John Feldt ERPA CPC QPA

Soon it will be too late for 2012. For 2011 it is too late unless they provided a safe harbor "maybe" notice within a reasonable period of time before the first day of the plan year (30 days is deemed reasonable). If they did this and they want to be safe hrabor in 2011, then an amendment must be signed by December 1, 2011 and a supplemental notice must be given out by December 1, 2011. That's December 1, not December 2 - this deadline is 30 days before the END of the plan year. edit: sorry, these comments are meant for an existing plan, wanting to add safe harbor.

http://benefitslink.com/boards/index.php?s...st&p=207952

Oh, sorry about that, Kevin's right - I'm sure your 415 amendment has yougoing to Rev Proc 2008-50 for the solution. Look at 6.06(2) and (3) (page 35 of my version). Here it is: (2) Correction of Excess Allocations. In general, an Excess Allocation, as defined in section 5.01(3)(a) of this revenue procedure, is corrected in accordance with the Reduction of Account Balance Correction Method set forth in this paragraph. Under this method, the account balance of an employee who received an Excess Allocation is reduced by the Excess Allocation (adjusted for earnings). If the Excess Allocation would have been allocated to other employees in the year of the failure had the failure not occurred, then that amount (adjusted for earnings) is reallocated to those employees in accordance with the plan's allocation formula. If the improperly allocated amount would not have been allocated to other employees absent the failure, that amount (adjusted for earnings) is placed in a separate account that is not allocated on behalf of any participant or beneficiary (an unallocated account) established for the purpose of holding Excess Allocations, adjusted for earnings, to be used to reduce employer contributions (other than elective deferrals) in the current year or succeeding year(s). While such amounts remain in the unallocated account, the employer is not permitted to make contributions to the plan other than elective deferrals. Excess Allocations that are attributable to elective deferrals or after-tax employee contributions, (along with earnings attributable thereto) must be distributed to the participant. For qualification purposes, an Excess Allocation that is corrected pursuant to this paragraph is disregarded for purposes of § 402(g), § 415, the actual deferral percentage test of § 401(k)(3), and the actual contribution percentage test of § 401(m)(2). If an Excess Allocation resulting from a violation of § 415 consists of annual additions attributable to both employer contributions and elective deferrals or after-tax employee contributions, then the correction of the Excess Allocation is completed by first distributing the unmatched employee’s after-tax contributions (adjusted for earnings) and then the unmatched employee’s elective deferrals (adjusted for earnings). If any excess remains, and is attributable to either elective deferrals or after-tax employee contributions that are matched, the excess is apportioned first to after-tax employee contributions with the associated matching employer contributions and then to elective deferrals with the associated matching employer contributions. Any matching contribution or nonelective employer contribution (adjusted for earnings) which constitutes an Excess Allocation is then forfeited and placed in an unallocated account established for the purpose of holding Excess Allocations to be used to reduce employer contributions in the current year and succeeding year(s). Such unallocated account is adjusted for earnings. While such amounts remain in the unallocated account, the employer is not permitted to make contributions (other than elective deferrals) to the plan.

Look at the 401(k) document, I would bet that it says something like: "If a Participant receives an allocation of an Excess Amount for a Limitation Year, the Plan Administrator will dispose of such Excess by first returning to the Participant any Employee Contributions (adjusted for Earnings) and will forfeit any Associated Matching Contributions, to the extent necessary to reduce or eliminate the Excess Amount, secondly by distributing to the Participant any Elective Deferrals (adjusted for Earnings) and will forfeit any Associated Matching Contributions, to the extent necessary to reduce or eliminate the Excess Amount." etc. etc. etc. Added upon edit: Also: can you offset the 7.5% by the average actuarial value of the DB accruals? If might not help much anyway, just a thought. Also, if the DB has accrual requirements, like 1000 hours, you might not be able to say that it's usable for a gateway offset, I think, since the gateway cannot have any allocation conditions.

Hope the plan allows catch-up and they are catch-up eligible? What does the 401(k) document say happens?

Of course, they don't have to restate and submit at all if they don't want the protection offered by having a determination letter.

457(f) = no 457(b) of nonprofit corp = no 457(b) of government employer = yes, but then the assets take on characteristics of an IRA and the pre-age 59.5 withdrawal excise tax of 10% could apply (if it's taken out of the IRA before 59.5, just FYI).

It's unclear. The PPA documents will be reviewed by the IRS, and unless the IRS says something before then, the document providers will find out once the IRS reviewers respond. I assume the providers will still place text in their document that allows a checkbox for each participant being in their own allocation rate classification.

If the original notice named the fund (or funds) for the QDIA, or stated something that is now outdated due to the change being made to switch the default fund, then I would think you should provide the an updated notice, preferrably 30 days in advance of the change.

Suppose the safe harbor plan is found to have failed some test after the plan year just ended: either 410(b) or 401(a)(4). Would an amendment under 1.401(a)(4)-11(g) be verboten because the plan is safe harbor? If you fail, no -11(g) option for SH plan: too bad, tough noogies, bah humbug? Or do we say that the 12 months are over and the provisions were in place for the whole plan year, thus making the plan now open game to be amended retroactively? Rhetorical questions only, I know, expecting a reasonable approach may be asking a bit much.

