SteveH

The answer is that it is too late to do a safe harbor plan if the notice was not sent out.

I haven't ever seen an insurance company refuse to disclose the comissions. More often than not I think the client never reads the Schedule A. Even if they do review the figure I think the numbers are so big that the client figures it must not be a commission and maybe is a number that they just don't understand. After all most of the 5500 report is filled with things the client doesn't understand.

By the way, I vote for WDIK and Don as having the best comments in this thread. I got a chuckle. My company is a smallish local TPA firm and we look at options for being more profitable all the time. If you can have your highly experienced people performing tasks that are growing your business all the while cutting costs on the menial work then why not? As a small TPA we always tout ourselves as being the great service, high level consultants. But you all know that there are parts of your business where you lose money. The #1 place is probably on employee distributions. You can't cahrge enough money to compensate for the amount of time they take. I would love to be able to outsorce at least that part of my work.

well intelligent sharks makes it Deep Blue Sea. I never saw the movie myself. I'm not sure anyone actually went to see it

Well it was a little fishy that there were two people asking for hellp with a research paper on the same day. It is October. We all know that no one starts research papers until a week before the semester is over. Even then, in this day in age can't you just hire a company on the internet to bust one out for you?

The only thing that i can add is that I am pretty sure if the employers knows the payment won't be for a qualifying hardship then they can't let the hardship happen. If an agency challenged this how it would be proved, I have no idea.

well that makes #12 Joy Ride I have no idea what #6 is.

I'm not sure I would reissue W-2s. The problem is that then 160 former employees are going to ask you to pay for the refiling of their taxes also. So not only have you incurred the expense of reissuing the W-2s, but now what are you going to do about the complaints? Maybe reissuse is the best and right thing to do, I don't know. Just be ready for the firestorm. By the way, 200% of the first 6% deferred is insane.

I might just be thinking virtually out loud here... For employees still employed - If the payroll advance wasn't due to be paid back necessarily until termination, was it counted on their W-2 at the end of the year? My guess is that it was. If it was part of their gross income at the end of the year, then has anything gone wrong yet? I don't think so. For employees that were terminated the same year as the advance originally happened. For those people I am thinking that their deferrals were higher than maybe their election form has stipulated on the last payroll. The advance payroll was probably done corectly, the last payroll probably had a lower gross pay than what their election form indicated. Has anything gone wrong from a plan persective? Well the employees probably haven't gone over their deferral limit for the year ($15,000 max for 2006), so there isn't any major plan issue. The employee might be upset, but I bet no employee even noticed. Now what about the match...you might have some match calculation problems. I don't know how your plan allocates matching dollars. Is it discretionary at the end of the year? Is it with every payroll, but limited to a % of the person's wages? if it is a 5 of wages, then the last payroll maybe didn't receive a full match depending on whether the match was calculated before or after the repayment. For instance if the company matches 100% of the first 4% deferred each payroll, I may have set my deferral to be 4%. My last payroll though, after the repayment might look like I deferred 8% of my pay and I wouldn't have been matched on 4% of it. Now that wasn't my intention as a participant to defer more than what I would be matched on. But this might not have been the case at all. Should 5500s be refiled? I only think this happens if you determine that you should hav emade additional match to the plan for some reason. Although I am not sure I would come to that conclusion. In my example above the only thing I think has happened was that you maybe withhled more money from the last paycheck than an employee wanted. Do you have to take that out of the plan and go through a huge process, I don't think so. If you were short on match dollars then you would have to go the lost earnings route, the late desposit route, and refile. I suppose you should retest the ACP, but if you passed before, adding more match for rank and file employees that hav etermianted shouldn't cause you to fail now. If you think you ahve overpaid the match, depending how you calculated that last payroll, then you probably haven't necessarily broken anything either. If the plan allows for discretionary match, then you have given some people a small additional discretionary match. As long as it wans't given to Highly Compensated Employees, you won't fail discrimination testing. Now your plan may not allow for an additional discretionary match, but you might be surprised. We write our docuemtns to include it, even though most plans never use it. Sort of a just in case. I think it boils down to has someone gotten screwed here? Have youoperated the plan incorrectly or did you only mess up payroll? What is the dollar cost of this? Is it worth trying to fix? Is your plan large enough that it is subject to an audit each year by a CPA? They haven't caught it yet. Are you certain someone else will? Maybe the company should announce that because of the wonderful 3rd quarter results, anyone that had a payroll advance back in 2003 does not have to pay it back! YAY! I don't think you have problems with the advance back in 2003 assuming that it was included in their gross wages for the year. I think the problems are cropping up on the last payroll becuase you aren't reducing their gross wages first. Or maybe I misunderstood everything you said.

