austin3515

There is no requirement that a discretionary match be announced that I am aware of - that would make it non-discretionary. I think its advisable to announce it, and even more advisable to abide by it. However, many plan documents do require the administrator to disclose this. However, I doubt to much complaining would result from an increase in the contribution. The decrease is where you would run into a lot of problems. I would recommend not increasing the cap, but rather the rate. So if the match was announced as 50% of 6%, revise it to 75% of 6%. That way, no one would have deferred more or less as a result of the change, and everyone deferring gets more money.

1) Generally the due date of federal tax returns (including extensions if applicable( 2) Don't know. what credit? 3) IF the Plan is top heavy as of 12/31/00 (i.e 60% of balances at 12/31/00 are held by key employees), this impacts contributions for the 12/31/01 plan year. 12/31/01 compensation is used to calculate the minimum. There is some confusion about who is a "key employee" for purposes of who gets the contribution, but I think the majority believe key employees as of 12/31/00 (in this example) would not get a 3% contribution. Therefore, if someone became key in 01, they would still be entitled to the top heavy minimum. 4) The Plan could be disqualified, deductions disallowed. I also want to say that if they are not made 100% of the key account balances are taxable distributions (or am I thinking of something else?). The trustee might want to mke the top heavy ontribution, and then just distribute in accordance with the participants final elections (i.e. rollovers, distributions, etc.)

My guess is no. A big part of the safe harbor provisions are notices to participants and without a time machine you'd have difficulty doing that retroactively. I hope you've been running your ADP/ACP tests!. Although somehow I suspect that you're asking this question because they haven't been done (or worse, they're not passing) There is of course no reason why you couldn't amend the document to be safe harbor next year. I do think the amendments can be effective part way through the year, but I defer to some of the Heavyweights on this message board for that one.

So no rate of match issue, but that doesn't matter because a different problem exists - namely you were never entitled to the match anyway? By the way, I have a Plan doc. (Individually designed by a reputable ERISA firm), and it also says that any match earned related to excess deferrals shall be forfeited.

Okay but then what's to stop me from telling a client to defer $15K in 2002 to take advantage of a matching contribution that is not capped (i.e. 50% of deferrals, with no limit). They pick up an extra $2,500 in matching contributions, with no penalty from what I can see. Am I missing something? Or is it just so wrong its ridiculous to try? Assume for discussion that passing the ACP would not be a problem.

I am an auditor, and agree that a lot of auditors who don't have the experience they should. One thing I find pertinent to add is that I have a client with ML, daily valued etc. Somehow they manage to maintain negative cash in a particular plan (not something I've seen on my other plans that use ML). Perhaps a monthly reconciliation would have identified this oddity in the beginning rather than two years after it arose. I agree whole heartedly with bank reconciliation analogy. Finally, I would also like to point out that the auditor cannot "make" the client do anything. We can recommend stuff. Sometimes that stuff may be unreasonable, but it may be the only way to be certain that material issues are identified. Then, when something goes wrong, we can say "well we told you do this, and you didn't. Had you done this, the problem would have been avoided." Multi-million dollar claim settled uneventfully out of court by writing a short letter recommending a reconciliation. It's important to remember that a firm can be ruined (Andersen who?) if things go wrong and we "should have" caught the mistake. Even if people lie cheat and steal, we're still expected to find everything.

I can tell you that I have a client who started a new plan, effective date of 3/1/XX, and deferrals began in June, with no reference to that date in the doc.

I wouldn't want to administer it, but I would like to have it as a participant...

That's AWESOME! I gotta get one of those!

Reason? IF you tried to find reason behind any of this stuff it would be a life long unsuccessful mission. My question was on the mechanics, and your answer was exactly what I was looking for! Thanks

I've read a couple of articles on the final participant loan regulations and they seem to mention something about "credit card loans." Unfortunately, they assume the reader knows the what the heck they're talking about, and I have no clue. What is this reference about?

IS that because the limit is the lesser of ADP of NHCE's plus 2 or 2x the ADP of NHCE's? I guess I was thinking it would be 2%? LEt's say there were 100 NHE's deferring 0%. Would that indicate that the plan was not effectively available to the employees? Would that cause a separate problem?

Perfect! Thanks guys!

Archimage - I take your word as gospel truth but if there is anything you can point me to, that would be great, otherwise, don't worry about it. I have the ERISA outline book 2002 edition...

Is there any scenario under which I would need to be concerned whether or not a plan is super top heavy. The Plans in question are a money purchase and a 401(k) profit sharing plan covering the same employees.

Has anyone seen a "check the box" Summary Plan Description before? The language is a template, and you check the boxes that apply, and fill in the blanks appropriately. It seems to me that they could easily be misleading to participants. Any thoughts? Should we recommend that our client get a regular SPD drawn up?

Thanks!

Thanks Tom - So nonexcludable, nonbenefitting for coverage and Not included whatsoever in ACP, right? Thanks a lot!

Doing coverage calculation for a 401(k) Plan with a match. Initial eligibility is 12 months, regardless of hours (i.e. elapsed time). After such period you are eligible to make deferrals as of the first to occur of 7/1 or 1/1. For the match, as long as you're eligible to make deferrals you are treated as benefitting under the match. But, in order to receive the match, the part must work >1,000 hours in the Plan Year. My questions is this, if someone did not receive for two reasons, 1) They did not defer, 2) they did not work the 1,000 hours, are they then treated as not benefitting? Thanks

Well 401(k) Worker, what's important is that you learned a valuable lesson. Come to Benefitslink.com next time you have a question! Everyone doesn't always agree 100% but as you can see from these posts, they agree on about 99%! Just so we're all clear, you are not double taxed on loans!

With a 401(k) it seems to me that the most important thing is that people aren't let in BEFORE the plan entry date. So if someones ENTERS the Plan on 1/1/03 (after meeting elig requirements in November 02), but joins in February, even though the next entry date isn't until July 1, no big deal because he IS a participant in February and therefore able to excercise his rights to change his deferrals. So unless the doc says you can only CHANGE deferral elections once a quarter, no problemo. Can someone confirm? I've run into this many times. That comment on 410(a) also seems important, unless the Plan's eligibility is automatic on 1/1 regardless of hire date. You can't have retroactive participation in a 401(k), and can't make em wait more than a year. Kwarren, is there also a 7/1 entry date?

Expanding on what veba brought up, you should definitely make sure that the PEO is handling the 401(k) the right way. The IRS came out with some policies/interpretations of the exclusive benefit rule that really screwed the PEO's. Like veba was saying, if the plan was not a multiple employer plan, the employees participating could have some very significant impacts - i.e., if the Plan is ultimately disqualified. The revenue ruling is 2002-21. http://www.irs.gov/pub/irs-drop/rp-02-21.pdf

Agree with above, but if I'm not mistaken the burden of proof in that sort of a situation is much greater on the administrator to ensure that there is a hardship. You don't have to be safe harbor, but as the name would imply, it is much "safer." I'd consider amending. Unless you are an employee, in which case this is more beneficial to you.

What is match for free?

Generic for you is detailed for me... Thanks!