Kevin C

Austin, I have to agree with Sieve on this one. It seems a lot of trouble to go to, but it should work. The preamble to the final 401(k) regs has a paragraph with an explanation of the section you quoted. Sieve, If the client wants it bad enough to do a short plan year and obligate themselves now to being SH 401(k) for another year to keep the SH for the short year, it should work. I don't see anything that prevents you from changing the SH provisions at the beginning of the following year. You just have to be 401(k) SH in the following year.

What does the plan document say about how the contribution amount is determined for each allocation group? I would expect it to be a discretionary amount for each allocation group. You wouldn't be imposing an integrated formula on the plan. All you are doing is using an integrated allocation calculation to help determine the amount of contribution for each allocation group. Will it work if you integrate in the calculation at $50,000? Try it and see. If an HCE gets a larger allocation integrating at $50,000 than integrating at the TWB, I doubt it will work. The 401(a)(4) general test will tell you if it works.

Sieve, Actually, my argument on the TH exemption keys on the phrase "... which consists solely of ...". You were arguing that the HCE portion of the NEC SH contribution does not satisfy 1.401(k)-3. To me, that means you are saying you have something in the plan other than a SH CODA and the SH contribution. If you still want to try the change, I wonder how this approach would work? The amendment results in the plan failing to satisfy a qualification requirement. The plan document is now the qualification issue. Plan document failures can be corrected under VCP. Of course, the IRS could just say the correction is to retroactively undo the amendment.

He will be Key for 2009 if he meets the Key definition for that plan year. Otherwise, he will be Former Key.

IPS, While you have the SPD out, look at the eligibility requirements and the entry date. Are they the same for the 401(k) and PS portions of the plan, or different?

For a DB plan, yes. For a DC plan, no. Matching contributions, EGTRRA, effective PY beginning after 12/31/2001. For other employer contributions, PPA 06, for plan years beginning after 12/31/2006.

The only limitation I can think of is that you probably would not have reliance on the opinion letters with respect to the requirements of sections 415 and 416. Rev Proc 2005-16, Section 19:

Yes, I interpret it the same way. It prohibits any amendment to "such provisions" I still agree with you. This is where I disagree. You say "eliminating HCEs from the NEC SH contribution". I see that in two parts. First the HCE's are currently receiving the NEC SH contribution. The NEC SH contribution is definitely a provision satisfying 1.401(k)-3. Who receives the NEC SH contribution is a part of that provision. Second, you want to amend the NEC SH provision. But, the reg says you can't amend the NEC SH provision. It doesn't say you can't amend unless the provisions satisfy -3 after the amendment. I have a question for you. With the plan as it currently is, if they only contribute the NEC SH contribution for the year, do they qualify for the section 416(g)(4)(H) top heavy exemption? Before you answer, consider that you are arguing that the NEC SH contribution going to the HCE's is not a provision that satisfies 1.401(k)-3. I see that the same as arguing that it does not meet the requirements of 401(k)(12).

Sieve, It's the next sentence of 1.410(k)-3(e)(1) that causes a problem for you. It would be nice if we would get some additional guidance about this, but I'm not hopeful that we will get anything useful. So far, all we have is guidance that adding Roth deferrals and hardship distributions mid year are ok. I read the reg as saying you can not amend the safe harbor provisions during the year. Roth and hardships are not safe harbor provisions, so I didn't see anything useful in that guidance. I do find it interesting that there have been discussions here about whether or not you can change deferral eligibility provisions or the PS allocation method in a SH plan during the year. My opinion is that those are allowed. Then, we have other discussions about whether a safe harbor provision that goes beyond the minimum requirements to have a SH plan can be changed. My opinion is that it is not allowed. Others have different opinions. In the end, it depends on how you interpret the language of the regulations.

Datair's 2007 interim amendment includes final 415 regulations language. According to Datair, the 2007 interim amendment was required to be adopted for a VS document by the end of the 2007 plan year if you elected any options in the amendment or by the due date for the 2007 tax return, if you did not elect any options. Either way, you are probably late with your 2007 interim amendment. If you have any clients in Datair prototypes, they will be ok because Datair adopted the interim amendment for their prototypes in December 2007.

It wouldn't be automatically disqualified, but you would lose partial reliance on the VS opinion letter. That affects your eligibility for EPCRS, unless you submit for a letter.

