BG5150

How does the hourly plan fail coverage if there are no HCE's?

The audit requirement generally starts with 100 participants as the start of a given plan year. So if these season people get terminated before the end of the year, they probably aren't ee's on day 1, so I don't see a problem. Also, if the plan has been filing a Schedule I for the past year, the threshold goes up to 120. Keep in mind, the Day 1 "participants" are eligible participants (with or without acct bals)+ any terminated ee's accounts with balances. This does not include beneficiary accounts or QDRO accounts, but would include an ee who may not be eligible for the plan, but has a rollover balance.

From my good friends at TAG. It looks like it would count in '06. Which is bad news if we are not getting this information until 2008 and the 06 test failed.

Because if the SH is your only contribution other than deferrals, you get a pass on Top Heavy. The regs say the SHNEC has to be AT LEAST 3% don't they? So, I'm guessing as long as the document doesn't say the SHNEC must be 3%, then it's okay to up it to whatever.

I have a participant whose termination date is 12/28/06. That is the last day he worked. The payroll ending date for his last paycheck was 1/5/07. SO he has compensation and deferrals on his 2006 W2. Should he be in the 2007 test? He did not work one single day in '07, and the pay he received was for work in 2006.

We have a plan that didn't submit census data to us for 2006, so we did the 5500 with the info we had on the record keeping system. We have since got the information and found that our participant count changed by about 5 or 6 for questions 6 & 7 on Form 5500. Changing the numbers would not be the difference between filing a schedule I or H. So would you amend the 5500 for a few people? Especially since one year's numbers have no bearing on the next or the filing type?

If you get a letter, send the amended returns. If not, just keep rollin' along.

TAG suggested to do it for 2008 only.

Does the excise tax on late refunds applicable if the plan is also making a 1-to-1 QNEC to satisfy the 2006 ADP test? If so, on what year's 5330 do I report it? '06 or '08? Thanks in advance.

A lot of documents I've seen will define compensation for benefits purposes, but allows the ER to determine an allowable compensation determination (usually 414(s) to be used for the ADP/ACP test. For example: Participant A makes $50,000 in 2007, entered the plan 7/1/07 and made $25,000 after that date. The plan limits deferrals to 10% of participation comp. In this case, the person could only put away up to $2,500 (10% of $25,000). But you could use $50,000 as the comp for ADP test. The corollary would be true, too: plan could limit deferrals to 10% of full-year comp. In this case Participant A could defer $5,000. But you could use $25,000 as the ADP comp. As always, check the plan language to see if you have this option.

Yes, that is what he is wanting to do. There are two methods of correction stated in EPCRS: the one-to-one correction method and the QNEC correction method. Since the plan year in question is 2006, I don't think a QNEC is possible; just to do the refunds and do the 1-1.

So the plan document would have to say something like: "The Employer can choose to limit the deferrals of HCE's if it so chooses" ? But with the absence of such language, I would think it could not limit them (the HCE's), and certainly not an individual HCE's and not others.

Is the plan using prior year testing? If not, I don't think the ER can legally do that, unless the plan is amended to hold all HCE's to x%. The company can recommend that the deferrals are reduced, but cannot mandate it.

If it's within 2 years, can't you just self-correct using the guidelines set forth in EPCRS?

Yet he would be counted in 7g. And as long as his account is not the difference between a large and a small plan filing, I wouldn't worry about it too much.

Maybe. Some plans call for re-satisfying the service requirements if the person incurs 5 consecutive one-year breaks in service. Also, if the break is only a few weeks, maybe using the prior election might be valid.

The answer I got from TAG is that if there is less than 9 months left in the plan year, the employer must make the contribution at the end of the year, after the ADP is known.

Not always. There are plenty of pooled separate accounts and other investment vehicles that do not have publicly available returns. And I thought freeerisa just had past filings and some company info.

See EPCRS, Appendix B, Section 2.02. Sieve was correct. You will have to wait until 2009 until the employer makes the contribution for the missed deferral (and, thus, the missed match), since you have to wait until the ADP test is run. There is also a section on correcting a safe harbor plan. Here is EPCRS: http://www.irs.gov/pub/irs-drop/rp-06-27.pdf

My thoughts would be to reset it to zero.

Now, now. Let's play like pretty children. (And that's "pretty" with an "r")

Most record keeping companies have forms that provide for the transfer of assets from a deceased person's account to a beneficiary (or beneficiaries). Usually, the paperwork is completed by the beneficiary and sent to the plan sponsor for authorization. Once the plan sponsor authorizes it, the transfer is done and the beneficiary can have control over that part of the money. As for the naming of the accounts (I'm sure that QRDOphile's response was tongue in cheek, but...): True, the name ont he account doesn't really matter, but the underlying identifier of the account is the SSN. It is needed so proper tax reporting can be done. The account number and name are arbitrary, but it just make sense to keep the true name or the participant/bene attached to the account(s) for which the correct SSN is the identifier.

Does this help? http://benefitslink.com/taxcode/

My vote is $10,000. You do not reduce the annual additions by the refund amount.

We have never had any problems disaggregating participants who were under 21 or would have entered the plan the next plan year if the plan used semi-annual entry dates. Would the test have passed if everyone was included? Some practitioners just automatically disaggregate the populations as a default. If the plan will pass with everyone in it, then all is good. For the excludable people: is the census data correct for those people? Be sure they are really excludable. Also, for "service less than a year": You could actually have people with a year of service who could be excludable. Say a person is hired in August 2006. One year anniversary is August 2007. With monthly entry dates, the person would come into the plan on Sep 1. With semi-annual entry dates, the person would come into the plan 1/1/08. So even though the person is eligible for the plan and has more than a year of service, he or she can be tested separately.