Kevin C

It sounds like a payroll nightmare to me. I think you would have some plan issues to consider, too. You would need to determine if there are issues with benefits, rights and features. If the exclusion favors HCE's I think you would have problems. You will also want to make sure that prohibiting deferrals from a significant portion of pay doesn't cause a problem with universal availability of catch-ups under 1.414(v)-1(e) because it prevents someone from being able to make the maximum available catch-up. I'm thinking of someone who makes say $35,000 for the year, but only $17,500 of his compensation is eligible for deferral. I see that as an employer-provided limit that prevents him from having the effective opportunity to make catch-ups, unless there is an exception for catch-up eligible participants. Discrimination testing could get interesting. I don't see any way that compensation for every other payroll would be a 414(s) compliant compensation definition. In particular, I don't see it meeting the requirement that the definition be reasonable under 1.414(s)-1(d)(2). So, testing would have to be done using a different definition of compensation.

I heard back from ASPPA. The IRS is sending an apology letter to our client. They are looking into the system problem and will update ASPPA when they know more.

We have amended to add a participating employer mid-year. Our situation was different, though. A client with a SH 401(k) sold the assets of the company to another company that did not have a plan. The new company adopted the existing plan so the employees were able to continue to participate in the plan. I don't see any rules in the safe harbor regs that the provisions regarding participating employers must satisfy, so I would probably do it.

You'll also want to look at 1.416-1. T-6 and T-7 address the TH required and permissive aggregation groups.

Yes, the Form 5500-SF was marked to indicate a Form 5558 was filed. Also, the filing on 10/11/13 processed and has a status of filing received. We sent copies of the IRS correspondence to ASPPA GAC.

It's more than just a processing delay. A client just sent us the late filing letter they received today. It is dated 12/2/2013. The extension was overnighted the IRS on 7/26/2013 and the 5500-SF was filed 10/11/2013. They also received a notice dated 11/25/2013 saying that their extension has been received and the filing deadline is extended to 10/15/2013.

You will also want to take a look at §1.401(a)(35)-1. If a goal is to keep the stock in the plan, that may be a problem if their stock is considered publicly traded under -1(f)(5).

You are still saying "new plan", so I will assume two separate plans. If the new document has an effective date of 7/1/2013 and an initial plan year that ends 12/31/2013, it can not be safe harbor. If it was set up as safe harbor you technically have a disqualified plan since it is a successor plan and it needed to be adopted before 1/1/2013 and have a full 12 month plan year. That should be fixable, but you won't be safe harbor under the new plan for 2013. If the new document has the initial plan year ending 6/30/2014 and it was adopted before 7/1/2013, the new plan can be safe harbor. If their portion of the old MEP was terminated, it lost the SH for the final year because the termination was not in connection with a 410(b)(6)© transaction or the employer having a substantial business hardship. 30 days advanced notice of the suspension of the SH match to participants was required to suspend the SH match. If the termination was effective 4/2013, there are no deferrals after that point until they can defer under the new plan. You follow the terms of the document to calculate contributions until the termination date. What was the termination date? If the participants were not covered by a plan in May and June, there are no deferrals and no match.

There are a lot of moving pieces here. You haven't provided enough information for anyone to be able to tell if you have problems. What are the plan years for the two plans? When was the old 401(k) plan terminated? When was the new 401(k) adopted? And, what was the initial plan year? Or, was the "new" plan a restatement of the old one? A safe harbor match can be determined solely on a payroll-by-payroll basis. See 1.401(k)-3©(5)(ii). Of course, the document has to say how the contribution is calculated. The rule about establishing another plan within 12 months after termination of a 401(k) plan applies for an Alternative Defined Contribution Plan, which is not limited to just a new 401(k). See 1.401(k)-1(d)(4)(i). As mentioned, the rule affects whether distributions can be paid following termination of a 401(k) plan. The issue with a successor plan deals with the length of the initial plan year of the new 401(k) and the timing of its adoption. See 1.401(k)-3(e)(2). If the new 401(k) didn't have a 12 month plan year or the document was not adopted before the beginning of the plan year, you have violated the plan year requirement of the safe harbor regulations because the new 401(k) is a successor plan and therefore not entitled to the new plan exception for the initial plan year.

1. Advanced notice is not required under the 401(k) regs for a plan termination in connection with a 410(b)(6)© transaction. Does "informal termination" mean it will not be submitted for a determination letter? 2. To stay safe harbor for the short year, the plan's safe harbor provisions must remain in effect through the date of the plan termination. If the plan document isn't clear on how the profit sharing contribution works for a short final year, that should have been addressed in the resolution to terminate. 3. No. Salary deferrals to plan A stop on the effective date of the plan termination. However, Company B can amend their plan to allow them to defer into Plan B.

