jjaatirs

I have a small PS plan with an integrated formula where the owner just wants to receive the same percentage allocation as his employees and forego the excess piece of the formula. I thought he could simply set the excess percentage to be 0%, but I'm not finding anything that specifically says he can do that (admittedly, just a 10-minute google search). Everything I find says that the excess percentage is the lesser of the base percentage or the maximum disparity percentage, without specific exceptions to be lower than that. Any cites or insights will be greatly appreciated.

Thanks, Lou & 2, I was leaning toward active so I'll go with that.

We have a client who terminated their plan effective 10/31/2014. As of 12/31/2014, there were some participants who were still active employees of the employer who had not yet cashed out of the plan. Should they be counted as Active or as Separated participants for purposes of lines 6a(2) and 6b of the 5500? The instructions say that Active Participants are "any individuals who are currently in employment covered by the plan and who are earning or retaining credited service under the plan." I can see the argument that these people should be counted as Separated since they are not currently in employment "covered by the plan" and they are not earning credited service under the plan. However, I can also see the argument that they should be counted as Active since they are currently employed by the plan sponsor and the are retaining credited service under the plan. I'm guessing that I'm missing something basic and obvious, but this one confused me today. Thanks in advance for any input.

Thank you both for your reference to 2009-31; it has been very helpful. Our determination that the payment for unused vacation time is not a bonus is based on the concept that it is compensation that the employee would otherwise receive, regardless of their individual performance or the company's performance. Using the definition that a bonus is payable for performance above expectations or above goals, vacation payouts would not be bonuses. That being said, the definition of a bonus you quoted earlier as simply "Additional compensation given to an employee above his/her normal wage" definitely adds some grey area to the discussion, as vacation payouts would most likely meet that definition. I'll stick with the not-a-bonus definition for now, although I am open to arguments to convince me otherwise. Thanks again for your input.

We have had the same question come up and have determined that the payment for unused vacation time is not a bonus--it is regular deferral and match-eligible compensation. A related question (that just came up today, so this thread was conveniently relevant) is whether or not the employer can do something more plan-specific with the unused vacation/sick time payout. Ultimately, the plan sponsor would like to contribute the unused vacation/sick time payout to the plan for the affected participants, rather than paying them in cash. We do not believe that that is directly possible--it cannot be a profit sharing contribution (even if the plan were cross-tested) since the participants essentially have discretion over whether or not such an amount would be contributed (i.e., by not taking all their vacation time), and it wouldn't be a deferral since the participants wouldn't be given the option to receive the payment in cash. Any suggestions on a plan design that would accomplish the employer's goal of getting this money into the plan, rather than paying it directly to the employees? One idea that came up was to give the employees the option of a payout of 50% of their unused vacation/sick time or a contribution of 75% of that amount to the plan as an incentive to get them to put the money in the plan (the percentages here are just for example--other options could work). Two potential problems immediately come to mind: 1) since this money would be deferrals, this solution doesn't help anyone who is already deferring the max, and 2) isn't this just a fancy way of saying that their choice is a 50% payout but, if they put it in the plan, then they get a 50% match on it, in which case it just adds ACP issues? Any thoughts on plan design would be greatly appreciated. Thanks!

If a plan sponsor deposits their profit sharing contribution into a holding account in the plan in installments throughout the year, are the earnings on that account considered to be Annual Additions for 415 when they are allocated to the participants? Specifically, there are several participants at the 415 limit already--can they get an allocation from the holding account earnings?