Kevin C

Wouldn't that effectively be requiring more than a year of service to participate? I don't recall ever seeing a document that didn't have the provision PensionPro describes. The EOB says that if an employee is excluded for reasons other than age and service, when the other conditions are satisfied, he must enter the plan by the later of 1) the statutory entry date or 2) the date the employee satisifies the plan's other eligibility requirements. It then says that if 2) applies, the employee must enter no later than that date, even if it is not a regular entry date. Unfortunately, it doesn't give a cite. In the online version, it is in Chapter 2, Section IV, Part F.2

You are thinking of the limits on the SH match in But, note it does not limit the match to 6% of pay. It limits the deferrals that can be matched to 6% of pay. The non-elective SH contribution rules are in

Yes, 7% is allowed. You do not want to set the % so high that you might have a problem with the deduction limit. I usually pair a 3% SH with a PS contribution if they want to contribute more than 3% for everyone. That way, part of the employer contribution can be subject to a vesting schedule.

Our GUST prototypes had similar language. We switched document providers for the EGTRRA versions. As I said in my post #3, our EGTRRA prototypes and VS documents have more flexibility than what you are describing. We use the 403(b) document from the same company. It has the same SH eligibility options as the 401(k). The adoption agreement section is pretty simple and straight forward. The first part of the 401(m) safe harbor is to satisfy the safe harbor contribution requirement of either 1.401(k)-3(b) or -3©. It doesn't say you have to satisfy all of the ADP SH rules, just the contribution requirement. When you apply 401(m) to a 403(b) plan, why would that be any different than applying 401(m) to a 401(k) plan with the same match provisions and immediate eligibility for deferrals? It's the same 401(m) rules in both situations. The 401(m) portion of both plans are mandatorily disaggregated for testing.

I guess I don't understand your statement. If you want the "plan" to be ACP safe harbor, then it must satisfy all of 1.401(m)-3, including 1.401(m)-3(d)(4). The issue is: what is the "plan"? If you are applying 410(b) separately to those who could be excluded, then you have two separate "plans" for testing. One "plan" covers the employees who have satisfied the lower minimum age and service conditions in the plan, but have not satisfied the maximum statutory age and service conditions. The other "plan" covers employees who have satisfied the maximum statutory age and service conditions. See 1.410(b)-7©(3). Suppose you have a plan that provides for immediate eligibility for deferrals and requires 6 months of service with semi-annual entry to receive employer contributions, including the SH match. You choose to treat it as two separate plans under 410(b) because otherwise, as you point out, it won’t be SH. The first “plan” to test is the eligible employees who satisfy age 21, one year of service and semi-annual entry. All eligible employees in this "plan" are eligible for the SH match. So, assuming no other problems, this “plan” is SH. The other “plan” is the eligible employees have not satisfied age 21, one year of service and semi-annual entry. This is all eligible employees who are not in the first “plan”. This includes some who are only eligible to defer and some who are also eligible for the SH match. This “plan” does not satisfy 1.401(m)-3, so it is NOT SH. Also see 1.401(m)-3)(j)(3). But, do you really care? In most cases, this “plan” will not include any HCE’s, so it will pass ACP. If an owner’s family member is in this plan, then they may get a refund their first year. In a 403(b), the sponsor is a non-profit, which doesn’t typically have owners.

Yes, you can require a year of service to receive the SH match. The match in a 403(b) is subject to the same 401(m) rules that apply to the match in a 401(k) Plan. The 403(b) document we use allows you to require age 21, a year of service and semi-annual entry to receive the SH contribution. Or you can use the eligibility requirements for the regular match or the PS contribution. Start with the definition of "Plan" in 1.401(m)-5. It refers you to 1.401(m)-1(b)(4). The last part of -1(b)(4)(iv)(A) deals with treating a plan as two separate plans, one plan comprising all eligible employees who have met the minimum age and service restrictions of section 410(a)(1) and one plan comprising all eligible employees who have not. 1.401(m)-3 has the rules a "plan" must meet to be SH. But, note that if the otherwise excludables do not receive the SH, then the plan comprised of those otherwise excludables is not SH, even if the plan comprised of the non-excludables is SH. See 1.401(m)-3(j)(3). That will only be an issue if you have an HCE in the otherwise excludable group.

Forms, You are thinking of the brief exclusion provision in Appendix B, Section 2.02(1)(a)(ii)(F). I agree it doesn't apply here. But, nobody has said they think it does apply. I'm referring to the employer correction method for improper exclusion for a period of less than a full plan year. I'm assuming they will restart this person's deferrals so she is not excluded for the entire year. The corrections for a full year exclusion and a partial year exclusion are in different sections of the Rev. Proc.

I disagree. 1.401(k)-3(e)(1) prohibits amending the safe harbor provisions during the plan year. I don't see any exceptions listed. The requirements to receive the SH contribution are part of the safe harbor provisions. I would make the change effective 1/1/2010.

Never mind, I didn't read your post carefully enough.

Since they have time to restart deferrals this year, wouldn't the appropriate correction for deferrals in this situation be under Appendix B, Section 2.02(1)(a)(ii)(B)(2)? And the match correction under Appendix B, Section 2.02(1)(a)(ii)(D)(2)? I think Section 6.02(4)(a) of the Rev. Proc. covers correction of the 3% SH. If the participant is excluded from the 3% for the entire year, Appendix A, .05(1) would apply.

