Leopurrd

Steve, glad to hear someone out there agrees with me MWeddell - you bring up an interesting point. But, since I am not a lawyer, I usually follow the interpretation in Sal's books. If you find anything definite - please update me! We've had several clients in this position and it would be great to offer them another alternative besides an NHCE only match. Thanks to both of you! Vicki

I don't think its an aggressive stance - I believe it is not allowed per the IRS regulations. Sal has mentioned this in his ERISA outline guide. FWIW, when we encounter this, we change the testing method to current. Can't wait until the EGTRRA restatements, I've heard with the new prototypes you won't have to use the same testing method for both deferral and match. We found out about this not too long ago and have since changed our document drafting style to not include a match unless the ER will be making one the first year. We then amend the plan to add the match the first year they decide to contribute and you can then use the 3% rule/prior year testing. Vicki

Hi all, I was wondering if anyone could direct me to a reputable ERISA law degree curriculum that was offered online - I'm interested more in the general benefits side and not the practicing side. I found a college based in Chicago with an LLM (?) program in Employee Benefits but I don't believe they offer online courses. Thanks!!! Vicki

Yes. the loan limit of 50% or $50,000 of acct balance applies only on the loan date. Although technically the 50% remaining in the acct is collateral, it can still be withdrawn should the doc allow.

here are the basics: 1. If you restate you provide an updated SPD, if you amend you provide a SMM. 2. If you plan on restating or amending, you need to do so soon - your final day for passing out a SH notice is 11/30 3. SHMAC is required to be in the document 4. SHNEC can either be flexible or required. required would be in the document, flexible would not. (with flexible you give out a maybe notice 30 days prior to plan year, and then distribute another notice by nov 30 of the actual plan year saying "yes, we will contribute") 5. ADP language needs to be in the document, only showing current year testing method. If you put a SHMAC or SHNEC into your document, you MUST make the contribution unless you have a business hardship, merger/acquisition or termination. I think I've covered the basics, but I'm sure there will be something I've forgotten addressed in additional posts. As an FYI, Whenever we have added the SH to a plan, we generally restate because of so many changes to the SPD - its easier than typing it all in an SMM.

Also, the IRS has commented that a change in testing method (prior to current or vice versa) is considered a discretionary amendment and must be implemented prior to the end of the plan year. I'm thinking that TPG would be considered a change in testing method as well.

Tom, Didn't look at the video (thats a big no-no says IT....) But, I read somewhere that they've added Salmon as a new soda flavor!!! Gotta look forward to that. The article on Reuters "Oddly Enough" said even Mr. Jones himself couldnt finish a bottle.. Vicki

I agree - there's always some sort of interpretation involved in these regs!!! I would guess that payroll period match (since in a SH is required to be deposited by the end of the next quarter) would be based on their SE income - so you would not deposit until year end, since they have no actual "income" until then, only draws??? I would think that you could also base it on the draws but overall their only payroll is their SE wages, which you don't know until end of year, so would require an adjustment after their tax return has been filed. But, IANAL so don't quote me on that! I only know what I read in the regs. Vicki

Corbel has added a revised SH notice with the Roth language.

I agree with Bird. Here is an excerpt from the Final 401(k) regulations: "One commentator asked for clarification of the interaction between these timing rules and the rule under the regulations that treats a self-employed individual’s earned income as being currently available on the last day of the individual’s taxable year and whether this last day rule precludes a partner from making elective contributions during the year through a reduction in the partner’s draw. The restriction on the timing of contributions is not intended to prevent a partner from deferring amounts that are paid to the partner throughout the year on account of services performed by the partner during the year, and the final regulations have been modified to clarify this point. However, self-employed individuals who take advantage of this opportunity to defer amounts during the year must make sure that the amount contributed during the year will not exceed the limits (such as the limits of section 415) that will apply to the individual, based on the individual’s actual earned income for the relevant period. " I take that as the income is earned at the end of the year once the tax return has been prepared, but the IRS does not count the deferrals from the draws as pre-funding (which is prohibited in the final regs). The self-employed participant in the plan would need to be sure that any expenses or other accounting entries did not put them below their deferral, or they would have a 415 overage. Vicki

Thanks for the confirm, WDIK I'd hate to give out the wrong info to someone!!!

If I remember correctly, those plans covering only owners and spouses are exempt from the fidelity bond requirement because they are not covered under title I of ERISA, which outlines the fiduciary responsibilities, including bonding.

