wsp

That doesn't ensure anything either. They could very well have that information available depending on their relationship with the participant. I still say go the notary route. At least then you're limiting exposure as a reasonable person would expect the notary to be legitimate.

We ran into a similar situation and were advised by legal counsel to do exactly that...ask for a notarized signature. We knew going in that the participant was not at the address so we simply wrote it in the distribution letter requesting that the letter be notarized. Took a few months, but the participant's family got the notarized signature and everyone was happy.

True, wish I would have added that caveat to my prior post, but OP said that "simply by allocating the contribution you've created a class" so I didn't go the coverage testing route.

Not true...I recently made the same assumption. Top Heavy contribution has nothing to do with the integrated profit sharing contribution (which E-Nut is right in that you don't test 401(a)(4)), although that contribution can be used to satisfy the top heavy contribution. If it were a New Comp plan and required testing you would test after the contribution is allocated and before the top heavy allocation. You don't go back and retest 401(a)(4) again. Either way the TH allocation doesn't create a class.

Thanks to you both. Much appreciated!

OK, I'm completely out of my element here....just looking for info to point a client in the right direction (ie who to go to for the real expertise). Years ago I worked for a firm that offered a flexible benefits plan that provided the employees with a base amount of dollars that could be put towards various benefit options. The base amount would provide the minimum coverage for most of the choices (medical, dental, life, disability). The employee could upgrade by using pre-tax deductions...additionally they could choose to use the reimbursement accounts for health, dependent care, etc etc. Lastly, we had the ability to set aside money to purchase additional vacation days and use for parking expenses. Client asked about our firm doing something almost exactly like that for them....my answer was "Yes, I could find someone to do that for you... and they'll be better and cheaper too!" Does all of this fall under a single plan document umbrella or is it piecemeal? Can my client go to a single Health & Welfare administration firm and get the documents and administration for this? Spendy? Client isn't extraordinarily large (100 people) so I would imagine firms like WWW would be out of the picture for cost reasons, but what about smaller firms? My guess is that whatever the cost, they will decide it's too expensive and will want to whittle away at the offerings until they reach the acceptable expense level. So does the typical RFP break down the costs by offering?

If anyone has access to cases heard before the 9th Circuit Ct. of Appeals prior to 1999 and can post Carich v. James River Corp., 958 F.2d 861 (9th Cir. 1992) We just might find our answer. Though it still won't tell us if the DOL will proactively seek out to enforce instances where they feel there has been fiduciary irresponsibility. Anyone???

All good and well....but the OP asked about monthly deposits and quarterly transfers. Hard to justify this one unless your dealing with multiple locations with multiple payroll cycles. Somewhere along the line in this thread the time frame for transfer went from quarterly to monthly and that's significantly different question. Realizing that it's completly subjective and up to the DOL investigator... could you see a small company ever being able to justify a quarterly deposit even if it was in an interest bearing account? Given the systems advances over the last decade (and the fact that the split and directions can be done using Excel and Word in 1/2 hour at most), I'm having a hard time with that time frame. So it comes down to this...can the DOL decide on their own (during an audit) if a breach has occurred and force the company to pay for lost earnings -or- must the participants bring suit and have the courts decide? And, since the money is in a trust account there is really no reward for this liability risk...why would you do it?

I realize that it's not related directly to your question, but if your plan is using the safe harbor hardship standards to house expenses, the hardship can only be used to purchase or prevent eviction or foreclosure. Simply being in arrears doesn't necessarily cut it. If the participant is trying to save the credit score then the loan is is the route to take. I'd check the document to see if you are using the hardship safe harbor or facts and circumstances.

Surely you jest....and exactly why is the name of the auditor germane to this? What does your prior job history have to do with anything? And more importantly, you can't possibly think that such information would be disclosed on a message board; or to anyone for that matter. Don't like it what I personally took from the audit...that's fine. Remember, I offered the example as my own opinion. You don't have to agree with it and that's fine. Say "I don't agree with you", but don't question my integrity.

That's what I took out of the audit. Of course it's all subjective as, obviously, they are keying on the ASAP phrase and that's up to the individual auditor.

Exactly... Last year a client of mine, that immediately segregates their deposits, was picked for a random DOL audit on their contribution deposits. Fortunately this client rarely took more than 3-5 days to deposit the money into the respective assets. The auditor actually checked both that the money was segregated AND that the money was deposited into the final intended destination. When asked what was reasonable time frame for this I got the "ASAP" response. But, the mere fact that she checked the dates on the asset statements tells me that the DOL considers this a part of the entire segregation process. So, in this case, IMHO it's justified to take the conversation beyond the initial question. If they're checking it...you'd better be doing it.

I certainly enjoyed it...Not sure yet if the enjoyment was in trying to solve the puzzles or watching WDIK in his futile efforts to avoid them. No offense intended, WDIK. Just trying to find humor in others troubles so as to avoid confronting that same demon in myself. I have to say the puzzles certainly beat reading some of the sarcastic and derisive posts that we sometimes see in here. I say keep them up, Tom.

