wsp

You can print to a .pdf using relius and even print a blank form. Can't use it for any filing purposes though. And it does print out the barcodes....I believe the barcodes contain the data so that it can be machine read...hence the "no filing requirement" If your person is using relius, have them save an empty plan book and simply open up all of the documents and then save the plan book. You then have the option of printing to a .pdf.

And here I thought you were going to say "Because I said so. Now don't sass me or you're liable to get a smack upside the head!"

Not presuming that you would tell your client what to do as it's his call. But....if it's a true economic hardship then they are going to take the distribution no matter what the penalty. Raising it to 1 year or even 2 years (if legal) won't stop them from taking the distribution. So, in an effort to deter Participant A (who isn't really in a hardship position) he is punishing Participant B who really is in one? Bit mixed up to me.....I'm guessing that the ability to reduce the matching contribution obligation without having to be the bad guy is coming into play here.

This plan does not use a safe harbor. Thanks to all who replied. My final question is if there is any maximum period for which deferrals could be suspended. Sal's book and several of the replies agree that 12 months is okay. How about 24 months? My two cents on your situation.... Given that the ability to take a hardship doesn't effect plan participation, I can't see how the extending of suspension time will prevent an employee from taking that hardship distribution. They will justify the need and the action no matter what the length of time is. So, to me that penalty has no correlation to the action and is excessive. But, that's just my opinion. I find it odd that such a punitive action is being considered given the employer's industry. I am also finding it morally troublesome that such an action is being considered as a means of avoiding a little extra work. Yet at the same time there is a profession of not wanting to lose a valued employee. If the employee is so valuable then 1) why not allow them to access the assets to get out of a hardship situation and 2) why would you subject them to such long lasting damage to their retirement savings? But, your question leads me to another one. Assuming that the hardship suspension period is a minimum and you can extend the period beyond the one year window, would you still be able to count those people as eligible and benefitting for purposes of 410(b)? Suppose you extended it beyond even those 24 months and made it 36 or 48? Still eligible and benefitting?

The only valid reason that you even gave was the ability to avoid fiduciary provisions of ERISA. But to me, if it were that onerous and expensive of an issue then we wouldn't have 401k's at all. Certainly the cost of one lawsuit can wipe out a few years worth of contributions by an owner and sponser of a small plan. So why bother? Has to be that the number of lawsuits is minor, or non-existant, if the plan is well designed and well monitored. The rest of your arguments make no sense. ADP testing? Not relevent in probably 70-80% of the School Districts. Random sampling of my state tells me that the smallest districts have 1 HCE. The largest ones have <1% of the staff considered HCE's. For those districts, if it's truly an issue they can stay 403(b) or do what everyone else does...educate the staff to encourage participation. Eligibility would be no different and internal workload would be less as there is ONE provider. Costs can be absorbed by the plan and still be cheaper than the typical 403(b) alternatives. And the fact that most can invest in an IRA is the same argument against all DC plans that don't have matching contributions. Why bother at all? The majority of people don't contribute even the IRA maximum to their 401ks. As far as ignorance? If I knew all of the laws pertaining to them, I likely wouldn't have posted...correct? But, The fact that Vanguad doesn't choose to offer their products doesn't mean that there aren't others who do. Can't count the number of times that my spouse has been approached by investment advisors who are promoting rediculously priced products. Those are the ones that prompted my thread. And even if Vanguard did offer their 403(b) product, would it be at the fee level as a 401(k) plan that offers Vanguard Institutional Funds?

Seems crazy to me given that they've made the two plans basically the same. Districts are basically tossing their employees to the dogs in exchange for the ability to avoid fiduciary responsibility and liability. From what I can see, only difference outside of responsibility/liability is the ability to make catch up contributions after 15 years of employment rather than waiting until age 50.

Is a school district considered a governmental employer and thus not offer a 401(k) plan? Seems to me that, given the salaries and contribution levels involved that the participants would be better served combining their buying power and thus recieiving a better class of funds. To me, and I'm strictly looking at it from the side of the participants. I'd much rather have a 401(k) and have access to the institutional class funds than a 403(b) where they hit me up with loads and higher expense ratios. Surely it can't be for the financial advice they are receiving on an individual level as most of the people that hit up these teachers are true ninnys looking for an easy trail.

Don't have the right data from the client, will have to get it. In the meantime I've plugged in a pro-rata comp figure and can see what you're talking about. Don't like it...not an apples to apples comparison. But at same time, we can exclude people who don't meet the statutorial minimums so why would this be any different.... Tried the two group method once along the way and it didn't pass...of course I've run this thing about 300 times so who knows what I was doing when it failed. But, I think by essentially pulling out that TH group I'm shooting myself in the foot (based upon their ages and comp). Thanks!

