kocak

Are you planning to run and ADP test for 2001?

RE if they were available prior to 9/30/02 it depends on your EGTRRA amendment. Ours generally said available for PYB after 1/1/02 so they wouldn't have been available until 10/1/02. RE the limit, it is a calendar year limit so for PY 10/1/02-9/30/03 they could conceivably do $1000 from 10/1-12/31/02 and $2000 for 1/1/03-9/30/03. Earlier this year I posted a worksheet for determining the amount of catch-up contributions that works especially well for off calendar years. If you don't find it doing a search, email me and I'll send to you. Michele

Similar Question. Plan is a top heavy 401(k) plan with immediate eligibility for the 401(k) component and 21/1 for the PS. All participants eligible for the 401(k) get a 3% TH minimum allocation. Participants eligible for the PS component get an additional discretionary contribution. When testing the PS for 410(B) are employees who have not met the age and service condition for the PS component excludable? My software is telling me I fail ratio percentage because it is considering all employees as nonexcludable, using immediate eligibility. My document says I must meet ratio percentage (no going to ABT), but it seems counterintuitive that I would be benefitting a participant with an additional PS contribution, when they haven't even met the requirements for that component of the plan. Especially since I would meet 410(B) if it were two separate plans. Michele

My recollection is that this determination is made each plan year. So if you had a profit sharing contribution 3 years ago, you are not necessarily precluded from being "not a top heavy plan" in the current year.

Make sure to look at the document, I think some providers had age 50 by end of plan year to be eligible (even though the rule is calendar year). Michele

If I'm remembering this right, you could have permitted disparity, but no individual could get an allocation of more than 15% without consequences. This limit is probably 25% now but I haven't done an integrated SEP since EGTRRA. Any one else remember this? Michele

I'm looking at somthing that was prepared for a CPA's CPE credit that reads as follows: "Because the employee has alreadygone through all available plan loans and still needs cash, a hardship withdrawal signals the immediate default on the plan loan, which in turn will be treated as a distribution subject to income tax and possibly a penalty tax ona premature distribution. Hence, the amount of the hardship withdrawal may need to be grossed-up considerably." Could this be true? If a participant has an outstanding loan, then takes a hardship, is the loan a deemed distribution? I've never heard of this? Comments are MUCH appreciated. Michele

Also check your document language. I was surprised to find the document we use had the 30 to 90 day timing written in the document, even though I had often operated under the "reasonableness" time frame in a new 401(k) plan.

Don't the rules say a SH notice must be provided within a reasonable time before the beginning of the plan year. The IRS has deemed this to be at least 30 days. But couldn't someone make an argument that the 30 days is not reasonable, in special circumstances? Note - we use the Corbel document, and the thirty day language is actually written in the document. This concerns me because it soesn't seem as flexible as the law, especially when putting in a new plan. You could just do PS in 2002 and then add the 401(k) SH feature 1/1/03. As a new feature you wouldn't need to meet the 30 days. kocak

I don't have a lot of details on this type of insurance "Job Protection Income". I was thinking it sounded like the type of insurance you can get to pay off your mortgage if you die, etc. There are probably stipulations, whereby the policy will not pay in all circumstances. Good to know that I can't run the premiums through the cafeteria plan. Thank you.

I do the same thing you do for excess deferrals. Assuming a 2002 calendar year plan. Excess deferrals returned by 4/15/03 are taxed in the year of deferral. They can be returned in 2002 or 2003. Earnings on the excess are taxed in the year of distribution. Excess contributions returned by 3/15/03 are taxed in 2002 (unless the de minimus <$100 rule applies). These can not be returned before 1/1/03. The earnings are also taxed in 2002. Which is why I show a net return on the 1099-R. So... earnings on excess deferrals are taxed in the year of distribution, which may be different than the year the excess deferrals are taxable, but earnings on excess contributions are taxed in the same year the excess contributions are taxable. michele

I've never heard of this before. Employees are allowed to buy insurance that will pay their salary if they lose their job. Is this type of insurance allowed to be paid with pre-tax dollars in a cafeteria plan? Does it make a difference if the plan sponsor is a prison? I'm not sure if the prison is privately run or government. Thanks. Michele

Participant and spouse elect to waive the QJSA in a DB plan, and elect a lump sum benefit. Two weeks later (before lump sum payment can be made) participant dies. Assume I don't have a waiver of the QPSA. I'm thinking the benefit needs to be paid under QPSA now, any thoughts? Michele

I would look at when the 402(g) excess occurred. Was he deferring $1500 a month, so he reaches the limit in Aug 02, etc. Michele

For excess contributions, I've only ever reported the net refund as income to the participant. Michele

don't mean to beat this to death, but back to my original question to the post, why are we pro-rating the SSWB? michele

LLC1 (taxed as a partnership) sponsors a cross-tested 401(k) plan. LLC2 (also taxed as a partnership) is a participating employer. The two LLCs are part of a group under common control. LLC2 has only one employee. He earns compensation from LLC1 and LLC2. The CPA is asking me for the most advantageous was to structure his compensation/contributions in the two LLCs. He earns more than the 401(a)(17) limit and will get an allocation of $40,000 in 2002. Any ideas? michele

Tom - I'm referring to ERISA Outline Book Chapter 3, Part A.4.d.3) What if the employer was not in existence before the effective date of the plan? In the 2001 edition it is page 3.141 Michele

Sorry Tom - 2002 Edition. Michele

Mike - take a look at the ERISA Outline Book, page 3.149. Michele Kocak

If you don't normally get determination letters, you might want to consider once since the plan is in existence before the employer. Why would you pro rate the integration level? I thought since you had a full 12 month plan year you didn't pro rate. mck

Check out the IRS website. They published a summary this summer for small employers, titled Choosing a Retirement Plan mck

I agree with Tom. The limits for 402(g) and catch-up are calendar year. In this case, you probably won't have to worry about blowing the ADP test, since it is a safe harbor 401(k) plan. You may run into trouble if the PS component is cross-tested, since the ABR will include deferrals. Also, you may want to consider that pesky benefits rights and features issue. Can all employees afford to defer $11,000 in two months? mck

I've seen both interpretations. In practice, for a profit sharing plan, I am comfortable amending during the plan year, up until the time a participant has 501 hours of service. mck

This is a new 401(k) plan right? Since a safe harbor plan must be 12 months long unless it is a new plan. mck