K2retire

I agree with Jim.

What is it about this plan that makes you think it is a non-ERISA plan?

Especially since your accountant apparently doesn't know what he or she is doing, at least as far as retirement plans are concerned.

Wouldn't it be the same sources available to the participant according to the plan document?

Income from real estate held in a trust seems like it would be considered trust income, not earned income. But you also mentioned a real estate license and managing property. That income seems like it would be personal services related and possibly self employment income that could go to a plan. Professional property managers are often not the owners of the real estate, so the trust might not matter.

1/2 of the SE tax is deducted from the gross profit in determining the earned income for plan purposes. There's more to the calculation than that, but that is the first step.

Most of us who work in this field can't imagine it, but the folks at Corbel used to propose using such a match instead of cross testing because they believed that most NHCEs would still not defer much.

I agree with Lou that the discretionary match will subject them to top heavy treatment. What I don't recall is if making it a fixed match, rather than discretionary, might solve that problem.

If it's an owner only plan, you're fine. If not, be careful that you change doesn't happen in a discriminatory manner. Has anyone else had a defaulted loan who could be impacted?

Our distribution fee is $50. Our internal policy is that the distribution fee is waived for accounts with balances less than $100 -- even though we are still performing all of the same work, including preparing the 1099-R and 945.

That is probably the most useful advice in all of these replies!

It depends on the plan's loan policy provisions. I remember being taught that if a participant had defaulted on a loan then the plan administrator must take that into account in determining credit worthiness for a subsequent loan. Also, some plans limit the number of outstanding loans and the defaulted one counts toward that limit until repaid. Corbel's EGTRRA prototype has specific choices in the loan policy that ask if the plan administrator must determine credit worthiness and if a participant may have another loan after a default. That implies that the answer to your question might be yes.

I've seen language in the excluded employee section of some GUST documents that excludes independent contractors who are reclassified as employees by governmental action or court case. This would seem to address the same issue. What I don't recall is if that exclusion is still allowed in the EGTRRA documents.

You definitely need feedback on the document. In most cases the funds would go to a forfeiture account.

If they are already giving a 3% contribution in the 403(b), what would be the downside of switching to a SHNEC 401(k)? The part about the pooled accounts doesn't make sense to me.

I believe you've just identified the exact concern that an IRS or DOL auditor would raise about this situation. Regardless of the facts, the appearance of coercion will be hard to overcome.

If you do have such a machine, of course please share with the rest of us. I'd like some extra time to restate about 850 DC plans by 4/30/2010, and it would be nice to have a little extra time to finish up about a dozen remaining 403(b) documents by 12/31/2008. Ditto -- but add a zero to the number of DC plans for us: 8500 plans, 20 employees, no increase in staff and no authorized overtime for the hourly folks. Gotta love management who doesn't know the field they are trying to manage!

I recall having a choice that said that forfeited funds were used to reduce the contribution in the year following the forfeiture. Is that what you're really asking?

When I worked for a full service TPA, we sent the safe harbor notice to the plan sponsor in advance of each entry date along with a confirmation for them to sign indicating the date on which they distributed the notice. We followed up on all outstanding notices until they were received. There's no way to guaranty that the client didn't lie, but at least we could prove that an effort was made.

FWIW, although ASPPA says they don't write trick questions, these are excellent examples of why I don't believe them! And it only gets worse. (When I use my full signature there's a QPA and a QKA after it.)

If the amendment has not been completed, how could the plan have been terminated 6 months ago?

That is the question I was thinking of, and without looking at the form, I may have recalled the exact wording incorrectly.

The second page of the 5500 has a place to put the prior plan name and such.

I never got an explanation that made this suggestion make sense to me. The discussion was with people charged with updating administration software. I am suspicious that they were wrong -- but they were insistent that those things were all possible within the same plan.

Ordinarily the match would be forfeited, not returned to the employer. That should solve all of your other issues as well.