Mike, I'd be glad to send data. If there's anything that I've learned over the years is that there are always others that know more than me so I strive to learn from them. This, obviously, is one of them. I'm comfortable with that as I can always teach that same person something about a different topic. You'll have to wait though as I'm getting ready to call it a day. Short one, I know...but soccer practice waits for no man and I choose to disappoint others before I'll disappoint my son. As I said earlier, I'll be thrilled if this passes. And to the degree that you point out my errors to make it so? I'll be glad to hear that too. It's all about the client and not me. I want this to pass muster with as little $$ as possible. They tend to like that...

Most of the ones I deal have become comfortable with doing exactly that. Though they do send out the constant (2-3x's a year) notice saying these loans are in default status and request clarification or post it in bold print on the webpage....so I would say their argument is that they are trying to get the instructions.

Based on your previous post regarding the 3 month entry, these early entrants aren't considered includable in your coverage ratio test for the profit sharing plan. Why would you want to amend to increase the employees who are statutorily excludable from the test due to not having a full year of service for plan eligibility? So, to actually amend to provide entry and subject they early entrants to being the the denominator when they are currently excludable would seem to overdo it. Are you properly excluding these individuals with less than 1 year of service from the coverage ratio test? ------- Yes, they are excluded from initial coverage testing. But, they do receive the top heavy and thus get INCLUDED when I move to the average benefits test after failing that initial percentage test, correct? At least I thought they did. And using that assumption, that's why I'm reluctant to amend and am clinging to the last fiber of hope that I could increase top heavy and avoid actually amending to include any otherwise excludables. Especially given that the top heavy increase would be smaller in terms of actual dollars.

I'm not sure I followed this one. Plan is a basic Corbel Volume Submitter plan. Neither hours or hire date would fly? Why not hire date? I could see having problems making this a one off amendment basing it on letting someone in early, but not if it was left for all employees. In this specific case I'd only be changing entry date to quarterly instead of semi-annual. Or was that not what everyone was suggesting.

Which brings us to the real world application where the business owner hires the beautiful young gals (legal age of course) to be his receptionist and payroll clerks and then tells his spouse that he has to otherwise they wouldn't be able to maximize their retirement plans. I'm sure it's not the intent of the IRS to do that...but who am I to argue with the results. But I digress....Mike, what you are saying is that as you get smaller and smaller doesn't it become necessary to become flexible with entrance requirements to ensure 410(b) passage, correct? flexible as in immediate eligibility?

Gotcha...makes sense in that regard. Ok this is really a fundamental question then. I thought I knew this but a number of different posts have said similar things. If my service requirement for the deferral is 3 months but service requirement for p/s is 1 year then isn't it possible that I have members of my TH group with over 1000 hours? In that regard it's very possible that I have 3 employees with 2080 hours (I don't so your amendment works, but just trying to get an understanding here.). I was under the impression that anyone who was a participant in the plan but wasn't eligible for a reason other than termination received that...essentially excluding only those with less than 3 months of service.

Dang, should have added the question about why it's an amendment to bring someone above the TH minimum if the document says "at least"....I recognize that it's an amendment to bring one of the TH group to a higher level, but if I'm bringing the entire group up??? Say that only because based on hire dates it's actually cheaper for me to bring the entire TH group up to 5% than it is for those 2 members up to 8%.

Can I discriminate in that regard? Or do I use DOH and bring in earliest hires? And, if I amend to bring in someone based on hire...how does that not apply next year for people who are already employed? I guess..how do you word that to make it applicable to only this year? Without it being a loss of a benefit for others who are employed? Seems like it's changing the entry date to me...

Wow....This has gotten way out of hand. Sorry about that. And sorry about delays in my response as I've been out of office with daycare issues. Family comes first! Someone about 6 pages back (I think it was Mike) asked about numbers as they doubted the plan truly failed. I'm hoping I'm wrong and it actually passes but here goes. 36 total employees 12 excluded min age & service 2 excluded <500 hours 22 non excludable 7 non excludable are HCE 16 benefit 7 of those are HCE Ratio Percentage 60 Going to Average Benefits I get 100% HCE Average of 6.73 and NHCE Average of 4.12. 2 of 7 HCE's receive comp at 190k and happen to be about 40 years old. Most of staff is about same age Top Heavy goes to all non-key participants who are employed at end of year even if not getting year of service. participation for deferral was 3 months. So, you do have participants receiving 3% at decent level of compensation. Further, three members of TH group were born in late 70's I have 7 people in TH group and 10 in the Not Eligible group (1 due to december hire and 9 due to term; six of which termed >500 hours) So, I think the plan still fails after 3% TH is given. Plan document says that TH contribution has to be "at least 3%" hence the original question. Why not increase that group up to plan's passing the ABPT test. I realize this has evolved into whether gateway must be given and for my specific case it might be moot as I have to give 5% to pass anyways (I had thought it was 4 but it's not). Now, the argument against increasing TH contribution is 1) goes against plan document which isn't true as plan document doesn't limit me. To me "at least" means I can go higher. And it's a top heavy minimum not a top heavy maximum (isn' t it???) 2) It would create a separate rate class. But isn't that what TH already does? And aren't I already including them once I go to the ABPT anyways? If I can't do that, what's the criteria that I use to bring people back. Change the entrance requirement? How do you make a change like that applicable to only 1 year? Seems to me that making such a change only brings that TH group into the mix anyways so what's the difference in what I'm saying and you are saying? Sorry for such base questions...10 years of my experience was with medium sized plans that the extent of the discrimination testing was adp/acp testing and the occasional refund calculation. Coverage and other testing was never an issue and plans never went top heavy.

