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Yes, I have read the one-to-one corection in Appendix B but I am still confused. I determined the amount to be allocated to NHCE is $3,000. I allocate that amount to all eligible NHCE participants in the year failure was not properly corrected. Turns out a significant number of those participants are have already terminated employment. Do I have to reallocate the amount originally allocated to the other affected participants so that the entire $3,000 is used up or does it mean since some of the participants have already terminated the plan does not need to put in the full $3,000 to correct the error? Any thoughts would be greatly appreciated. Example 1: Employer A maintains a profit-sharing plan with a cash or deferred arrangement that is intended to satisfy § 401(k) using the current year testing method. The plan does not provide for matching contributions or after-tax employee contributions. In 2007, it was discovered that the ADP test for 2005 was not performed correctly. When the ADP test was performed correctly, the test was not satisfied for 2005. For 2005, the ADP for highly compensated employees was 9% and the ADP for nonhighly compensated employees was 4%. Accordingly, the ADP for highly compensated employees exceeded the ADP for nonhighly compensated employees by more than two percentage points (in violation of § 401(k)(3)). There were two highly compensated employees eligible under the § 401(k) plan during 2005, Employee P and Employee Q. Employee P made elective deferrals of $10,000, which is equal to 10% of Employee P’s compensation of $100,000 for 2005. Employee Q made elective deferrals of $9,500, which is equal to 8% of Employee Q’s compensation of $118,750 for 2005. Correction: On June 30, 2007, Employer A uses the one-to-one correction method to correct the failure to satisfy the ADP test for 2005. Accordingly, Employer A calculates the dollar amount of the excess contributions for the two highly compensated employees in the manner described in § 401(k)(8)(B). The amount of the excess contribution for Employee P is $4,000 (4% of $100,000) and the amount of the excess contribution for Employee Q is $2,375 (2% of $118,750), or a total of $6,375. In accordance with § 401(k)(8)©, $6,375, the excess contribution amount, is assigned $3,437.50 to Employee P and $2,937.50 to Employee Q. It is determined that the earnings on the assigned amounts through June 30, 2007 are $687 and $587 for Employees P and Q, respectively. The assigned amounts and the earnings are distributed to Employees P and Q. Therefore, Employee P receives $4,124.50 ($3,437.50 + $687) and Employee Q receives $3,524.50 ($2,937.50 + $587). In addition, on the same date, Employer A makes a corrective contribution to the § 401(k) plan equal to $7,649 (the sum of the $4,124.50 distributed to Employee P and the $3,524.50 distributed to Employee Q). The corrective contribution is allocated to the account balances of eligible nonhighly compensated employees for 2005, pro rata based on their compensation for 2005 (subject to § 415 for 2005).

I did find the reference....now my next question is what would be considered a corrective contribution? Here is my situation....I correctly calculated the 2009 ADP refunds, notified participants of the amount of distribution and tax consequences but when I faxed the distribution forms to John Hancock did not notice only the cover page was send. I discovered the error in 2011. My thought was to do a one-to-one correction but many of the NHCE affected participants are terminated and paid out. So, if the amount they would receive is less than $75, do I need to give them a contribution? Any thoughts would be greatly appreciated. See reference from EPCRS below: (a) Reasonable estimates. If either (i) it is possible to make a precise calculation but the probable difference between the approximate and the precise restoration of a participant’s benefits is insignificant and the administrative cost of determining precise restoration would significantly exceed the probable difference or (ii) it is not possible to make a precise calculation (for example, where it is impossible to provide plan data), reasonable estimates may be used in calculating appropriate correction. If it is not feasible to make a reasonable estimate of what the actual investment results would have been, a reasonable interest rate may be used. For this purpose, the interest rate used by the Department of Labor’s Voluntary Fiduciary Correction Program Online Calculator (“VFCP Online Calculator”) is deemed to be a reasonable interest rate. The VFCP Online Calculator can be found on the web at http://www.dol.gov/ebsa/calculator. (b) Delivery of small benefits. If the total corrective distribution due a participant or beneficiary is $75 or less, the Plan Sponsor is not required to make the corrective distribution if the reasonable direct costs of processing and delivering the distribution to the participant or beneficiary would exceed the amount of the distribution. This section 6.02(5)(b) does not apply to corrective contributions

I believe the EPRCS corrections program states if the contribution for a terminated participant who has already been paid out is less than _____ you do not need to make the corrective contribution......but I cannot find the reference.......is that a true statement and if so, where can it be found?

After the plan year end it was determined a partial plan termination had occurred. Some of the affected participants had been paid out during the plan year. I am assuming when the forfeitures are restored no earnings adjustment needs to be calculated correct? Any thoughts would be appreciated.

If a plan amends to allow "in-plan" Roth conversions, can they exclude terminated participant from the option? Any thoughts appreciated.

We are working with a group of individuals who because of ownership % have three unrelated companies. Currently, one of the companies would be in an audit situation and the other two would not. If we put the companies onto a multiple employer plan, would all three companies need to be audited? I am thinking the answer would be yes...but would appreciate any thoughts.

Does anyone know the difference between a sub-transfer agent fee and a shareholder servicing fee?

Does anyone know where I can find a copy of the attachment for late deferrals? We use the Datair 5500 program and I do not see a copy of the form.

Does anyone know if they have voted on this bill yet and if not when they are scheduled to vote?

