wsp

Plan has a discretionary matching contribution feature with no end of year requirement. Company intends to match 100% of first 3% of contributions and fund the match on a payroll by payroll basis. Aside from a PR standpoint is there any notice requirement if they decide to raise or lower that match during the year?

And if he doesn't want to roll it at all? What now? Do you amend the prior 5500's? or take the easy and not correct way and show it as a rollover into the plan. After all the distribution never actually took place so it should have been shown as a plan asset all along. This one little topic shows how quickly the most innocuous of transactions can blow up on us 2-3 years down the road. Imagine if he was the trigger to moving from a small plan to a big plan in 2005. Plan sponser ends up being on the hook for the forfeiture reinstatement AND the audit expense for an extra year.

Ok, I'm in agreement with the direct rollover not triggering the 60 day rule....wasn't differentiating between rollover and direct rollovers. Now, I've got a chance to get some practical knowledge here... Assuming that there was obviously no constructive receipt by the rollover trustee then the money should have been redeposited back into the trust and the account reinstated once the check became stale (instead of being placed into that forfeiture account). Given that it's almost 2 years later would the distribution paperwork still be valid? Can you reissue a check based upon a signature and a request that's 2 years old? If it is still valid, what should happen if the original rollover option is no longer available? Does that negate the paperwork? This type of situation (2 year old lost checks) is rare, but we often have residual distributions that need to be paid and some are 12-14 months after the original distribution. I would think that the same concept would hold true for these as well.

Seems the IRS and the DOL are at odds with this one. How can you redeposit if the distribution is no longer rollover eligible??? IRS says that receipt of check begins the 60 day countdown. So, to me anyways, when that period ends the check can no longer be run through the trust. At that point then the funds should be transferred in an account separate from the trust account thus preventing their use as a forfeiture. If the distribution were originally a rollover then a revised 1099-R should be issued making it taxable in the original year. I'd guess that withholding should also be taken and submitted with a revised 945 being issued as well (though I'm not 100% sure on that one). Also would tell you what to do with the 5500. As of 3/1 all stale date distributions revert to non-participant status. Typically this is before the 5500 is completed so it's simply a matter of annually contacting the custodian and asking if any checks are stale. Bottom line is that if the participant waits longer than 60 days then he/she needs to argue their case before the IRS and not me. I'm not in the business of issuing PLR's. Of course I could be way off base on this interpretation. It's simply my opinion and is very conservative one.

My thoughts exactly....Seems like education is the problem here not location or multiple entities.

I agree with PEP.... 3.1 is more likely the eligibility provisions. Unless there is a provision somewhere in section 4 that limits the contribution to those who have reached 1,000 hours you've likely got a document that provides a contribution to everyone; even those who have termed. Because it reads like that I would interpret the document to read that the contribution must be deposited after each payroll. Which makes sense as you don't want residual distributions all over the place. Look around section 4.4 to see if there are any hours or end of year requirements. Verbage should read something along the lines of "Only Participants who have completed a Year of Service during the Plan Year and are actively employed on the last day of the Plan Year shall be eligible to share in the discretionary contribution for the year." There should be a section either just before or just after that should tell you when the accounts should be credited and the timing of the payments. That's going to tell you whether they have to be calculated and deposited on a payroll by payroll basis. The calculation of the accounts and the timing of the payments can be two entirely different periods.

major is simply one who was chosen to help "design" the plan and choose investment vehicles. Plan sponsor says yes to the advisor but other two (one NHCE) says no. So it's not a matter of plan sponsor being cheap. Plan sponsor also plans on turning over practice to one of two saying "no". Plan sponsor also has largest account balance and thus would be responsible for greatest portion. But...immaterial now that I know can be done. Does anyone have a plan that utilizes the services of an F/A on a per hour charge rather than basis points. Going rate for services is about $250/hr so a 2 million account would need a lot of hours to justify a 50 basis point fee (plan only has 6 participants). Better yet, how about a cap put on a service contract? 50 basis points up to 3k per year or something of the ilk. That way there's less disincentive to roll the non-managed IRA balances in.

