Dan

You are correct that SBJPA did change 415 compensation. However it did not change 404© definition of compensation.

A plan sponsor may demand payment for o/s loan for terminated participants or he may permit them to continue making payments. The plan is not obligated to receive payments after termination of employment. Most do not want to deal with the administrative hassles. As far as timing, payments must be paid according to the terms of the note and the note satisfied by it's original due date.

Yes employee deferrals (and all other plan contributions) are included when testing 404©. The net result can be that an owner may not accrue a full $30,000 benefit due to deductibility limits.

NHCE ADP is 5.0%. So HCE ADP must = 7%. HCE1 def%=6.33, HCE2 def%=9.50. Total =15.83 must reduce to 14%. This means must reduce 1.83 of HCE2 def%. 1.83% *100,000 = 1830.

I calculated 812.50. I do not know how they arrived at that answer. I think that answer is wrong.

We have prepared a cashier's check made payable to participant and kept it with other client records. While we are not sure this is an acceptable rememdy, it seems safe to argue that if this were not done, participant would have no benefit at all.

We always recommend that employers not pay out participants until we received approved D-Letter. However we have also sugggested that participants may be paid out, so long as at least one pariticipant remains in the trust until receipt of D-Letter. However this is not a document/distribution issue, but a 'get them off my back' issue. A plan document that provides distributions after next plan anniversary date does not have a time standard to make those distributions, unless it's spelled out in the document. In the case of plan termination and requesting D-Letter, I am certain that you can wait until receipt of approval before doing the distributions.

The plan document should address this issue. If it does not, then he probably may not change to any successor trustees. With that said, all of the prototype documents I have ever worked with have dealt with this question, directly. Read the document.

If I understand your question, a participant's instructions were not executed accurately. Correcting the transaction(s) would cause the participant to have a lower balance today than if the mistake remained uncorrected. I think that it could possibly fall under anti-alienation rules. We have dealt with similar instances as described above. We calculated the results comparing participant's investment performance both ways. At each time where the participant benefitted by our mistake, the participant was asked if he wanted us to correct the mistake or allow actual (better) results to stand. I believe you can guess what the participant did in each case. My understanding of SEC rules indicates that investment providers may not profit from mistakes made to investment accounts, e.g. back-dating a transaction causes account to be worth less than leaving the error in place, thus creating a surplus of funds after correction. If this understanding is incorrect, I would appreciate clarification or correction. I would think it would extend to all service providers too. It all comes down to a simple premise. If a mistake is made, whatever benefits the participant the most, that is a safe choice. They should not bear the risk of loss, of any kind, in case of an error to act on their instruction. I would appreciate hearing other opinions/approaches.

I assume the answer to MWeddell's question is no, they did not file for an extension of time to file their corporate return. They may not make a contribution for 1998 and amend their 1998 tax return to reflect this contribution. If they had filed for an extension of time to file their corporate tax return, then their funding deadline would have been extended as well. Otherwise, it is too late for a corporation to fund a contribution for it's 1998 tax year. They may make a contribution, but it would be treated a 1999 contribution if it were made today, given the scenario above.

If you begin with $125,000, deduct 1/2 SE Tax of 5410, then deduct $15,000 for employee contribution, and you have 104,590 on which to make 15% contribution. Since comp is net of contribution, multiply 104590 * .15/1.15 = 13642. I am not sure where 13,649 come from, assuming the amounts you provided are correct.

What does the plan document say? It should spell out all of these details. Layoff, recall rights and seniority cause me to think of union plans. Union plan's are typically subject to good faith bargaining. In that case, the plan document must spell out all provisions. The Plan Administrator should be able to answer these questions. Good Luck.

Apart from normal study preparation, I agree with Amy who recommended study of previous exams. They can provide experience reading and understanding what the questions actually ask for and that is crucial to success taking C-1. The most important factor of all may be the ability to be relaxed when taking the exam. Get a good night's sleep the night before and then go do your best. Do not get discouraged if you find the questions to be difficult, that is not unusual. Especially with ASPA exams. My test taking experience has shown that I fail tests that seem easy when I take them. So, difficult exams are positive for me. Good Luck.

We have a client that uses ADP for their payroll. I had always been told ADP was unable to provide data using any media other than tape. However that is not necessarily true. This client, in Oregon, is able to send an ASCII file that has the same data, in the same columnar order, as the hard copy report. The client must complete some special processing to create the file, but they do it. And then we get a diskette. I do not know of any other payroll services that are providing data this way. We also get Excel spreadsheets from clients on a regular basis. Some send files on diskette. Others attach files to email. I have one client that sends data through a Yahoo address. Quantech also provides a Data Collection Module that is able to be electronically imported. We use it as well. Hope that helps.