I am working on a 403(b) plan that has a pro-rata profit sharing allocation. All participants receive a 3% profit sharing contribution on a per payroll basis with no end of year or hour allocation conditions. The plan sponsor thought they could contribute an extra contribution to three highly compensated employees on December 31 and did so without consulting us. Now the plan has about $6,000 of employer money which should not have been contributed to the plan. The organization I am dealing with is a 501©3 org. so deductibility is not an issue. Is their another excise tax that I should be worried about? Any thought would be appreciated?

Go to the John Hancock plan sponsor website - they have two webcast explaining how to complete 5500 using John Hancock information - Janice Wiggins is the moderator.

Has anyone attended a good web-cast or workshop related to the revised Schedule C which provided some good case studies and examples of the completed Schedule C based on the case study fact pattern? If so who sponsored the web-cast or workshop?

Plan administrator thought participants were to start deferring first of month after satisfying eligibility conditions. Document states enter the plan the day eligibility conditions were met. I can find where EPCRS states if the participant was not given the opportunity to defer for the entire plan year you take them out of the ADP test. However, I cannot find any guidance for participants who are briefly excluded where the error is not discovered until after the end of the plan year. I am assuming you do not take the person out of the test. This assumpiton gives rise to my next question - Do you use full year compensation, compensation from date they started deferring or something else for the ADP test? If you use compensation from the time they actually deferred, it might make the participant neutral when you use the average of the group to calculate the required QNEC for the missed opportunity cost. Seems logically but is it the right approach. Any suggestions would be greatly appreciated.

Just checking to make sure I am thinking correctly. Partial plan termination occurred and employees laid off because of employer initiated action were 100% vested. If some of the employee who were previously laid off are later rehired, new employer contributions would be subject to the vesting schedule counting past service correct?

The summary plan description stated: The following adjustments to compensation will be amde for salary deferrals - bonuses not applicable.

When plan was converted in 2005, the document was restated and the definition of compensation excluded deferrals from bonuses in error. The plan was restated in 2005 and the error was just discovered. What needs to be done...is there a VCP to fix a scriveners error?

If I have payroll deductions for medical and child care under my employers section125 plan and my husband was laid off does the change in his employment status allow me to stop my section 125 deductions mid-year.

Search the Benefits Link Newsletter for Sungard's article "IRS Expands Correction Procedure to Permit Correction of 401(k) Excess Amounts" on August 10, 2009.

Is the 2009 Form 5500 available yet?

A corporation is dissolving and terminating the plan July 31st due to substantial business hardship. They currently have an end of year 3% non-elective safe harbor feature. Since the plan is terminating due to a substantial business hardship it is my understanding they can eliminate the 3% non-elective contribution and use the ADP test. Does anyone see a problem with my analysis?

How can I find copies of these revenue rulings. I have tried to serach with no sucess.

The plan document allows for in-service distributions on account of disability. Disability is defined as the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or which has lasted or can be expected to last for continuous period of not less than twelve months. The participant has been on social security disability for about 12 years and works part-time (apparently making less than the amount which would affect his social security disability benefits). He has work for the company under this arrangement for about 15 years and is currently requesting an in-service disability withdrawal. What I am having a problem with is the fact he is and has been employed for the last 15 years with this company. However, am I suppose to be reasoning that he is only able to work part-time and that his position cannot be defined as substantial gainful employment? Assume he is entitled to an in-service disability distribution. Does the fact he is on social security disability automatically qualify him for the 10% waiver?

Does anyone use the Lincoln National Life prototype document? We are looking at a takeover client and the SPD states participants must work 1000 hours in a six month period to be eligible. We were wondering if the 1000 hours and six months was an option which was hard coded into the document or if the document utilized blank lines to fill in the hour and month requirements. We usually prorate the 1000 hour requirement with additional language stating if the participant works 1000 hours during any eligibility computation period they are eligible to enter the plan to avoid any IRS challenge regarding discrimination. However, I cannot find any documentation which states requiring 1000 hours in a period of less than 1000 hours is not allowed. Does anyone know where I might find some documentation?

I am looking at a Sungard Relius Plan Workshop outline. One of the topics included in the outline is titled new IRS guidance on early entry and the otherwise excludable rule. Does anyone know what this is referring to?

My question may not have been worded very well. True, Treas. Reg. 401(a)-3 states that the maximum service requirement a plan can impose is one year of service (in some cases two). While a plan can impose other eligibility requirements, a service condition which could require more than one year of service is invalid. Therefore, excluding part-time employees whose customary employment is for not more than 20 hours per week is an impermissible service requirement because such an employee may work more than 1000 hours in an eligibility computation period and therefore exceed the section 401(a) limits. However, a plan may exclude part-time employees as long as the employer designs the provision in such a way the there is no possibility of indirectly imposing an hour of service requirement in excess of section 401(a) statutory maximum (i.e. if the employee actually works 1000 hours they will be brought in on a prospective basis). See IRS QAB dated 2/14/06. The plan has dual eligibility immediate for deferrals and 1000 hours for employer. No employee would receive an employer contribution with less than a YOS as Sieve suggested. Chad thanks for the insight. That was sort of what I was thinking regarding participants who were expected to work more than 20 hours and ended up not doing so. I always understood the 1000 hours let them in but this is the first plan where I have encountered employee who did not actually work more than 20 hours. I do not understand how coverage testing will be an issue. Those with less than 1000 hours would be in the otherwise excludable group.