The IRS has said that a 3-year cliff and a 6-year graded vesting schedule are identical for testing purposes, but yours has immediate vesting. This would appear to be subject to BRF testing. Just curious, has the IRS ever made a case of that? The plans are aggregated for coverage, so the differing eligibility requirement does not appear to be a benefit right or feature to me. Oh, by the way, you may want to read this link: http://benefitslink.com/boards/index.php?showtopic=49421

"a plan will fail to satisfy the requirements of sections 401(k)(12), 401(k)(13), and this section unless plan provisions that satisfy the rules of this section are adopted before the first day of the plan year and remain in effect for an entire 12-month plan year." Maybe I am misunderstanding "section" - that means 1.401(k)-3, or does it mean something else? If it means 1.401(k)-3, then where in 1.401(k)-3 is the rule regarding entry dates? The light has not yet turned on for me to see this so clear yet, so I would really like some enlightening, if you can. Tower of Terror? Not as much now that Jim H is no longer there.

Yes.

I did not get to go this year :( - if i could add tears here, I would - I mean, for me it's like a disney trip to go to those sessions.

So, even though an explanation of the plan's definition of eligibility is not required as part of the safe harbor notice, a safe harbor plan cannot amend to let group of NHCEs into the plan before the beginning of the next plan year? Mid-year addition of Roth and beneficiary hardship have a green light. Mid-year change for In-Plan Roth is okay for now, but not in the future. Can the plan be amended mid-year to change the name of the plan if it's a safe harbor plan? How about the definition of "disability" - can that be changed mid-year? Can a safe harbor plan be amended mid-year to use a corporate trustee instead of individual trustees? How about an amendment mid-year to allow predecessor service for eligibility purposes? Can a SH plan be amended to change from balance forward to individual direction mid-year? Can the plan be amended mid-year to stop paying plan expenses from forfeitures to allocate instead, or to change the use of forfeitures in the next year to be in the current year? Can the SH plan be amended to allow installment payments or to remove installment payments mid-year? Can a SH plan be amended mid-year to change the one-year marriage rule to/from "not applies" from/to "applies"? Can a SH plan on a vol sub document be amended mid-year to add multiple employer language if the controlled group of employers break up mid-year? edit: typo

They are also not able to defer anymore starting 1-1-2012.

Suppose a calendar year 401(k) plan excludes non-shareholder HCEs from all contribution types. The employer does not apply the top-paid group election. Suppose an employee is hired in June of 2010 (not a shareholder) and they do not earn enough wages in 2010 to be an HCE in 2011. Suppose they enter the 401(k) plan on July 1, 2011 (after one year of service). Allocations are made to their account for 2011. Suppose they are paid enough in 2011 to be considered as an HCE in 2012. Starting January 1, 2012, they are excluded by the terms of the plan. The plan is top heavy. Are the required to receive a top heavy minimum allocation in 2012? on edit, added: Please assume this plan is not a safe harbor top heavy exempt plan.

You mean, can the employer contribute 25% of pay? You are correct that the 415 limit in play here is the 100% of pay limit. The wages, for 415 limit purposes, is something above $12,500 (since 415 does not net out FICA). Suppose his 415 wages are actually $13,110. If that's the case, the employer could contribute $610 and he's reached the 415 limit of $13,110 ($12,500 deferral plus $610 ER contrib). Then as you suggest, if he's catch-up eligible, the employer can contribute even more. The 415 limit does not include the catch-up deferrals. But, if you try making a full $5,500 into a catch-up with a $7,000 regular deferral and $6,110 an employer contribution, then you have to look out for the 404 deduction limit. 25% of overall eligible wages in the plan will limit the employer's deduction. With just one employee in the plan who makes $13,110, the employer contribution could be $3,277.50 (25% of $13,110) and the deferral of $12,500 is broken down as $9,222.50 regular deferral and $3,277.50 as catch-up, for a total allocation of $15,777.50.

1984 Social Security Taxable Wage base = $37,800 1984 415(b)(1)(A) = $90,000 (down from $136,425 in 1982) 1984 415©(1)(A) = $30,000 1984 402(g)(1) = n/a 1984 Officer comp, 416(i)(1)(A)(i) = $45,000 1987 Social Security Taxable Wage base = $43,800 1987 415(b)(1)(A) = $90,000 1987 415©(1)(A) = $30,000 1987 402(g)(1) = 7,000 1987 Officer Comp, 416(i)(1)(A)(i) = $45,000 1987 HCE, 414(q)(1)(B) and © = $75,000 and $50,000 1987 ESOP amounts, 409(o)(1)©(ii) = $500,000 and $100,000

In 1984, I think the DC dollar limit was $30,000 (down from $45,475 in 1983). In 1987, it was still $30,000 (it eventually increased in 2001 to $35,000). In 1976, the DC limit was 26,825 and it was 25,000 in 1975. However, for purposes of determining your limits under 415(e) under the transitional rule, if you contributed more than the DC maximum in 1976 and in prior years, you can ignore the amounts that were contributed in excess of the limits.

A QACA SHNEC, when contributed, might not be 100% vested (QACA allows a 2-year cliff vesting schedule). Does this mean the IRS thinks a QACA SHNEC forfeiture cannot be used to satisfy a QACA SHNEC, but instead must shift to some other type of contribution source? If so, what if there are no other contribution sources? edit: typo

Well, I'll attempt to answer my own post. I think that under the current rules (in effect today), the SPD/SMM timing applies. However, next year when the new fee disclosure rules take effect, then the disclosure must be provided before the new fee can take effect. If any others want to opine, that would be great.

Oh man, my bad. Yes, I was thinking SIMPLE IRA.

Adopting a qualified plan would invalidate the SIMPLE plan.

If you submit an application under VCP, you can propose a lot of different methods for correcting the plan. If the IRS ultimately agrees, you'll get a compliance letter that indicates they accept your method. However, under SCP, you'd be taking a risk that a later audit might find that your method is not satifactory to the auditing team. I don't think he was stating that you can always use forfeitures to fund a QNEC when correcting a plan error, but if you ask them with a VCP application, it's possible, depending on the facts and circumstances, that they may accept such a use of forfeitures.