We desire all of the original loan documentation. This should include loan amount, rate, length, payment amount, etc. We certainly need to receive loan amortization schedules as well as current status of loan within the context of amortization schedule. I am unaware of any reason to demand payment of outstanding loan balances because of plan recordkeeping or investment provider changes. Be sure to monitor payments during transition. If payments are made and credited properly, the participants should have no impact whatsoever. Participants must make loan payments promptly, even if employer does not remit them promptly to investment provider. And payments should be sent as soon as possible after receipt. However, loan payments do not have same statuatory time standards that appply to deferral contributions. Good Luck.

Alex, I am not sure exactly what 'terminate ... 401(k)& 401(m) provisions' means, exactly. I do not know how a portion of a plan can be 'frozen' or 'terminated'(my ignorance on parade or perhaps my pension vocabulary is limited). I thought those were both all or nothing options (exotic plan needs excepted). However I recommend amending the plan to cease accepting deferral contributions to the plan. The deferral (and match) contributions are no longer part of the plan operation. That appears to be the desired end, to which your question was posed. [This message has been edited by Dan (edited 04-27-99).]

Adjusting withholding is unnecessary. There is an easier way to deal with the tax withheld portion. After all, 20% is required tax withholding amount. One may elect to withhold more than 20%. Calculate correct cash distribution, by taking correct distribution, minus amount previously withheld. This is amount of cash participant is now entitled to, given the amount that was originally withheld. Then take amount participant has received previously and subtract correct cash portion determined above. Ask participant to return the difference. Upon receipt of differnce, issue corrected 1099-R and you are done. Good Luck.

Originally, retirement plans held retirement benefits until a participant reached Normal Retirement Age, usually age 65. While times have changed, this is still permissable if plan document so directs. In fact, this provision is common. Immediate payouts are a recent phenomenon. A plan sponsor may make any provision for distributions, so long as the rules apply equally to all participants. A plan that requires a 90 day wait following termination of employment provides a rapid payout. The plan sponsor does not benefit from keeping a participant's account in the plan for any length of time. There are reasons for requiring a time period. They are providing time for the plan administrator (or firm) to verify accounts. Participants are unhappy if they receive a payout and then are notified they received too much and therefore must return money to the plan. Retirement plans are not intended to be a savings account. As Kathy said, the idea is to make retirement plan balances difficult to get. I am not aware of any regs that specifically adress distribution timing, other than assuring that the plan must evetually pay out each participant. As was said before, timing is subject to adoption agreement elections made by the plan sponsor. Please read, as Kathy suggested, your plan's SPD to concerning distributions. Then address your concerns to the plan sponsor.

The scenario you descibe is more complex than is appropriate for resolution on this forum. The best advise is to seek competent help by contacting an ERISA attorney. Good Luck.

I agree with Mike's post.

The ownership attribution rules do apply when determining Key Employee status. We may not attribute Key Employee status, we only attribute ownership. After attribution of ownership, the spouse's (in this case) status is determined based in other criteria. However a 1% owner is not a Key Employee based solely on owning 1% of the plan sponsor. A 1% owner must also satisfy the $150,000 earnings requirement to be classified as a Key Employee. If the ownership attribution were in excess of 5%, then the spouse would be a Key Employee regardless of earnings. I hope that helps.

We have calculated vesting for short plan years as follows: If the short plan year is the first plan year, say 10/1/98 to 12/31/98, then one computes vesting for the period 10/1/98 to 9/30/99. However if the short plan year was not the first plan year, again using the period 10/1/98 to 12/31/98 as the short plan year, the vesting computation period would be 1/1/98 to 12/31/98. This is a question that is commonly asked. Unfortunately I have yet to hear a definative answer. I can not say how this approach would withstand DOL scrutiny. Did this participant actually work 1000 hours between 1/1/98 and May 1998? If not, then there is no question, no additional vesting is appropriate. However if so, the conservative approach would seem to be vest him the additional year. However that may not meet the needs of this plan sponsor. Good luck

He is an Key Employee by more than one definition. However, I would determine that she is not a Key Employee. Incidentally, she would not be a Key Employee, even if she was an officer. Good Luck.

I agree with Dave's post.

The definition of Key Employee from Code Section 416(i)(1)is as follows: For purposes of this section -- (1) Key employee. -- (A) In general. The term ``key employee' means an employee who, at any time during the plan year or any of the 4 preceding plan years, is -- (i) an officer of the employer having an annual compensation greater than 50 percent of the amount in effect under section 415(B)(1)(A) for any such plan year, (ii) 1 of the 10 employees having annual compensation from the employer of more than the limitation in effect under section 415©(1)(A) and owning (or considered as owning within the meaning of section 318) the largest interests in the employer, (iii) a 5-percent owner of the employer, or (iv) a 1-percent owner of the employer having an annual compensation from the employer of more than $150,000. Respectfully, in the situation described above, I do not believe the spouse would be a Key based on (iv) above since it requires ownership and compensation. The compensation component of the definition is clearly not met. Assuming spouse is not an officer, Spouse may be Key based on (ii) only.