jquazza

Here's the original test. For NHCE2 I used DOE comp hence the higher contribution rate.original failing test NO NAMES.pdf

Mike, I'm probably getting confused. I had dealt with a similar case a long time ago. I think it was subject to the minimum funding rules and that's why we had the excise tax. Anyway, that test is failing and there's no way around that. There's an HCE with an EBAR more than twice of any NHCEs (using DOE comp). The report from the previous TPA doesn't show any analysis that says the plan passed. ABT passes but that's not enough. So, I need an 11g amendment by 10/15 to increase one NHCE's contribution. If funded by 10/15, i can count it as 2014 contribution. Can I deduct it in 2015 anyway with no excise tax? If funded after 10/15 and before 12/31. Count the contribution in my 2014 general test, but in 2015 415 and that's it? No excise tax either?

I am not assuming anything. it seems they were careless and in the report they sent the client, you clearly see an HCE with an EBAR higher than anyone else.

I picked up a new comp plan. Previous TPA calculated PS contribution which ends up failing the general test. I understand I can still fix it with an amendment. My question relates to any penalties or excise tax associated with it. I seem to remember that if we the sponsor makes the additional contribution by 10/15 and wants to take the deduction for the previous year, it will be associated with a 10% excise tax. What if the sponsors takes the deduction in 2015. Is it just a 415 issue and as long as I don't have one, there's no penalties?

Thanks for the citation Peter. David, I let the investment adviser deal with investment related issues.

401(k) Plan Sponsor is changing service provider. Few Participants who held a guaranteed fixed income fund are being assessed a "market value adjustment." Sponsor doesn't feel participants should be penalized for its decision and would like to make up the charge to the participants. Would you count this fee reimbursement as a contribution to the plan?

I think it is only a requirement to obtain an EIN when the trust has UBTI and the plan has to file a 990-T.

Thanks for your answers. I think we'll follow Austin's way of looking at the problem. Failure is really insignificant and participant is in the same position he would have been if the error had not occur. /jq

Medical Practice 1 had a 401(k) Plan (Plan 1). Company dissolved and plan is instance of terminating. Most doctors went to work for Medical Practice 2 (new unrelated company.) Practice 2 sets up own new 401(k) (Plan 2.) Dr. K had self-directed brokerage account in Plan 1 (SDA1.) Practice 2 sent deferrals and PS contributions to SDA1 for about six months. Then Dr K established a new SDA for Plan 2 (SDA2) and all assets were rolled over from SDA1 to SDA2. What issues should I be concerned about? Does this constitute a PT? How do you book these transactions in the Forms 5500 for Plan 1 & Plan 2?

Medical Practice 1 had a 401(k) Plan (Plan 1). Company dissolved and plan is instance of terminating. Most doctors went to work for Medical Practice 2 (new unrelated company.) Practice 2 sets up own new 401(k) (Plan 2.) Dr. K had self-directed brokerage account in Plan 1 (SDA1.) Practice 2 sent deferrals and PS contributions to SDA1 for about six months. Then Dr K established a new SDA for Plan 2 (SDA2) and all assets were rolled over from SDA1 to SDA2. What issues should I be concerned about? Does this constitute a PT? How do you book these transactions in the Forms 5500 for Plan 1 & Plan 2?

No, it's a tax on the sponsor, not on the plan.

Age based and designed based safe harbor, somehow, these terms seems to contradict each other. How can you have a designed based SH age based allocation?

When using the 1-to-1, you have the option to allocate the QNEC only to the NHCEs who are still employed at the time of the correction.

And if I might add my grain of salt (kick it up another notch on the conservative scale,) you can only use the terrm w/<500 exclusion if the reason the participant was excluded from the allocation was actually the last day or service requirement. Say a plan excludes hourly employees and has a last day requirement for the match. An hourly employee with five years of service quits with less than 500 hours, that employee is not excludable, because the reason he didn't get the match is not because he quit, it's because he's hourly. I have seen SOOOOOOO many plans missinterpreting that rule.

If you look at treas reg 1.410b)-7(d), it clearly says that plans are not aggregated for nondiscrim (adp/acp) if they are aggregated solely for the purpose of the avg. ben. ratio test

Not a bad idea.

Trumpy, did you take the rhetoric class offered by Warren Beatty?

If you aggregate the plans for coverage, you must aggregate for nondiscrimination (ADP/ACP.) The other thing is even if you pass coverage independently (say 2nd plan covers staff as well,) and you run separate ADP for each plan, but you have an HCE in both plans, you have to combine his/her deferrals from both plans on each test.

Austin, the way I read it, I think you can use the DOL calculator only if you file with them under VFCP, not if you self-correct without filing. Do you agree?

Even with an -11(g) amendment, you don't have to provide 100% vesting. Surely, you couldn't give it to a participant who is 0% vested and terminated during the plan year being corrected, but if the participant is still accruing vesting at the end of the PY, that shouldn't be a problem. Excerpt from the regs: Corrective amendments must have substance. A corrective amendment is not taken into account in determining whether a plan satisfies section 401(a)(4) or 410(b) to the extent the amendment affects nonvested employees whose employment with the employer terminated on or before the close of the preceding year, and who therefore would not have received any economic benefit from the amendment if it had been made in the prior year. Similarly, in determining whether the requirements of paragraph (g)(3)(vi)©(1) of this section are satisfied, a corrective amendment making a benefit, right, or feature available to employees is not taken into account to the extent the benefit, right, or feature is not currently available to any of those employees immediately after the amendment. However, a plan will not fail to satisfy the requirements of paragraph (g)(3)(vi)©(1) of this section by operation of the provisions in this paragraph (g)(4) if the benefit, right, or feature is made available to all employees in the plan as of the date of the amendment.

The question is not whether forfeitures can be used to fund the QNEC, the question has to do with made up earnings. IMO, you can't. Your document says you can use forf. to reduce contributions, fine, QNECs are contributions, earnings aren't.

The other thing to consider is what ytpe of assets are held and who has the custody. If the assets are held by a bank who can certify the statements, the auditor usually only has to do a limited scope audit and that reduces the fees tremendously.

There is a very prevalent misconception with partners of LPs or LLCs who think because they file a schedule C, they are self-employed and can set up a separate plan for themselves (usually a SEP-IRA or similar plan.) Since they are partners (exclude passive investors partners,) they are actually considered employees of the partnership for pension purposes and the only plan they could participate in should be established by the partnership and be subject to the coverage and nondiscrimination rules that apply to qualified retirement plans. Now, if you're an independent contractor and get your income reported on a 1099 instead of a K-1, you may actually be self-employed and set up a plan for yourself. As far as your employee is concerned, what kind of income does he get (w-2 more than likely) and who reports it. The entity that reports his income is the entity that can cover him for pension.

I would tend to think your $27,800 calculation is correct unless you used your '04 catch up to exceed 415 in your 03 plan year (PYE 6/30/04.)

It's probably okay, but you should send confirmation letters to both the new and old address.