company with one plan. Is it possible to set up two separate plans with all HCE's and some NHCE's in one plan, as a safe harbor plan using the 4%Match, and all other NHCE's in another plan that is a straight 401(k) plan (distinctions made by production/nonproduction personnel). I'm assuming the only way to pass coverage is to aggregate the Plans because al HCE's are in one plan. But then because you aggregate for coverage, you must aggregate the Plans for ADP/ACP testing? But then one Plan is a Safe Harbor and exempt from ADP/ACP. Also, since there are no profit sharing contributions in either plan, I'm assuming I don't have any issues with 401(a)4. Is that right? My real question is "does the need to aggregate a safe harbor and a non-safe harbor plan to pass coverage blow the safe harbor all together?"

Perhaps it wasn't the best use of the term, but the point is it is geared to improve the saving abilities of the rich (as was most of EGTRRA)

Did you mean that the doc might say only non-keys get the forfeiutres? I thought only key employees never get a TH?

You obviously can't have retroactive participation dates in a 401(k). Therefore, if you keep the same eligibility requirements for the entire plan, you would need to have separate definitions of Entry Dates. What's most common is all across the board in my experience.

Once a participant, always a participant (unless break in service rules kick in, which here it seems they do not).

If someone is a nonkey employee who is still employed by the employer than they are eligible for the top heavy. Provisions of any other plan shouldn't have any affect on another plan. In other words, if based on the interpretation of the top heavy Plan, they are eligible, they should get the contribution. Remember, each plan document is stand-alone contract between the employees and the employer.

Correct on all counts! All non-keys must get 3% of employer contributions from any source including forfeitures. Anyone excluded from the top heavy because of the hours requirement must still get 3%, and you may exclude anyone who was not employed on the last day, if the plan does not require employment on the last day to receive the forfeitures.

What kind of a sicko would disallow someone caring for their parents in a time of need? That would be a disgrace and if challenged I would simply call the 6:00 news and start a PR war.

REgardless of whether its a good idea or not, timing is important, and the timing here is ridiculous! It was bad enough that after every single plan in the country was required to be rewritten from soup to nuts for GUST. Then Georgie Porgie passes EGTRRA and it was back to the drawing board again. Treasury is still digging themselves out of that whole, as tons of regulations still need to be issued. Now we're going to overhaul it again? More amendments? More restatements? Is he basically admitting that EGTRRA was a mistake? Also, talk about class warfare! How many people can take advantage of these opportunities? $7,500 each in LSA and whatever the new IRA thingamabob is called, $15K to ERSA's. That's $30K a year! Every American must realize that this another break for the rich - as if EGTRRA wasn't enough! It does nothing to address that the lower income people will still do noting to save, to say nothing of middle america. D- Georgie! But go kick some butt over in the Middle East! You've got this pension geeks support in those efforts!

Why not amend the plans to allow "elective transfers" between the plans? It's my understanding that for these transfers a severance from employment is not required. Then they just transfer their account balances, inclusive of the participant loans, and all of the problems seem to disappear... Am I missing something?

When someone defaults you get a "deemed distribution." The loan is still there an must be paid off until a distributable event occurs. Once a dsitributable event occurs, a "loan offset" can occur. For most plans, termination is a distributable event, although some will require one to five breaks in service prior to a distributable event. In 401(k) Plans, attaining age 59 1/2 is also a distributable event (i.e., termination not required) Once there is a loan offset, the loan is officially gone. I provided this elaboration to clarify the difference between loan offsets and deemed distributions, a concept which many readers may not understand. It is clear that the people who posted the two above posts understand this very well...

I thought catch-ups would only need to be created in the situation where there excess deferrals (either from failed ADP or 402(g) excesss). It would therefore seem to me that for purposes of the match you would treat all deferrals (including catch-ups) the same for purposes of matching contributions. Especially if the match is done each pay period. Am I missing something?