Santo Gold

Can a plan exclude "non-exempt" employees from a 401(k) plan, as long as 410b is satisfied?

Can an employee max out her 401(k) contribution ($15,000) and then continue to put more after-tax money into the plan, as long as 415 is not exceeded (other ER contributions and forfeitures counting toward 415 as well)? Do after-tax contributions count toward the 402g limit? Thanks

A PS plan has 2 different PS allocations. One gives a flat percentage to all eligible participants. The other one allocates on a service & comp weighted basis. The same group of participants share in each allocation. Would 410(b) be tested separately for each of these allocations, or can we combine and test together in 1 410b test? Thanks

I think I have this right, but I was hoping someone would verify: 401k plan started in 1997. Had a document at the time but never amended. 40 participants. Therefore, they need GUST, EGTRRA, RMD, Inv dist. We will have all the documents drafted, signed and dated (current dates) and follow the VCP submission process. Compliance fee is $1,000. So far so good??? Also, is it required they they also request a document determination letter (we are using a prototype) and, other than the compliance fee, is there any additional up front or post review government fees/penalties for using VCP? Thanks

If I 401k plan has a 6/30 plan year, does that mean it should have been amended by 6/30/2006?

If a Profit Sharing plan uses a points method for allocation (points for compensation increments of $100 plus point for YOS) of employer contribution, is that considered a safe harbor for 401a4 purposes? If not, can it be designed in a way that it would be considered safe harbor?

I met with a new 401(k) client and in wrapping up the meeting, the HR person asked if I thought they needed a separate ID number for their "OBRA trust", distinct from the EIN. Their accountant said yes, their OBRA trust expert said no. My initial response of "what exactly is an OBRA trust" did not hinder them from still asking my opinion. It sounds like their employees contribute (after-tax) money into an account, and pretty much use it any way they want, similar to a savings account. Thats about all I got out of it. My initial thought is that if this account has money in it and is attached to an EIN, well if the employer goes bankrupt I would assume that any place with money and the Employer's ID is ripe pickings for creditors, so they would want a separate number. Any help out there from someone who might know what to make of this?

Correct, I do not think I am going to satisfy the safe harbor with the service weighted allocation. Therefore, when performing the 401(a)(4) test, should/can I combine both allocations? It would probably be beneficial to do so, since the flat percentage of pay allocation would help.

A 401(k) plan has a non elective company contribution (fixed percentage of pay) that goes to all eligible employees. In addition to that, there is an additional company nonelective contribution that is allocated weighted for service and compensation. When testing for 410(b) and 401(a)(4), can/should both contributions be combined, or must each separate allocation method pass each test on its own? Does the answer change if the eligible group of employees who receive these 2 separate contributions differ?

The 401(k) plan sponsor wants to pass the investment advisory account fees onto the plan participants. Investments are self-directed, but pooled, so the TPA will prepare quarterly statements for the participants. Do the fees have to be shown separately on the participant statement, or can it be "netted" against the earnings? Thanks

Can't believe the creativity people have when designing 401(k) plans. Here's a new one: Can a company establish a 401(k) plan such that participants can only make elective deferrals once a quarter? They have bi-monthly payroll and I assume participants would have $0.00 deferrals in 5 out of the 6 quarterly payrolls. Then, with payroll #6, they would have a set amount withheld. Participants choice as to whether they want to have 3 months worth of contributions taken out in that last payroll, or have some other fixed amount withheld. I really don't know why they would want to do this, but I assume the employer thinks it will cut down on admin time for his HR person. Despite the nonsense of the whole idea, do you see anything "wrong" with it?

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A 401k PS plan was written to provide for lump sum distributions only (no J&S). The plan also allows for hardship withdrawals. Would the hardship w/d forms still require spousal consent, even though it is not needed for other distributions?

401(k) plan currently has no hours requirement and no last day of employment requirement for participants to share in the profit sharing contribution. The employer is looking to change this to 1000 hours/last day required to share in the contribution. For participants already in the plan, this would not be allowable, but what about for new participants, scheduled to enter the plan on 7/1/06. Could the plan be amended before then and applied to any new participants entering the plan after the amendment date?

