Trekker

Bob R - thanks for taking the time to provide this information. Let's hope some guidance comes soon.

Just checking back in. Has any official proclamation been issued on new plans adopted after 1/31/07, but in Cycle A? For example, a new profit sharing plan is adopted effective April 1, 2007, and is in Cycle A due to EIN ending in 6. What is the deadline for submitting this plan? Thanks.

J Simmons - sorry for the delay in replying. I haven't checked the board lately. Yes, we did receive a DL on the amendment that specifically carved out the non-controlled group members from the safe harbor.

We had an individually designed 401(k) plan which allowed a couple of non-controlled group members to adopt the plan, making it a multiple-employer plan. All controlled group members had to operate with the safe harbor, but the two non-controlled group members chose not to. The plan document specifically named them and stated that the safe harbor provisions did not apply to them. If they ever wanted to take advantage of the safe harbor, the plan would be amended. We never had a problem with this.

ak2ary: Thanks for taking the time to offer your response. We will consider this angle and see if it offers a good resolution.

I have a slightly different question on a similar situation. Participants properly completed an elective deferral form to have a percentage withheld from Compensation, which, by plan definition, includes bonuses. There is also a matching contribution. Deferrals were not withheld from bonuses for plan years 2005 and 2006. Related matches were not made. Employer will calculate what should have been withheld and deposit the full amount. Since this is not a "missed opportunity" situation, we don't want to run the risk of using 50% as permitted under RP 2006-27. Appropriate matches will be made and earnings will be added. TWO QUESTIONS: (1) Is this self-correctible without filing a VCP since we're within two years of the failure? (2) Must the ADP and ACP test be recalculated for those years? The correction involves both HCE and Non-HCE. Any help is appreciated.

I think it was a case called Keystone that said mandatory employer contributions must be made in cash. Hope this helps.

Thanks, Blinky; the 01-31-07 date is all I have read as well. Another contact of mine referred to what I guess is the "regular" RAP for new plans (return due date with extensions), but I could find no comfort for that view in RP 2005-66. It is an EGTRRA document. Just to be safe, we will submit by 1/31/07. The extra time would be nice, but not worth the risk. --Trekker

Yes, it is an individually drafted cash balance plan. --Trekker

New Plan effective 1/1/06, signed in December of 2006, EIN ends in "1" Must this plan be submitted by 1/31/07, or since it is a new plan, do we have until the due date of the tax return, or 3/15/07, plus extensions? Thanks (and what happened to the board covering these items?)

I'm not an attorney, but I remember a case (I think it was Keystone) that would not permit required contributions to be made in stock. Discretionary contributions were a different matter. I am writing off the cuff; just thought I would throw this in the mix.

In 2001, we had a similar situation and asked the IRS for a general information letter advising the preferred method for testing a plan whose sponsors were members of a controlled group for part of the year and not a controlled group for the balance of the year. The IRS replied that there was no law on this particular point and, therefore, they would not offer guidance. I think we ended up treating employees of the company that left the group as terminated. This may not match your situation, but the IRS offered no guidance on ours.

We will be drafting a new individually designed profit sharing plan for an employer with an EIN ending in "1" early next year. The plan will not be signed until March, 2007. When should this plan be submitted? Must it be submitted off-cycle or can it wait until the next Cycle A years down the road? Thanks for any help.

Replying to BelowGround's query -- I'm looking at a current law versus PPA chart from the Groom Law Group. The current law side of the chart quotes what we all have understood about in-service distributions from pension plans, then the PPA side says: "Section 905 of the Act amends ERISA Section 3(2) and adds a new IRC 401(a)(36) permitting, beginning in 2007, pension payments to be made to a participant who (i) attains age 62 and (ii) continues in employment." Hope this helps.

Basic Facts: Parent Company A owns Company B. Company B has no employees. Company A has employees and maintains a 401(k) plan. On October 1, 2006, an unrelated party is buying the stock of Company B. After the sale, the new buyer will hire some employees from Company A. The new owner wants to establish a safe harbor 401(k) plan for these employees effective October 1, 2006. It would be a calendar year plan. Before the sale, even though Company B had no employees, it was part of a controlled group that did have employees. The final regs say: A plan is a successor plan if 50% or more of the eligible employees for the first plan year (10-1-06) were eligible employees under a CODA maintained by the employer in the prior year. For the successor plan rules, before the sale, is Company B considered an employer maintaining Company A's plan? Any cites would be helpful. Thanks in advance.

I'm not writing with much confidence, so let's hope others chime in. I just want to help get the thread going. I think since a participant with elective deferrals in his account has a vested account and may not be deemed to receive a cash-out, it seems to follow that with no deemed cash-out, you can not have a deemed back-back.

Thanks, Tom. What confused me is that the 2005 Pension Answer Book (Krass), Q26:47, specifically states that safe harbor matching contribuitons may not be taken into account for this purpose (second paragraph of answer). The pre-EGTRRA Notice 98-52 is cited. Perhaps the book just didn't catch the updated rule.

I know this has been asked before, but I can't find the links and there is conflicting information out there (no surprise). We have a 401(k)/PSP, with an integrated PSP contribution and safe harbor match (100% of the first 4% of comp deferred). Last day/1000 hours required for PSP. A participant is employed on the last day, but no 1000 hours, so he is entitled to the top heavy minimum instead of the full PSP allocation. He is deferring and receives the match. QUESTION: Does the safe harbor matching contribuiton made on his behalf count toward the satisfaction of the top-heavy minimum contribution he is entitlted to? I know the answer is yes for non-safe harbor matching. Most of what I find references the EGTRRA provision that matching contributions that are used to satisfy top heavy are still treated as matching contributions. I just need confirmation that safe harbor matching contributions that are used to satisfy top heavy are still treated as safe harbor matching contributions. Thanks. P.S. This is one of those times when you know that you know the answer, but you can't put a finger on why.

May I raise again Hyper's question with a slight difference? Our fact situation is similar. Employer wants to expand population for 2005 but wants to make additional contributions for the added people. This would not reduce current participants' allocation. The Employer is on extension for its corporate return. Can this amendment be done? Thanks!

I need a clear answer to this question after reading RP 2005-66, Sec 17, and the latest IRS FAQs. Client in Cycle A has an individually-designed plan, GUST approved and up to date with all amendments (EGTRRA, RMD, cashout). Our firm has a Vol Sub specimen plan with IRS for approval. Client wants to switch to our volume submitter. Sec 17.03 and 17.04 of 2005-66 and Q-6 of the IRS FAQs seem to dance around this issue, but I just can't make out the song! MY QUESTION: Does client simply sign 8905 by 1/31/07 or must client adopt an interim plan, which is our specimen plan currently under review, by 1/31/07? Thanks.

Isn't this because top-heavy contribution is based on 415 comp, which is always for the full year?