John Feldt ERPA CPC QPA

Sully, Yes. The only time an amendment would be required earlier (by December 1st actually for a calendar year plan) would be in the case where the plan provided a "maybe" notice for the year, and now they decided that they actually will contribute the 3%. That amendment and the supplemental notice must get done no later than 30 days before the last day of the plan year. I've marked that in bold below. 1.401(k)-3(f) Plan amendments adopting safe harbor nonelective contributions (1) General rule. --Notwithstanding paragraph (e)(1) of this section, a plan that provides for the use of the current year testing method may be amended after the first day of the plan year and no later than 30 days before the last day of the plan year to adopt the safe harbor method of this section, effective as of the first day of the plan year, using nonelective contributions under paragraph (b) of this section, but only if the plan provides the contingent and follow-up notices described in this section. A plan amendment made pursuant to this paragraph (f)(1) for a plan year may provide for the use of the safe harbor method described in this section solely for that plan year and a plan sponsor is not limited in the number of years for which it is permitted to adopt an amendment providing for the safe harbor method of this section using nonelective contributions under paragraph (b) of this section and this paragraph (f). (2) Contingent notice provided. --A plan satisfies the requirement to provide the contingent notice under this paragraph (f)(2) if it provides a notice that would satisfy the requirements of paragraph (d) of this section, except that, in lieu of setting forth the safe harbor contributions used under the plan as set forth in paragraph (d)(2)(ii)(A) of this section, the notice specifies that the plan may be amended during the plan year to include the safe harbor nonelective contribution and that, if the plan is amended, a follow-up notice will be provided. (3) Follow-up notice requirement. --A plan satisfies the requirement to provide a follow-up notice under this paragraph (f)(3) if, no later than 30 days before the last day of the plan year, each eligible employee is given a notice that states that the safe harbor nonelective contributions will be made for the plan year. The notice must be in writing or in such other form as may be prescribed by the Commissioner and is permitted to be combined with a contingent notice provided under paragraph (f)(2) of this section for the next plan year.

A retirement age of 44? Hmmm. That could be ok, but you'll want to look at T.D. 9325, "Distributions From a Pension Plan Upon Attainment of Normal Retirement Age" from May 22, 2007. http://benefitslink.com/taxregs/E7-9643.pdf

It is allowable to do so, exclude some HCEs from SH and not others. Some prototype documents have a section where you name exclusions by contribution types and by employee class.

Locust. See page 15 of the pdf file, where it says "How will the money in the Plan be invested?" You will be able to direct ...

1.401(k)-3(e): (e) Plan year requirement (1) General rule. --Except as provided in this paragraph (e) or in paragraph (f) of this section, a plan will fail to satisfy the requirements of section 401(k)(12) 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. In addition, except as provided in paragraph (g) of this section, a plan which includes provisions that satisfy the rules of this section will not satisfy the requirements of § 1.401(k)-1(b) if it is amended to change such provisions for that plan year. Moreover, if, as described under paragraph (h)(4) of this section, safe harbor matching or nonelective contributions will be made to another plan for a plan year, provisions under that other plan specifying that the safe harbor contributions will be made and providing that the contributions will be QNECs or QMACs must also be adopted before the first day of that plan year. Emphasis added. Seems fairly clear for Treasury writing.

If you want to just pick the gateway issue, then go to 1.401(a)(4)-9. You can look specifically at: 1.401(a)(4)-9(b) Application of nondiscrimination requirements to DB/DC plans go to 1.401(a)(4)-9(b)(2)(v)(D)(1) and (2): (1) General rule. --A DB/DC plan satisfies the minimum aggregate allocation gateway if each NHCE has an aggregate normal allocation rate that is at least one third of the aggregate normal allocation rate of the HCE with the highest such rate (HCE rate), or, if less, 5% of the NHCE's compensation, provided that the HCE rate does not exceed 25% of compensation. If the HCE rate exceeds 25% of compensation, then the aggregate normal allocation rate for each NHCE must be at least 5% increased by one percentage point for each 5-percentage-point increment (or portion thereof) by which the HCE rate exceeds 25% (e.g., the NHCE minimum is 6% for an HCE rate that exceeds 25% but not 30%, and 7% for an HCE rate that exceeds 30% but not 35%). (2) Deemed satisfaction. --A plan is deemed to satisfy the minimum aggregate allocation gateway of this paragraph (b)(2)(v)(D) if the aggregate normal allocation rate for each NHCE is at least 7 1/2% of the NHCE's compensation within the meaning of section 415(c )(3), measured over a period of time permitted under the definition of plan year compensation. There's a lot more reading than that to do, but this may help.

Thank you!

This was at the end of the recent ASPPA ASAP: "In addition, the IRS says the new ERISA §101(j) notice (provided within 30 days after a limit under IRC §436 kicks in) will satisfy the ERISA §204(h) notice requirement for those changes." Probably a dumb question, but what is this saying?

Technically, I think they only apply to plans that are subject to ERISA.

I am not an attorney. Was this part of PPA 2006, thus no amendment is needed until 2009? Perhaps an SMM might be needed before the amendment even gets done?

If you are an independent contractor, it is still possible that a gov 457(b) plan allows you to be eligible for the plan.

What deduction method was established when the plan was first established? Did they deduct in the fiscal year in which the plan year started, ended, or pro-rata? I think that establishes the precedent for future years, but I could be wrong on that.

