austin3515

There was a whole big discussion on this topic not to long ago. Click on search up in the top left. then just search message boards

I think if you work the phones a bit at the DOL you will get some results. Many times the first nit wit that answers the phones doesn't know much about retirement plans as evidenced by your phone conversation. It's imperative that you get past the first line of defense on the phones. Find other people in the same boat and get an attorney. For $4K, you can afford a few hundred bucks for a nasty letter from a lawyer...

Can a partnership with two partners and no employees sponsor a 401(k) Plan?

Don't forget the DOL loves these things... If you have trouble getting it, you may not even need a lawyer... Just call the DOL... That's obviously a last resort though...

Interesting... Whether its legal or not I don't know. But what an administrative nightmare. As trustee/fiduciary/administrator, the sponsor must authorize all expenses of the Plan. It is also the sponsors responsibility to act prudently with respect to such decisions. How do they monitor a separate advisor for each participant, given that they're required to monitor such service providers? You'd have to look at all the fees they charge, make sure they charge a reasonable fee, and that they are qualified. What a fiasco!

I thought that safe harbor plans were now exempt from top heavy rules?

If the IRS says its okay, then its okay, right? There are a lot of methods not included in the regulations that are set forth in 2002-47. In fact, if those correction methods were in the regs, we wouldn't need 2002-47. Just a thought...

Tom - You're initial response as hilarious! Rosemary, its hard to hear sarcasm when its typed in, but he's a good guy and will answer your questions tirelessly... Tom - why would anyone in their right mind irrevocably elect not to participate??? Something I've never quite understood...

I should say though, that I learned a great deal from reading the balance of the article!

Jon - In your article, it indicates that only Plans with a corporate trustee are eligible for the limited scope audits. Not true! Per the DOL regulations, the only requirement is that the institution holding the assets be regulated blah blah blah. Most of the major companies are aware of the rule, but once in a while, a trust company/bank that is eligible to give the certification won't do it because they're not the trustee. It's very frustrating (I'm a CPA by the way, and my firm does about 40 audits a year, several of which are limited scopes without a corporate trustee involved).

You guys are the bomb! Thanks

So for step 3, all you need to do is pass the nondiscriminatory classification test? Or does it need to pass the ratio percentage test? Also, does the general nondiscrimination test apply because people are getting different rates? Feel free not to respond, this thread is getting old...

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.