Santo Gold

We have a new 401(k) plan that is to become effective 7/1/2007. The employer wants to have a 21 & 1 requirements with semi-annual entry. In addition to the doctor, they have 2 ee's hired 9/06 and 1 hired 4/07. They want to have the 2 2006 hired ee's in the plan as of 7/1/07, but impose the 21&1 on the 2007 hire ee. Would writing the document to say that "any employee working for the company on 1/1/07 is eligible for the plan on 7/1/07" be acceptable? Using a date (1/1) prior to the effective date (7/1) in order to bring people in? Thanks

I have an employer who wants to have a PS contribution allocation requirement of (i) at least 9 months of service with at least 1000 hours worked in that period, plus (ii) employed on last day of the year The first condition is obviously unique and what I have questions on. After reviewing, this would only apply to new participants, as participants in the plan on the first day of the plan year (1/1) who work 1000 hours would not receive a contribution only if they were not there on 12/31. Can you have a 1000 hours requirement with less than 12 months of service? Any other pitfalls you see to this? Thank you

An employer had a few late deposits of 401(k) contributions. The lost earnings amounted to around $60. The 5330 excise tax adds only about $10 to that. 15% of $70 is $10.50. I did not see it in the 5330 instructions, but is there a $100 de minimus excise tax when using 5330 for late deposits? Thanks

So, the employer must (in writing) designate which plan year the contribution is for. They could say its for the 12/31/06 plan year and allocate immediately, and count it as an employer contribution for the 6/30/07 fiscal year for taxes. The only part I did not understand is why it has to be made before 6/30/07? Thanks

If a 401k plan has a 12/31 PYE, while the fiscal year for the company ends 6/30, how would we go about making a PS contribution? For example, the ER wants to contribute $10,000 for the fiscal year end 6/30/07. Would that have to be allocated based on 12/31/07 eligibility and wages? And if that is true, then we would have to wait until after 12/31/07 to deposit (ind account plan). But then that means the employer would have to extend the company's tax return beyond 9/15. Is all of this correct? Is there a better way to handle this?

That's interesting. Elective deferrals are combined for 401k and 403b, but not for 457. So, assuming his compensation is high enough, he could put in $31,000 total employee dollars!! Thanks again

A doctor is switching jobs and will be working with more than at least 3 different organizations. He will have the ability to defer salary into a 401(k), 403(b), and 457 plan, all separate plans of different employers. Can he contribute $15,500 into each plan, or does the 402(g) limit apply cumulatively over all plans? Thanks

The link below mostly addressed a question, but I was hoping for further clarity: Company A sponsors Plan A and has a match safe harbor 401(k) plan. Company B is unrelated and sponsors Plan B which is a 401k but not a safe harbor. Company A buys Company B and wants to merge B's non safe harbor plan into A's safe harbor plan in mid year (7/1). From what I've read and linked to, this cannot be done without Plan A losing its 2007 safe harbor status. Is that correct? If so, does the employer still have to make the safe harbor contribution even though it is not a safe harbor (I would assume so since it is in the document)? One suggested alternative was to freeze Plan B as of 6/30, allow B's employees to participate in Plan A as of 7/1, and merge Plan B into Plan A on 1/1/08. Plan A would remain a safe harbor at all times. Do you agree with all of this? Thanks very much. http://benefitslink.com/boards/index.php?s...c=32952&hl=

I think I found my answer...... A MP plan cannot have a 401(k) arrangement. So, having a MP/401k combo plan is not permitted, which is really what I was asking. I believe you could merge a MP into a 401(k), as long as it did not act like a MP/401k combo.

Can a Money Purchase Plan be merged into a 401(k) Plan?

Can a safe harbor 401k plan switch from a basic to an enhanced match in mid-year?

The employer wants to move ahead with this. From what I've researched, in-service withdrawals can have an age restriction only (on PS money). There does not have to be a service requirement (i.e., 2 years of seasoned money before a participant can take it out. Is this correct?

Thank you for the input. That surprises me.

It's a bad idea. Thanks for the comments

401(k) Plan A is merging into 401(k) Plan B. Plan B does not allow for loans, but Plan A does and has 1 outstanding loan currently. Can Plan B be amended to allow for rollover loans only even if it does not allow for new loans? Does it matter if the outstanding loan being brought over is for an HCE or NHCE?

I assume the "should" part is NO since people are going to be taking money out of this plan left and right, and it operating not really like a retirement plan? Any other drawbacks you can think of?

