rlb64

Is the participant responsible for calculating the earnings in this case?

Participant exceeded 402(g) by aggregating deferrals in 2 unrelated employer plans. Deferrals in each did not exceed the 402(g) limit. Must earnings be paid out? How would it be calculated?

Company A is planning on spinning off subsidiary Company B. Company B will have a new start up plan to which affected employees' 401(k) accounts will be transferred from the Company A plan. Both have calendar year plans. Our concern is affect on the new start up plan. I believe Company B would run non-discrimination testing for the short year from effective date through 12/31. If no employee has ownership in Company B, does this mean there are no HCE's for the first short year? Also, must the 415 test aggregate the accounts under both plans for 2006 calendar year?

Employer's ADP test failed for 2005 using prior year testing. All employee are eligible to participate on date of hire. The ADP test would pass if we carved out the otherwise excludable employees in 2004. I understand that if a plan uses prior year testing, the change to disaggregating the otherwise excludables doesn't help the first year because it's treated as a plan coverage change. My question is since all employees are eligible, can't we just "declare" that disaggregating (for coverage) began in 2003, which would allow us to use the disaggregated 2004 NHCE ADP for 2005 HCE testing? Coverage passes automatically regardless of whether we disaggregate. I hope this makes sense to someone.

Must a participant loan policy allow a participant to revoke payroll deductions for repayment and force it to go into default?

Is the key difference between deferring compensation in a tax exempt 457(b) and 457(f) substantial risk of forfeiture? In other words, if a tax exempt doesn't care about conditioning benefits on performance of substantial services, can we say there is no reason to offer a 457(b) plan? Are all ineligible 457 plans subject to 457(f) including frozen deferred compensation plans? Thank you

HCE transfers from one employer to another in a controlled group. One employer maintains a safe harbor 401(k) plan, the other does not. Safe harbor plan provides a safe harbor match of 100% up to 6% of pay. The other plan provides 100% up to 5% of pay. The aggregation rules require aggregating HCE contributions in both plans for each plans nondiscrimination testing. In the aggregate, the rate provided to this HCE is slighly lower than everyone else in the safe harbor plan because part of his aggregate deferrals are matched up to 5%, not 6%. Does this mean the safe harbor plan is ok?

Thanks, I have another question regarding determining catch-ups for plan imposed limits. The ERISA outline books discusses summing up the limits for each compensation period included in the plan year or using a weighted average. Can someone explain how the two methods might be different?

Plan imposes a deferral limit for the year. Participant defers less than that limit during a portion of the year. Can this participant contribute a higher percentage than the plan imposed limit for the remaining portion of the year so that the total deferrals for the year in the aggregate do not exceed the plan imposed limit as a % of total compensation?

Any thoughts on amending as a scrivener's error and going through EPCRS?

So, there isn't a 411d6 issue? I guess I should have mentioned the allocation is prorata based on compensation. It's not written to provide a % of compensation.

Non-profit org's document for the first plan year ending 6/30/05 provides for 1000 hours of service and employed on the last day of the plan year condition to receive profit sharing allocations. The client did not intend to impose these conditions and has been submitting profit sharing contributions with each payroll from the start. There are no HCE's during the first plan year if this matters. Any suggestions?

Form 5330 instructions say the due date is the 7th month after the employer's tax year. The employer's tax year ends 12/31/04. The employer files a 5558 extension for the 5500. Is the 5330 and tax payment due by January 31, 2006?

Errors were discovered in the 2004 ADP test resulting in additional refunds of $55 for each of 5 HCE's. The IRS correction program says $50 can be ignored. Does the plan have to distribute these?

If the controlled group consists of 2 firms and each has their own plan with different plan years, how is coverage run? Is coverage run as though the other doesn't have a plan?

I think you are asking whether "restructuring" is permitted for ADP/ACP testing. I believe the answer is no. You would need to spin-off into separate plans.

How would the IRS distinguish this from any other type of rehire?

It does, but they want to keep it safe harbor.

Employee is having financial difficulty. Employer is willing to terminate the employee so that he can receive a full distribution from his 401(k) and then rehire. What are the risks?

I'll have to request a copy of the SPD. I don't believe I have it anymore which I realize wasn't very smart. I'm not sure if I labeled the plan correctly. It's a section 125 plan that makes available a fixed annual employer amount plus an additional employee elected amount prorated throughout the year from each pay. As I incur health, eye, or dental expenses, I submit for reimbursement against the account (which allows for payment on a pre-tax basis). I was always under the impression that the participant can seek reimbursement under these plans for the full annual amount at any time during the year. For example, if an expense totalling the full amount occurred the beginning of the plan year, that full amount is reimbursable. This account is definitely not a health savings account for a high deductible health care plan.

Prior to termination from employment, I submitted outstanding reimbursable health expenses to my employer for reimbursement. However, they only reimbursed me for a pro-rata portion of the elected annual dollar amount as of date of termination. To simplify, my total elected amount, some of which is covered by employer contributions, was $1000; but they only permitted reimbursement of approximately $500 (the amount deposited to "my account" as of date of termination). Is this correct? If not, do you have a reference or regulation?

mbozek, just to clarify, let's assume the person pays 15% tax rate. If this person wants to invest pre-tax, then the person could invest $7,843.14. At 8% over 20 years, it grows to $36.556.53. If the person pays the same tax rate after 20 years (after withdrawing the entire account), the person is left with $31,073.05. If roth, the person invests $6666.67 ($7843.14 less 15% tax), grows at 8% over 20 years to $31,073.05. So, it seems the Roth is better if you expect your tax rate to be higher at retirement than it is now while pre-tax is better if you expect a lower tax rate. If pre-tax, the tax savings is at a rate equal to your top braket... while at retirement, the withdrawal is likely not entirely taxed at the same top tax braket rate even if your retirement replacement income remains relatively level.

Partnership has a top heavy profit sharing only plan in 2003, but started a 401(k)/match the end of 2004. The match is a safe harbor formula, but technically didn't start the safe harbor until 2005. The only contributions thus far for 2004 were the deferrals and match for all employees and partners. The partners assumed they did not have to contribute any top heavy minimums in 2004 due to starting the 401k/match. They have already filed their tax returns. I assume the top heavy minimum deposited shortly would have to be deductible in the 2005 tax year and included in the 2005 415 test. Is this correct? The plan provides top heavy minimums to key employees. Is 2004 earned income adjusted to calculate the top heavy minimums for the partners?

Spousal consent is required if the participant elects an installment and designates a bene who is not the spouse. Spousal consent is not required if installement, but the bene is the spouse.

Can total contributions including catch-up exceed 415 compensation? For example, participant's compensation is $10k, receives $2k profit sharing in 2005, can he defer $10k?