austin3515

I'm sorry, the newest plan document they can find is from the 1980's? Yikes!

I don't see why you can't make him eligible solely for profit sharing for 2014, and then only again when and if he satisfies eligibility. Participation is not a protected benefit.

I don;t think so either. Look at the compliance questions. "during the plan year." Those questions apply and would be unanswerable if the "one participant plan" box was checked. The instructions do not include the words "for the whole year" though when listing out the requirements for one-participant-plan status (ie., it only says "plan covers only owners" -- it does not say "plan covers only owners for the whole year"). But I think that because the form covers the whole year, the exceptions from filing as an ERISA plan would not apply if not met for the whole year. For example, if there were late deposits, those should be reported on the compliance questions. Similarly, if this was a pooled a plan, and participant assets were invested in the owners vacation house, the prohibited transaction should be disclosed on G. So you would have to file the regular 5500 due to the real estate. You can do an EZ/SF one-participant-plan next year.

I might have said the same thing, except that I have found auditors more likely to call it a transfer in transit, because the trust itself that comprises the plan did not possess the assets.

Plan B is merging into Plan A. The legal documents say merger is as of 12/31/2014. The assets do not move until 1/15/2015. We're reporting the transfer in on the 2014 income statement in the appropriate section, but where do we put it on the 2014 balance sheet? Other receivable? [We did this effective 12/31 to avoid a 1 day audit for Plan B].

An internal email I just sent that I decided to share with my BL Buddies! When you are processing lost interest for a lot of people, the hard way is to calculate the total interest and then use a somewhat complicated formula to prorate based on total interest and total 401k. Here is an easier way. Enter the loss amount as $100,000. Whatever the interest is can easily be converted to a percent. So if the interest comes out to be 6,472.32, the interest rate (or "factor" to be more precise) is 6.47232% which ought to be precise enough to get us within a penny or two of what interest ought to be. So just multiply each person’s 401k by 6.47232%. No calculator required for that conversion, just pretend the comma is the decimal point. If you are using this technique, I would still calculate what the total interest is supposed to be (i.e., enter the actual loss amount with the same dates) so you can prove you did it correctly. I guess it will only work with one loss date at a time. I hope you like it...

I think it is extremely clever! Great idea! It addresses the clients objectives and avoids refunds! It is completely and totally wrong but who cares, the client is happy! I can pretty much guarantee you they owe the HCE's the full match. The TPA "Stole" money from them. The test might fail, but they get the match money back (assuming they are vested).

You're saying the existing match is 100% vested and you want to add the new match with a vesting schedule (let's assume it is an annual match with allocation conditions)? Wow, for me that seems to be over the line. What happens if one day get rid of the 100% vested pay-period match, and then later on you amend your Vesting Scheduled Match to each pay-period? I wouldn't do it personally!

you know what we need is a decision tree for corrections of missed deferrals. IF this then that. Has anyone heard of anyone putting one together? Maybe I'll email Relius... I think that would be bookmarked along with the rollover charts and the cola limits!

Anyone have any new light to shed on this topic? I am dealing with it again. Can I aggregate employer contributions for testing between the two plans. The EOB points out that 1.410(b)-7(f) says (f) Section 403(b) plans. In determining whether a plan satisfies section 410(b), a plan subject to section 403(b)(12)(A)(i) is disregarded. However, in determining whether a plan subject to section 403(b)(12)(A)(i) satisfied section 410(b), plans that are not subject to section 403(b)(12)(A)(i) may be taken into account. And then 1.410(b)-7(d) says: (d) Permissive aggregation for ratio percentage and nondiscriminatory classification tests (1) In general. Except as provided in paragraphs (d)(2) and (d)(3) of this section, for purposes of applying the ratio percentage test of § 1.410(b)-2(b)(2) or the nondiscriminatory classification test of § 1.410(b)-4, an employer may designate two or more separate plans (determined after application of paragraph (b) of this section) as a single plan. If an employer treats two or more separate plans as a single plan under this paragraph, the plans must be treated as a single plan for all purposes under sections 401(a)(4) and 410(b). So (f) says I can aggregate for coverage, and (d) says if in fact I do that I need to aggregate for all purposes under 401(a)(4). So I think I've done it? I've proved beyond the shadow of a doubt that I can aggregate for testing when testing the 403b? I can see that this could be cumbersome in some situations because the permission to aggregate does not go in both directions, but because my 401k plan excludes HCE's I don't need to do anything special anyway with that plan. And of course, the whole point of having both plans is generally for this precise design. Thoughts?

Are the waters not sufficiently muddied, and the stakes so incredibly high (i.e., ineligibility of ALL rollovers) to make it tantamount to insanity to do this?

Company Big buys the stock of Company Small, closing date of 7/15/2015. Company Small will resolve to terminate the plan on 7/14/15 and will then proceed to pay everyone out. We are being told that at some point, the non-respondents can be transferred to Company Big's 401k plan, essentially in place of the force out IRA's. to me, this seems ridiculous, because really what happened is we allowed all of these active employees to close out heir accounts (before age 59.5), with the pre-existing knowledge that the plan was in fact going to be merged into the parent company's plan. In other words, the original plan was to merge the two together with the added step of first paying out everyone who otherwise would be ineligible for a distribution in the event of a merger (i.e., due to the 12 month rule relating to terminated 401k's). Am I missing something?

rcline, I have an idea, we should print the full versions of the last 3 threads on this topic and send it to the top IRS person via FedEx. We should all do it so they get 25 copies of all the same message board discussions!

