Madison71

Thanks Bill - maybe I am reading the report incorrectly. Lets say the Plan is underfunded, but the employer's employees who are participants in the Plan are not vested in the benefits. Would you have withdrawal liability if the participants are not owed a benefit because they are not vested or would it be treated like a termination in a DC plan where all participants are automatically 100% vested.

Please forgive my ignorance in this area. Large multi-employer plan - from the quick view of the financials, it appears the the plan is fully funded. Company is considering selling. Attorneys for the other side are talking about the large withdrawal liability. Disregarding the rules under Section 4024, can a company be subject to withdrawal liability if the current Fund's status show it as fully funded and none of the employees are even partially vested at this point? Thank you!

What type of purchase - stock or asset?

Plan sponsor has a 401(k)/Profit Sharing Plan. Plan sponsor wants to invest in real estate. I don't know the exact details of what yet. I know there a lot of caveats to having real estate in the plan, but does anyone have a good article on this? This article would talk about real estate in the plan and the step by step guide to how you do it. Thank you and Happy Holidays!

I am now seeing fringe benefits covered in 415 safe harbor (whether paid or not). I'm assuming use of auto is fringe benefit covered under definition of compensation. Am I correct here?

Company has a 415 Safe Harbor definition of compensation in it 401(k)/PSP. This definition ncludes all items under 1.415-2(d)(2)(i) and excluding those in 1.415-2(d)(3). I believe the company pays for some of the executives company cars. We are trading voicemails. HR manager was talking about "auto gross-ups" and asking how you treat for 401(k) and PS. Do you include this in compensation when determining 401(k) deferrals and employer contributions? I did not see where these specific sections addressed autos. Thank you!

Ok - so I am preparing this determination letter request - Form 5300 and am preparing the ratio percentage test determination on lines 13. Client supplied the data. 2 related companies - 2 plans. We have already filed the d-letter for the other company and it passed with a ratio percentage over 97%. In the company we are filing the determination letter there are 80 total active employees. There is 1 highly compensated employee in this company eligible to participate, 124 in the other company ineligible to participate in this plan. Total number of eligible non-HCEs in our plan is 80, total number in the other company ineligible is 1100 for a total of 1180. To me it seems like it is a no brainer and it automatically passes. 1 HCE in this company eligible to participant in the plan 124 in other company ineligible. The percentage eligible is less than 1%. 80 NHCEs in this company eligible, 1100 that are not. That's a little under 7%. So, for easy math lets say it passes by 700%. What is my ratio percentage that I put in the d-letter? I would think it would be 100%...not anything higher. Thank you so much - bit of a rush with last minute restatements.

Resolution to terminate 401(k) plan well over 1 year ago. Most of participants have filled out distribution paperwork, but there are 5 that have not responded. We have sent out the paperwork several times. They are not technically missing...more like unresponsive because we believe that we have the correct addresses. The balances are all well above $5,000. One is close to $300,000 and we do not want to roll this over without good authority that we can do so. What can I do to get these participants out of the plan? Can I roll them over to an IRA without authorization when above 5K? As the TPA we are incurring expenses for filing 5500's, etc. and the plan sponsor is out of business and will not pay us so we are not receiving fees for this. Custodian will not take fees out of remaining participants accounts even with Trustee authorization. Any help would be greatly appreciated. Thanks.

I appreciate all of your assistance. I need to really run it again and review your comments and make sure it sticks. I'm still trying to nail down the new 403(b) regulations. Usually New Comp. works best with most of my clients so I haven't had to worry about thinking through this in awhile. I thought I had it, but I guess I never had it down. This area never gets boring. Again, thank you!

Thanks a lot! I took a look at it, but am slightly confused by the numbers. On one of the rows you have: Comp 0.03 0.025 0.057 Proportional Contribution I understand all but the .025 number. Where does this come from? Also, the contribution totals only 23,600. If you add in the 15,500 for Elective Deferrals, you are still short 6,900.00 Where does that come from (Unless that is the SH 3%, but I thought that was calculated in the .03 above)? Thanks for the spreadsheet. I'm not trying to be difficult....

Now I am really confused. It sounds like I am starting at the wrong place up front. I calculated it as follows: HCE 1: (Comp= 230000) (Elect. Def= 15500) (SH= 6,900) (Comp+Excess= 358,000) (5.7% of Comp + Excess = 20,406) (Remaining Cont = 3,194) (Total = 46,000) Thats where I got confused on the excess of covered comp. cannot exceed the lesser of 5.75 or twice the % below the covered comp. level. I must be thinking about it incorrectly. After reading that, I'm thinking that after factoring in my 15,500, I have 30,000 left to get me to 46,000. I then factor in my SH and have 23,600 left. I have to start with my profit sharing contribution allocated equally amongst all participants first before I can contribute to the excess because of the lesser of 5.7% or twice the percentage below the covered comp. I'm having trouble because I never had to worry about it before. The integration level on all of our plans is the TWB, so 5.7%. The plans are all profit sharing only, so on 230,000 you can add in your comp. + Excess get your 358,000 and calculated 5.7% of Comp. + Excess = 20,406 and then the remaining profit sharing contribution would be 25594, which would easily meet the 5.7% or twice the percentage below.... What am I missing? I seriously appreciate all of your help (and any others who want to weigh in). I see your confusion. What this provision is stating is that in order to get the maximum 5.7% allocation on the excess compensation of ($128,000), the allocation percentage for the base must be at least 5.7%. You may not allocate 4% on the base plus 5.7% on the excess. Remember, do not get confused in the changing definition of 'base compensation'. I typically use the entire $230,000 as base compensation (making the maximum allocation to excess comp the lesser of 5.7% or the allocation percentage applied to the base). Now let's suppose that my I consider base comp as $102,000 and excess anything above the integration level (as always). In such view, the maximum allocation to the excess compensation is the lesser of the lesser of twice the percentage allocated to the base or 5.7% plus the percentage allocated to the base.) Plugging in numbers, if the base is 10%, then the maximum excess is the lesser of 20% or 15.7%. If the base is 3%, then the maximum excess is the lesser of 8.7% or 6%. Does this help?

