austin3515

§1.401(m)-1(b)(4) I read through this and didnt see any problems. It says things like different plan year ends cant be aggregated, and different testing methods can't be aggregated. It doesnt seem to refer to the fact 403b elective deferrals and 401k contributions cant be aggregated.

HEre is the reg: I think it fits! (ii) Elective contributions taken into account under the ACP test. Elective contributions may be taken into account for the ACP test only if the cash or deferred arrangement under which the elective contributions are made is required to satisfy the ADP test in §1.401(k)-2(a)(1) and, then only to the extent that the cash or deferred arrangement would satisfy that test, including such elective contributions in the ADP for the plan year or applicable year. Thus, for example, elective deferrals made pursuant to a salary reduction agreement under an annuity described in section 403(b) are not permitted to be taken into account in an ACP test. Similarly, elective contributions under a cash or deferred arrangement that is using the section 401(k) safe harbor described in §1.401(k)-3 cannot be taken into account in an ACP test. In addition, for plan years ending on or after November 8, 2007, elective contributions which are not permitted to be taken into account for the ADP test for the plan year under §1.401(k)-2(a)(5)(ii), (iii), (v), or (vi) are not permitted to be taken into account for the ACP test.

Check this out. If it works, I seriously want a gold star! 403b covers the HCE's. The HCE's are exlcuded from the 401k. Plans both have the same match formula, so one ACP test, everyone gets the same match formula. We're failing the ACP test. We also happen to be passing the ADP test because of course no HCE's are making ANY 401k contributions. How do we feel about shifting ALL of the employees deferrals into the ACP test? Pretty neat right??

The TPA is done. There is no defense. If the TPA added the language they lose in court 10 out of 10. Just settle.

kmhaab, can you confirm that you're sure what I suggested is not the case? Is the Plan;s eligibility immediate? Did your client ever let them particpate, or did they always exclude them from the plan on a permanent basis on account of being under 1,600 hours? My scenario is in fact permissible.

If you really want to go outside the box, you could change the plan year-end. That might be completely unpractical, but I think it works. Never tried it myself, but curious if others think it is an acceptable workaround.

This might work: Participants expected to work less than 1,600 hours in a plan year are excluded from the Plan. Regardless, if any such participant is actually credited with 1,000 hours in their first 12 months of employment or any calendar year, then they are eligible after that computation period. So they are not eligible immediately, as would a 1,600 hour employee, but they are eligible after a year, thus satisfying 410(a). Do I win???

But really if the employer doesn't pick up the tab here, or at least half that's just really not cool...

Are you sying that you can self correct under EPCRS even using methods that are not listed in EPCRS? I didn't realize that was a possibility.

You must use the whole calendar year. Everything is always the whole calendar year. There is no such thing as a comp as a participant, etc. in these plans.

Reading through the new publication 560 just released and I'm struck by how they seem to go out of their not to call attention to the fact that Section 125 premiums reduce eligible compensation. It seems the only reference to this rule is that when it describes those pre-tax contributions that do not reduce compensation, 125 deductions are not listed. And of course it's stupid that your EMployer should be rewarded for making you pay more for health insurance premiums, or that you should be penalized for being older because your deductions are increased as premiums increase. Does the IRS not want me to follow this rule? It seems if they did they would say "hey, watch out - 125 deductions reduce comp!"

They are saying in this article that people can self-correct. I certainly will take them at their word but unless I am missing something this is not part of EPCRS? What are your thoughts on that?

ummm.... YEAH!!!

Participant elected in 2015 to contribute Roth 401(k). From 2014 through June 2018, the participant contributions were inadvertently set up as pre-tax in all respects (w-2 reporting, deposits at recordkeeper, withholding calcs, etc). What to do? Note: The participant has since rolled his entire balance out to an IRA, but if it helps we can start by assuming the money is still in the plan...

Let the record reflect that I have liked a post from Larry Starr!

Ahh, now it's getting interesting. So you're saying the hospital is the trustee of a trust that owns the surgical center shares for the benefit of the surgeons?What I mean of course is, that is what you presume is going on here? A trust/beneficiary connection?

I just saw this now. I appreciate the attempt but I'm not sure what it means. If the hospital owns shares for the beneficial interest of a surgeon, is the surgeon considered an owner for CG purposes. I gather the answer is "it depends on the legal documents" which is what QDRO was essentially saying.

So it is possible to not be the legal owner, to have only a beneficial interest, and still be treated as a direct owner for controlled group rules? Believe me I will leave it to the lawyers but I'd like to know more about this topic so I have a better understanding of what I don't know!

I've never heard of beneficial interests before, but I am now learning that the shares of a surgical center owned by a hospital are held for the "beneficial interest" of the surgeons who perform their surgeries there. Now, its an affiliated service group either way (i'm omitting details, take my word for it!), but I am curious as to how the controlled group rules are impacted by beneficial ownership. I'm reading it's the same concept as Merrill Lynch holding 10MM shares of Facebook in it's own name for the beneficial interest of its brokerage account customers. (i.e., the account holder owns the securities, albeit indirectly). Any insight appreciated!

That's just it, it is not, I don;t think. Probably a simple video camera (not a big fancy production studio with $50,000 high def video cameras). The value is derived from the instructors "performance." But it just seems hard to rationalize that this would be a service business in the way an accounting firm would be.

Company creates digital media for distriubtion on websites. Custoemrs pay a subscription to watch a tutorial on line regarding how to do a particular task. Let's say for example it was cooking. Does that sound like it would be a service business?

I also found this in 1.410(b)-5 Average benefit percentage test. (5) Determination of employee benefit percentage—(i) General rule. The employee benefit percentage for an employee for a testing period is the rate that would be determined for that employee for purposes of applying the general test for nondiscrimination in §§1.401(a)(4)-2, 1.401(a)(4)-3, 1.401(a)(4)-8 or 1.401(a)(4)-9, if all the plans in the testing group were aggregated for purposes of section 410(b). Because they referenced "if all the plans in the testing group were aggregated" that suggests the permissive aggregation rule applies, and they are all one plan for purposes of determining the testing age.

Makes sense!

hmmm... I suppose aggregating or not I would get the same result. I actually misspoke about one thing- one plan is just a 401k/match plan. The other is the cross-tested plan. But whether I "aggreagete" or not I guess I end up in the same place. Agreed?

Aha - I am not aggregating. I do have to run one average benefits test though. But otherwise I am testing each plan separately for coverage, and of course the rate group testing applies those coverage principles. But I'm not aggregating.