If the new employer won't accept the loan, I would suggest that the employee starts up a business venture real soon, and set up a plan. Then accept her own rollover with the loan in kind.

I believe the ASPPA seminar said it could be either way. Although I am not sure if they went into as much detail as what you are asking. I got the impression that if an employee had never affirmatively signed up for the plan, then they also hadn't affirmatively not signed up for the plan. So those existing employees could be included in the auto enrollment feature. Your point about someone that has signed up at a 2% rate...that I don't know. I would be inclined to say leave them at 2%, or maybe have them specifically reaffirm their intention of staying at 2%. I personally don't work on a while lot of 401(k) plans anymore, so the section on auto enrollment I think i let my mind wander a little. I would think increasing someone's participation when they had previously signed up at a lower level is just going to give you headaches. People are very sensitive when you start jerking around with their pay. If tehy do get upset and they can throw their previous election in your face it won't matter if you feel you were justified to increase it because of the new auto enrollment feature. The employee is mad now, you have extra work to back out the additional contribution, and bring the deferral election back down to 2%. I wouldn't do it, but keep searching around. Don't take my word as the final.

Simple question? If you have an over 50 sole propreitor that has a small net schedule C that is trying to contribute as much as possible to a 410(k) profit sharing plan, do the catch up contributions count towards the 100% of pay limit? $30,000 net schedule C 25% of pay profit sharing allocation This leads to $2,119.43 half SE taxes, a $5,576.11 profit sharing allocation, and what must be the schedule C after pension contributions of $22,304.46. (22,304.46 + 2,119.43 + 5,576.11 = 30,000) Now if we add some deferrals to the profit sharing contribution we could go with $5,576.11 + $15,000 + $5,000. But this ends up with a total contribution of $25,576.11. That is over 100% of the $22,304.46 schedule C. I visited two websites yesterday that calculate the maximum for a 1 person plan, and they both came up with the $25,576.11 number. I thought the maximum would be somewhere between the $22,304.46 and the $25,576.11 because if you lower the profit sharing allocation down from the 25% of pay then the schedule C after pension will increase. So who is wrong here? Me or the websites? I know the catchup contributions have to count towards the 100% of pay limit because then someone that is paid $1 could contribute $5,000 to the plan and that makes no sense.

Well I know that you can not pledge the plan as collateral. You may be able to find a private lender that would loan the plan money which would be fine, but it would probably be a high interest loan beacuse the lender couldn't come back on the plan for the balance if they stopped paying. The lender's only recourse would be the property. I don't think it is out of the realm or possibility though. If the plan were to put down 50% on the property I am sure there would be lenders that would take a chance on that. The other option would be to "partner up" with someone. I know a real estate firm that will purchase a rental property with an investor. The investor puts up the 20% down, and the real estate agent/firm will obtain the loan for 80% of the property. The real esate firm will operate as the landlord. All rents and expenses from the property will be the sole responsibilty of the real estate firm. They will be responsible for keeping the proerty maintained and also rented. In exchange for this the investor will receive a 50% interest in the equity of the property. The real estate firm will receive the other 50% of the equity. It is really a pretty unique approach to real estate. It allows investors that want to be in real estate not have to act as the landlord. It also allows the investor to limit their risk quite a bit. If the property must be sold for whatever reason, the real estate firm guarantees that the investor will at least receive their investment back. If you look at a rental property purchase price of $100,000, the investor puts up $20,000. Let's assume after one year the property has increased in value 5% to $105,000. The investor is entitled to $2,500 of the equity which is a 12.5% return on their $20,000 investment. If the property is sold there are no taxes due because it is inside of a qualified plan. Pretty neat if you ask me. This "partnering up" option allows the plan to operate completely as an investor. It makes a lot more sense to me so that the plan isn't operating as a landlord.

