chc93

Mike, what about this thought. A plan can have different ratio percentages for different contribution sources, eligibility requirements, etc. So using the average benefits test for coverage, which also requires the ratio percentage to meet or exceed the safe harbor percentage that is derived from the concentration percentage, wouldn't a plan have a different concentration percentage related to the specific ratio percentage being tested for coverage.

Thanks Tom. You cleared this up for me.

My understanding is "yes"... if determining HCE status for 2012, look back to 2011 compensation and use the HCE compensation limit for 2011, regardless of compensation in 2012. And so forth...

Tom, if coverage by ratio percentage fails, then have to do coverage by ABPT. And to satisfy coverage, in addition to ABPT >70% using all employees, the plan's ratio percentage must be greater than the safe-harbor percentage (derived from the concentration percentage). My question is if the concentration percentage for this includes all employees, or only those in the PS contribution coverage testing. Similarly, for rate group testing using the mid-point, is the mid-point that is derived from the concentration percentage using all employees or only those in the PS conbribution coverage testing. You may have answered this question saying that 1.410(b)-4 and 1.410(b)-5 are entirely different sections. If so, I think the concentration percentage is derived using only those employees in the PS contribution coverage testing for both ABPT coverage and rate-group testing. Agree?

Tom, thank you very much for your reply. I understand everything you said. My question concerns coverage (ABPT) and rate-group testing. PS has 1 year eligibility. 401k has immediate eligibility. If the PS contribution fails ratio test for coverage, I move to ABPT for coverage. Here, I include all employees (since immediate eligibility) and all contributions/deferrals, and ABPT > 70%. For the concentration percentage, do I include all employees that were in the ABPT, or only employees counted for the PS contribution, to get the SH, NSH, and mid-point percentages. Or is there a different concentration percentage for coverage using the ABPT, and for the PS contribution rate-group testing. Thanks again...

Follow on question... ABPT includes everyone, RG for PS can exclude some. For the concentration percentage to get the SH, NSH, and mid-point percentages, are there 2 of them... one for the ABPT including everyone for the SH percentage for coverage, and another for RG for PS with some excluded for the mid-point for RG testing.

Yes. If NHCE gets 10% and HCE gets 10%, it's a safe harbor uniform percentage, and no testing is required. if NHCE gets 10% and HCE gets less than 10%, HCE's rate group coverage passes at 100% on a contributions basis. No need to cross-test on a benefits basis at all. But, as a side note, we had a plan in the past that mandated cross-testing on a benefits basis in the document. So even a safe harbor uniform percentage contribution allocation could potential fail. The plan was amended to remove this restriction.

Got it... thanks, Mike.

Mike... I'm confused by the bolded part above (or at least, not understanding). In order to cross-test in the general test, don't you need to pass the APBT at >=70% first?

What about the ABT for coverage. If the NHCE getting 15% is very young, it may be possible that the ABPT is >70%. And the safe harbor percentage at that point is 50%... and no cross-testing "yet", so no gateway "yet".

We had the same situation once. The DOL said that the most recent 3 years should be "accurate". Older years should be at least a "best guess" estimate, if cannot be "accurate", which is what we did. No problems after that. As posted above, if you don't file years older than 3, the DOL will probably still say that these forms are missing. So probably better to file all years with a cover letter. The DOL apparently wants all forms filed, one way or another.

We have a client with 4 plans for this reason. The split of employees is based on well-defined divisions within the company. Participants are only moved if the switch divisions. I can't recall in the past if a whole division was moved from one plan to another, in which case all participants in that division would have moved from one plan to another. In our csae, we had ERISA attorney set everything up. In your case, with date of hire as the definition for the split, I would think you'll need a third plan, which would not overlap with the existing two plans... but I don't know for sure. Maybe need ERISA attorney?

Well... at least in ftwilliam, a signer's name is associated with Plan Administrator and/or Plan Sponsor. If one name is associated with Plan Administrator only, and another name is associated with Plan Sponsor only, both have to sign. If one name is associated with Plan Administrator/Plan Sponsor, then only one name needs to sign... as Plan Administrator. I think the names/"titles" go along with the filing. In fact, if both PA and PS are different, I don't think ftwilliam will even submit to EFAST2 until both sign. At least that's how I understand how this works.

