austin3515

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..

None that I know of. 2002-47 is th self correction prorgram provided by the IRS. This inidcates only a few failures which can be corrected by retroactive amendment. Does the plan allow for after tax contributions? It could be recharacterized...

The ex must consent to any distribution (or loan if a 401(k)). Sounds to me like she was awarded some sort of an interest in the 401(k). Therefore, she is allowed the right to protect her interests (i.e., not consent to a lump-sum). No studpid questions by the way! There are however, stupid answers, and I hope mine is not one of them!

Pensions are like my new hobby. If you've noticed a lot of messages from me, it's cause I'm relaxing on vacation! Pathetic, I know, but it really doesn't take that long to respond... I've learned more on these boards in the past month than on the job for a year! It's cool to hear everyone else's problems! The title of moderator is well deserved. Thanks for all your question answering.

1) Maybe. But I'd say keep it clean and get 2. 2) $5,000 cash out: DB Plan - if present value of benefit is less than $5K (including ADEC), involuntary cash out okay. DC Plan - If account balance is < $5K Involuntary cash out okay. You have two plans, so you need to administer two plans. You're getting into very gray areas here. To accomplish you're goals, I'd definitely try to legally transfer the ADEC to the 401(k). I should think its possible to do.

If somehow the DB plan and the 401(k) plan docs allow this to happen, then go for it. Otherwise, it seems to me that to transfer assets from plan to plan would require some sort of plan amendment. You definitely can't just do it because its administratively feasible. Alternatively, perhaps the money still stays in the DB plan (in a separate investment account), but is just tracked on the 401(k) plan software in a separate bucket. That might work legally. It probably raises a lot of other issues, like allocations of investment income for the TPA, and processing distributions. It probably could be set up to simplify the process. Also, don't forget the spousal waiver rules that apply to the ADEC bucket (if the 401(k) happens to be exempt.

I'd go with "scriveners error." (of course I'm not an ERISA attorney, so bear that in mind) I.e., it was never the intention to include them, and the plan doc was poorly written. Was it common knowledge that they were excluded? Especially if it was communicated in writing. Perhaps the summary plan description was accurate? Were they covered by plans at the PEO? Regardless of whether the PEO plan was a safe harbor, it would help your case of scriveners error if they actually had a retirement plan. Aggressive? Probably. But its a better answer than that they were improperly excluded... I have assumed that 410(B) is not an issue (but I think it is, although only parenthetically).

Actually, I love it! Some day I hope to take on more of a consulting role, but auditing is the quickest way to get familiar with all the issues, I think. There's also a large emphasis on training, so its been fairly easy for me to have access to self study course/seminars, etc.. Albeit most of the work is pretty dry... Thanks for the sympathy!

I perform these audits about half the year and toomuchstress said is dead on accurate!

Just curious when that was effective - the "any HCE's" are considered not otherwise excludable? If you don't know, don't worry. I just had a client whose TPA made them fail for just that very reason. It was for the 98 plan year. Was it effective for the 98 year? Also, what does it mean that you're a moderator? Do you work for benefitslink? Thanks

Does the plan mandate the form of the adoption? I guess I'm a little out of my league on this one, so don't quote me. I shouldn't think it would be to terribly aggregious to just draft an adoption agreement and sign it retroactively. There oughta be enough paperwork substantiating the adoption - notices to employees, etc. Again I'd run that by a lawyer, but that's my thought... Lets be frank, its not like we stole money from grandma!

That doesn't exceed any limits I've ever heard of. Annual additions limitation (IRC 415) is 25%. You're only at 20 (pre EGTRRA this included the 15% of deferrals - post EGTRRA you're only at 5%). Plan docs commonly limit deferrals to 15% of comp (again, pre EGTRRA), so that shouldn't pose any problems. And because they're an NHCE, they would likely not have exceeded the 402(g) limits (10,500) (If they earned more than 70K, they would have deferred more than 10,500 in your scenario.

Tom - Remember, the regs from a few years ago allow you to treat these employees as having met the requirements for ADP/ACP testing purposes only. (But NOt for 410(B) - it is a strange scenario!) Are you saying here that even if there are HCE's in the otherwise excludable category that you would not have to run ADP/ACP testing if they're the owners kid? I thought I remembered reading that somewhere actually (but never found it again), that for years after 1998, the ADP/ACP no longer needed to be run on the otherwise excludables. One other question- On Schedule T (i.e, coverage), would you have to disaggregate the "two" plans? If the Plan benefits all nonexcludables I imagine you can still check that 3d box indicating as much?

Why sponsors don't think before they act sometimes is beyond me! Well they think, but they think "what's the big deal!" Two quick thoughts - 1) Make sure that related employer wasn't already included anyway - many docs indicate that any members of the controlled group are eligible to participate. That would of course create a different problem - exclusion of eligible employees. Or maybe not, if they were newly added to the controlled group - i.e., acquisition. 2) Check out IRS revenue procedure 2002-47. I don't know what it will say about this specifically, but that is the correction program set up by the IRS. I should think this is a common problem that receives due attention in there. 3) Make sure you don't have a multiple employer plan (i.e., more than one controlled group participating). If Company A owns 60% of Company B - less than 80% threshhold), but both A and B are in the Plan this would, I believe, be a multiple employer plan. The trouble with this is all testing must be done twice - once for each controlled group.