austin3515

So there's different tests - one for contributions and one for different rates? Or am I missing the boat here?

DietPepsi - 401(a)(4), general nondiscrimination testing applies when there are different rates for different people. In order to pass this test, each "rate group" must pass 410(B). If a rate group doesn't pass the ratio percentage test, then you may pass the average benefits test. Rate Groups are defined as each HCE, and all other employees with allocation rates at least as great as that HCE. People with rates lower than that, are treated as not benefitting. So if there's 10 HCE's. there could be 10 rate groups (unless of course, as in this example, several HCE's have the same rate).

Answer me this - I have immediate eligibility for the 401(k) and evern the match portion of my Plan. Can I then make people wait 4 years to be eligible for the profit sharing? Essentially, the match plan has a three year service requirement, doesn't it?

Interest owed but not deposited is the amount invlolved - not the original amount of outstanding deferrals. The rationale is that the deemed loan is only the interest due, as the deferrals were eventually depoisted. Of course, if deferrals were deposited 4 months late, that might change the story. Its definitely judgment though. The DOL put out a great Q&A on the Voluntary Fiduciary Correction Program. Check that out - it walks you through the process of correcting late deposits of employee deferrals very well.

Just went through a similar experience with 401(k) deferrals, and that's exactly what we did - letters to financial institution indicating ineligible rollovers. The participant must also authorize this. The twist here is that it doesn't rightfully belong to the owner, as did the salary deferrals in my scenario. It would seem to me that the contribution was made in error. The Plan may provide some sort of correction like the money goes back to the company. OF course if the tax return has already been filed, that does complicate things. I'm glad my client isn't the only to distribute all assets before running all the appropriate tests. Unbelievable!

I haven't seen anything specific (although I'm sure Kirk's reference is solid), but it seems to me it would be difficult for a fiduciary to prove he was acting prudently by investing in a noninterest bearing checking account. Even investing in a savings account seems derelict.

How could zero to three years of service be zero percent? Doesn't that cause a problem?

I should think you've done justice to the issue by merely distributing the monies to the participant, issuing a 1099-R for excess deferrals, which I don't believe is an excise taxable event. I've got no references, but it sounds reasonable...

Good question! Is he over 59.5 and does the plan allow for such in-service distributions? IF so, there probably isn't a problem, but make sure the document was followed. If the above does not apply, does the plan allow for loans? I would try to structure it as a loan, and have him make up for whatever he was behind on his loan payments at the time of discovery. Was the money taken from his account? I.e, was the reduction applied to his balance? If so you could probably argue that it was some sort of an operational failure, but the money should be repaid. If you say it was a loan, but there is no participant loan program, you still have a PT because by not allowing loans to everyone you've blown the PT exemptions that apply to participant loans. If it was just taken from the plan assets in general, there is a clear PT (borderline embezzlement?).

LMFAO!! Brian, your tag line is hilarious!

http://www.benefitslink.com/cgi-bin/qa.cgi...d=107&mode=read This Q&A (which Poje referred to earlier) says it should be treated just like a 402(g) excess. I'm not a TPA, so I have no idea what to code that!

I think the mantra should be amended...

Why do it that way? Poje's way seems a lot cleaner, and there's no reissuing W-2's and stuff like that. You get to the same place. Plus, I wouldn't want it to look like someone forfeited deferrals. I know that's not happening, but some wise guy agent could make that conclusion I would think.

Tom - Is that that book by Reish Luftman? Carries a heavy price tag, but I'm starting to think about pushing my firm to get it.

I tried that once... Got fired. I don't recommend it

No, but I'm glad you responded! What are you doing with them?

It seems everyone is agreement on everything. Arhcimage, that last is an interesting one - I've never seen a match of greater than 100%. Is it even allowed? I'm surprised its never heard of...

A client has not used theoir forfeitures since 1997. The doc requires them to be allocated out annually as if they were profit sharing contributions. Is it necessary to go back and reconstruct the allocations back 4 years? Any references on this stuff?

For what its worth, I agree with Kjohnson. It seems to jive with the 401(k) answer book...

Agreed! The 4% hitch is buried a little further down on the page! non-safe harbor Nondiscretionary match (i.e. wording included in plan doc) - limit is no compensation in excess of 6% of wages may be considered. Non-safe harbor discretionary match - same 6% limit as above. However in addition, contributions that eqyate to >4% of earnings are not allowed regardless (i.e 25% of 20% = 5% of Comp, so no go). Right?

Per the 2001 401(k) answer book, question 2:152: A plan that satisfies the ADP safe harbor (i.e., your 3% nonelective) also satisifes ACP as long as one of the following three scenarios applies (I only include the applicable one): 1) The Plan provides non-safe harbor matching contributions and a) the matching contributions are not made with respect to compensation in excess of 6% of compensation, b) the matching contribution does not increase as the rate of deferrals increases, c) at any rate of deferrals, the rate of matching contributions that would apply to any HCE who is an eligible emlpoyee is no greater than the rate of contributions that would apply to an NHCE who is an eligible employee and who has the same rate of deferrals.

I have a client who inadvertently recorded loan repayments as just regular 401k deferrals. The only real conseqence I can come up with is that the W-2 needs to be amended. Is there anything else?

Thanks!

I have a client who calculates and funds the match each payroll period. The Plan doc, however, provides for the calculation to be based on annual informatio, not on pay period information (as some other docs provide). What are people doing in situations like this? Do they always have to recalc all participants at year end to ensure that fluctuations in their deferral rates, or having their deferrals capped out early in the year haven't distorted their match? Thanks!

1) the 401(k) anser book includes the definition "costs related to purchase of a primary residence." It doesn't say costs of the residence itself. I'd say the land is sufficiently related. 2) The burden of proof isn't super in magnitude on the administrator to verfiy everything. It sounds like a gray area, but certainly reasonable to approve it... I can't see this being challenged realistically - would the IRS dare to discriminate against a guy living a mobile home? I can't see it..