Dennis Povloski

If a plan currently has an automatic contribution arrangement, and the sponsor doesn't want to deal with that anymore, can you turn it off, stop deferrals, and make it so that employees must turn in a deferral election in order to defer from that point forward? That is if employees were deferring because they were defaulted into the plan under the ACA, can you stop their deferrals when you get rid of the ACA? or must they still continue to defer at whatever rate they were deferring when the ACA was last in effect?

CPA called to ask a question..... An individual is receiving payments from his former employer as part of severance package. The CPA is interested in running these payments through a corporation and having the corporation pay the individual a salary so that it can adopt a plan. His concern is that this employer doesn't really have a purpose, and therefore may not be considered an employer for qualified plan purposes. The definition of Employer in the ERISA Outline Book talks about an being an employer under common law principles. Can anyone give me some details on what "common law principles" refers to, and how this relates to 401(a) and ERISA?

Yuck! Would that be a demographic failure requiring VCP if using the correct method produced a failure?

So I checked my document, and it does say that if you're using the ACP safe harbor and are making contributions subject to the ACP test that the ACP test must be passed using the current year method...... BUT, what if I'm looking at a 2008 restatement that was done after the plan was no longer safe harbor? I do need to actually pin down the date when the plan was no longer safe harbor because I don't know if they were even allowed to mark prior year in this restatement, but just to keep it simple, let's assume that it was safe harbor more than 5 years before the restatement was done.

Takeover fun!! What are the implications if a plan document calls for prior year testing for both the ADP and ACP test, but the prior TPA used current year testing for both for multiple years. The plan was safe harbor more than 5 years ago, so I don't see any reason for them to have been forced to switch. Thanks!

Thanks for sharing. Bummer.....at least now I don't feel so bad about missing an ethics course so I could attend something more useful.

So I passed my ERPA Exams (yeah!), and submitted my application. They make it very clear that it will take at least 60 days to process. When you call up to check on the status of your application, the recording tells you that if it has not been 60 days, hang up and call back when 60 days have passed. For me, my 60 days will happen the week following the ASPPA National Conference (which I am attending). A while back, I contacted ASPPA, who told me to e-mail OPR to ask if there is any way for me to apply that CE to my ERPA requirements whenever my enrollment card shows up. Three weeks later, OPR responded to me saying "that's a good question, I'll check on it and get back with you........" I still haven't heard back from them. Does anyone know if there's any kind of precident for this with other enrolled persons (enrolled agents, enrolled actuaries, etc.)? or am I just out of luck?

Company sells all of its assets including employees effective 9/30/2010. Owner continues to maintain the business entity, and would like to set up a defined benefit plan to help offset some of the income derived from the assets sale. My thought was that we set up the new plan effective 10/1/2010 with a short plan year running 10/1/2010 to 12/31/2010. The idea being that the employees termination date was 9/30/2010 (the date of the asset sale), and they would not be covered under the new DB plan. I now find out that they have an existing 401(k) Profit Sharing Plan. Since the 401(k) plan runs on the calendar year, does that mean I have to consider both plans for Non-discrim, coverage, top heavy, etc? They technically don't have the same plan year, since the DB will have a short plan year. But will I have to employees for the whole year in my DB plan because they were covered under the 401(k) PSP? I'm not sure what's happening to the 401k as a result of the sale. Any thoughts to point me in the right direction are greatly appreciated! Thanks!

He thought it was a great idea!

I have a Profit Sharing Plan where each individual participant has an annuity contract , and each participant self direct the subaccounts within their annuity. The owner is contemplating adopting a defined benefit plan for his business, and he would like to dump the DB contributions into the annuity for his benefit in the profit sharing plan. I believe that it is possible to commingle DB and DC assets, as long as the recordkeeping is clear (contributions, expenses, earnings, etc can be properly allocated to the correct plan). But this just sounds wrong to me. Is it at least a prohibited transaction? Self dealing, perhaps? If having by larger asset base in the annuity, the owner could have some kind of unfair advantage over the employees? Anyone care to share their thoughts?

That does make life easier. Thanks!

Lets say that prior to 1/1/2010, a company had a bi-weekly pay period. Starting on 1/1/2010 and going forward, the pay period switched from bi-weekly to semi-monthly (paid on the 1st and 15th of each month). Participants make loan payments through payroll deduction. What happens to the amortization schedule when the pay period switched? Should participant receive a new amortization schedule based on the outstanding principle due? Does the participants need to sign new loan paperwork because the terms of their original loan paperwork have changed? If the reamortized schedule calls for larger payments, and the participant has been making payments amount on the original schedule, what happens? Any other issues/thoughts? Thanks!