I think there was mention of this at the Q&A at ASPPA, in regards to using the EBSA calculator as a safe harbor??? I guess what I'm really trying to say is that you should be OK by using their calculator and wouldn't have to rely on calculating individual rates of return.......Can anyone else from the conference confirm or deny this? There were SO many things to absorb, I'm afraid I forgot some things already! Vicki

Tom, trust me, it's a complement. BTW, thought your presentation at ASPPA was great, especially your song

I'm sure Tom could give you the cites for the regulations, but here is my attempt to answer your question: No. Gateway contributions must be under 401(a) and match is under 401(m)(?). If you had a 3% SHNEC, this could be used for gateway/avg bens purposes (but if your HCE had more than a 9% contrib, you would have to give an additional contrib for gateway using the lesser of 1/3 or 5% rule). Your match would help with the average benefits test, though! Vicki

Hi everyone, Came across this post on Sat prior to leaving for ASPPA. My husband became hooked and somehow unlocked the file!!! (He's an impatient computer whiz.....) Unfortunately it took the fun out of it for me, but I figured I'd give answers out as needed!! Just ask or PM me Vicki

you are correct - any deferrals characterized as catch up are above the 415 limit. deferrals can be recharacterized when they exceed the 402g or 415 limit, or when you have an adp failure.

Yes; any discretionary contribution would only need to pass coverage testing. If the employer wishes to benefit the employees in the profit sharing plan rather than a medical plan, thats his wishes. You would need to be sure you were allocating the contribution based on your plan document and that any top heavy contributions were made accordingly.

Also, you may want to verify if any of the deferral is catch-up - your non-discrimination testing and 415 limits do not include any catch up contributions.

Just remember, additional employer contributions above the SH match will not allow you to rely on the top-heavy exemption

SoCal, Not sure about Question #1 - I know that on our Corbel prototype, it allows only for you to exclude ALL HCE's. I'm not sure about excluding only SOME. However, with it being HCE's it may not be frowned upon. Then again, I'm not an expert on plan document drafting. (Although; if they did not want to defer, they could elect out on a nonstandard document?) In regards to #2, all SH contributions MUST be 100% vested. Unfortunately you can't get around that, even with HCE's.

I agree - if ineligible, the funds should be forfeited for future allocation/reduction and the participant should be made whole through a payroll check. However, you may want to look into the new 415 regs - although proposed I believe you can rely on some of the proposed changes, including the fact that you can defer on severance pay up to 2 1/2 mos following termination if it would have been "normal pay". So, it may not need to be returned??? Here's an exact quote from an article posted here on BL: "7. Payments After Termination of Employment Addressing an issue that has lain dormant since the inception of Section 415, the proposed regulations state that Section 415 compensation generally does not include payments made after termination of employment, except for regular compensation, commissions, bonuses, overtime, shift differential and cashouts of accrued leave that could have been used if employment had continued. So long as these payments are made within 2-1/2 months of severance from employment, they may be considered compensation for purposes of Section 415. However, pure "severance pay" is not considered compensation for Section 415 purposes." Here's the link for more info: http://benefitslink.com/articles/washbull050620.html Hope this helps!

SoCal, There are specific restrictions on the Safe Harbor contributions; namely: -it must be specified in the document (unless you're using the flexible 3% shnec, I think, but that's another story that I cannot elaborate on) -there cannot be any restrictions on receiving the match (so as soon as you enter, if you defer, you get a match, regardless of hours worked/last day rule) -it must always be 100% vested -it cannot be distributed on account of hardship, etc (mainly your QNEC/deferral restrictions) -You must give a notice on an annual basis at least 30 days prior to the first payroll of the plan year for which you are relying on the sh contribution. You can exclude HCE's from receiving the SH contrib if your plan doc allows. Of course, these arent ALL of the restrictions, but I think the most prominent ones. If they want to switch to a SH match, they'll need to adhere to the rules above, amend their plan, and give notice to the employees by Nov 30, 2005. If they want to pass ADP/ACP without safe harbor there are add'l options, but they will still be restricted compared to the safe harbor route.

I have a client in great need of a wrap document. I've received conflicting answers from Corbel in regards to their cafeteria document - one associate said it met the wrap requirements,another did not. For those who are familiar with the Corbel documents - what is your opinion - do you use the cafeteria document as a wrap document? Thanks in advance for your replies.

WDIK, Thank you for the link - it's very helpful! I can figure it out from 1996 on.