pbarrett

Just to make sure I've got the testing down right...., I have a client (doctor) who makes well over $200,000. He has establilshed a new comp plan with a last day rule. There are 2 groups: 1.) the dr 2.) all others. The dr. is set to get $40,000. The employees we're giving 1/3 of his % which is 6.7%. Actually, we giving group #2 7%. My 410(b) coverage (70%) passes. My 410(b) average benefit fails The minimum allocation gateway and safe harbor minimum both pass. Based upon the above testing, the allocation is ok. I don't need to worry about the average benefit test failing because the gateway passed. Right? I generally have the new comp plans pass both gateway tests (minimum and safe harbor). Am I being too conservative? Pat

Thank you all so much! Pat

I'm looking for annuirty rates for ages 60 - 70 -- life only and joint and 100% survivor -- 1983 Individual Annuity for Females projectd to 2000 by scale G with 6% interest. Anyone have a clue as to where I could obtain this table? Thanks, Pat

I am preparing a 5500 for 2002 year on a small ps plan. I have two defaulted loans (on two active HC participants). The accounts are all participant directed. I am reporting on line 2g of the Schedule I. It is my understanding I still need to carry the loan until the loans are paid off or the participants quit. If I deduct them on 2g, how do I keep the value in the plan? Do I show the defaulted loans plus interest as a receivable? I know there must be some easy trick to this. The valuation report is an issue too. I can distribute the loans within their accounts; but then what-- do I add it back in some way? I realize when I do the final final 1099R I adjust the basis but until then I'm confused has to how to account for it. This is an annual val. The total amount of the 2 loans is $75,000 so it will stand out with total assets of $325,000. If anyone has any ideas on how to account for this transaction, please advise. Thanks!

Corbel is taking the position that contribution receivables are no longer to be considered non qualifiying assets. I received an email from the Atty that led the 5500 workshop who wrote yesterday " Corbel reconsidered it and come to the conclusion that the receivables are not treated as plan assets for this purpose. Hence, you should not count them in the numerator or the denominator in determining the 95% qualified plan exemption. You do not need to bond for them (and indeed probably cannot)." I put a call into the DOL research department too but have not heard back yet. I guess this is still a "grey area." Pat

Has anyone heard that there has been a recent change and contribution receivables are no longer considered "non qualified" for bonding purposes?

We have a client who wants to have the following ps vesting schedule (the plan is not currently top heavy but it is projected to be in appx 4 years): Start the plan with a 1/20 5 years 100% fully vested When the plan becomes top heavy, change the vesting schedule for new participants entering to - 2/20 6 years 100% vested. The plan has fairly high turnover and the client feels the additional forfeitures will help offset minimum top heavy contributions. Sounds ok to me. Anyone see any problems?

If I have a plan with "mixed" assets generating a total of appx $6,000,000. Let's assume 96% are qualifying assets. Does the $500,000 bond limit still hold or would I need to have the client get a bond for $816,000? ($6,000,000 X 96% = $5,760,000 X 10% = $576,000) $576,000 plus $240,000 (4% non qual) = $816,000 If 100% of the assets were qualifying, could I leave the bond at $500,000?

I have a 12/31/02 401(k) plan and just did the testing and found the plan failed the ACP testing. The HCE need to have funds distributed. I will be sending checks to two HCE less losses and reporting the amounts as income for 2003. One of the three HCE is not vested. Questions: For deduction purposes, for the 2002 year, can the employer write off the entire match contribution even though part will be refunded in 2003? Second, they have to make a top heavy contribution, can I forfeit the non-vested highly's excess match and use it to help fund the top heavy? In other words, reallocate it just to the NHCE needing a top heavy contribution (some of the NHCE do not need a top heavy contribution due to the match amount they received.) I didn't see anything in the doc except that it is to be forfeited. My guess is it would have to be reallocated to all eligible participants. Thanks for any input. Pat

Correction on last reply-- catch up on individual 50 or over-- should have reviewed before I sent it.

It is a 2002 plan year. The money was contributed 2/04/03 for 2002. The db of around $39,000 and $25,000 ps. When I read that if no "employee" is covered by both plans, the regualr deduction limitatins apply with respect to each plan... if any employee is covered by any combination of db and dc then the greater of 25% or minimum funding etc.--- does employee mean participant?? No diff if you are a NHC participant or HC or key? If I'm getting this, on combo plans like this one, the owner for 2002 could have received the db minimum funding plus a $12,000 deferral if she had funded it timely (including catch up due to being over 59.5), right? For 2003, it sounds like this client can only get the $39,000 (appx #) right???? Thanks for your help!

I have a PLLC plan with 100% husband/wife ownership. The wife took $100,000 in comp (W2). The husband took no comp. There are no employees. The cpa wants to set up a db/dc combo plan. Based upon the db plan specs, our actuary has computed she can contribute $39,291. The CPA is under the impression she can also contribute and deduct $25,000 in the dc plan. For a total deduction of $64,291 because there are no employees. I've reviewed 404(a)(7) (A) and © and it states if one "employee" is covered by both.... then the limit is the greater of 25% or the amount nec to meet the min funding. I don't know at this point if the CPA is confusing deduction limits with the removal of the 415e or I've lost it all together. Please help. What is the total deduction this owner can take?

