John Feldt ERPA CPC QPA

Who is the Employer? A government? Are they a church-controlled college? Or a non-profit? Government plans and church plans are not tested for discrimination of employer contributions.

I'm not sure I read the proposed regs that way. The wording appears to state that the DOL cannot question the timeliness of your (small plan) deposit if you got the money into the plan by the 7th business day following the date it was withheld from pay. Thus, if you deposit later than the 7th day, you then fall under the normal rules of: ASAP, which cannot be later than the 15th business day of the following month. The DOL, upon examination, could question a deposit made after that 7th business day, but the proposed regs do not appear to say it is automatically late. Thus, if you deposit on the tenth business day because your accountant left the company, you may have facts and circumstances that the DOL might accept (maybe).

Okay, that's what I suspected. Now I'm convinced. As for prototype, we plan to only use volume submitter documents going forward (with EGTRRA documents), there's no longer any advantages for using prototypes anymore (as far as I know).

Reviewing a single DC plan (not a combo) that has each person is their own class. The plan covers everyone (it passes 410(b) using the ratio percentage test: over 70% covered). The valuation shows the owners maxing out (20%). The NHCEs look like this: 2 NHCEs get 9% of pay profit sharing another NHCE gets 49% of pay profit sharing all other NHCEs get the 5% gateway The 401(a)(4) test reveals a result of 70.01% (thanks mainly to the one NHCE whose ebar makes up more than half of the sum of the NHCE ebars). Each of the general test percentages are above the safe harbor percentage, except one class: which is above the midpoint, but below the safe harbor percentage. The one NHCE getting 49% is the youngest and this was their first year in the plan. They are not the very lowest paid of all eligibles (third lowest), but no one else in the plan has less service than they do. The average NHCE in the plan has seven years. Is it a problem that the this one NHCE employee is getting a 49% of pay allocation?

DC plan or DB plan?

If these rehires are only part-timers, then I'm going beyond my expertise when I now suggest that they discuss with their CPA the option of considering such rehires as independent contractors instead of employees, so please don't quote me on that idea. If they are full-time, then they really have to refer to their current employment requirements, one of which states that 5% must be withheld from pay to go into the plan. They could change the mandatory deferral to voluntary, and just match dollar for dollar on deferrals up to 5% of pay (that might save the employer some money too, if some now choose to defer under 5%). Is there a union contract preventing that option?

In 411? IMHO, I do not agree that the provision is only protected for those who are already 45, but that it is protected on a broader scale. I think any existing account balance (or benefits accrued) before the amendment is executed (or is effective, if later) can grow into this in-service distribution option. For example, someone age 30 with 24 months of service has a $2,000 balance. That balance has certain distribution rights attached to it. If the participant ever attains those necessary conditions which were riding along with that balance, then I believe those distribution rights also apply to that balance. When they turn 45, then that portion of their balance should be eligible for the in-service. That's my approach anyway, FWIW.

FWIW, I agree that you are not required to offer annuities as an optional form of payment.

Agreed.

(that is, participation is not required, but if you choose to participate, you must defer 5%). I thought mandatory was a condition of employment, where the employee cannot choose whether or not to participate.

I hesitate to disagree with BNA, but I see not their argument. Did they provide a citation for it? Maybe they are confusing T.R. §1.403(b)-3(b)(3)(iii) which tells me that church plans using retirement income accounts must have to have a written plan, but church plans NOT using retirement income accounts have no written plan requirement? The instructions to Form 5500 tell us that government 403(b) plans and church 403(b) plans that are not "employee benefit plans" under Title I of ERISA are exempt from filing. Remember of course, if the "church" 403(b) plan primarily covers employees of an unrelated trade or business of the church, then the ERISA exemption won't apply. Under Code §410(d), a church plan may elect to apply funding, participation, and vesting rules from ERISA, which then subjects the plan to ERISA Title I. Such an election is irrevocable. To me, this means that the "sponsor" of a true "church" 403(b) plan could volunteer to subject themselves to ERISA permanently, and doing so would require the 5500 reporting.

Just a note regarding the 5% deferral: Unless this is a church plan, the universal availability requirement allows a minimum of $200 for deferrals, meaning you can reject an annual deferral that would not hit the $200 mark. Thus, I am thinking that a 5% minimum possibly violates the universal availability requirement. FWIW.

If that definition passes 414(s) and your document allows you to do so. Be sure to look in the plan document, which spells that out, probably something in the 401(k) /(m) section, something like Safe Harbor Compensation "the Employer must apply a nondiscriminatory definition of Compensation..." edit: typo

Perhaps if you had a document staff of 3 and you had 1000 DC plans to restate, then you may rush.

Ditto.

Yes master, now I see clearly.

Yep.

Of course, if you are talking about a 403(b) plan, and assuming you were only referring to the employer contributions, not the deferrals, then as Bob Architect (of the IRS) indicates, and I quote "... it is the belief that this plan could be a subject of a number of items either stapled together or held together by a big paperclip." So, just use a big binder clip, maybe add a sticker that says it is meant as a big paperclip (just in case) - and be sure to let us know how well received that is by the IRS folks.

I'll have to fix my audio, I can't hear anything.

I'm not sure hours worked is a good measure anyway. IMHO, their contribution toward the company's bottom line is the most critical metric. I've seen several firms where hours worked was a big deal to them, but the most efficient and most productive employees would rarely receive recognition/rewards, even though they added as much or more to the bottom line while spending less time to get there. If you need them to take on additional work, which could require additional hours, I still suggest that any additional compensation related to such extra work be based on the results, not how long it takes to get it done. I have also seen many procedures that were unnecessarily lengthy to support manual work because the people doing the work were unable to use excel or VB to speed things along. Be sure to measure quality as well as quantity.

Just to make sure, you are saying that a plan that utilizes the gradual age or service schedule under 1.401(a)(4)-8(b)(1)(iv) will NOT be required to provide the 5% gateway nor the 1/3 gateway, but the plan is still required to run (and pass) the general test. Is that correct?

Tom, In your session at the annual ASPPA conference, you had a few slides about this, and on one of them, I see the comment, "Remember, this is just to be able to satisfy the gateway - it doesn't guarantee passing nondiscrimination." Are you saying that if the plan uses this, suppose it's entirely based on service only, 1 year intervals, and the requirements are met: (regular intervals, starts at 1%, decreasing ratios, no ratio over 2.0, no jumping by more than 5%) must the plan also run a general test regarding the allocations? Is that what they mean in 1.401(a)(4)-8(b)(1)(viii), Example 1 part (iv), Example 2 part (v), Example 3 part (iv) when they say "if it satisfies paragraph (b)(1)(i)(A)"?

I know, I was failing to make the comment appear tongue-in-cheek, using WDIK's broker's use of the word ludicrous. I like the non-compete provision idea, that's good. edited to add: Lest there be any confusion to any reader here, the broker in WDIK's message was obviously incorrect about such a provision being illegal.

We will only take directions to draft a plan amendment with at least a verbal consent of the client, excluding the IRS required amendments of course. An even more ludicrous plan provision would be to not allow any participant distributions until normal retirement age (client wanted this in their plan to prevent any employee from taking their lump sum to set up a competing business).

If you are talking about the early withdrawal 10% excise tax (pre age 59.5, or pre age 55 lump sum, or pre-age 50 if public safety), then you will be pleased to know that the 10% penalty does not apply to 457(b) plans anyway. For instance, distribution code 1 on the 1099-R for a 457(b) distribution would only apply if a distribution from the plan included some non-457(b) rollover eligible money that had been rolled into the 457(b) account in the past, and it would only apply to that portion of the distribution. edit: grammar