The firm. A few of the major participants have made it clear they don't want the services. My guess (hope) is they already pay an outside financial advisor. If that's the case then no reason to pay two on an ongoing basis though I think at very least one should be retained during startup; perhaps on a fixed fee rather than basis points (large rollovers planned).

The online confirmation letter says "If you have input any of the information on your application in error, please wait seven days and contact the EIN Toll Free area at 1-800-829-4933, Monday-Friday, 7:30-5:30pm. If you do not want to call, please make corrections on the letter you receive confirming your EIN and return it to the IRS." I've been able to call and have things changed, but only because I was listed as the 3rd Party designee on the original SS-4.

Well, I certainly enjoyed the views of Love Boat...but then again I was 13.

#2 Love Boat???

I don't agree that you give him a choice between the two. His original instructions were to make a transfer. He has brought it to the plan's attention that the transfer was missed and needs to be corrected. Thus, I think the plan's hands are now tied and they must correct. Even if it's to his detriment. He should have kept his mouth shut and made the request again if he's better off. My guess is he's done the math and knows he's not better off quite yet and he's trying to get maximum money...classic shakedown of the plan. Don't give a choice of whether to correct, the correction method, or the timing of the correction. Just get it done using share accounting and get it done quickly. And I agree that "would have's" are dubious. If that was his true intent then he would have made that transfer into the stable value or at least told the plan administrator to make this correction quick because he want's into the stable value. Can't go backwards and say "I wanted to do this or that...." My only question would be...if it turns out that additional money is needed to make the participant whole, can you use forfeitures? I would think not if forfeitures are allocated but it would be ok if they are offsetting contributions. Agree?

Is there a requirement that a plan have a financial advisor? Client is a law firm and are choosing a daily trading recordkeeping platform that has educational tools and asset monitoring tools built into the website. Could they avoid the fees and simply go at it alone? Would the answer change if it were a small manufacturing company? Note this is not a should they...but a could they question.

Since you're using online platform I would assume that it's a daily traded account and thus is share accounting. If so, it's easy. Calculate the number of shares that would have been purchased on the original date had his directions been followed. Then apply any dividends reinvestment or capital gain purchases that would have been made to the account. That's the number of shares that need to be purchased to make the participants account whole. The value of the shares on any other given date are immaterial (including the notification date). Only thing to discuss is with the custodian of the assets. Can they purchase up the assets and then notify you of the cost so that the client can wire the necessary funds. Your goal is to make the account whole not provide punitive earnings numbers to the participant.

Can't forfeit without reasonable steps to locate her. Putting her on SSA isn't attempting to locate. I'd prepare and send him the letters associated with the IRS locator service. Doing so will cost him postage but it'll save him (and you) litigation down the road if his ex ever remembers about her balance and he didn't take that step to find her.

I find that statement quite ironic in that communication professionals in our field constantly tout a quality retirement vehicle as a reason for coming to or staying at a place of employment. Why would the state be any different? Certainly we all want our state governments to employ quality individuals, don't we? And an attractive compensation and benefit package will attract quality employees. You may as well question the government offering ANY benefit package; including paid vacations. That being said, I do agree that there must be limits as to the level of subsidization of a government sponsored DC plan. If the plan utilization is extremely low (especially given the already stated fee structure) then I don't think that's a good use of money. At some point the cost-benefit ratio swings too far to the side of the costs and it becomes necessary to take it "out of house". Me personally? I say make the switch when it costs more to administer the plan then the state will lose by having the employees gripe over the change at the water cooler while on the state's time. The fewer the people utilizing the plan, the sooner you make that switch.

