ERISAnut

Never a 7 unless the spouse actually takes over ownership of the account and is no longer the beneficiary of the decedent with respect to the account. Hence, always a 4. You are confusing apples and oranges. Assuming this is a qualified plan (and not an IRA) she will be treated as the "participant" with respect to her beneficiaries. Hence, distributions will be made with respect to her recalculated life expectancy each year (assuming this amount remains longer than her husbands life expectancy in the year of death minus 1 for each subsequent year). If she dies, the her life expectancy is used (minus 1 for each subsequent year) and compared to her beneficiary's life expectancy in the 1st year of distribution (minus 1 for each year). To get to the bottom of your question without getting too technical, she is the beneficiary in all instances unless she rolls the account over to her own arrangement (thereby becoming the owner and no longer the beneficiary).

Without the "creative accounting" tactics to make it look as if there were never any ineligible deferrals made, VCP would be the only method of having those funds removed from the plan. Note that VCP, unlike SCP, requires IRS involvement since there is otherwise no statutory authority for those funds to get distributed from the trust. Trying to distribute outside of VCP would only serve to create other violations of failing to follow the terms of the plan and perhaps improper distributions and even 401(k)(2) violations. A mistake in fact is always a self correction option in the event the employee was allow to contribute due to a mistake in determining eligibility when in fact he was not eligible. But, when the employee exceeds a plan imposed deferral limit (say 10% of compensation) then there is not plan provision allowing for this to be corrected; and a distribution to get the employee down to 10% would only create another violation. This is why the IRS involvement is necessary. That's VCP, not SCP.

Additional Question regarding Simple IRA exclusive plan rule... Employer A sponsors a 401k plan and purchased 100% of the stock of corproation B in 2006. Corporation B sponsors a Simple IRA for it's 4-5 employees. For purposes of the exclusive plan rule, if $0 contributions have been made to the Corporation B's Simple IRA in 2006. Corporation A wishes to terminate the Simple IRA in 2006 and amend Corporation A's 401k plan to include employees of Corportion B as eligible participants in Corporation A's 401k plan during the 2006 plan year, correct? The affect to the Simple IRA in 2006 would be moot since there are $0 "excess contributions" to return, correct? You are correct. In the event there were contributions to the SIMPLE, then there is a transition rule in place to allow those two plans to continue without violating the exclusive plan rule. But like you said, it's a moot point.

Yes, it would be best to start the 401(k) plan on January 1, 2007 and discontinue the SIMPLE IRA as of December 31, 2006.

You must first establish whether the SEP is operated on a Calendar Year or Off-Calendar Year. For the 2005 calendar year, there is a special rule stating that the participant is not active in 2005 in the event the contribution is totally discretionary and there was no way to know if a contribution would be made for that year. Hence, when funded in 2006 by the employer tax filing deadline (including extensions) the participant is considered active for 2006; even though the contributions were made with respect to compensation received during 2005. For an off calendar plan year, the same principals would apply except that the plan year is now covering two taxable years of the participant. Let's assume that the plan year ends June 30th 2005 the employer tax return in on extension until February 15th 2006. Then any contribution made to the SEP would make the employee active in 2006 since this is when the contribution was funded. NOW where you get kicked in the head. Let's suppose than instead of making the contribution (for the PYE June 30, 2005) in 2006, it was funded on September 15th, 2005. In this case, the employee is considered as active for 2005. However, if a contribution for June 30th 2004 was actually funded during 2005; then that contribution funded on September 15th 2005 is now DEEMED to be made in 2006. Hence the individual is active for 2005 and 2006.

I'd never venture to attempt a controlled group determination without first know who owns the other 50%. Many times I have encountered this question, it was the Doctor's wife. Just a thought.

With respect to SIMPLE IRA calculations, it should prove very simple as you do not have to reduce for the 1/2 of the self employment taxes when determining compensation. Hence, once you reduce the owner's compensation by "employer" amounts funded to the employees, you go straight to reducing his compensation by $1 for each $1 of employer contribution. You shouldn't need a spreadsheet for this.

The EMPLOYER is the same. Merely changing the entity type does not create a new employer. You're overthinking it.

Facade, You are making it too difficult on yourself when you try to read the technical language inside the code and the regs. If a plan excludes hourly employees from participation; even if those hourly employees would otherwise satisfy the age and service requirements for participation, then those employees are not included in the ADP/ACP tests since they are not "benefiting" from that arrangement. However, those same employees are includable inside the coverage tests since they represent an exclusion that is not considered a "statutory exclusion". When trying to learn how to prove non-discrimination in a plan, it helps to understand how coverage testing and non-discrimination testing are different. You cannot test a plan under ADP/ACP until the population being tested has passed coverage under 410(b). That means you must first ensure the exclusion of the employees other than those who fail the age and service requirements passes 410(b). Once you prove this, you then proceed to the ADP/ACP test while testing ONLY THOSE EMPLOYEES WHO ARE ELIGIBLE under the ADP and ACP plan. If you are excluding hourly employees, then they aren't eligible.

