jquazza

I don't understand why you say you would pass at 100% of TWB integration level but not at 70%? When you do your rate group testing, you can use permitted disparity, whether your integration level is 100% or 20%. The only thing that changes is the maximum disparity % (5.7%, 5.4% or 4.3%) In your case, it looks like it wouldn't matter anyway since you can only apply the permitted disparity on the additional 2% (remember, you're not allowed to apply permitted disparity to the SH contribution) and therefore the max disparity % should be 2% so no problem there. If you calculated your allocation with a 4.3% disparity, that's why you're failing, otherwise, if all the NHCEs make less than 61k+ and at least 70% of NHCEs benefiting at eh 5% rate, you should pass. If no, (document permitting) then can you pass with the ABT? If not, you can try cross testing.

You can amend the PS to eliminate the J&S requirement, but they would still apply to the MP money, hence, you have to keep track of them separately.

It's very strange that they would only take the K1s and not a report. If you were planning to make additional contributions, the K1s could not be finalized until the plan costs were taken into consideration. Would they still insist on getting the K1s? I agree with Blinky, they need the data, but they could rely on a report without getting the actual K1s (are they asking for the W2s for the staff too?) There has to be a certain level of trust between the TPA and the sponsor for the relationship to be fruitful.

I think it's convenient too to be able to match the 5500 to the investment sponsors statements (which are on cash basis for the most part.)

I see, then, if catch-up are not taken into consideration, the partner who is making the extra deferral contribution would be shorting himself out of his PS contribution. If all the partners get on board with his strategy, that could help them reduce their staff contribution costs, however, they might have an ADP test issue.

An auditor confusing coverage and nondiscrimination, how strange!

You don't have a statute of limitation on 5500 if you didn't file the form. Filing the schedule P with your 5500 triggers the SOL.

Blinky, catch up contributions don't count towards 415, so there really is no issue. The Partners could get 41k + catch up.

Katherine, I am not sure I get your point, at any rate, I thought the pass-through income from S-Corp could not be used for pension purposes (I believe it stems from an old case Durando vs. US.) Did that change?

You usually have 9 months after the close of the plan year. If your plan is on extension, the deadline is two months after you file your 5500. You should provide it to all participants (including terminated w/ a balance and beneficiaries of deceased participants.)

I don't believe that to be true. If you look at the 414(q) regulations, nowhere does the Service disguinshe a C-Corp from an S-Corp.

A priori, it doesn't seem like a controlled group. One thing you have to pay particular close attention to in a case like this would be Options. If any of these owners has any sorts of options to purchase the other owner's interest, suddenly they are considered more than 50% owners and the attribution rules change.

Scrappy, no one wants to answer your post, so you must have hit a sensitive subject. I'll take a stab at it though: In my opinion, you should stay away from what you're trying to do. Before you can shift deferrals to the ACP, your plan must be able to pass ADP with and without the deferrals shifted. The HCE who is supposed to get a refund is catch up eligible, so you "cure" your ADP failure by recharaterizing his deferrals to catch up contributions. In my opinion, your plan still failed ADP, you just used the recharacteriztion method to correct the failure (as opposed to QNECs or distributions.) In prior posts, some administrators had expressed differing opinions, arguing that your ADP test was passing since you didn't have any refunds due to the catch-up recharacterization. Incidentally, how much would a QMAC be? You're only failing by .15%, if the NHCE is making between 20-60k, that's a QMAC between $30 and $90. It seems like a better option than having to deal with refunds and tax filing or audit roulette.

We've used a small application called At-Stat over the past few years that works fairly well (plus it's very cheap ~$1,000.) It doesn't do the solving but you can recalculate contributions and rerun the tests in a matter of seconds. Anyway, you can call Charlie at (410) 561-7022, he can send you a demo CD.

Why not just amend the allocation date and requirements just for the 12/31/04 year?

No, you cannot do that. Take a look at treas. reag. 1.414(v)-1(b)(3) and -1(d)(2). The excess elective deferrals count against the catch up limit for the calendar year in which the plan year ends. It is assuming as you said in your post that 402(g) is not an issue. Nice try but no cigar...

You might have better luck getting an answer if you post this question under a different topic. This is the 401(k) board.

On the 5330, don't just report the penalty, make sure you complete the section IX to describe how the PT was corrected. Also, on the 5500, reporting the PT on schedule G is no longer necessary, however, you have to include an attachment (schedule of late participant contributions.) See the DOL website for the format.

Sole Prop have until their tax filing deadline to deposit their deferrals (including extensions,) however, they must have made a written election to defer before the end of the plan year.

It appears this condition would violate one of the conditions required for qualification, the nonalienability of benefits, hence, your plan would not be qualified. What's the purpose for the 7/1 effective anyway? If it is for anything else but deferrals, you have up to the last day of the plan year to execute your document, so you can wait until 6/30/05 and establish a plan effective 7/1/04. For 401(k) deferrals, you need to have your plan established before you can withhold them.

MPark, if you're a TPA only, I assume you use an outside firm for your clients custody needs. That's who needs to provide a SAS-70 for the auditors. The SAS-70 doesn't apply to the pure TPA work (the auditor should still review your testing and verify your Recordkeeping.) The SAS-70 is really useful to control the work of the financial institution holding the assets.

You have to use extreme caution there. If your firm is not allowed to keep the sub-TA or 12b-1 fees in excess of the plan fees and you credit the plan for that excess, you might very well be violating securities laws. The extra income to the plan could very well be construed as preferential dividend (the plan received more income on its investments than the rest of the shareholders) and that's a big no-no. Contrary to the other posts, I would either credit the plan fees for future expenses or actually return the money to the investment provider (inasmuch as we hate doing that, they might actually need it these days.) You may also want to amend your fee agreement so that you can keep these fees in the future.

As a matter of fact, I don't see the advantages of setting a Simple (k) or IRA for one man plans. The main advantage of Simple plans is that they get you out of ADP/ACP testing and Top Heavy Minimums (and get you out of 5500 for Simple IRAs.) A one-man plan will always pass ADP/ACP and would have no issues with Top Heavy. Now, we're talking about Simple 401(k)s or Simple IRAs, not a product offered by your firm called Simple to confuse the rest of the pension community.

Mbozek, I don't know how protection you would get from that acknowledgment. What we've been doing is when we draft the document, we exclude reclassified employees (e.g. independent contractors who are subsequently determined to be common law employees.) You still have to demonstrate coverage with these folks as nonexcludables, but if they come back to claim a piece of the pie (did someone say Microsoft?) they won't even get little crumbs...

Andy, I am with you on the annuity adverse opinion, I guess I am slightly turned off by the 8 1/2% + commissions and high surrender charges, but again, I do not sale them. I guess they do bring a certain comfort level to folks who need guarantees and that has a price. The reverse side is fixed annuity payments may not keep up with inflation. I am a little confused by GBurns' comment as far as the taxes are concerned 4. Taxes on accumulations or earnings. What is the tax liability of the IRA vs the annuity? Wouldn't you pay taxes on whatever you take out anyway at your current rate in either case?