It sounds like you have a 3% nonelective safe harbor to pass the ADP. In that case, the employer match can be anything, as K2retire says, as long as the plan document allows it. If the discretionary match satisfies the safe harbor for match, you're done. If the discretionary match doesn't satisfy the safe harbor for match, you need to test the ACP. If the plan doesn't allow for the ACP test (we've seen this), then the match must meet the match safe harbor.

While I agree with you, I think the question is that someone who front-loads $10,000 will not get the "true-up" at the end of the year, but someone who front-loads $17,000 will get the "true-up" at the end of the year, and if this is allowed. (I hope I got this right) If this is the quetion, then I don't know the answer... but it doesn't sound right to me. I would think it's either "true-up" or not.

We had this happen to a company (bankruptcy) and plan that terminated a couple of years before these checks were received. We referred the DOL Field Assistance Bulletin 2006-1 to the bankruptcy attorney. While the FAB addressed demutualization proceeds, the thought process seemed appropriate. The DOL basically says to use prudence, weighing the cost and ultimate benefit. If allowed by the plan and it is determined that allocations to participants are not "cost-effective", the amount may be used for other plan purposes, such as fees. The DOL also goes on to say that it might be appropriate to not accept the settlement distribution. Apparently, these kinds of settlements/proceeds can be returned to the issuing party. In our case, the bankruptcy attorney sent the checks back, and I never heard about it since.

For a terminated plan, we routinely provide the final SAR to the plan sponsor, and tell them to keep it in file so if a participant ever asks, he can give them a copy. I think there was some discussion recently when the Annual Funding Notice for DB plans started, on who needs to get the AFN. If I recall correctly, a DOL representative mentioned that the requirement is for any participant who had a benefit in the plan at any time during the plan year must receive the AFN.

If the deferrals and loan payments remain in the employer assets accounts, then you are right. If the deferrals and loan payments are actually segregated into a separate plan trust account, then the TPA is right. The only requirement is to segregate the assets, not necessarily deposited to participants accounts within the timeframe. Of course, depositing to a plan trust account, but not depositing to participants accounts for them to invest may raise other issues.

Back when MP plans merged into PS plans, we provided the MP plan SAR to participants who were in the MP plan, noting that the MP plan assets were transferred to the PS plan. Then the PS plan SAR would note that assets were increased by the transfer from the MP plan. I would think you'd do the same in your case.

I agree with you... I was trying to think if we've ever encountered a situation like that in the past... and what we might have done... since I think it's less clear in a pooled account / quarterly, semi-annual, or annual valuation situation.

The way that we approached this situation is that for a daily valued plan, the "deferrals" have already been deposited to the key's account. At that point, there is no reason to "pull" that money out of the key's account and placed in a holding account, unless there's a testing failure. So without a testing failure, the TH min is required. In the older days when all plan money was in a pooled account, I think this could be done, since until the valuation is completed, the deferrals are not really in the key's account... just simply "contribution deposits".

Having a discretionary match available to NHCE's in the prior year, but not contributing a match is a different situation. In that case, your prior year NHCE ACP would be 0%. That is one reason why prior year testing doesn't work well with discretionary matches. Good point... I missed that. Thanks...

We had a similar question for a discretionary match that was discontinued for a couple of years. Since this wasn't the first plan year, and the plan was on prior year testing, in the first year that the employer match was reinstituted, the HCE's were limited to $0 match, since the prior year NHCE ACP was zero. I would imagine it would be the same for deferrals. If the plan is on prior year testing, and 2012 is not the first plan year, the prior year NHCE's ADP is zero, and the HCE's will be limited to zero. One option would have been to start a 401k safe harbor and switch to current year testing effective 1/1/12. Maybe you can still do this for 1/1/13, if necessary.

This is correct. The Portal Settings is under the Admin Menu at the top, next to Logout. Confirmation emails is third from the top. As maverick says, if the Admin name (drop-down box) in the status grid is blank, the Master Admin will get the confirmation emails. If you are selected under Admin, you will get the confirmation emails... all this after you set confirmation emails to Yes. I get the confirmation emails without fail. In fact, while on the phone with some clients, they tell me when they click the Submit button, and I get the confirmation emails within a few seconds. It has worked really well.

We also had an experience with a large plan (no 7 business day rule). In this case, the DOL came in to audit (I forget why) and found that a few deposits over a 3+ year period were more than the "normal" 2 days or so... so some were 3 days late, some 5 days late, etc. VERY SMALL lost earnings, but they had to do it, along with all of the 5330's.