K2retire

Further supporting my earlier contention that you have to raise the whole group -- not just the people you want to raise.

Most non-profits don't pay well enough to have any HCEs, so the fact that this one is having a problem implies that they are both relatively large and have poor participation. Would adding a match help persuade NHCEs to defer? If so, problem solved. If not, adding a safe harbor match should be relatively inexpensive and solve the problem. Administering both a PSP and a 403(b) sounds expensive incredibly time consuming to me.

I agree and would further caution that if the per pay period match was underfunded, it may now be late and subject to lost earnings calculations.

I trust they'll be receiving a lengthy and articulate response.

Yes.

Or were you asking about how to treat contributions for W-2 employees of the self employed business owner?

I was deliberately vague earlier, because I didn't trust my memory and hadn't taken the time to look it up. The response on the ASPPA forum is what I remembered -- the money goes back to the participant's account. As for earnings, I don't know. Notifying the IRA institution that it was not eligible for rollover was a brilliant way to encourage the participant to return it to the plan.

It wasn't the participant's money -- it was the plan's money. As such the plan fiduciary has a duty to obtain the return of the inappropriately distributed money. Of course, we both know how likely that is to happen. If I remember correctly, distributing deferral money without a distributable event, particularly to someone under age 59 1/2, is a potentially disqualifying event. There is a nearly forgotten situation in my distant memory that causes me to suspect that the employer must make the plan whole if it can't be collected from the participant. But the blatant unfairness of that possibility makes me suggest consulting an ERISA attorney for a better answer.

Slight adjustment to post # 4 will fit the bill. PS of $46,000 less enough to allow for the SH match. Deferral of $5,000 doesn't become catch up until the 415 failure, but would result in catch up receiving a SH match. Granted it's not likely -- but it COULD happen.

Much as I love these theoretical discussions, wouldn't it be a whole lot easier to just get the participant's signature???

Because that group is now receiving 5% plus $265 and it is no longer allocated prorata within the group.

Are there any HCEs in the group with the 2 people the actuary wants to increase?

I believe it was rescinded about the time that they noticed that people were spending more than they earned.

I'm not sure what you're seeing, but everything I've read indicates that this will be filing over the Internet. Whether or not your Internet connection requires a modem seems to be an unrelated issue.

If the payroll company is not processing the distributions (and I've never heard of one that does) they would not have the information needed to do the filings.

Being a prototype does not mean that a 2 step integration formula can't be used. It is one of the choices in the Corbel prototype.

The 3% SHNE can't be used in the integration calculation.

The exception is if the only eligible employees are the business owner and the owner's spouse.

As frustrating as it may be to wait, it is often to your benefit. For example, if you take a distribution now and the employer contributions that you are entitled to later, you could end up having to pay a second distribution fee for that amount later.

I don't know -- that phrase brings to mind someone's old advertising slogan for undergarments!

Makes sense to me to -- which means it is likely wrong in IRS logic.

Whether or not you are a highly compensated employee (assuming you're not an owner of the business or a relative of an owner) changes each year depending on whether or not your income is over the threshold for the previous year. The amount is adjusted for inflation each year. If your income last year was over, you are an HCE for this year and there's nothing you can do about it.

But if the plan was terminated in 2003, it no longer exists to hold anything.

In the situation I was thinking of, bonus was paid monthly. It was a percentage of the amount billed to the client and paid at the end of the month in which the client paid the employer. I left that position in October 2005 and received my final bonus payment (for work completed in 2005) January 31, 2007. Ignoring the separation from service for a moment, this auditor apparently believes that the 2007 bonus payment should be subject to the 2005 deferral election? That makes no sense.

But what if the bonus/commission is not payable until the client pays his bill to the employer? In that case the work may be done months before the payment becomes due. And if the client defaults it might never become due. There are many assumptions here.