Richard Anderson

Yes. The deemed loan (including accrued interest) is considered an outstanding loan until it is offset. Once you determine the maximum loan amount, you'll then deduct from that any current loan balances (the deemed loan). Whatever is left is the max amount of new loan.

Can you amend and restate the current simple 401(k)?

Here's what I've been doing in this case: If I want the match to be 30,000, but because of quantech precision it comes out to 30,002.55, I will manually enter a match of 2.55 less for one or more of the HCEs. The plans I work with are smaller and don't have $6,031,754.90 of eligible compensation, as yours does. I don't know how far off this method will be from 100,000, but it might be close.

If I understand what you want to do, I think it will be a trial and error calculation. You don't know what x is, but want the total match to be $100,000. I think you have to use a value for x, such as 5%, then see what the total comes out to be. If the total is less than $100,000, then increase x, until the total is 100,000. I don't think that the system can do the calculation. It will take several iterations, using different values for x.

There may be a distinction. 72(p) was amended in 1986. Currently 72(p) says "used to acquire a dwelling unit that, within a reasonable time, is used as the principal residence of the participant." Before being amended in 1986 72(p) read "used to acquire, construct, reconstruct, or substantially rehabilitate any dwelling unit which within a reasonable time is to be used (determined at the time the loan is made) as a principal residence of the participant or member of the family (within the meaning of section 267©(4)) of the participant." Since "construct, reconstruct, or substantially rehabilitate" was eliminated from the language in 72(p) after amendment, I think that "acquire" might not include construction.

Unless the plan also matches on post tax contributions, then the post tax contribution does not affect the ACP safe harbor, but the safe harbor is only for matching contributions. The post tax contributions must be tested separately. If the plan also matches on post tax contributions, then the match on the post tax can be safe harbor, if the requirements are met. But the post tax contribution itself must be tested. Jeff V, It's hard enough getting NHCEs to defer pre-tax; are many taking advantage of the post-tax deferral? Are the ones deferring post-tax, first deferring the 15% pre-tax limit?

Timing of forfeitures does not seem to be the problem here. Disposal of the forfeitures is the problem. We do what R. Butler suggests. I'm reluctant to leave forfeitures sitting in the plan until the next matching contribution. What if the employer never makes another match? Should the forfeitures just remain in the plan? Our document is silent about what to do with forfeitures if the employer makes no match, so we suggest to the client that this year's match is exactly the amount of forfetures.

If other matching contributions (other than safe harbor) are made, then the ACP safe harbor is met if: 1. matching contributions are not made with respect to deferrals in excess of 6% of comp. 2. the rate of match does not increase as the rate of deferral increases. 3. discretionary matching contributions may not exceed 4% of comp. If the above conditions are met and the plan provides one of the safe harbor contributions, then the ACP safe harbor is met, and no testing is required.

KJohnson, Did you get a D letter for this "offset" plan? The plan has little or no incentive for someone to defer 1, 2 or 3 percent. But, it could "force" participants to defer more than 3%, because they won't get a match at any lower deferral rate. Was this the driving force on the plan design, and is it working as planned? Is the ps contribution discretionary? If so, is the allocation of the match "definitely determinable." Why not just have the matching language state that only deferrals over 3% of comp will be matched? What is the advantage of the "offset" language? Interesting plan design.

Well I just read Rev. Rul. 78-223, and that ain't it.

Here is the footnote citation exactly as it appears in the material distributed at Michael Preutt's workshop 44 at the ASPA conference: "Rev. Rul__-___,____-_C.B.___." However an earlier footnote references Rev. Rul. 78-223, 1978-1 C.B 125. I have not read this Rev. Rul., but I think this is the one you are looking for.

A participant that has been receiving minimum distributions dies. Wife is beneficiary and also is in the plan. What are the options available for the spouse concerning distribution, rollover, leaving it in the plan, etc? Also will the method of calculating the minimum distribution change? Are there options as to how the spouse calculates the minimum distribution? The deceased and spouse are owners.

"Their match is far and above more generous than safe harbor and they don't want to reduce it." It may be possible to have safe harbor match as generous or more generous that satisfies the safe harbor. If the current match, for example, is 100% of the 1st 10% of comp deferred, that will not pass because it matches more than the 1st 6% of comp deferred. But a 200% match on the 1st 5% deferred will pass the safe harbor.

R. Butler is correct, the filing date is not relevent for deductibility, the due date is. But if the due date was 3/15/01, then it is to late to increase the contribution and deduct that contribution for 2000. Tom is correct that the contribution can be allocated for 2000, but will be deductible for the 2001 tax year.

All plan participants (participating in either plan) not terminated as of the end of the plan year will get TH contribution if the aggregated plans are TH.

Now, I disagree with myself. I was wrong. Compensation in a control or ASG must be aggregated. I think MR's method of pro rating the 170,000 between employers seems logical.

Tom, I don't understand what you mean here: "At that point, you have, for all practical purposes, a plan in need of cross testing, since you have two classes of employees - one group receiving one % of pay, and another group receiving 3% of pay." Assuming the plan wishes to satisfy 401(a)(4) using the safe harbor, the plan must pass 410(B) by considering those who receive only the top heavy contribution as not benefiting. If it passes 410(B) this way, no further testing is required. Otherwise, the 401(a)(4) safe harbor can not be relied on. Do you agree?

Disagee. $170,000 limit in one, $75,000 in other.

All matching contributions would be subject to the ACP test, including the "safe harbor" match, because you failed the requirements of Notice 98-52, section VI.B.3. The "safe harbor" match you describe will meet the requirements for ADP safe harbor, but not ACP safe harbor.

Although, 2000-3 does allow the sponsor to suspend the safe harbor match during the year, provided proper notice is given, you don't get to rely on the safe harbor for any part of the plan year and must do ADP/ACP testing. If you want to argue this situation is similar (I don't think it is), then the safe harbor won't apply for the plan year. I agree with Alf. Also, I don't think the IRS will be concerned with trying to analyze the motive behind the change (employer wants to be more generous), they simply will apply the rules to the situation. Without guidance on this specific situation, I would be cautious. Why not add a discretionary match instead?

Where have the PSP deposits been going? If individual accounts are being set up, but won't be available until June 1, deposit deferrals to a pooled account in the plan's name and then transfer to the individual accounts on June 1.

I think that if neither plan refunded any deferrals to the participant, then both plans would include all deferrals make to their respective plan in the ADP test. If one of the plans makes refunds at the participant's request, then that plan would not include the refunds in the ADP test.

If matching contributions are made on deferrals in excess of 6% of comp, then the plan cannot rely on the ACP safe harbor, and must pass the ACP test by including all matching contributions, including the safe harbor match.

"if a non-highly compensated employee makes elective deferrals in excess of the annual cap to one or more plans of the same employer, then the excess deferrals are not taken into account in calculating that NHCE's actual deferral ratio". Where did this quote come from?

Gains or losses must be calculated and returned along with the excess contribution or excess aggregate contribution, but those gains or losses are taxable in the same year as the excess contribution or excess aggregate contribution. So, if distributed by 3/15/2001 in a calendar year plan, the excess and the gain or loss are includible in income for 2000. If distributed after 3/15/01, both the excess and the gain or loss would be taxable in the year of distribution.