From your post, I gather he is 100% owner of both businesses. Yes, there is a rule that complicates and may prevent what you want to do. See What kind of timing does the owner have in mind for starting the new plan?

You haven't missed anything. Our document provider says they expect the DC Opinion letters around March of next year. When I spoke with one of their attorneys at the ASPPA conference at the end of October, he indicated they were still negotiating with the IRS over document language. The two-year period for adoption won't start until after the Opinion letters are out. The restatement cycles are covered in Rev. Proc. 2007-44.

The cite I posted says you can prorate an employer provided limit and apply it separately to each shorter time period. That can trigger a catch-up determination for a particular pay period even though on an annual basis there would not be catch-up at that point. The examples use a % of pay limit, but I don't see why it couldn't be a per pay period dollar limit on deferrals. It was a long shot, but I thought I would ask.

Does the plan place a limit on deferrals that can be made for a particular pay period? I'm thinking of: 1.414(v)-1(b) (2)Contributions in excess of applicable limit (i)Plan year limits (A)General rule.— Except as provided in paragraph (b)(2)(ii) of this section, the amount of elective deferrals in excess of an applicable limit is determined as of the end of the plan year by comparing the total elective deferrals for the plan year with the applicable limit for the plan year. In addition, except as provided in paragraph (b)(2)(i)(B) of this section, in the case of a plan that provides for separate employer-provided limits on elective deferrals for separate portions of plan compensation within the plan year, the applicable limit for the plan year is the sum of the dollar amounts of the limits for the separate portions. For example, if a plan sets a deferral percentage limit for each payroll period, the applicable limit for the plan year is the sum of the dollar amounts of the limits for the payroll periods.

Has anyone heard about this? Employee Plans News Issue 2013-8, from the new section today: Use Form 8822 B to Report Change in Identity of Responsible Party for Your Retirement Plan Beginning January 1, 2014, any entity with an EIN, such as a plan sponsor, must report a change in the identity of their plan’s responsible party on Form 8822-B, Change of Address or Responsible Party - Business, within 60 days of the change. If the change is made before 2014, and the sponsor has not previously reported the change, the sponsor should file Form 8822-B prior to March 1, 2014. For retirement plans, "responsible party" is the person who has a level of control, directly or indirectly, over the funds or assets in the retirement plan. See the instructions to Form 8822-B, page 2, for a detailed definition of "responsible party" and an explanation of who must sign the form. Here is the Form: http://www.irs.gov/pub/irs-tege/epn_2013_8.pdf

A few questions: 1. What does their deferral election say? 2. Are the senior executives maxing out their deferrals in the 401(k)? 3. Is the match determined payroll by payroll or on an annual basis? or, with a true-up? 4. Do the senior executives have plan comp in excess of the 401(a)(17) limit ? I'm wondering if they would have received the same match for the year if the correct compensation definition had been used and if their deferrals for the year ended up being what they elected. Sometimes you get lucky and an error produces the same result as doing it right.

I couldn't find it, but I recall a previous discussion where someone pointed out legal problems with discriminating against legal aliens. I found the following with a web search: http://www.eeoc.gov/eeoc/publications/immigrants-facts.cfm One section says: The Immigration Reform and Control Act of 1986Discrimination based on citizenship is expressly prohibited by the Immigration Reform and Control Act of 1986, commonly referred to as “IRCA.” IRCA also prohibits discrimination on the basis of national origin by employers with between four and fourteen employees.

I don't think you are missing anything. I read 1.401(k)-3(f) as saying that for a plan that provides for current year testing, providing the conditional and supplemental notices are the requirements to be able to amend mid-year to add the 3% SH. Our VS document has language saying you can do that, but I don't see anything in the regulations requiring you to have that kind of language in your document to do the amendment.

In that case, I'll agree it works out the same either way on the taxes, as long as the refund was paid after he terminated employment.

MoShawn, I'm not following why you would be looking at the age 55 exception in your situation. It only applies to distributions following termination of employment and you said the participant terminated at age 60. Once he is age 59.5, there is no early withdrawal penalty.

It was mentioned in the Washington Update session at the 2013 ASPPA annual conference as a possible revenue raiser under consideration. I don't remember if it was included in any of the bills they discussed.

The cite you are looking for is in Notice 87-13 I agree that if it is rolled to another plan where he/she is currently employed, it would qualify for the exception if distributed from that plan after termination of employment at age 55.

Is there a provision like you would find in a 401(k) saying that you are required to follow the terms of the document to the extent they do not violate ERISA? If it does and if the ERISA cite above applies, you should be able to ignore that provision. Either way, it would be worth a phone call to the document company to ask about it.

Is it an ERISA covered plan?

Interesting. For an ERISA covered 403(b), would ERISA 403©(1) apply?