Lori H

sieve, well when you say generic, if you are referring to medical expenses, purchase of prinicipal residence, tuition, funeral and eviction prevention, then yes it has the generic provisions.

i understand that a hardship can be grossed up to include any taxes necessary due to the hardship. However, Sieve, this is a standardized Corbel document and does not have a generic hardship provision. Nor do the Safe Harbor hardship rules apply. I bet the plan sponsor goes ahead with the hardship distribution. Should be interesting.

The plan document does not technically state this is a reason for a hardship, but.....Here's the sob story: Participant has two mortgages, they(husband and wife) were on short term disability last year, they are trying to sell their house in alabama, but it has not sold. They do not have other assets to sell and they do not want to take out a loan and get further in debt. They owe $9000 in fed taxes. The SPD does say that the amount of your need may include any amounts necessary to pay any federal, state or local income taxes or penalties REASONABLY ANTICIPATED TO RESULT FROM THE DISTRIBUTION, being the operative words. It would seem like if the government is due money, they could get it from a retirement plan.

A small doctors office has a profit sharing plan. The plan defines comp as W-2 wages. The practice is an S Corporation and in calendar year 2008, the Doctor did not receive W-2 wages but received dividends, which I believe was reported on a 1099. I believe this is something he did under the advice of his book keeper( he does not have a CPA). The adoption agreement only offers the following options for compensation: W-2, Section 3401(a) wages or 415 safe harbor compensation. I am under the impression that should he choose to make a profit sharing allocation, he gets ZERO since he claimed no W-2 wages. Nor do I think retroactively amending the plan's definition of compensation would accommodate dividend payments. Am I thinking right?

The plan year just ended 12/31. The plan doc is a standardized Corbel which states "...the provisions of Section 401(k)(3)(F) may be used to exclude from consideration all NHCE's who have not satisfied the minimum age and service requirements of Section 410(a)(1)(A)". My thinking is that if the 2 excluded participants under the restructured eligibility requirements are not in the plan, then the QNEC is only necessary to bring the ADP/ACP up to the 2% spread without them. Pre restructuring NHCE ADP is 1.80%, after restructuring 2.40%. HCE ADP is 8.99%

a 10 participant plan has a 6 month age 21 eligibility. It miserably fails the ADP n ACP. So we utilize the statutory minimum age/service conditions and it still fails. When calculating QNEC's, do the excluded participants under the statutory conditions receive a qualified non elective contribution?

thank you Becky

ok thanks, so once line 6 on 550 is over 120, then you audit.

2007 plan year, plan had 107 eligible participants. Used the transition rule for 2007. This year plan has 109 eligible participants. Can we use the 80-120 transition rule again or is the audit required? Im thinking the latter rather than the former.

For 2008 an HCE defers the $15,500 and the $5000 catch up, for a total of $20,500. The plan fails the ADP test and it is determined through the leveling process that $3000 is to be refunded to above HCE as he deferred the most. He will actually HAVE to take that refund, correct???????? However, if he had deferred the $15,500 and then only did $2000 in catch up for a total of $17,500 and it was determined the plan failed the ADP and a refund of $3000 was necessary, that $3000 could be classified as catch up and therefore no refund necessary. Am I thinking right?

i just learned that the PLAN actually owns the contracts, not the participants. They reassigned the contracts to the plan when they got the new plan docs and the participants signed off on them. Seems to me the plan sponsor could just simply write a letter to the custodian and request that the match be returned to the company.

Was the match immediately vested? What does the insurance contract or custodial agreemernt provide for a return of mistaken contributions? If the funds were contributed to an individual contract/agreement owned by the employee there can be no return without the employee's consent because the employee owns all the rights to the contract. thanks mjb. Thats what we were afraid of. Yes, the match is 100% vested. I take it the sponsor would need to get a letter from the participant allowing for the return from the contract. I think there will be a problem in transferring the funds back to the employer since it would not be a a tax free transfer or rollover from the employee's account (another Q is what would be the event that allows a distribution from the contract?) It many be best to just not to do anything. yeah but how does that affect non discrim testing? I know the IRS doesn't penalize for giving money away, but.....