Can a profit sharing plan have an in-service distribution age requirement of age 21? I know it sounds absurd, but from what I read, the age for in-service w/d can be any age prior to NRA. Does this sound OK?

Found my answer: Since they are participants, but all would have less than 3 YOS, they would get the vested percentage from the old schedule, based on their current YOS. Then, they would follow the new vesting schedule until they are 100% vested.

A 401(k) plan has a vesting schedule of 50% after 1 YOS, 75% after 2 YOS and 100% after 3 YOS. The employer wants to amend to a 2/20 schedule, but only for employees hired after a certain date. Employees can make 401k contributions immediately upon hire (no eligibilty requirements, but have to wait 1 year to participate in the 401(k). Since these new hires are actually participants in the plan, I think that they would be 50% vested after year 1, but would then follow the 2/20 schedule thereafter. That is, 50% after year 1, 2, and 3. Then, 60% after year 4, 80% year 5, and 100% year 6. Does anyone agree with this?

The person who begs to differ is a financial advisor who, for selfish reasons, would prefer the plan not offer after-tax Roth contributions. I think he is thinking Roth IRAs and assumes the same rules apply to Roth 401ks. Thanks

Roth 401(k) contributions held in a trust as part of a qualifed plan has the same protection from creditors as traditional 401(k) contributions, correct? This is spelled out in ERISA.....is it Title I? Someone outside the office begs to differ Thanks

Thanks to everyone for commenting. I read Rev. Ruling 86-142 and am coming to the "undesired" conclusion that in this specific case referred to, that payment of these transaction fees cannot be deducted as a business expense. They appear to be more like a broker's commission and thats what 86-142 is dealing with, that commissions cannot be expensed. If the employer pays for these transactions, either directly to the broker or through the plan as reimbursement, they are considered contributions for 404. Its also interesting (at least I did not know this) that for other investment fees, that if the ER pays them directly, they are an expense. But if the ER reimburses the plan for the fees, then its a contribution.

What is your authority for treating commisions and other transaction expenses as contributions? Hope this helps. I think the conclusion is that if the employer put those amounts in the plan to pay the commissions, etc., it would be a contribution. Question: Are plan expenses paid by the employer deductible as business expenses? Or, do they count towards the deduction limit for plan contributions under Code Section 404? Answer: They are deductible as business expenses, and do not count towards the 404 contribution limit. The exception would be if the fees relate to commissions, which the IRS regards as contributions (for 404 purposes) even if they are paid directly from the employer to the service provider. The following is from the PWBA Opinion Letter 97-15A: Concerning the portion of the "Wrap Fee" arrangement consisting of fees paid to the brokerage firm generated by services rendered on behalf of Plan X, Rev. Rul. 86-142, 1986-2 C.B. 61, considered the deductibility of broker's commissions charged in connection with the purchase and sale of securities for a qualified employees' trust or an IRA. It notes that broker's fees are not recurring administrative or overhead expenses incurred in connection with the maintenance of the trust or IRA. Rather, brokers' commissions are intrinsic to the value of the trust's or account's assets; buying commissions are part of the cost of the securities purchased and selling commissions are an offset against the sales price. Based on this analysis, Rev. Rul. 86-142 held that employer contributions to the trust of a qualified plan, or direct payments by the employer to a broker, to pay brokers' commissions cannot be separately deducted as ordinary and necessary expenses under section 162 or 212 of the Code. The fees in question are for self-directed assets held in a pooled brokerage account. Twice each month 401k monies are deposited and subsequently invested into mutual funds, as directed by the participants. There is a $10 fee per transaction so for 8 mutual funds, thats $80 a payroll, or at least $160/month. The employer wants to pay for these costs. Would you agree that this is a transaction fee, but not a commission? I think the employer can deduct as a business expense. Thanks

An employer wants to pay certain plan fees, but will only do so if he can deduct the fees as an expense against income. If the company pays for these expenses and takes a deduction, then the amount the company pays is really an employer contribution and is subject to the allocation formula in the plan, correct? It seems like this could lead to problems, but I'm not sure why. Does anyone have experience with this situation? Thanks

After some prodding and more digging, SS#'s did turn up for all terminated participants. Now we just have to locate these people. J. Simmons: I think what you suggested is reasonable. Its an interesting problem though, that if there are no records (other than their names) of their employment, and if no one currently at the company worked with the terminees, it would be difficult to be 100% certain if the lost participant is who he says he is. Thanks for replying.