The plan doc doesn't address the order of contributions so I feel we have to use the deferrals first. I am correct that the 415 limit is 100% of comp (and I don't consider the catch-up) right. So because he deferred $11,000, he could get a $2,000 ps, and $1,000 catch up. The lesser of 100% of comp or $40,000 throws me. This is the first "lower paid" person I've seen hit the limit. Generally, I've seen the HCE with the $40,000 plus $1000 for 2002 (which is still less than 100% of their comp). I just want to make sure, with the catch up, you can go over 100% of comp, right? We may have problems. The employer said there would be no match or ps contribution and there are 3 employees who are really mad. The employer is 62. There are 3 upset employees, who came back from retirement contributed the max (all over 65). The other 6 participant put in nothing and range in age from 21 to 40ish. I'll have to run the test and see how it all looks. Thanks for your insight.

Mike, age 72, (non owner) made $13,000 in 2002. He deferred 11,000 plus the $1,000 catch-up contribution. The employer has now decided to make a hefty ps contribution for the 2002 year. Many participants are upset because had they known . . . What is the maximum ps contribution Mike can receive?

I've been searching thru the messages and it appears to me that Indian Tribes are considered "governmental" for ERISA purposes and therefore no 5500 needs to be done (message of 5/19/00). We have a 401(k) plan that we took over. They have an ERISA doc but the old TPA never filed a 5500 or did a val. They really only tracked the loans. Is this reporting matter (5500) still a "grey" area or has anyone see anything recently that clarifies the reporting requirements? Thanks for any input!

Gosh, sounds like I pushed you over the edge. Thanks for your help.

I'm still working on large versus small plan. I use the Quantech reporting system. The ACP/ADP test reports 128 participants. The 401(a) (26) reports 128 non-excludable as does the 401(A) (4) (number used for Schedule T) The 5500 Count Report (that we use for the 5500) line 7f gives 109. I am now up against the 80/120 issue. Do I use the 109 # or the 128#???

I guess I am confusing it with the 402g. So really, there is no penalty for doing the distribution after 3/15 as long as it is before the 12 month period. Right? The worse thing might be the HCE might be in a higher tax in 2003 versus 2002. (As you might tell, I usually work on the DB side.)

We have a plan that failed the adp portion of the test. We were attempting to get all the distributions processed by the 15th (actually we thought we had until today). If the excess distributions go today, am I correct that the excess amount amount will be taxable in 2002 and 2003 (calendar year plan). To be clear, let's say the 2002 excess was $1000 and it had a $2.30 gain. The $1,000 will be taxable in 2002 & 2003. The $2.30 gain will be taxable only in 2003. Right??

Because March 15th was on Sat., can we still process corrective distributions today????

The plan document allows for profit sharing contributions. To date, the employer has only matched the deferrals. My guess would be waivers (not to participate) would be somewhat informal and could be revoked at any time, but I will certainly find that out. I was under the assumption non-highlys could not opt out at all so thank you for educating me. The ACP/ADP test fails. It was my understanding I had to leave the "waived participants" in the test. I took them out of the test and they still fail. Refunds may be done tomorrow or they may opt to go with Qnec/Qmac contributions. I'm getting a headache over this already. Any additional thoughts or ideas would greatly be appreciated. Pat

Good point. By straight ps plan, I meant new comp only- no deferral or match contributions to worry about.

We have a takeover plan. The period ending 12/31/01 should have been audited and the Schedule I versus H should have been prepared etc.. (It closed in the 2000 year with more than 120 participants.) We're going to break the news it must be audited for 2002. What about the 2001 year? I suppose the proper thing to do would be an amended return. What are the penalties? I'm thinking this new client will simply want to "roll the dice" and see if IRS ever picks up on it. The are not going to be happy at all about the audit and having to pay for one. It's a 401 k plan with a 2 month eligibility. The have over 200 employees and only 40 actually defer and receive match. The other TPA firm only counted the ones who participated and said all other elected to opt out of the plan. I know they can't do that for acp/adp but I've never had that issue come up on the 5500 count. I'm thinking we have to count everyone who had the opportunity to defer regardless of whether the employer had them sign a form to "opt out". Am I losing it here? Also, if the client "rolls the dice" will my beginning number of participants be a red flag (it will really vary with the closing from last year.) Help!

I know it is too simple of a question to even ask, but-- Assuming I can pass the gateway, can I give the key owner an allocation of more than 25% of the total profit sharing contribution? I've taken eligible comp times 25% and reached "X". The key makes $80,000. This is a straight ps plan. If I can pass the gateway can I actually give the key let's say 35%??? As long as my total amount is 25%, I pass the gateway, does it matter how high I take the key's allocation %???

We work with many brokerage firms that have 40l(k) funds invested for participants in various mutuals funds. We are a 3rd party TPA firm. We have a takeover plan. The prior TPA sent the brokerage firm's statement (1/01/01 thru 12/31/01) cash basis along with the SAR. The census data was not included (e.g., date of hire, vested %) on any statement to the participant. Also, it was simple a cash statement. It did not account for the deferrals/match contributions that came in the following year for the prior year. The 5500, of course, did. So did the SAR. We have also sent an additional statement based on an accrual basis, which reflects all of the census info and vesting percentile. Am I doing too much work? Does the DOL/IRS have any regs on what the participant must receive on an annual basis (I know an SAR and SPD must be given at the appropriate times). All of are plans are based on annual valuations. Any thoughts would be appreciated.