And, if you are over 50, then catch-up deferral contributions can be done to both also.

What do you think will satisfy this part: "You must describe the Plan’s QDIA, including its investment objectives, risk and return characteristics..." This will be specific to the default fund - I'm thinking we may need something like a morningstar report and and perhaps have the notice refer to that?

Ack!

Well it does, but not exactly. If you aggregate with another plan so that other plan can pass 401(a)(4), then that exception goes bye-bye. 1.401(a)(26)-1(b) Exceptions to section 401(a)(26): (1) Plans that do not benefit any highly compensated employees. --A plan, other than a frozen defined benefit plan as defined in §1.401(a)(26)-2(b), satisfies section 401(a)(26) for a plan year if the plan is not a top-heavy plan under section 416 and the plan meets the following requirements: (i) The plan benefits no highly compensated employee or highly compensated former employee of the employer; and (ii) The plan is not aggregated with any other plan of the employer to enable the other plan to satisfy section 401(a)(4) or 410(b). The plan may, however, be aggregated with the employer's other plans for purposes of the average benefit percentage test in section 410(b)(2)(A)(ii). So, the other plan's use of the 412i plan to pass 401(a)(4) removes this exception, as I see it.

You are referring to a 457(b) plan. As mjb pointed out at the end of the thread link below, a deferral is not counted for the $15,500 limit under a 457(b) plan until it is vested. http://benefitslink.com/boards/index.php?s...&hl=vesting So, the amounts that are not vested do not technically count against the limit until they become vested. If that "nonvested" amount has grown with earnings, and those earnings also become vested at the same time the deferral does, then those earnings also count against the limit at the time they too become vested. So, if an employee was already 100% vested at the beginning of the calendar year, then the total "deferral" amount subject to the limitation is the employee's deferral amount and all employer contributions (the "annual deferral"). The gains and losses no longer are not counted toward the limit. If the employee was only 80% vested, then the gains and losses on the nonvested portion would count against the limit at the time they became vested. So, in your example for 2006, if: 1. Employee elective = 12,000 2. ER contribution = 4,000. 3. the account was fully vested on 12-31-2005 4. Gains during 2006 are 2500 You are correct that the total is $16,000 and the excess is $1,000 (unless catch-up can be utilized). The refund deadline for that excess would depend on whether the employer is a government employer or a tax-exempt entity. "As soon as administratively practicable" for the government, or April 15th for the tax-exempt entity.

The percentages of auto increases and the timing are minimums. If you want to increase quicker, then you are okay as long as your percentage is equal to or greater than the minimum that would be required for that time period for each participant. We have had a few clients who decided to just start the automatic percentage at 6% to avoid having to track when the increases have to occur.

If they are doing this with some specific participants in mind, then perhaps the IRS would consider such a contribution as a current 403(b) deferral, thus subject to FICA now and subject to current deferral limits?

Yes, they can send out a new notice. Explain that because the submission date has been changed, a new revised notice had to be issued.

thanks!

I must be missing something regarding the date on which the new PPA rates and mortality apply for lump sum payouts. Do these apply in determining the amount payable to a Participant having an annuity starting date on or after January 1, 2008, regardless of the plan year? I expected this to be tied to the plan year, but I didn't see the plan year tie-in. So, for example, could (or should) an October 1 plan year begin utilizing the new PPA interest rate and mortality January 1, 2008?

Also, how was the plan ever a true qualified plan if it's only use was to accept a rollover contribution, with no employer contributions ever being made and no employee deferrals ever being made? Don't you think the IRS would question the legitimacy of such a plan? Also, there's no tax basis on the distribution (the "sale"), so the entire distribution is taxed as 1099-R income, not as capital gains. I hope they thought about that when they started down this trail.

I'm not sure that we are supposed to disclose fees on this site. However, if you charged $100 per hour ten years ago, then the questions are: 1) Do those employees who do the work get paid more today than they did 10 years ago? 2) Has the efficiency increased enough each year to keep that hourly rate as it stands? After reviewing this, then, as Obi-Wan said to Luke "You must do what you feel is right, of course".

A Roth IRA has no RMD. A Roth 403(b) does have RMDs. "Does the employee determine the RMD for each of these types of accounts separately?" No. The total balance in your plan is considered. Can the employee choose to take the RMDs from either the Roth or the Traditional account? Yes. or, does the employee need to take RMDs from each type? You can choose to take it out all from Roth, all from pre-tax, or some of each, depending on how your 403(b) plan document is written. If some of the Roth is withdrawn, and the "basis" still needs to be tracked, then a pro-rata calc is done since it's a 403(b) plan. (In an IRA, the Roth principal would be considered the first amounts withdrawn). You can get out of some of the RMD requirements from your 403(b): Roll over the Roth 403(b) portion of your account to a Roth IRA, and that Roth IRA will not require RMDs! Be sure to take any needed RMD first. Be aware that the 5-year Roth clock in the IRA does not get to adopt the 5-year Roth clock from your Roth 403(b) rollover. So, if you already have a Roth IRA, then your Roth 403(b) rollover gets to use that existing Roth IRA's 5-year clock. If it's a new IRA, then the five-year clock starts anew, so be sure to wait 5 years before taking withdrawals. Of course the traditional 403(b) portion is still subject to RMD. Hmmm. This all sounds so familiar...