austin3515

I think I said everything correctly. This was something he had said earlier. This is a true statement. I think in his particular situation the point is moot because he mentioned he cannot pass it, but I was just trying to be thorough. Let's keep it really really simple. Component Plan 1 has just 1 NHCE (C1 NHCE). Component plan 2 has 1 HCE (C2 HCE) and 1 NHCE (C2 NHCE). C2 HCE is getting a 5% EBAR and C2 NHCE is as well. The ratio percentage for the only rate group is 50% because only 1 of the 2 total NHCE's is getting at least as much as the only HCE. This is true even if C1 NHCE is getting a 7% EBAR because you have electively chosen to test based on component plans, which requires that you treat C1 NHCE as not benefitting. I think the fact that no one would ever use component testing in my example is besides the point. I fancy it was a very illustrative example...

We;re not talking about coverage when we talk about component plan testing. The plan still needs to pass coverage the old fashioned way. We're only talking about 401a4 nondiscrimination. Each rate group in Component plan 2 must pass the ratio percentage test, and because as you mentioned you can't pass ABPT, each group needs to be at least at 70%. If there are 10 people in Component plan 1 who are NHCE's you are already starting 10 in the hole because they are all treated as not benefitting. If any of the rate groups were under 70%, you would need to pass the average benefits test, which as you know would include the entire plan.

It wasn't effective in my particular situation, but I assume they will find that overall they got a lot of people to file their 5500's as a result of this email blast. Would a 30% compliance rate be classified as effective, in light of the minimal effort involved? My guess is "yes." Say they sent this blanket email to 500 sponsors and 150 filed as a result. I think that would make them happy.

Another lively discussion on the same topic. This one includes the EOB section, which references the 2003 Q&A you mentioned. http://benefitslink.com/boards/index.php/topic/28318-adpacp-prior-year-testing/

No actually it is definitely a plan imposed limit. The PLAN says I can impose a cap on HCE's to pass testing. This is pretty well documented, I didn't come up with it on my own.

My guess is "because it's really easy." Edit: And also "because it's really effective.."

I'll try not to read too much into that sigh...

To be more clear, you treat them as not benefitting.

That's the way to do it!

What I mean is, sometimes we tell the whole group of HCE's, the max you can do is 5% of pay, plus the 5,500 in catch-ups. So they elect 5% of pay for regular deferrals, and $211.54 in catch-ups each pay-period. By year-end, guess what? The HCE has followed instructions perfectly. The catch-up payroll deduction code really does equal actual catch-ups. The 5% cap is the plan imposed limit imposed by the ADP Testing section where we can limit HCE's administratively to prevent a failure.

Why give the daughter nothing whent a few extra minutes allows her to be treated just like everyone else? My experience is that owners hate it when they can't treat their kids just like their other employees...

They have separate elections because (and this is even worse) payroll companies have diferent deduction codes... Why why why?? So now hte payroll company is coding contriubtions as catch-ups even though in total contriubtions might only $10,000. Then the ______'s of the world will exclude those amounts from the ADP test because they're catch-ups. Then you've also got participants who are 50 who elect to contriubtion 45% of pay and who get capped at $18,000. Why? Because they didn't prepare separate catch-up election. Why indeed... The only good thing that comes out of it is if I'm trying to manage an ADP test, I will tell a client to contribute their testing limit as a percentage, and divide their 5,500 of catch-ups over 26 pay-periods.

I personally would like to see someone prove that integration was used for 35 years... I've always ignored it...

If the Plan is Top Heavy for the given year, you MUST provide a 3% TH Min allocation to the ENTIRE Plan. So if the Plan is a safe harbor match, anyone not getting a match of at least 3% of pay needs to be topped off. Anyone not getting any match gets the 3% THM. If you're using comp as a participant in a 3% SHNEC, you might need to top off the Newly Eligible employees. What does gateway have to do with this? Is this a cross-tested plan? If so, you can ignore the excludables for purposes of the gateway anyway. Dangerous plan design for a top-heavy plan especially if you don't already know the answers to these questions. Lots and lots and lots of traps for the unwary...

You do have to run the ADP/ACP for the non-safe harbor portion of the Plan. 1.401(k)-3 Safe harbor requirements. (h)(3) Early participation rules. Section 401(k)(3)(F) and § 1.401(k)-2(a)(1)(iii)(A), which provide an alternative nondiscrimination rule for certain plans that provide for early participation, do not apply for purposes of section 401(k)(12), section 401(k)(13), and this section. Thus, a plan is not treated as satisfying this section with respect to the eligible employees who have not completed the minimum age and service requirements of section 410(a)(1)(A) unless the plan satisfies the requirements of this section with respect to such eligible employees. However, a plan is permitted to apply the rules of section 410(b)(4)(B) to treat the plan as two separate plans for purposes of section 410(b) and apply the safe harbor requirements of this section to one plan and apply the requirements of § 1.401(k)-2 to the other plan. See § 1.401(k)-1(b)(4)(vi), Example 2. 410(b)(4) (4) Exclusion of employees not meeting age and service requirements (A) In general If a plan— (i) prescribes minimum age and service requirements as a condition of participation, and (ii) excludes all employees not meeting such requirements from participation, then such employees shall be excluded from consideration for purposes of this subsection. (B) Requirements may be met separately with respect to excluded group If employees not meeting the minimum age or service requirements of subsection (a)(1) (without regard to subparagraph (B) thereof) are covered under a plan of the employer which meets the requirements of paragraph (1) separately with respect to such employees, such employees may be excluded from consideration in determining whether any plan of the employer meets the requirements of paragraph (1). i.e., you have two plans. One safe harbor plan covering everyone with 6 months and one non-safe harbor plan covering everyone with less than 6 months. But of course that is only an issue if the owners kid/spouse gets hired because no new hire without ownership would ever be an HCE.

Not my call

Is there something specific about this precise tolpic? I did not see anything, but did notice it referneces "payments made" - is that what you are referring to?

For reals??? That makes this easy! So in other words, let's assume they defer 100%. They get NO 1099 until they take a distribution X Years later, and then they report the 1099 MISC income as SE income at that time. jpod, anything written up that I could have for the files??

20% for the SEP but almost 100% for the 457b, because there board fees are just above the 18K limit. This is very interesting jpod. The 1099 probably is just the amounts actually paid to the board member. Then when the distribution is paid, it's reported on the same 1099-MISC. The only issue I have is how does the board member pay the full amount of payroll taxes because the contributions will be fully vested. Sounds like so far no one has actually been through this...

As I mentioned, they are already maxing out their 402g limit. Any thoughts on how the 1099 reporting would work, and how the deduction is actually reported in this situation?

http://www.irs.gov/pub/irs-dft/f8951--dft.pdf I just found this draft of the new form... Lot of good it does me though.

How do I complete 8951 to pay the reduced loan fee that came out in 2015-27?

Bingo, that's what I would always do.

But here is the issue - in this example, for the 9/30/2015 ADP Test, you can only exclude $4,500 of his 2014 Deferrals from the 9/30/15 ADP test. Absent the failure, you could have excluded the full $5,500.