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If all of the refunds were not distributed, then the ADP test fails [1.401(k)-2(b)(1)(i)]. Rev. Proc. 2008-50, Appendix B, 2.01 has a correction method for a failed ADP/ACP test. It is basically your option 4, but the earnings adjustment is caluclated under the Rev. Proc., not using the gap period rules.

Even if you did get a determination letter, a fiduciary would still have to monitor and remove the in-house fund if it ceased to be an appropriate investment for the plan. The requirement to follow the terms of the plan document only applies to the extent the provisions are consistent with ERISA [Act. Sec. 404(a)(1)(D)]

John has it right that a nongovernmental 457(b) must be unfunded. Those accounts should be titled in the name of the employer. There is one other wrinkle with vesting for 457(b)'s that makes doing anything other than 100% immediate vesting a potential problem. Contributions, whether employer or employee deferrals, do not count as annual deferrals until they are vested. See 1.457-2(b)(1) & (2). 1.457-4©(iv) Example 3 has a plan with a 5 year cliff vesting and a $3,000 per year contribution. When the participant becomes vested, the plan exceeds the annual deferral limit.

It's in the 401(k) regs.

The terms of the loan program might not be included inside the plan document. Our documents and Reg 2550.408b-1(d) allow a separate written loan policy. If your plan does the same, the information you are looking for should be in the written loan policy.

Did you find anything in Rev. Proc. 2008-50 that says you can correct late deposits of amounts withheld from paychecks under EPCRS? The following sections indicate to me you can't: The 2008 employer matching contributions should fall under EPCRS, IF they are late. What was the due date for the matching contributions? You are still in the time period where SCP is available for significant operational failures.

I would start by reviewing the DOL's Voluntary Fiduciary Correction Program. Their website says Simple IRA's covering employees are eligible. There is information there about the VFCP Class Exemption. http://www.dol.gov/ebsa/compliance_assistance.html#section8

No, that does not sound right. The participant who defaulted on the loan has the deemed distribution.

For the IRS penalties, look at Notice 2002-23. It is mentioned on the DFVC page on the DOL website.

Datair might have allowed the interim use of their EGTRRA documents before they received the opinion letters. They told me in July 2006 they were considering doing that after they received the first round comments from the IRS. Adopting an "interim pre-approved plan" makes you eligible for the 6-year restatement cycle. See Rev. Proc. 2007-44, Section 17. I think that also means that they need to restate by the end of the current cycle.

jpod, In addition to advising them to not do it again, I'd say they have two separate corrections to make. (Rev. Proc. 2008-50, section 6.02(2)(d)) The first is the failure to take the elected deferrals from the paychecks for one pay period. The second is taking double deferrals from the other check. For the first, I would look to the brief exclusion rules in Appendix B, Section 2.02(1)(a)(ii)(F). If they don't qualify for it, they would be under the partial year exclusion rule. Worst case would be a QNEC to correct the deferrals for the excluded employees. If they qualify for the brief exclusion rules, they don't have to correct the deferrals. Either way, if there is a match, they would have to contribute the missed match. For the second, I don't see any direct guidance. The general principles in Section 6.02 of the Rev. Proc. encourage retaining the funds in the plan. Since the extra amounts were withheld from paychecks, I would consider them as deferrals. I think a reasonable correction would be to keep the extra deferrals in the plan, but notify participants that they can adjust their future deferrals if they want to. If there is a match, there might also need to be some kind of match adjustment if the timing of the double deferrals causes someone to get less match than they otherwise would have received. Even if you do a match correction, that doesn’t mean that everyone will receive additional matching contributions. The match correction rules in Appendix B, Section 2.02(1)(a)(ii)(D)(1) say that the match correction is reduced to the extent that (i) the sum of this contribution and other matching contributions actually made on behalf of the employee for the plan year would exceed (ii) the maximum matching contribution permitted if the employee had made the maximum matchable contributions permitted under the plan for the plan year. If there is no match, you may end up with the same result inside the plan as in your suggestion to “let sleeping dogs lie”. But, if the plan ever gets audited, it would be nice to have good notes documenting that you followed the correction method steps to get there.

The PBGC's Comprehensive Premium Payment Instructions says "[h]owever, a deceased participant will continue to be counted as a participant if there are one or more beneficiaries or alternate payees who are receiving or have a right to receive benefits earned by the participant." It's at the top of page 12 of the booklet (page 14 of the .pdf). http://www.pbgc.gov/docs/2009_comprehensiv...let.pdf#page=13

I agree they are not in the test. Cite 1.401(m)-2(a)(1)(i) and note the terms "eligible HCE" and "eligible NHCE". The definitions of both terms are in 1.401(m)-5. If they are excluded from the match portion of the plan, they are not eligible employees. The ACP test compares the eligible HCE's to the eligible NHCE's.

jpod, The OP says "...it was corrected three weeks later". It could have been corrected using one of the methods from Rev. Proc. 2008-50. Unless we get more information, we won't know what they did. Do you want to continue the discussion assuming an employer failed to take deferrals from one pay period and then took double deferrals from a pay period three weeks later?