The last day requirement is that participants be employed on the last day of the plan year, not that they work on the last day of the plan year. If the business temporarily shuts down over a period that includes 12/31, that doesn't mean no one is employed on 12/31. It's the same situation as a company open Monday - Friday when 12/31 falls on a weekend. There was a fairly confusing ASPPA IRS Q&A question about this at one of the mid-year conferences a few years ago. The bottom line of the answer was that it is whether the employment relationship exists on 12/31 that matters, not whether the company is open for business on 12/31.

Look at the plan provision for designating a beneficiary. It should say who the beneficiary is if one is not designated. The terms vary from document to document, but I don't remember ever seeing a document that did not say something on the subject.

I've done that with a couple of terminating plans that had participants who could not be located. The Trustee takes care of all of the paperwork. It was a fairly easy process. For participants who can not be located, Notice 2005-5, Q&A 10 is particularly helpful.

Try 3 isn't the same result as before. It looks like you have it now. Of course, that assumes there isn't a plan imposed deferral limit and that the 415 limit doesn't trigger catch-ups.

You are closer, but not quite there. In your "Deferrals (Pre-Catch-up)" column, HCE 3 should be $15,500. HCE 3's deferrals in excess of $15,500 are not counted in the ADP test. Then, when you allocate the refund amounts, HCE's 1, 3, 4 & 5 will have refund amounts. HCE's 1 & 5 have not used up their catch-up limit for the year, so their refunds get reclassifed as catch-up. HCE 3 has already used up $4999.84 of the year's catch-up limit, so only $0.16 of the limit is available to reduce his refund.

Sorry, I was looking in the wrong place. The last sentence of 1.414(b)-1(a) that Sieve cited says a corporation can be in more than one controlled group.

Does the EOB mention overlapping group rules? There are some rules in 1.1563-1T©. I don't know if they are still current.

Sieve, I was reading your first quote as language addressing IRC 404(a)(6) where the contribution can either be designated for the current or prior plan year. If you can find a cite where it says a similar designation can be made for the current or a future year, I'll be glad to change my mind. For a profit sharing plan, the plan has to contain a definite allocation method. Becky gave some cites for it. The employer contribution is discretionary, so we are not talking about an employer contributing more for the current year than the plan calls for. Once a contribution has been made, the plan says how it gets allocated. What is being proposed is that the employer has the discretion to override the plan's allocation method, only allocate part of the contribution in the current year and allocate the rest in a future year. I see that as an impermissible use of employer discretion to reduce account balances as of the end of the current year, by not allocating a portion of the contribution that would otherwise have been allocated at the end of the current year, and refer you to 1.411(d)-4 Q&A 4. A MPPP is different in that the allocation formula produces a single contribution number that is not subject to employer discretion. If you contribute too much, you have no way to allocate the excess under the terms of the plan. But, you do have an non-deductible contribution and an excise tax.

Sieve, I don't see anything in the language you quote that gives the employer the discretion to decide whether or not an amount contributed this year will be allocated this year or held until a later year. The second quoted sentence just says the employer will provide enough information for the Administrator to be able to allocate the contributions in compliance with the terms of the plan. If you did have plan language that gave the employer or the plan administrator the discretion to decide whether amounts contributed this year would be allocated this year or allocated in a later year, I think you still have a problem. When the terms of the plan say the contribution is allocated as of a date, it becomes part of the participants' accrued benefits on that date. I see the question as: " Can the employer use its discretion to cause an amount contributed this year to remain unallocated until a future year?" I think the answer to that lies in 1.411(d)-4, Q&A 4 and the answer is no, they can't do that. Otherwise, you are allowing the employer to use discretion to reduce participants' accrued benefits at the end of the current year.

Did you verify the HCE determination? That's where I start when I check an ADP/ACP test.

The final 415 regulations eliminated some correction methods that were included in plan documents. Make sure you look at your final 415 regulations amendment to see what it says. It probably changes the provisions that were in your document.

No you can't do that. Once someone has earned the right to receive a contribution for the year, you cannot amend to take that right away from them. The allowable timing of the amendment will be determined by what the current plan provisions are. But, amending after the end of the plan year doesn't work at all.

For High 3, you are including $20,499.84 of deferrals in the test. He/she is catch-up eligible, so you should only be counting $15,500. $4,999.84 is catch-up due to a statutory limit (402(g)) and excluded from the ADP test.

Catch-ups triggered by the ADP limit are still counted in the ADP test. See 1.414(v)-1(d)(2). You do the ADP test. If you fail and any of those receiving refunds are catch-up eligible AND have not used their full catch-up limit for the calendar year, then their ADP refund gets reclassified as catch-up up to the remainder of their catch-up limit. You do not redo the ADP test afterwards.