Would it still be a problem if that amendment was left in place? Certainly the amendment would be driven by the fact that they are getting an HCE in earlier, but if it serves to eventually benefit other NHCE's would it still be considered discriminatory? As far as increasing the safe harbor contribution amount as Tom threw out there...wouldn't that be dependent upon the plan document? I'm not using cites for this, just my own not so common sense. But seems to me that if it's a match based upon payperiod by payperiod compensation without a catchup match provision then you're providing differing levels of match contributions aren't you?

Actually this is why so many small businesses hire TPA's to administer their plans. Many times it's the smaller businesses that can reap the biggest dividends from doing so. And in your case, they can ensure that the maximum benefit is available for you, the business owner. On a side note, a key employee is not determined by title or who the owner feels is key to their business. So, what you consider a key employee may be entirely different than what that the IRS says it is. Your plan very well may be top heavy and you don't know it. Especially given that you said that you have senior level, Highly Compensated individuals employed by you.

Although broker/dealer gets paid equivalent of total of 12b1's, the mutual fund company also pays out percentage of assets to TPA. Anywhere from 5 to 12 basis points depending on amount of assets. So if they aren't 12b1's they are still sub-ta's of some nature. So, question still holds true. If we allocate it as income in the same manner in which they were taken, are they then not considered a contribution. And how careful must we be to ensure only those who had the fees taken are the ones that receive the rebate?

While you can modify the plan to add those eligibility requirements, depending on the company and the number of people who have yet to become participants, it may make more sense to make all current employees eligible and make the stricter eligibility requirements applicable to new hires. Bad PR and a few disgruntled employees can cost far more than the expense involved in making a few employees eligible early.

I did a quick search on this and found a topic that began to address it but it petered out before any resolution could be found... Given full disclosure to the plan sponser and plan participants, can 12b-1 fees be allocated back to the participants as income? Plan sponser is using a financial advisor that is using R-2 shares. We do not want to accept any 12b-1's (even to offset fees) as we simply would rather remain neutral as to assets (in this specific case there are cheaper recordkeeping opportunities that offer r-5's and thus no 12b-1's and savings to the participant) Since 12b-1's are really a reduction of income, I'm wondering if we can allocate them back as income to the same individuals...in essence making them whole? or do we run into the issue of them being labeled as "fee reimbursement" and thus a contribution and thus having to be allocated as such.

Anyone know if ASC does this?

I've got a client that is operating a simple plan that has 90% participation rate. Assuming similar participation in SH plan so choosing 3% NEC. They are looking at ways to better benefit a couple of their sales employees. Using the current scenario they are limited to about 15% and 12.5% in p/s contributions under a new comp plan. Can I put them under their own plan and test them separately? Plan 1 2 HCE's 0 NHCE's Plan 2 4 HCE's 18 NHCE's In order to pass 401(a)(4) as a whole entity I had to reduce the 2 HCE's to 15 and 12 1/2% respectively. Simply not enough young NHCE's employed by the company. As their comp is in the 130k range they are about 7k each from maximizing. Both plans would have same eligibility provisions, vesting provisions, safe harbor status, investment options, and distribution options. Only difference is that plan 1 would be new comp and plan 2 would have discretionary p/s. Eventually both plans will use new comp but as I said, not enough young NHCE's. 5 of 6 HCE's are age 37 or 38. Please tell me if I'm off base here. Let me know if you need more information....

Thanks, That's what I'm looking at doing as well...though I'm likely going to avoid the p/s feature. Only 2 hce's make more than 90k. So while they would get more $$, the percentage going to ownership group doesn't justify the expense. Especially since it brings Top Heavy into play.

Is anyone running a Safe Harbor plan with a fixed and discretionary matching contribution. I'm curious as to the participation rate and the level of participation that a plan like this really has. Also, why use these formulas over other alternatives? I've got it in mind for a client that doesn't fit into the new comp models and am trying to ferret out possible issues; good and bad. (besides no adp/acp and top heavy).