#3 - The Story of the 2006 Pension Reform Bill #5 - The DOL Auditor Always Rings Twice #36 - Fahrenheit Form 5500

Sponsor has 2 separate 401(k) plans, covering 2 separate groups of employees. In the past, we have aggregated the plans and tested them together for ADP/ACP testing, and they have passed. 2005 was a close call and its likely 2006 will not pass. However, our initial analysis is that if the plans are tested separately (disaggregated), they both would pass ADP/ACP. Of course they would have to also pass 410(b) via disaggregation. The question though, is whether changing from aggregated to disaggregated for testing is a document issue? Does that need to be spelled out in the document, or can we make the switch without any amendments, notices or such?

I know this has been discussed before, but I am having trouble finding the previous posts. Can a 401(k) plan with immediate entry for 401(k) purposes, impose a 1 YOS eligibility requirement before eligibility is met to share in the safe harbor match? Thanks

Only HCEs are employed right now, so there is no problem with discrimination. Question for Belgarath: I'm using an IRS approved prototype document for this plan, and would not normally file for a determination letter. Did you file for a letter solely because of the retro effective date?

Thanks for that informative link; it pretty much covers the exact situation I have. Sounds like the answer it is "probably" OK to have the effective date pre-date the company's existence. Based mostly on IRS conference opinions.

A small company was just started in May, 2006, and damn the torpedos, they want a 401(k) plan up and running by 7/1/06. They want a calendar year plan, but with a 7/1 effective date, which would make their initial plan year a 6 month SPY. The document software does not seem to support having an intial SPY, and as such, there would have to be an amendment before 1/1/07, indicating the plan year as being from 1/1 - 12/31 after the 2006 plan year. This is what they will likely do, but what if we just drafted the document to reflect a 1/1/06 effective date? We would have the "whole plan year we want". The company wasn't around at that time, but would that invalidate the document?

When determining ownership percentages for Key employee (or HCE) determination, do you count just shares owned, or should share options also be considered?

Very gutsy game by Buffalo in game 7, but they came up just short. I give them credit for getting this far with all the injuries on defense. The penalty that lead to the "canes winning goal was unfortunate as well, but I guess the refs had to call it. Great effort, great series.

A plan sponsor's 401(k) plan was badly mismanaged by the the new (and now former) investment agent, complete with money not being invested timely, bad information being given to the participants, etc. A few participants have requested that their current 401(k) contributions cease, at least until this situation is resolved. Can the sponsor temporarily stop all 401(k) contributions, for maybe 4-5 months, until these problems are fixed, and then resume contributions again for all who are interested in re-starting?

With Columbus long out of the stanley cup hunt, I am pulling for Buffalo. Great city that could use the boost of winning a big-time sports championship (for those of us who still consider hockey a major sport:)). I think Carolina may have a slightly better team, but Buffalo just seems to have more "moxie". Either way, the winner of that series should have no problem with Edmonton, who seem to have overachieved in these playoffs.

Having 1 master brokerage accounts instead of individual FBOs is an option. But even with that, the cost to the financial advisor is still significant. Even limiting trades to once a month, you'd still have money deposited from Money market to the 4 funds each month ($80) times 12 months, for $960 annual fee that the advisor will cover. This is a small plan, less than $200,000 in assets so he can't be making that much extra to absorb something like this, at a minimum, every year. And thats not mentioning if someone wants to move their existing money around, which could also happen. Holding the trades and moving money quarterly would probably work fee-wise, but with self-directed accounts, it would be disingenious to tell participants that they have 100% self-direction for their 401(k) money, and then leave some of it sitting in a money market for up to 3 months not invested where they want it. I think that is asking for trouble. Can we get creative with the document and say something like participants having partial self-direction, with a limit of "X" number of times each year they can move money, and current 401(k) money will only be invested on a quarterly basis? That would blow 404© to pieces, but is it still allowable? His motives, I think are what I indicated: That he can offer the lowest fee to the sponsor using this approach and wants hang his hat on that, with everything else falling into place after that.