I would guess that Corbel has some of those pipelines to the IRS and they say in their article: "The IRS, on the other hand, interprets this provision as permitting mid-year amendments only when the IRS formally issues an exception." Even though I know Corbel thinks this is an incorrect interpretation of the regs, I have enough faith in them to believe that someone very high up in the food chain told them just that.

Not if they do not have the same allocation conditions. But I like the fact that if I ditch the last day/1,000 hour rules on PS, then what you said is a true statement and I can get both. Darn good plan design. THANKS GUYS!! (PS, Safe Harbor MAtch will not work out, all ee's contribute 5% or more).

Here is Corbel's article on this topic. They shed some light on where they are coming from. http://www.relius.net/news/TechnicalUpdates.aspx Edit: Apparently the link does not go straight to the article. It is under 2014. March 11, 2014 - Safe Harbor 401(k) Plans: IRS Position on Mid-year Amendments

This came from a Corbel SPD. I thought it was interesting because it lined up with the regs so nicely. And because it fits so nicely I am concluding that Corbel decided this satisfies the minimum requirement. The IRA provider will charge your account for any expenses associated with the establishment and maintenance of the IRA and with the IRA investments. You may transfer the IRA funds to any other IRA you choose. If this applies to you, you will be provided with details regarding your distribution rights and the automatic rollover IRA at the time you are entitled to a distribution. However, you may contact the Plan Administrator at the address indicated in this Summary for further information regarding the Plan's automatic rollover provisions, the IRA provider, and the fees and expenses associated with the IRA.

OK, it just occurred to me to exclude HCE's from safe harbor. Thoughts?

Can we use the Age Weighted Allocation method together with the Safe Harbor Nonelective? I have this nagging suspicion that the answer is no we cannot. Wouldn't this cause the equivalent benefit rates to be different at NRA? Case in point we have two very young HCE's (their father owns the business). Under Age Weighted they get very very little, but if I throw the 3% Nonelective on top, all of a sudden their Equivalent Benefits rates are much higher than the NHCE's (who are a little older). I'm referring to the "safe harbor" Age Weighted method, the one that gets me out of the gateway minimum.

Someone else at one point made a fabulous comment which is that surely during all of the determination letter proceedings over the last 8 years a trend would have been detected if the IRS was taking a hard-line stance regarding this provision. But I do believe that the above-referenced notice started the controversy because it was so hyper-specific. They could have opened the net a lot wider but did not. Make no mistake about it, I do not think the regs support this insanity. I think I said that but wanted to clarify that we agree on much more than we disagree.

http://www.irs.gov/pub/irs-drop/a-07-59.pdf The Internal Revenue Service has learned that some employers have concerns about adding provisions during a plan year to their § 401(k) safe harbor plans (described in § 401(k)(12) of the Internal Revenue Code) in order to take advantage of recently effective changes to the rules for § 401(k) plans, such as a qualified Roth contribution program (as defined in § 402A) or hardship withdrawals described in part III of Notice 2007-7, 2007-5 I.R.B. 395, when the pre-year safe harbor notice required by § 401(k)(12)(D) does not include information about the added provisions. This announcement provides that a plan will not fail to satisfy the requirements to be a § 401(k) safe harbor plan merely because of mid-year changes to implement a qualified Roth contribution program (as defined in § 402A) or the hardship withdrawals described in part III of Notice 2007-7.

OK then answer me this. Why come out with a revenue procedure or notice or whatever it was indicating that it is ok to add Roth 401k and hardship distributions? Based on your position that would have been stating the obvious.

These two comments do not seem to reconcile. It is the IRS's stringent interpretation of the rules regarding amendments to safe harbor plans that is behind it. I think most people generally agree that the regs themselves pretty clearly would not prohibit this sort of change. Your reading/cite of the reg suggests you fall into this camp. It is only the IRS's comments that have "freaked" everyone out.

My FAVORITE topic... Plan uses 3% nonelective. They have a match that does not meet the ACP Safe Harbor (at least I don't think it does) because they cap the match at $5,000 per year. I don't think it meets the ACP because it is at least possible that an HCE could have all of his/her deferrals match, while an NHCE (perhaps one whose compensation increases substantially from the prior year) does not have 100% of their contributions matched. But regardless, they want o increase the cap from $5,000 to $6,000. That means that some HCE's and some NHCE's will get more match, but probably will disproportionately benefit HCE's, because the full $6,000 match only inures to those making more than $120,000. Of course, if one looks at it from a different perspective, it is truly the HCE's who have been discriminated against all along. Anyway, permissible or not too permissible?

I don't think Lou S. was emphatic enough. This is a very very very incorrect statement. Also, make sure the plan is not top-heavy before you do away with the safe harbor. (I presume you have safe harbor match already). IF the owners have been socking away the max for 15 years and you have high turnover among lower paid employees, I could easily see where your plan could be top-heavy.