four01kman

One person employer currently has a safe harbor plan (previously covered more employees, all of whom have left). Wants to change either to sep or simple, but the regs seem to say it can't be done if another plan is still maintained by the employer. 2006 contributions won't be made until tax filing date. Does this mean SEP or SIMPLE can't be adopted until after the 2006 contribution to the safe harbor plan is made?

I'm with Pax on this.

Temper, temper PinP

I'm not quite sure how one "freezes" a safe harbor plan in mid-year. Unless what is meant, the plan is amended to not allow contributions (either employee or employer) for the remainder of the [year][for ever][?] I understand the final 401k regulations to provide for matching for the [entire] year in which the safe harbor election has been made. But if in fact you can "stop" in mid-year, certainly a communication to employees would be required, not necesaryily a "safe harbor" notice (especially if the safe harbor provisions was being eliminated), but a notice regarding the cessation of benefit accruals and the elimination of matching contributions. It also seems to me the amendment (and collateral communication) would have to occur prior to the date on which everything stops.

There is a solution. I'm not sure the company will "buy" it, but with an "automatic enrollment" provisions for all employees on a specific date may significantly increase participation even without a match. Although employees will be able to "opt out", inertia is a powerful force.

The Internal Revenue Code Section 401(k) and the regulations issued thereunder.

You probably get one but not either. There are providers who are looking for recordkeeping and there are providers looking for investments. I don't know any providers who are not looking for either. Of course, there are providers who will draft and charge just for documents.

Lori, I can't think of why this would be a prohibited transaction. Employer creates a plan; employee rolls over balances from another plan; employee takes allowed loan. What the employee does with the proceeds is immaterial.

Thanks for the good words Kirk. The role of a fee-based advisor can be open ended. In this situation, the employer and the employees both need help. The employer in deciding what funds to offer employees. The employees in deciding what funds to put their money. Whether the record keeping costs will increase is a function of the provider chosen. In some situations, the advisor can put a program together that is less expensive than a bundled program. This is not a black and white area, but one with many shades of gray.

Using fee-based advisors is becoming more and more common. Sometimes the plan sponsor picks the advisor and sometimes each participant has that right. This is becoming a larger part of my practice.

Include them in LLC plan or a PEO with a 10% contribution. If PEO doesn't have 10% plan, they are to be included in the LLC plan.

They get them from the DOL.

I agree. Your services is "priceless", why shouldn't you be compensated? Jim

The financial advisor in questions obviously is not truly conversant in the field. First, the numbers don't make sense (10 people times 4 funds times $20 equals $800. Second, there is an easy alternative: have a master account that does all the trades (4 times $20 equals $80) and then transfer the appropriate number of shares to each participant (hopefully, at not cost -- at least it doesn't cost anything with my b-d). Of course, my clients are fee-based, and don't generally pay transactions costs (because they have funds that don't have require transaction cost). If you have a good relationship with the client, I would strongly suggest they reconfigure the investment options or absent that, reconfigure the adviser.

Look at a nonqualified plan for the very HCEs only. This would solve some problems, but create others.

Your second choice is the cleanest way to accomplish your goals.

I don't see why you couldn't do this. It sounds as if there is no discrimination in favor of the HCEs. It probably will have to meet the normal requirements for benefits, rights and features of 401(a)(4) and 410(b), but it seems there is an automatic pass without HCE involvement.

I don't think pension plan assets can be invaded through in-service withdrawals. Those withdrawals are limited to profit sharing plans [including 401(k)]. The basis 401(a) regulations specifically restrict pension plan payouts.

and you can have the plan effective on January 1, 2005, with deferrals effective December __, 2005. This allows you to use 2005 414(s) pay for the deferrals.

My understanding of part of what makes an investment advisor (however titled) a fiduciary is based on whether the individual "provides investment advice for a fee". Further, my understanding of the DOL position is that is not relevant whether the compensation is through fees, commissions or trails. Additionally, this advice can be rendered either to the employer sponsoring the plan, the plan participants or both. Although there doesn't seem to be a "bright line" test, it is hard for me to see a situation where the broker, financial advisor, etc. fails to be a fiduciary when providing investment advice to the employer or the participants.

1. Kirk, as always, you are the best. 2. In answer to the question, if the attorney looks at the rules for 401k hardship withdrawals, there is not additional requirement other than that in the rules. Once again, some attorneys (not you Kirk) have a tendency to "finger read".

A "safe harbor" 401k plan might do the trick. For those who do not want to participate, there is no penalty to those who do. This requires a "fixed" match of 100% of the first 3% of employee deferrals and 50% of the next 2% of employee deferrals. All employees are considered eligible and the ADP and ACP tests automatically are considered met.

You are living in a dreamworld. Check with you e&o carrier. How you receive the dollars is not material, receiving dollars for providing particular services is.

As with most things , it depends. Are you using "counting hours" or "elapsed time"? With the first, the answer is maybe, with the second, no.