We are merely distinguishing between depositing the assets into the PLAN's checking account and INVESTING the assets pursuant to each participant's investment elections. Once the amounts are DEPOSITED into the PLAN's checking account, 2510.3-102 is satisfied. I did not offer an opinion on how long is "as soon as administratively feasible". The individual asking the question seemed to have been combining two distinct processes; Segregating the assets and investing the assets. Can we speed up now?

Can of Soda: 65 cents. Gallon of Gas: $3.00 Appetizer at Friday's: $6.99 Complete fact finding: PRICELESS

What do you mean by "move to an escrow account"? Generally, you must report on a 1099-R all distributions (with few exceptions i.e. less than $10). From your comment, trying to determine if the distribution was actually made from the plan; or whether there was some 401(a)(13) violation.

You would NEVER do this in a DB plan. That's a given. As for a DC plan, it "may not" be considered unreasonable to charge distribution fee to the participant receiving the check.

Question 1 - The technical answer is that you must always follow the terms of your plan. I am not familiar with any plan provision that would allow of forfeitures of balances merely because they are small. Also, if the balance is forfeited, it would not be eligible for rollover. Question 2 - This again seems to be a document issue. You should generally follow the governing documents of the plan. To that extent the plan charges an expense of 100% of a participants balance may become a fiduciary issue on fees charged to the participant. I am not given an opinion as to whether this is a fiduciary breach, but it is along that standard that would be applied to answer your question. These scenarios should generally be considered prior to designing the fee agreement.

If you obtain a QKA within your first four years inside the industry, then you are ahead of the curve. Many times, you can simply look in the yellow pages for all TPA's. Many companies have extra positions that they never advertise because of the influx of resumes. On the flip-side, there's always companies looking for GOOD talent. Your issue would be that you'll probably find yourself surrounded by incompetent people who do not share (or even understand) your enthusiasm.

Do not confuse the 416 requirements with 401(a)(4). The Top Heavy rules are under 416 while the non-discrimination rules are in 401(a)(4). You seem to be using top-heavy in the wrong context.

Stated differently, There is NO requirement that the top-heavy minimum contributions be 100% immediately vested.

Nothing cut and dry. The idea of making the deposits into a plan's checking account is perfectly acceptable and recommended wherever possible. The gets the funds out of the employers control and into an ERISA protect trust. Investment timing is a separate fiduciary issue. Hence any scrutiny would be based on a complete set of facts and circumstances (but nothing cut and dry). You may be less likely to meet the 404( c) standard; but who does?

Each employee should open a new SIMPLE IRA account in order to receive the company contribution they are entitled to under the SIMPLE IRA arrangement. As for the amounts contributed to the Safe Harbor 401(k), this would be a separate issue as to what "definitely determinable allocation formula" inside the plan was being honored to make those contributions. These amount should be used as 2005 contributions since they were contributed then. This would at least keep the 401(k) from being damaged. The issue of the late contribution to the SIMPLE IRA would be a good one. This is just a bit of consistency where someone failed to treat an apple as an apple (and an orange as and orange). You CANNOT make a fruit salad out of a SIMPLE and a 401(k).

The 5 year in-service distribution rule is participant driven. This means that you would consider the inservice distribution for only those participants who are includable in the Top Heavy Test. If this owner terminates employment more then 1 year prior to the Top Heavy Determination Date, then his balance and his previous distributions would be excluded from the analysis. The termination and re-employment routine would not fly. Too much work just a save a 3% contribution to employees anyway.

You are wrong because 410(b) is a different standard than 401(k)(3) and 401(m)(2). Stated in layman's terms, the coverage test is different from ADP and ACP tests. All a safe harbor 401(k) does is deem the plan to pass the ADP test (and in many instances the ACP test). Whether your plan is safe harbor or not; you must pass coverage under 410(b). 410(b) doesn't look at who receives what; but instead looks at what percentage of HCE's are benefiting under the plan compared to the NHCE's that are benefiting under the plan. You can exclude any class of people who want provided the ratios satisfy the coverage test.

Hence the term "facts and circumstances". The entire idea is not to catch the participants by surprise but ensure they realize that unless they act, the automatic deferrals will be made. Therefore, it is not so much a time-frame standard; but a "please don't let this thing backfire" standard. Once these are made under the automatic enrollment rules, they are deemed to have been elected by the employee and are then subject to the withdrawal restrictions of 401(k)(2). So, provide the notice and communicate what the notice means if you have to in order to ensure employees know to act if they do not wish to contribute.

Two thoughts: 1) Do not get SHMAC confused with SHNEC with respect to helping satisfy the gateway into Cross-testing. The SHNEC can be used while the SHMAC cannot. 2) Do not confuse Cross-testing with Integration. The 3% SHNEC may not be used as the base percentage in an integrated allocation formula. Peace!!