BG5150

So, for my own edification: the "1/3" gateway test can be satisfied with 414, but the SH "5%" gateway must be tested on 415?

Thanks. I read those and the actual settlement document ( the url was in the cover letter), and these 5 were listed as possible, acceptable remedies: Here is a link to the document: http://www.sec.gov/litigation/admin/2007/34-57048-dp.pdf

I have several clients getting proceeds from the Bank of America Fair Fund. It looks like it has to do with MFS funds. What should we do with these proceeds? I would think that pro-rating the funds across people who held positions in the funds, but the cover letter mentions that it applies to account held from 2000 through mid-2003. It would not be feasible to see who held accounts during that period. However, I don't think it would be fair to spread it out across people who currently have a position in those funds. I thought of just putting it in the forfeiture account, but I recall some time ago that this wasn't a well-regarded disposition. Any thoughts?

I think yo have to go under 100 to remove the audit requirement. The 120 was put in there so a minor uptick in population over 100 wouldn't trigger an audit.

Are you confusing "severance pay" with "compensation paid after severance of employment."?

And what would they re-classify it as? Any contribution for them would be considered an allocation for TH purposes.

Wasn't that called "Family Aggregation" many moon ago?

I certainly wouldn't do it right after termination. I thought people had to wait 30 days before receiving a distribution unless they waived the waiting period. So, I would give them AT LEAST a month. Just make sure they got a proper termination package with distribution instructions and the 402(f) notice (Special Tax Notice).

Or after-tax? Loan payments? Top Heavy? (if non-keys get a TH contrib)

It should be okay. 1/3 of 13% is 4.33% Make sure that the SH is coded as an EMPLOYER source. It will test with the rest of the PS.

Doesn't the resolution to terminate the plan say all contributions to the plan will cease as of x/y/zz?

As for the deferrals: Will a lot of them be making deferrals? And at what percentage. My experience with part-time or seasonal workers is that they generally put little if any money away for retirement. This will affect the ADP test.

From the EOB:

I think it is an operational issue--failure to adhere to the terms of the plan document.

I'm guessing that "we ALWAYS use the method that benefits the testing" isn't considered ok even though it reasonable (it's an easy distinction), nondiscriminatory (it doesn't discriminate against HCE's) and consistent (it's always done).

How does the plan pass then? Basically, you are taking what would have been refunds in a failing test and calling them something else (catch-ups). If you had an ACP test that failed, but the match to be refunded was forfeited instead, would you say the ACP test passes?

I often get plans that fail the ADP test, but there are no refunds because of catch-ups. If this happens to one of your plans, to you tell the ER the test fails but there is no refund? Or do you just say the plan passes?

We, as TPA, work with different investment providers. Some track loans, some just invest loan repayments when told to do so. What happens if someone pays off a loan, but the ER still send in payments every week and the money is invested in the trust? Could that liberally be though of as a Mistake of Fact, and the money returned to the ER to then be given tot he participant? Or, should the money be forfeited and the ER pays the participant outside the plan?

If the deferrals are to two different plans, which ER is responsible for the 1099?

Does being a "former key employee" affect anything other than excluding that person's balance from the Top Heavy test?

I guess. But what happens if a Doctor leaves, or if one joins? Would you have to amend the plan each time? Or is "Each doctor in his or her own class" sufficient?

What are the Hardship requirements under the plan? Safe Harbor? Facts & Circumstances? Under Safe Harbor, they are pretty clear. Under F & C, I seem to have read that the participant must exhaust all available funding including any brokerage accounts or other liquid assets. From 1.104(k)-1(d)(3)(iv)B However, the ER can rely on a written statement that (Same code section, but C instead of B)

It says in the EOB that no more than 50% of the vested account balance can be used to secure a participant loan. If other security is obtained, could there be a participant loan that exceeds 50% of the vested account balance and not be considered a prohibited transaction? (And, in any case, no more than $50,000)

Send them a list of bad things that will happen if the plan gets disqualified. If they feel the need to ignore you and continue with doing this, I would fire this client.

Never mind my other reply. I was thinking that the owners wanted to put something in, and wasn't thinking about forfeitures. It's Tuesday , but if really feels like a Monday.