Could you elaborate? I think msladky is going on the assumption that all non-vested dollars are not being directed instead of just the termed non-vested dollars. If it's all non-vested then I would think that 410(b) could come into play because it would almost be the same as if that contribution never took place. How can you call it a contribution if they can't invest it. I think it's a reach , especially if it's spelled out that way in the plan document, but plausible nonetheless.

4) There were some participants who were employed on the last day who worked less than 1000 hours that were excluded from this allocation. However, because of the top-heavy requirements received a top heavy minimum allocation of 3%. You've got it pretty much nailed down. One part that I realized I left out after reading your summary is that the entrance requirements for the 401k are much more lenient than the profit sharing and thus the number of people brought in for the top heavy minimum is fairly large. Additionally their ages in relation to everyone else makes that 3% more valuable and increasing it makes more of a difference when using accrual factors. So, it's my hope to piggyback off the ability to simply increase the TH minimum contribution rather than amend plan to bring in people for 2 years when it shouldn't be necessary to go through this next year or even raising the base percentage which actually doesn't help me based upon the company census. So that's my question...can I influence the 401(a)(4) testing by increasing the TH percentage rather than amending the plan. And, if so, is it capped? Could I theoretically go higher than that 8% base allocation figure?

Client has an integrated plan with the base contribution approximates 8% of pay. Plan is also Top Heavy and intially failed 410(b) due to large number of retirements during the year. As a means of passing 410(b) I am able to include the top heavy group for average benefits testing under 401(a)(4). Do I then simply start at the 3% top heavy contribution and increase that number until I pass the 401(a)(4) test? Or do I have to start at the oldest employees (in terms of service, not age) and bring them in at the regular contribution rate in order to pass (in other words separate out the top heavy from 401(a)(4))? ErisaNut...you and I had talked about this before and this was the reason that I was increasing the top heavy to pass 401(a)(4), just had lost my train of thought back then.

Forfeitures are used to offset contributions so that's not an issue. And the company is supposedly holding that forfeiture in a "non-vested" account until the 5 years is up. It's a new client and this is the second time it's happened with the first being prior to our hiring. So that brings us back to the participant being the only one who could potentially be impacted. Are we infringing upon his rights to invest said assets by pulling the non-vested piece from him? If not, what's the practical difference between doing this and forfeiting the money? Either way the particpant is not controlling the earnings potential of those funds.

401k plan administered by insurance company is currently taking the non-vested money from termed participants and placing them in a non-vested account. The participant is then made 100% vested in the remaining balance. They do not make those non-vested funds available to the company, which uses forfeitures to offset contributions. I don't have a problem with that, but they also don't allow the participant to trade that non-vested part of their account. So, should the participant make a trade in his original account and then rehire....we've got a problem. Or do we? Would the participant owe, or be owed based upon the earnings differential, a residual income amount once those forfeited funds are reinstated? anyone else do this? I don't take forfeited money until the 5 year break or a distribution occurs, but evidently they don't follow this train of thought.

It's a side bar but.... Up until last year I was fortunate enough to have 5k childcare. But darn it if she didn't raise her rates to $110 / week (2 week vacation) to put me up to $5,500. But, I do recognize that she's the anomaly. One of those people who truly do the job "for the children". And, I did constantly run into the same issues that were mentioned above...re: vacations and service at eoy. Now that she raised her rates it's actually a relief that it's no longer an issue.

Yes. Absolutely. Sorry, should have put that in there. Calculation is done 7/1 and cleanup transfer done when allocation is complete; usually 10-15 days later depending on trust. My rationale for our process is that we just try to get that initial transfer as close to the true balance as possible so as to mitigate the size of that final transfer. We are trying to minimize the exposure for the other participants. To me, 80% transfer rate leaves too much sitting in the fund from the point of the allocation date until the date the final transfer takes place. Assuming the worst and you have a large portion of a fund transferring out the exact same quarter that the trust is late in supplying their statements and the fund dips during the period only to recover the last 70 days. You then had 20% of that account accruing a loss in the fund for 20+ days. Do you go back and calculate THAT loss and transfer it after the 9/30 allocation? You'd have to. I wouldn't buy into anything less than a 90% transfer and definately wouldn't do that without applying a simple ROR earnings calculation to it first. Maybe I'm overdoing it though.

I still have a few. I haven't changed the way that I've been doing transfers since the early 90's. I take the extra step of adding in contributions and a simple earnings calculation using the ROR calculated from change in NAV * (begbal + 5/12 ctrb to date). Gets me close enough without expending that much more effort. Of course, my plans don't have more than 10 funds so getting those ROR's is not that time consuming. So it boils down to what's worse...transferring a little too much or not quite enough.