Dennis Povloski

Thanks for sending that to AIRE. By the way, that same question (just with different numbers was on the test). I found that many of the questions on the real exam were on the sample exam with a tweak in the wording. So, for all you ERPA candidates out there, spend a couple dollars and get the practice exams! They are totally worth it!

There is errata on airellc.org, but this particular question is not referenced.

It's nice to know I'm not crazy. Thanks!

I'm not coming up with the answer on the answer key, but then again....I'm one of those strange DB guys. Anyone care to take a look? Based on the following information, which of the following statements regarding excess contributions is/are TRUE? *The plan is a calendar year 401(k) plan. *The plan does not permit employer contributions. *The plan fails the ADP test and is going to correct by refunding excess contributions to the HCEs. *The HCE ADP limit is 6.00%. *All HCEs are listed in the table below. *None of the HCEs are catch-up eligible. HCE1, comp = $180,000, Deferral = $15,000, ADR = 8.34% HCE2, comp = $100,000, Deferral = $10,000, ADR = 10% HCE3, comp = $80,000, Deferral = $5,600, ADR = 7% I. The total amount of excess contributions to be refunded is $8,200. II. HCE1's excess contribution is $4,200. III. HCE2's excess contribution is $2,000. A. I only B. II only C. I and II only D. II and III only E. I, II, and III The Answer Key says C is the correct answer, but I'm coming up with $9,000 for the amount to be refunded. Aren't I supposed to bring each HCE ADR down to 6% to determine the excess contribution? That gives me $4,200 for HCE1, $4,000 for HCE2, and $800 for HCE3.

Doctor is 100% owner of an LLC and 40% owner of an S-Corp. In the LLC, he is the only employee. He receives contract work to provide services through a hospital, and those are his only clients/sources of income. The S-Corp is his practice where he tends to patients of the practice. This smells like an affiliated service group to me, but since the client bases are totally different, and everything is accounted for separately, I'm not sure. Anyone willing to throw out any ideas on this one (besides ask your ERISA attorney to make a determination ).

Boo, I hadn't thought about the Top Heavy part yet. Just brainstorming. Now that I look at it, there are HCEs that are Non-Key...Booo! This means that I do need to give the them something...grrr..which will most likely cause me to give the NHCEs something above the gateway minimum. So my 11g amendment would just need to be for whatever is above the gateway?? Still something you would give your blessings to?

So, I'm taking over a CB that has been combined with a 401(k) Profit Sharing Plan for 401(a)(4) testing. The 401(k) PSP document was drafted using an integrated allocation rather than a cross tested allocation. The amount of the PS contribution is discretionary. If what should have happened is that the NHCEs needed to get a 5.5% PS contribution and the HCEs get 0% PS contribution, would it be possible to say that the employer decided not to make a profit sharing contribution, thus causing a testing failure, and then make an 11g amendment giving the NHCEs a 5.5% allocation? Then we would amend the 401(k) to provide the correct allocation going forward. Is that pushing it too far? Thanks!

Yikes! Of course the plan that brought rise to the question is a law firm! Can you point me in the direction of something where I could do more research Pojemeister? Thanks!

Client never got a separate tax id for their retirement plan trust. Plan investment accounts have been opened using the company EIN. Should they order a tax id for the trust now? If so, are there any issues/extra steps to address when changing the plan's tax id number?

Awesome! Thanks for verifying that.

The 8717 instructions describe an exemption from the User fee "...that applies to all eligible employers who request a determination letter within the first five plan years or, if later, the end of the remedial amendment period that begins within the first five plan years with respect to a plan...An application for a defined benefit plan from an eligible employer for a plan that was first effective on or after January 3, 1996, will automatically meet this requirement..." I'm submitting the 5300 for a cash balance plan that was originally effectiving 1/1/2000, and is on Cycle D. The plan received a determination letter on 2/13/2003. Does this exemption apply to my plan? Thanks!

A law firm has 3 partners and one employee has been described as a "non-equity owner" that owns 10% of the business. His compensation is based on his ownership percentage. For qualified plan purposes, is there any difference between an "non-equity owner" and an "equity owner"? From what I've read, non-equity owner sounds like a title more than actual ownership in the firm. There is no buy in, and their authority is limited, so I'm not sure if this is a true owner or not?