Thanks a lot. I did run the calculation prior to your response and came up with the 5.7% plus an additional 1.39% for a total of 7.09%. Where I got confused was where I read that "in order to remain a safe harbor formula, the allocation percentage in excess of the covered comp. limit cannot exceed the lesser of 5.7%, or twice the percentage below the covered compensation level for the year." So what you are saying is that you can apply the 5.7% first to the excess and then any remaining (1.39%) would be added to the remaining? It just didn't seem right when I read that provision quoted above. How you explained it does make sense though. Thanks.

I was hoping someone could walk me through the following situation. Plan sponsor wants to add an integrated profit sharing component to his 401(k) safe harbor plan (we looked at many other options such as New Comp., but didn't work with ages, etc.) The integration level will be the TWB which would make it 5.7%. So, if you have 4 owners, 2 in their 20's, how would the scenario work to get them to 46000 Owner 1 (age 51) 230,000 Comp. - Elective Deferrals - 15,500 Catch-up - 5,000 3% SH - 6,900 Excess (5.7%?) Base (Remaining to get to 46,000?) Owner 2 (age 56) 230 Comp. Elective Deferrals - 15,500 Catch-up 5,000 Excess (is it 5.7% of Comp?), Base? Owner 3 (age 24) 230K Comp. Elective Deferrals - 15,500, Safe Harbor 6,900 Excess (?), Base (?? Owner 4 (age 28) 230K Comp. Elective Deferrals - 15,500 Safe Harbor 6,900, Excess (?), Base (?) Sample NHCE (60) 48,000 Comp. Elective Deferrals - 15,500 Safe Harbor - 1,400 Excess (?) Base (?) There are many other NHCE's, but want to see how that is factored in as well. Thank you!!!

I have a couple of questions. A client of mine called and said he wanted to terminate his 401(k) Plan. It is your standard 401(k) plan with a discretionary match, it is not a safe harbor. He has not contributed in many years. His accountant told him he could not terminate the plan until the end of the year because some participants are contributing. The plan document says he can terminate at any time. My understanding is that with a 401(k) plan that is not a safe harbor, you could terminate at any time as long as you make all participants 100% vested. Is this correct? Also, he wants to start up another plan for participants. He is thinking of doing a SIMPLE 401(k) Plan. My understanding is that with successor plan rules, he could start a SIMPLE IRA in the same plan year, but not a SIMPLE 401(k) Plan. Is this correct? Also, my suggestion to him is to terminate the plan and not deal with setting up another because the SEPs and SIMPLEs involve employer contributions (sometimes mandatory I believe with the SIMPLEs) and he doesn't have the cash to make any employer contributions is the near future. Any thoughts there? Thank you.

I have a question related to counting participants on Line 7b or Line 7c of a Form 5500. So - you have a terminated participant in a DC Plan who has an account balance. Should he or she be reported on Line 7b or Line 7c. I always thought Line 7c because terminated and entitled to future benefits, but the terminated participant is entitled to the benefits now..so is it Line 7b. If not, when would you report someone in a defined contribution plan under 7b? If they are receiving annuity payments under the plan? I have read the 5500 instructions, but it seems a little unclear to me. Thank you!

Great. I was just making sure that you include the previous loan in the total account balance...b/c it says "1/2 of vested account balance" I just wanted to make sure the previous loan was included when computing 1/2. Thank you.

Thank you for getting back to me. I agree with the approach you laid out. Anyone agree or disagree?

I posted a little while ago, but can someone please describe the loan requirement rules for 1/2 of the vested account balance? Plan allows multiple loans - participant took out a small loan a couple of years ago and wants to take out another. His account balance includes the remaining loan balance that needs to be repaid. Do I calculate 1/2 of his total vested account balance by adding the remaining balance of the original loan to his account balance - then figure out 1/2 of that balance and that is the total loan he can have outstanding (including 1st loan and loan he will take). Thank you.

You have a plan the allows multiple loans with a maximum of 50,000 or 1/2 of the participant's vested benefit. Minimum loan of $1,000. Participant has a total account balance of 10,000 (including a loan outstanding). Participant takes out a loan for $3,000 two years ago for 5 years. The outstanding balance left on the loan is $2,000. If the participant has a total account balance of $10,000 (which includes the $2,000 loan), how much can he take out in a loan? Is it $3,000 (1/2 of 10,000 minus the $2,000 loan already outstanding), or is it $2,000 (1/2 of $8,000 minus the $2,000 already outstanding? Thank you for your help

I was wondering if someone could help me with this question. Assume a TPA meets the requirements for being an IRA provider. How can a TPA offer IRA products to participants of a Plan it administers and get around having a prohibited transaction? I know there is an PTE for automatic rollovers, but what about for amounts above the automatic rollovers? Is there a particular exemption or way to get around it? Consider a TPA and wants to start offering IRA products to plan participants who may leave the plan and want to rollover their accounts to an IRA. I can't find anything on point. Please help