An error? There's an ERROR on this board! Blasphemy! And, your home goes up on the block right after mine. My wife will be so happy as she so loves to stay in our trailer. And after all, it is approaching summertime.

Absolutely correct, wasn't thinking when I wrote that. But as this is a construction firm with an old school owner, they do not want to pay a dime if they don't have to. So, he likely would terminate if his premiums for health insurance were less than the top heavy contributions. I know that he will ask about it anyways. What we are likely looking at is a termination of employment and he simply gets insurance via his spouse who remains on the company payroll. See anything wrong with that? He's still 5% owner and obviously so is she...but that shouldn't matter. Correct?

I thought for sure #2 was The Cannibal Women in the Avocado Jungle of Death.....but I realized that there was no "V" in it. So I'm going to have to say The Towering Inferno.

At this point owner is only employed as a consultant and to receive healthcare benefits. And, unfortunately, it's not a 3% contribution. Company allows participation in 401k after 3 months of service and Company also typically contributes 15% to staff in an integrated formula. To pass discrim tests the Top Heavy has to be higher than that. This year it was 1/2 of the p/s percentage (they've yet to decide) In terms of real dollars, Top Heavy contribtution ends up being higher than COBRA payments for 2 years. And, 3% is material depending upon census isn't it? Could be very material in comparison to actual contribution in high turnover years.

Silly question, but... Client has plan that has recently become top heavy. 75% owner has 50% of account balance and is in process of transferring ownership and control to children. Owner is 70 1/2 and taking RMD's. If owner terminates, and no longer receives compensation, would his distribution still be considered an inservice distribution for purposes of top heavy distribution add backs simply due to his ownership status? 5 year look back versus 1 year. Client is currently making more in top heavy contributions than his COBRA payments for health insurance would be. And if it's considered a full distribution, what happens if (hypothetically) he rehires after a 1 year break in service? Other option is to take it Safe Harbor beginning 1/1/2007 and ending profit sharing contributions. In which case plan gets amended to use forfeitures only to offset fees. But, if we are trying to maximize contributions for children we would need to use a super match formula. I know those extra matching contributions do not remove the safe harbor label, but do they get considered safe harbor contributions for top heavy purposes? They do not mind making the extra matching for staff, they just don't like making the contribution for "otherwise excludables" many of whom terminate before becoming eligible.

Doing so would simply put them in a worse position than before. The point of the hardship distribution is to eliminate the hardship rather than spreading it out over the next 10 years or so. And remember, if you're forcing this participant to jump through all these hoops to get a hardship distribution then you'll have to do the same for the HCE who comes to you to get one to help offset her kids tuition/room and board for her last year at Loyola. I don't think you want to go there... Have the participant write the letter, accept it as fact, and you're fine.

True, but I would imagine that requirement is dependent upon the severity of the hardship. Can't very well expect someone to pay back a loan if the cessation of contributions isn't enough to satisfy the hardship. And, if you know they don't have the means to pay back the loan then aren't you going against your loan policy in that instance as well?

2 Silverado 3 My Darling Clementine 6 Outlaw Josey Wales 8 The Magnificent Seven

It really is as much as you want them to. You're in control of how much effort that you want them to go through prior to taking a hardship. If you want this to truly be a last resort then ask for complete financial documentation. But, you are allowed to take them at their word, absence of any information to the contrary. By word, I mean that you would want a written statement that they have no other resources available and/or satisfaction of the hardship can't be obtained through insurance reimbursements, asset liquidation, cessation of contributions to the plan, plan distributions or loans, or commercial loans. The second choice (written letter) is certainly less work on your part and is allowable under the regs.

Actually he doesn't want to (or not want to) terminate. He came to me looking to see if his plan was compliant and if there was a need to change it. He has no opinion either way which is surprising considering he's an Attorney. The compliance is easy.... I'm inclined to say leave it as it is since he doesn't care about maximizing...just wanted to get other's thoughts. I'm the only TPA in an office of CPA's and this is my only outlet to bounce queries off of. And since my last SARSEP terminated about 4 years ago, my exposure to this type of plan is limited.

Filing or preparing? There is no cost to file. For my clients preparation of the form is part of normal plan fees. For my own two cents and others might disagree but the preparation of plan documents, related amendments, and other documentation of that ilk outweigh the costs of the Form 5500. If there's a valid reason to maintain multiple plans, then the cost of the Form 5500 is negligible in comparison.

Can anyone provide me a valid reason for an attorney nearing retirement age (4 years left or so) with two young attorneys and 3 admin staff members who are all participating in the plan would want to terminate a SARSEP? Said attorney has said he's fairly comfortable where he's at in the retirement plan picture and isn't looking to maximize his contributions and isn't even fully funding the SEP portion. My first thought was coverage but it's a small firm and turnover is non-existant. Two of last three hires have been the attorneys and they likely won't be hiring any more soon. I'm thinking that short term this plan is pretty darn good. What about after retirement...When two attorney's are expected to take over the firm. Plan only continues if it's a stock purchase and not an asset purchase, correct? thoughts?