Was the match immediately vested? What does the insurance contract or custodial agreemernt provide for a return of mistaken contributions? If the funds were contributed to an individual contract/agreement owned by the employee there can be no return without the employee's consent because the employee owns all the rights to the contract. thanks mjb. Thats what we were afraid of. Yes, the match is 100% vested. I take it the sponsor would need to get a letter from the participant allowing for the return from the contract.

we have a similar situation. a non profit plan allows participants to defer upon date of hire, but must wait 2 years to receive match. well the employer goofed and started matching immediately. refund to employer? move to a forfeiture account? YIKES

non profits who maintain a 401(k) are subject to full Non Discrimination testing, correct? If so, then what is the benefit of having a 401(k) as opposed to a 403(b)? Thanks

This happened once with a plan that got audited by the DOL. They just required proof that a bond was obtained. No fines or sanctions.

I just received a response from the attorney who handles their document and restatements are NOT required for plans who terminated prior to 1/1/09 AND ALL ASSETS are distributed prior to 1/1/2010

Thank you Sieve. Mass Mutual is the sponsor of the standardized plan document and the plan is registered with them, therefore the sponsor receives all the appropriate amendments and for the most part adopts the default provisions issued in the amendments (EGTRRA, Lower Mandatory Cash Out, final 415, etc). A resolution was executed in March 2007 to terminate the plan, yet assets were not fully distributed until 2008. Bottom line is if the plan was in force for the first plan year after 7/1/07, restatement is required?

Hi J. In Sept they received the amendment package for the Final 415 Regulations along with the MassMutual announcement that their new restated documents have been approved by the IRS and they have until 4/30/10 to restated. The notice also states that "if your plan has been terminated or amended to another provider's plan document, please disregard this notification." The sponsors plan was terminated prior to the notice being received. Thanks

Is it a requirement to restate a plan that terminated and paid out all participants prior to 2009? If the plan received all the amendments from the document sponsor and is in compliant, it would seem that plan restatement would not be necessary and that the sponsor would not want the added cost of restating the plan. Thoughts?

i think this is the case BG5150. if the plan specifically defines the profit sharing allocation as pro rata then there is no need for New Compability Gateway language in the A.A. It would seem though that the software would automatcially blank out those options once a profit sharing allocation has been chosen. I'm having the sponsor go back and ask Paychex why it was incorporated.

I have always been under the impression that every trust of a qualified plan needs its own EIN for deposits and distributions. Now I am not so sure. My experience is that after several years of inactivity, a trust EIN is no longer valid. What are your opinions?

well, it would seem that the plan SHOULD be 404© compliant as it would offer an extra layer of protection to the plan fiduciary. Why the New Comparability Gateway would be checked is a mystery to me when the plan is a basic Safe Harbor with a profit sharing option. I've never seen a Paychex document before, but they didn't mail the document to the sponsor until 12/14/08 and the restatement date is effective 1/1/08. Not a lot of time to review it before the end of the year and to execute it or correct any problems that may be in the restatement

a small safe harbor 401k just received its new restated doc. plan has basic matching safe harbor formula with a discretionary pro rata profit sharing option. The odd thing about the adoption agreement is that in it they also have the New Comparability Gateway option checked stating the plan will satisfy the minimim allocation method identified as follows: reallocate preliminary contributions or hypothetical contributions paid to HCE's to NHCEs so that the allocation to each NHCE equals the lesser of the amount described in 2 of the other options. Well this is not a New Comparability plan, so is there any reason that would be checked? Additionally, this is a participant directed plan, yet it is NOT intended to comply with ERISA 404©. What problems could occur by not complying with 404©? This is a paychex volume submitter plan with a corporate trustee

Can you briefly explain the difference between After Tax contributions and ROTH 401(k) deferrals? I know ROTH goes towards 402(g) limits and is part of the ADP test requirements, but both are after tax. Thanks