Richard Anderson

No, compensation for the 15% deductibility calculation includes only those who benefited under the plan. In a profit sharing only plan that means the person must receive an allocation of employer contribution or forfeitures.

R. Butler Can SVP be used when there has not been a disqualifying failure?

It is 1999 deferrals.

John A Your analysis is exactly what I think the situation is, but I wanted confirmation. Neither of the plans could distribute before April 15 without notification from the participant. After April 15, I don't think there is any authority to make a distribution of excess deferrals, unless a disqualifying defect occurred. If the excess caused a disqualifying defect, then the plan could correct under EPCRS by distributing the excess plus earnings. But in the absence of a disqualifying defect, I think the excess deferrals must stay in the plan until a distributible event occurs. However, this does not seem like a reasonable outcome. If someone knows of authority for distributing excess deferrals after April 15 when no operational defect has occurred, please post here. Thanks.

Yes, this is OK. But, when testing for controlled group status; for 415 purposes only, the at least 80% test is replaced by 50%.

A participant defers 10,000 into two diferrent plans for a total of 20,000 for a calendar year. The two plans are not part of a control group or affilated service group. If this was a control group, I believe one or both of the plans could be disqualified if the excess deferral is not distributed. But, since this is not a control group, and neither plan allowed deferrals over 10,000; neither plan can be disqualified. My question is; can the excess deferral be distributed, or must it be distributed? Or, must the distribution be postponed until some other distributible event occurs?

Where can I find a copy of Notice 97-10? I'm having trouble locating a site.

This plan was "terminated" in 1997, but no distributions were made. All participants accounts were 100% vested at that time. Now that the plan sponsor does not want to terminate the plan, are those accounts still 100% vested? I don't see how that would be right because the plan will be treated as if the termination has not occurred. But the participants have been getting statements showing that they are 100% vested. The Board Resolution terminating the plan that all participants are 100% vested in their accrued benefits effective December 31, 1997.

In a money purchase ESOP plan about 15% of the assets of the plan are currently in the money purchase source. The MP source includes both employer stock and other investments. The ESOP loan has been paid, so there is no leveraged stock in the plan at this time. An employee is eligible to make a diversification election for 25% of the employer stock in his account. How do I determine what source to take that diversification election from? Pro-rata? Money purchase first? Money purchase last? The employee has the option of taking a cash distribution or transferring to the employer's employee directed 401(k) plan. The plan does not specify any other options for divesification. Should it include an annuity option? Otherwise, without spousal consent, can the participant elect to diversify the MP portion? If the transfer to the 401(k) plan includes assets from the MP source, does the 401(k) plan have to track it as MP source or something else, like rollover? If MP assets are transferred to the 401(k), does the spouse have to sign a J & S waiver? I would think so, unless the 401(k) plan tracks the transfer as MP source.

I have an ESOP that I'm separately tracking two different 1042 sales to the ESOP. The employer has repurchased shares from the ESOP. Which shares did the employer purchase, or does it matter? Can I just assume it was pro-rata from each?

A profit sharing plan terminated in 1997. A determination letter was received on the termination. No distributions have been made since the termination. All 5500s since 1997 have indicated that the plan is terminated. The plan sponsor now wants to "reinstate" the plan. Can the plan be un-terminated? If so, what is the procedure?

If the 3% non-elective 401(k) safe harbor contribution is made to a money purchase plan that has no other contribution; what is the 404 deduction limit? I think it would be 18% of eligible comp (15% for the ps plan plus 3% for the money purchase plan). Someone else here thinks it would be 25%.

All participants, whether they are eligible for the PS portion of the plan or not. This could be a reason for not having immediate entry in a 401(k) that may be top-heavy. For ADP/ACP testing and coverage testing the plan is allowed to disaggregate participants who have not met statutory eligibility requirements. But, there is no such consideration given for a minimum TH contribution. This seems to be a deterent to liberal eligiblity for the 401(k) portion of the plan.

For the one that uses the full set of numbers I have been using the one with the lowest ratio; sometimes that is the PS, sometimes match. If the 401(a) part uses the average benefit test; but, 401(k) and 401(m) parts pass the ratio test, I mark 4f that the plan satisfies coverage by the average benefits test.

You used the term "owner/officer". Officer information is not relevant for HCE determination. If the company has only five employees, then only the highest paid employee will be in the top paid group. (5 x 20% = 1). Although the owner and son are not in the top paid group; they are HCEs because of more than 5% ownership. But, I don't think that you will want to use the top paid group election if all employees made over $80,000 in the prior year. If all employees are HCEs, then the non-discrimination rules are deemed to be passed. In fact there is no prohibition against discriminating against HCEs.

If there are no 5% owners and there was no compensation in the prior year because the employer did not exist, then you have no HCEs for the first year. Your analysis is correct, all participants in 2000 are NHCEs.

The document we use has a paragraph after the contribution formula that states: "Notwithstanding the foregoing, the Employer's contribution for any plan year shall not exceed the maximum amount allowable as a deduction to the employer under the provisions of Code Section 404." Therefore, if it is not deductible it can not be contributed to the plan. Are you sure that your document does not have similar language?

Also, distributions used to correct failed tests or limits (ADP/ACP/MUT, 402(g), 415) are not subject to the 10% penalty. And exempt also, are distributions that are a series of substantially equal payments made over the life or life expectancy of the participant, or part. and beneficiary.

If the forfeitures are reallocated, then they would not be added back, because they never left the plan. If forfeitures are added to the employer contribution and allocated along with it, then also the forfeitures didn't leave the plan. But, if the forfeitures reduce the employer contribution or are used to pay plan expenses, then forfeitures have left the plan. Even so, I don't think that they would be added back along with the distribution. Both the IRC and Regs. refer to adding back distributions only.

I check line 3d, and skip the rest of the schedule, if all nonexcludable NHCEs benefit in each of the disaggregated plans (401a, 401k, 401m). If any nonexcludable NHCE does not benefit in any one of the disaggregated plans, then I don't mark line 3d, and I complete line 4.

If the participant claims to have never received the check is he or she due three years of investment gain on his/her account?

If excess annual additions are cured by distributing elective deferrals, are those distributed deferrals included in the ADP test? I'm inclined to think that the same treatment as excess deferrals would apply. Therefore, if the participant is a HCE the distribution would be included in the ADP test; if the participant is a NHCE, the distribution would not be included. Is that correct? Also, is the distribution for excess annual additions included in the top heavy test?

Can anyone help here?

If all nonexcludable NHCEs benefit in each of the disaggregated plans (401a, 401k, 401m) then I mark line 3d, and skip the rest of the Schedule. If any nonexcludable NHCE does not benefit in any one of the disaggregated plans, then I don't mark 3d, and I complete line 4.

Try Lorraine Dorsa's Advanced Plan Design Q & A on the benefitslink site. http://www.benefitslink.com/cgi-bin/qa.cgi...ced_plan_design