Two consultants each have their own S-corps. Somehow each consultant also receives a w-2 from the other's S-corp. They each also receive a W-2 from their own S-corp. To make it more interesting, the two consultants both provide consulting services to a common client (who happens to be each consultant's largest client). There is no common ownership between the two S-corps, and the two consultants have no family relationship. If they each set up a retirement plan, are they really considered separate employers and can therefore max out under each plan? There has to be something wrong here, I just can't put my finger on it.

Do rate of pay assumptions work under PPA? For example, if I'm running a beginning of year val for a 1 man plan where the only participant enters the plan on January 1 and takes his first paycheck during the plan year. What comp do you have to use? or must you run an end of year val in this case? I had thought that prior to PPA, you could use a rate of pay assumption for that first year. Any thoughts?

I'm pretty sure I know the answer to this already, but I just need to see it again. If we're cross testing, does a participant receiving the SHNEC after the 1 year wait also have to get a gateway contribution even though there is a 2 year wait on the profit sharing?

Correct. I should have mentioned that I was just talking about the non-elective portion. Thanks! Dennis

Is it ok to use dual entry dates if a plan has a 2 year wait and provides for 100% immediate vesting?

Sieve, I agree with you on the service requirement, but I'm still concerned about the age requirement per WDIK's and J Simmons' comments. If someone had previously met the service requirement, but didn't turn 21 until January 2nd, they would have to wait until the following January 1st to enter the plan. Wouldn't the participant need to come in at least 6 months after his or her 21st birthday? The discussion took a turn to focus on the plan's original definition for eligibility. The definition was amended to a standard age 21, and one year of service definition, but the Entry Date was not amended, so it is still the first day of the plan year (January 1) coincident or next following. I guess because of the 100% vesting, the service requirement is not bad, but the age requirement still concerns me. I think the plan needed either dual entry or a retroactive entry date from the get go.

This is, perhaps, the strangest document I've come across. Not that you're interested, but it has a cash balance formula for the doctors and a traditional db formula for the staff. And, of course, there was no determination letter included in my copy of the files...joy!

You caught me! This is actually for a DB plan, but since it was an eligibility question rather than a DB specific question, I posted here. I have a lot of respect for the folks that post on this board. As you point out, a 401k feature has its own special maximum eligibility rules. I believe the same maximum eligibility rules apply to DBs and other Non-elective contributions. Hopefully, this doesn't null the whole discussion.

Here is an excerpt from the document, which turns out to be a little different than what I described in the OP. This by the way is an attorney drafted custom doc: Time of Participation: (a) Each Employee who was employed by the Employer on the effective date of thie Plan (January 1, 2000) commenced participation in this Plan on the effective dat, provided that the Employee was credited with not less than 1000 Hours of Service during the 1999 calendar year. (b) Each Employee who did not commence participation in this Plan under subsection (a) above will commence participation in the Plan on the first Entry Date coincident with or immediately following the later of: (1) his attainment of age 21, or (2) his completion of 6 months of service after his completion of 1 Year of Service, provided that he is still employed by the employer on such Entry Date. © The Entry Dates are the first day of each Plan Year.

Plan had an age 21 and 6 month wait, entry on the first day of the plan year coincident or next following. Said plan was later amended to have an age 21 and 1 year of service wait, but the entry date was not amended. This does not satisfy the statutory eligibility requirements, does it? Is there a different answer if the plan provides for 100% immediate vesting (a la 2 year wait)? Thanks!

That does make sense. Just in time...Final Regs...only 319 pages! Heres the link to the federal register: http://www.federalregister.gov/OFRUpload/O...09-24284_PI.pdf

Can you really take out a loan from the plan to make a contribution? I'll admit that I am totally ignorant on this technique, but for some reason, it just doesn't sound right. Just my jumbled thought...

Is there any guidance on how 436 benefit restrictions interact with a terminating plan? If the AFTAP is <60%, but the owner has the majority of the benefits and is willing to waive receipt of any benefit not able to be funded by the plan assets, can the lump sums be paid out?