JButtrick

I have a new DC plan in 2004. At year end there were over 2,000 participants. Although there were participants techinically eligible on 1/1/2004, there were no assets and no one had an account balance. There is an end of year requirement for an allocation. I would think that there we no participants on 1/1/2004 and certainly not on 12/31/2003 I don't find guidance in the 5500 instructions regarding new large plans. What I do read is that the large/small distriction is based on participants at the beginning of the year. I would think that this is a small plan for the 2004 5500. The major question is whether an audit is required. I would think NO. Comments?

39 folks have looked at this post, but none have responded. Is this a question for which there is no answer or is it too obvious to deserve a response?

A Sole Proprietor with employees and an existing PS plan (NOT 401(k)) wants to add a Safe-Habor K feature before October 2005. I believe that is permissable as long as there was not previously a K feature. For the employees, the SH contribution must be based on pay from (at least) the effective date of the feature to the end of the year and their K contributions will necessarily be limited to 100% of pay after the feature is added. But, what about the owner? Since his income isn't determined until year end, can he count the whole year's income? Does he need to pro-rate his income? Pro-rating would seem most equitable, but is it required? I assume that his draw doesn't figure into the calculation.

Thanks, both responses seem to reflect the majority opinion, however, neither (nor any other information I have found to date) address my basic question ... Are they asking who filled out the form or who is responsible seeing that the form is prepared. I believe that a literal reading of the instructions would suggest that they want to know who has the responsibility, but I suspect that they really want to know who filled out the form. The responses so far would suggest that others have been assuming that they want the latter, but I'm not sure that the instructions support that.

For years I have been blithly ignoring item 5 on the 5500, Optional Preparer informtion. Apparently I now have an alert client who read the form and wants to know why Line 5 is blank. Having reread the instructions, I see that it is "to designate the person or entity principally responsible for preparation". I can read that two ways: (1) who is responsible for getting the form done - that would be the Plan Sponsor, yes?. (2) who filled in the boxes on the form - that would be the TPA. I don't mind admitting that I filled out the form, but I don't think I want to admit that I am responsible for having the form prepared. I am I getting too paranoid? I wonder why it is worded that way, rather than "Name of paid preparer" or some such thing.

I am looking at almost the same issue, except tha FY is 6/30 and the client is looking at a Comparability DC plan. I agree that the PED should be 1/1/04, but my question is what compensation do we use for allocations and testing? I assume we would need to use a full year for determining the HCEs, but I think we would need to use pay since the PED for the allocation and for calculaing the testing percentages. To use a full year's pay would be double dipping.

I think there is a difference between a trust to trust to transfer, such as when plans are merged and a loan that part of a transaction which would otherwise be a Rollover. The Payor is not the Trustee, just a directed Payor and they don't have a copy of the Plan, so that isn't an issue I think I am just going to pull rank and tell them to change the L to an G. Thanks for your help! However, I would still be interested in any additional comments anyone may have.

The assets of Sold Company were sold to Purchasing Company. Most of Sold Company's employees were hired by Purchasing Company. Purchasing Company insisted that the Sold Profit-Sharing Plan be terminated. The participants could then elect to rollover their balance to Purchasing Company's qualified plan. One participant had an outstanding loan. Purchasing Company continued to do the loan repayments through payroll and transmit them to the Sold Comany Plan. Purchasing Company and the plan trustee both ageed to accept the loan balance as part of the rollover once the Sold Plan was termianted. The Payor for Sold Plan cut a check in the amount of the net account balance (Balance - Loan). Purchasing Company then remitted the repayments to the Purchasing Plan. It is now 1099-R time and the payor has issued 2 1099-Rs, one for the amount of the check with a code G and one for the amount of the loan with a code L. The payor is insisting that the loan balance cannot be included as part of the rollover on the 1099-R. It must either be paid off or defaulted. It seems to me that what we have here is an "In-kind" distribution and I can see no reason why it can't be included as part of the rollover 1099-R, but so far I have been unable to find anything in writing that says this is OK, probably because it is either (1) so obvious that no one has needed to address it or (2) so unusual that no one has though to address it. Can anyone help?

In testing an alternative defintion of compensation, the regs (1.414(s)-1(d)(3)) say that the average inclusion percentage (AIP) for the HCEs may not exceed the AIP for the NHCEs by more that a de minimis amount. Is there a "safe harbor" definition of de minimis? Is 4.57% (97.35 vs 92.78) de minimis? Does anyone have experiance with the type of "facts relevent to whether the difference is de minimis" (from Item 8 of the 5300 Schedule Q Demo 9 instructions)?

If the UAAL is negative in any year, does the funding method revert to Aggregate or stay FIL? If we stay with FIL, do we continue with negative UAAL? or Set the negative UAAL to $0 for the following valuation. Assume the plan is not subject to full funding limitation.