jquazza

When you tell that to clients, the written election sudenly pops up. It was in a drawer all along and they forgot to tell you what they were decided to defer.

I say trust your TPA. You pay them for a reason. No one here has enough information to tell you whether your test was performed properly. The fact is there are rules that allow you to exclude from the test participants who would not have been participants had the eligility requirements of the plan been more stringent. Did somebody say you can always sue the TPA if he made a mistake??? That's not true, TPAs cannot be sued...nor do they ever make mistakes...

It seems like a pretty sorry job if you ask me! Joke aside, I'll keep him out anyway. For this year's test, his compensation this year is irrelevant to the HCE determination. If your using the top paid group, you have to look at the previous year's comp. So that the fact that he didn't draw any compensation in 2003 doens't matter. It will affect the 2004 HCE group though. Also, in 2003, the document has to specify whether the plan will use the top paid group election, so if he is the only HCE and has to be excluded from the test because he has no comp, the plan is deemed to pass.

I think it's really up to the fund company to monitor this and assess any penalty if they wish (providing they can under the fund prospectus.) I work for a bank that does a lot of trading with various of fund families, and we started to get trade rejections due to timing concerns. Keep in mind that timing a fund in itself is not illegal. Fund companies have gotten themselves into trouble because they prohibited timing in their prospecti and did nothing to monitor such activities (and in some instances knowingly facilitated such activites in contravention of their self-imposed rules.) Unless you have arrangements with fund companies that put the burden of monitoring timing on your shoulders, it's not your problem.

You have until the end of the plan year to amend your plan with a safe harbor provision. The safe harbor notice has to be provided 30 days before the plan year begins. So, if your plan is a calendar plan year, provide the notice to the participants by December 1, 2004 and amend the plan by December 31, 2004 to have a safe harbor plan in 2005.

The IRS is pretty clear on that and its position is backed by a court ruling (Durando vs US). On an S-Corp, no W-2 means no compensation for pension plan purposes. You cannot consider part of the pass-through income earned during the first few months as SE income.

I think you have a problem if you give a 5% QNEC to the NHCEs, because now, your PS contribution gives 12% to the HCEs and 7% to the NHCEs. Can you do that in your plan? Unless you have a new comp allocation formula, you probably can't. And Tom is correct, you will have to pass the General Test with and without the QNEC.

So, nobody wants to take a stab at this one? The situation must be scarier than I thought!

401(a)(4) governs the nondiscrimination of plans. For 401(k) & (m), nondiscrimination is demonstrated by the ADP & ACP tests, which you avoid when you're safe harbor.

The money has been distributed from your plan, so you are clear with that respect. All you need to do is send the participant a letter identifying the portion of his/her distribution as a corrective distribution not eligible for rollover and let himher deal with his/her financial institution. You will have to correct the 1099-R to reflect the proper code of course.

Problem could have been avoided if the 5500 was filed on cash basis.

WDIK is correct. You have to be careful about the timing of your amendment though, you can't decide to become safe harbor mid-year, just like that. Remain cognizant of the notice requirement etc... The sponsor will probably have to wait until next plan year.

If the document makes the distinction between both sources and the PS contribution specifically says 10%, you probably have to make it in addition to the safe harbor nonelective. Read your document.

If your document specifies that the match will made on a periodic basis, say by payroll, you don't have to true it up.

You seem to be missing the point, you can exclude non-resident aliens with no US source income. Your individual might no be a resident alien. I am not so sure about that definition, does he need a green card to be considered a resident or are you considered a resident if you have a visa-work permit? It seems you might be considered a temporary resident (as opposed to green card holders who are permanent residents.) At any rate, in your case, the individual seems to have US source income, hence he is not excludable for 410(b).

I have a Simple 401(k) plan that was designed with a 1-year eligibility requirement and one entry date, the first day of the plan year in which the employee met the eligibility requirement (not the best plan design by any standard.) Now, say a participant was hired in December 2002. His one year of service is in December 2003 and therefore is entry date is 01/01/2003. He didn't have the opportunity to defer as he quit shortly after his one year anniversary. Should the employer be obligated to contribute a QNEC for him (in the amount of the NHCEs average?) What if if was hired in June and did not quit, would that make a difference?

You should try to work with NIPA or ASPA. Both offer professional designations (APA, APR for NIPA, QPA, QKA and CPC for ASPA) and training manual. Checkout NIPA .org or ASPA.org.

All the plans that I've seen have language authorizing refunds for 402(g) violation. In your case, there are no 401(a)(30) violation (since the participant didn't exceed 402(g) in any of the plans, so that the sponsor really should be off the hook as far as plan disqualification issues and liabilities are concerned. The participant should request the distribution of the excess from either plans with attributable earnings. If the distribution is done by April 15, he will avoid the double taxation.

I absolutely disagree. The reason you default a loan is because the participant doesn't have a distributable event. Once the participant terminated employment, he has a distributable event (I assume as most plan docs will allow that,) hence, you don't need to do a "deemed distribution", a regular distribution is in order. Process your loan offset.

I believe in order to be able to shift, the plan must pass ADP with and without the shifted deferrals. Your plan fails ADP in the first place, so there really aren't any deferrals you can shift. See the treas. reg. 1.401(m)-1(b)(5).

Thanks.

Take a look at Treas. Reg. 1.401(a)(4)-11. If you have a fail/safe provision in your document, you're probably okay. If you need to amend the document retroactively, it seems that you would need to provide them with a QNEC (the NHCEs ACP) regardless of their deferral amounts.

The way documents are drafted these days, you can pretty much pick and choose who will be added to your benefiting population. Considering an amendment to add folks in the matching group who did not defer and consider them benefiting would violate Treas-Reg 1.401(a)(4)-11(g)(4). The amendment must have substance (whatever that is, is $10 subtancial for anybody's retirement?) But basically, I gathered that we cannot use a retroactive amentment to include terminated participants and not provide them with any benefits. My guess is I will have to at least provide a QNEC equal to the ACP average for the NHCEs. Now, that's only when we have to increase the covered population by amendment. If the document had a "fail/safe" provision to pass coverage automatically, it would not matter whether they deferred or not. Andy do you concur?

Mr. Butler, have you been reading pension stuff all night long and still can't get to sleep? It's time to ask your doctor for better pills!

A sponsor offers a 401(k) plan with matching provisions. The match has a last day and 1000 hours allocation requirement. The plan fails the ratio percentage test and the average benefit test. I am trying to amend the plan to pass coverage. The participants I will include in my amendment need to receive a "substantial benefit" from the plan in order to be counted. Out of all the employees who were excluded due to the last day or hour requirement, only 3 deferred. I need to bring in 9 to pass coverage. Do I have to contribute a QNEC for them? What are my options?