Yeah, I am familiar with 401(a)(26) , but in practice how is this done? Is this an addendum at the back of the plan document each year? Are you amending the plan to put everyone's actual name in the eligiblity section? That would probably require an amendment each year. I think I would actually laugh out loud if a takeover document came across my desk that read,"Susie, Jimmy, Patty, Tom, Blinky, SoCal, PIP, Andy, and Ed are eligible for the plan, everyone else is out." So it sounds like naming names for eligiblity is ok, as long as the DB and DC plans are tested together so that as long as we have 70% overall participation in the plans we pass the ratio test. 1 eligible HCE 9 eligible NHCE 4 covered by the DB plan includes the HCE, these 4 do not receive DC allocations. 4 differnet people covered in the DC plan and are not covered in the DB plan. Test the plans togehter. That is a 77.8% ratio test. A 40% DB participation test If everyone receives the same accrual benefit in the DB plan and the same allocation rate in the DC plan then we don't have to general test and all is good?

only one I could add to is 13 Jaws wait wait 11 is pearl harbor

Not a problem as long as you can pass testing. You can exclude people with blonde hair and blue eyes if you want to. You just have to pass testing.

Ok, I'll buy that. Would that be on a stand alone basis for the DB plan or combined with the DC plan? Obviously if everyone is covered by at least one of the plans you are passing the ratio test if you combine for testing. It seems odd to me that you would be picking 40% of the employees to be covered in the DB plan and then allow everyone else to benefit in the DC plan. Then say we pass a ratio test and everything is fine. When i say strange, just strange to me because I haven't been designing plans like that. Now that might not pass gateway, but thats a different topic.

Well in some research I was doing I noticed that you can use a lower hours threshold in the plan for the BIS, and even none at all, but I think that is going to make it a custom document.

Also that extra 2% could probably be given all to the owner subject to 415 limits and testing. You don't have to allocate the 6% pro rata, it can be allocated just as a new comp plan would be.

Blinky: Shouldn't you use some sort of job classification for eligibility? I have been working under an assumption that it was ok to name names for allocation/accrual amounts, but not for actual eligibility. I don't know what section it is, but eligiblity must be determined in a non-discriminatory manner. I would think naming names could be considered discriminatory. In other words lets say we have Judy the administrative assistant. It would be ok to say: Administrative Assistants are ineligible to participate in the plan. --- Or if everyone was eligible for the plan it would be ok to set the allocation formula for administrative assistants at zero. It is not ok to say: Judy is ineligible for the plan. Right? I know you kind of get to the same spot, but if she is a participant you have top heavy and gateway considerations. Those contributions are probably taken care of in the DC plan in the example in this thread. I just think you MIGHT have a problem if you are naming names in the eligibility section of the document.

Yes

Sad, but I had my 401(k) account stolen once by an employer. He straight up liquidated it. It was only a couple thousand dollars so what could I do? Hire an attorney? It would have cost me more than a couple thousand dollars. The company was very small so I doubt the DOL would have come in. Maybe 2 or three people were affected. He ended up filing for bankruptcy. it was a bummer, but I chalked it up to a life lesson. I should have quit sooner.

It's really a shame when things get so complicated.

Then sell him a Roth 401(k).

I was worried about the apples and oranges thing. Seriously. I have always gone by that phrase, once a participant always a participant until termination, but it got a little foggy there for a bit. Thanks for the clarification.