Richard Anderson

I think that a terminated plan participant must be given notice that if their account balance is greater than $5,000 they are not required to take a distribution from the plan. If this is so, how is that requirement met? Is there a special notice for this, or can it be added to the 402(f) Special Tax Notice as a separate paragraph, say at the beginning of the tax notice? Thanks for your help.

Thanks pmacduff, But that tread didn't seem to answer the questions that I have, so I'm posting here, hoping for more responses than TRA-C-C got.

We have several employers that have both MP and PS plans that have the assets of both plans invested in one account. I have heard a few people say that comingling the assets of more than one plan of the same employer creates a Master Trust. I'm not sure that it does. Does anyone have any thoughts on this? Also if a MP and PS plan have all assets of both plans comingled, should there be only one trust EIN that both plans use, or should there be seperate trust EINs for each plan.

You are not withdrawing from the plan, you are using plan funds to purchase an asset that the plan owns (insurance). If you consider this a withdrawal, why would you think that any of the 401(k) account could be used to purchase insurance?

I am posting this question to this board because this is where the small plan experts hang out. A one participant money purchase plan deposits the required plan year 2000 contribution of $30,000 on June 30, 2001. The plan sponsor did not extend his tax return. My understanding is that the contribution can not be counted as an annual addition for the 2000 plan year unless deposited within 30 days after the due date of the employer's 2000 tax return. If this $30,000 has to be counted as an annual addition for 2001, must the 2001 $30,000 contribution be made late also in order to not have $60,000 in annual additions for the 2001 plan year. Also my understanding is that there is an exception to the 30 day after the 404(a)(6) period rule if the employer makes a contribution to satisfy an accumulated funding deficiency (1.415-6(B)(7)(ii) ??). Now if I understand this correctly (unlikely), if the contribution had been made by April 15 (30 days after the due date of the tax return) it would be an annual addition for 2000. Also if the contribution is made after September 15, 2001 (date at which it becomes an accumulated funding deficiency) it would be an annual addition for 2000. But, if made between April 16, 2001 and September 15, 2001, the contribution will be an annual addition for 2001. Please tell me I that I am wrong.

If a plan sponsor reimburses a plan for expenses paid out of the plan, is that payment to the plan considered a contribution? Here are the facts: Client sees August 2000 trust statement with investment fees of $1,000 charged to the plan. So, in September 2000, the plan sponsor deposits $1,000 to the trust to reimburse the plan for expenses paid by the plan. Is this a contribution? If so, here's my problem: The plan is going to be terminated. There is only one participant in the plan (owner of the plan sponsor). He had no compensation in 2000.

Plan Sponsor has been filing 5500's in the past, but now has no employees other than the owner. I believe that 5500EZ may now be filed, since there are no employees. Is the final return marked for the 5500 and/or first return marked for the 5500EZ when making this switch?

Hi Tom, You said: "starting in 2002, a safe harbor 401k plan is also deemed to pass top heavy, providing no additional contributions are made". Sal Tripodi said at the ASPA Summer Academy that the plan will be deemed to pass the Top Heavy requirements if the only other contribution in a safe harbor 401(k) plan is a discretionary match that passes ACP safe harbor (limited to 4% of comp, etc.) If that is correct, then in 2002 a plan could have a safe harbor match of 200% on the first 5.5% deferred. An HCE owner making in excess of $200,000 defers $11,000, receives $22,000 safe harbor match, and then tosses in $7,000 as a discretionary match for a total of $40,000.

This looks like a control group to me, therefore, the two companies are considered a single employer. Dad is attributed ownership of son's company, and son is attributed ownership of dad's company.

Who owns the other 50% of B, and are A & B an Affiliated Service Group?

Yes, but it has to be in the notice. Your employee would not defer with a 400% match that is 100% vested?

1) What if forfeiture is used to reduce ER contributions? The employer gets the benefit of another deduction using the same funds? Forfeitures that reduce the employer contribution are not deductible. The amount actually contributed to the trust by the employer (contribution - forfeitures) is deductible.

Most documents specify seperate accounting. Would'nt not doing so be a failure to follow the terms of the document.

While completing the 2000 5500, I noticed that the financial information on the 1999 Schedule I is incorrect. When filing an amended return, Should I send a 1999 5500 with box B(2) marked, along with a corrected Schedule I? Or should I include all Schedules, even those that required no corrections?

Why do you think that you have a deadline for rollover?

From your prior post: "The Plan document currently states that hardship withdrawals are allowed "...up to the lesser of 100% of his Participant's Salary Reduction Account...." 100% of the Salary Reduction Account would be $900.

no

There is little guidance on hardship distributions before the 401(K) regs were issued. But hardship withdrawal provisions fit under 1.401-1(B)(1)(ii) which states that distributions to a profit sharing plan may be made in the following situations: 1. After a fixed number of years 2. After the attainment of a stated age; or 3. Upon the occurrence of some event, such as layoff, illness, disability, retirement, death, or termination of employment Hardships distributions fit condition 3 above.

Hardship withdrawal is allowed from all sources, if allowed by the document. Hardship withdrawal from 401(k) deferrals is limited to contributions. No such restriction exists for hardship distribution from other sources, such as match or profit sharing. Cites from CCH or the regs, without checking what the plan document allows, will not tell you much. As Jim Kais said check the plan document. From what sources are hardhip withdrawals allowed?

For ACP safe harbor, the match must not relate to deferrals in excess of six percent. The matching rate must be at least as great as the basic safe harbor match, but can be more, such as 350% in your example. It must be 100% vested and the notice requirements must be followed.

I believe that a 3.5/1 safe-harbor match on the first 6% deferred does satisfy the ADP and ACP safe-harbors. Only discretionary match is limited to 4% of comp. There is no such limit on an enhanced match. But given the required notice, the employee would most likely want to defer with a 350% match that is 100% vested.

The "recurring and substantial" requirement is for profit sharing plans.

Who is the trustee? Many small plans name one or more of the firm's owners as trustees. If the custodian of the plan assets moved the plan's assets without authorization, they should be liable for any plan losses, and should be willing to restore those losses. Have you asked them to do so? If so, what was their answer?

In order for someone to be excludable because they terminated and did not have more than 500 hours, they must not benefit. Since she received the 3% safe harbor, she is not excludable.

A limit on only NHCEs will not be a safe harbor.