Thanks for pointing that one out! I actually scanned the FAQ's on the website, and missed this one all together!

If the IRS has sent out anotice saying that the Form 5500 is late and that a penalty will be assessed, can the plan sponsor participate in the DoL's DFVC program and get a waiver of the IRS penalty? That is, can they get a waiver of the IRS penalty if the participate in the DoL program after they've received notice from the IRS? or is there no hope because they already got the letter from the IRS?

True 'dat!

In this case, I'm taking over a plan where the $11,339 match was deposited, and there's no indication that a correction was suggested. All the other participants are within just a couple dollars of the 4%, so that's why I figured that they must be allocating the match on a payroll basis. The document appears very flexible. It says that if the allocation period is less than the plan year, the employer may elect to make the true-up as long as the additional SHMAC is made on a uniform, nondiscriminatory basis. In the True Up definition it refers to the "Allocation Period" which is defined as the "12 consecutive months or less for which an employer contribution is made or allocated under the terms of the Plan". There's no specific election in the document itself.

DB guy asking 401k questions........ Plan is a Safe Harbor 401k with the basic match contribution. The Plan Administrator appears to be matching per payroll period with no True Ups at year end. If a participant is at the max comp level and maxes out his deferral for 2009 (not catch up eligible), is there any way that he can be allowed to receive a SHMAC of $11,339? By my calc's 4% of $245k is $9,800.

The financial advisor is working on that, but he doen't know how long it will take the client to dig through his files to find any documentation...........

I made my first post in the 403b forum, and didn't get a response, so I thought I'd come back home to the 401k forum... I've come across a small dentist office where the dentist and his wife make salary deferrals into something called a "Supplemental Retirement Account" with Merrill Lynch. I've never heard of this, so I Google'ed it. Everything that popped up referred to either a 403(b) or a 457 plan for a college or university. Neither of which would be appropriate for this particular client. Does anyone know anything about these SRAs? Thanks!

I've come across a small dentist office where the dentist and his wife make salary deferrals into something called a "Supplemental Retirement Account" with Merrill Lynch. I've never heard of this, so I Google'ed it. Everything that popped up referred to either a 403(b) or a 457 plan for a college or university. Neither of which would be appropriate for this particular client. Does anyone know anything about these SRAs? Thanks!

Yes. She is eligible to defer. I just can't figure out how I'm supposed to get her deferrals into the plan since the leasing company "is not able" to process a pre-tax withholding for the employees it leases out. The medical practice is fine with her deferring, but since she's employed (and paid by) the leasing company, I don't know how to get the deferrals into the plan. That's the heart of my problem.

She's definitely included, and she's my only NHCE (yeah). The safe harbor is the non-elective, so she'll definitely get that regardless of her deferrals. Reed - thumbs up on your humble opinion!

I believe that she needs to be included in the testing, but I'm not sure of the mechanics of getting her to make a deferral, and then transmitting it to the plan. The ERISA Outline Book suggests (although no formal guidance is given) that the medical practice may be able to reduce it's fees to the leasing company by the amount of the deferral, and then transmit the funds to the plan, but the leasing company would still have to prepare her W-2 accordingly (and they say they can't), so I'm kind of at a loss on this one. Fortunately, this is a safe harbor plan, so I don't have an ADP test, but effectively this whole set up doesn't allow her to defer even though the plan says that she can. Does that make this become a benefits, rights, features problem?

I have a medical group that has one receptionist that is a leased employee. The leasing company says that it does not have the ability to do pre-tax withholdings for the employees that it leases. The leasing company does have a 401k plan for employees that physically work for the leasing company (like in its corporate office, for example), but the employees that it leases to other organizations are not covered under this plan. I've never dealt with this before. Does anyone have any suggestions for dealing with this if the receptionist wants to defer into the medical practice's plan?

Plan was a straight profit sharing plan and had a 2 year wait on eligibility & 100% vesting. Then, they added a 401(k) feature with safe harbor non-elective contribution. The 401k and SHNEC have 1 year wait. So there are participants that are eligible to make deferrals and receive safe harbor contributions, but not yet eligible to receive profit sharing contributions. I have 1 HCE that is not deferring, not eligible for SHCEC (which only goes to the NHCEs), and has not met the 2 year wait to become eligible. I am cross testing this plan. 1. I believe that my NHCEs that are getting the SHNEC must be bumped up to the Gateway as well even if they're not eligible for the PS yet due to the 2 year wait. Is that correct? 2. My 1 HCE that is not getting anything happens to be non-key. Does he get a top heavy contribution because he is eligible for deferrals? 3. Is my 1 HCE included in my non-discrim because he is eligible to make deferrals even though he is not eligible for ps or SHNEC? Thanks!