Lou S.

You could try having him sign a letter (under penalty of perjury maybe?) that no administrative fees will be paid by the trust after he takes his money, that he personally guarntees all Plan fees will be paid by him and that if he understands if fails to exceute any documents required to be signed by the Plan Trustee in a timely maner, you'll be forced to report him to the DOL. Or tell him fine if he wants his money now, you'll resign as a service provider to the Plan and he'll have to hire someone else to complete the termination. Not sure either would work or if you'd want a lawyer to draft the letter but it would most likely cover you if he should bail after taking his cash.

Perhaps not the option the keys (likely the owner of the company) wants to hear but if the T-H minimum is "only" $30K (and I use this understanding it is not MY $30K) then what about the owner taking a plan loan to make the T-H minimum? Though if business is so bad a $30K contrib will put them under, owner may already have a participant loan. Just a thought to throw out there in case it is an option.

Several big problems with the safe harbor for the supposed short PYE 10/1/11 - 12/31/11. The plan isn't effective for 3 months with a sign date of 12/1 since deferal can't start until the plan is executed. Also no formal notice is tantamout to no notice as far as the IRS is concerned.

I agree that it is next to impossible to get the IRA custodian to code it correctly so that it doesn't look like same $1,000 is taxed twice. I think the best a participant can ususally hope for is to get the cash from the IRA and claim the IRA distribution as return of basis on the 1040 when the IRA does send a 1099-R showing taxable income and keep execllent documentation in the event of future IRS audit. I am not a CPA but perhaps attaching an explaination to the original 1040 wouldn't be a bad idea either. edit - don't most IRAs have some procedures for returning excess IRA contributions? I would imagine that many participants screw up and send too much in with at least some frequency and there must be some procedure to pull out those funds since if I'm not mistaken if t hey aren't withdrawn the IRA holder gets hit with a 6% (or is 10%) excise tax for each year those funds remain. I don't work directly with IRA and haven't personally had this experience but that is where I would at least start with RBBH

See page 6 of 1099-R instructions http://www.irs.gov/pub/irs-pdf/i1099r.pdf Failing the ADP or ACP Test After a Total Distribution

The instructions to Form 1099-R pretty clearly state how you handle an excess contribution that was already rolled to an IRA and how to report it on two separate 1099-Rs. And yes the excess must be removed from the IRA, unless the IRA owner is depositing it to the IRA as an IRA contribution and not a rollover from a qualified Plan. And to echo others, yes all nondiscrimination testing is required in the year of plan termination.

Does the plan specifically NOT match on catchups? If the ACP passes and there are no ADP refunds becuase of recharaterization, what exactly is there to forfeit? If you do deterime though that the forfeituires are required, I am unaware of any de minimum rule that would allow you to not forfiet.

Upon further review I believe you are correct. Wouldn't hurt to ask for a clarifiaction from the horses mouth (in this case Corbel) since they drafted the doc. You can always have the client amend in an in-service to cover both problems but then I'm sure you are aware that's gonna apply to everyone.

I believe 1 is yes and 2 is no. I also agree it is silly not to allow them in both situations.

I believe that is correct and the way we have done it.

Any chance to aggregate the CBA plan and the 401(k) and maybe they aren't top-heavy? Been a long time since I looked at those rules with respect to CBA/non-CBA aggregation so I'm not sure it is something you can do but might be worth the research if 3% contrib is significant. Otherwise I agree that they 3% is required, that's not really in doubt.

OK, maybe a controlled group does exist. If so and B still has ees they can probably take advanatge of the transition period if they want. When in doubt refer them to an ERISA attorney to determine potential controled group status.

If they bought the assets, there is generally no controlled group situation. The owners of B still own B and are responsible for the plan that now probably has few or no active employees. Company A could grant service with B in their document or treat them all as new hires. B could terminate Plan and participants of B can take distributions as they please. OTHO when Company A buys the stock of B, you generally have a controlled group and the employment history of B carries over to A and A becomes responsible for the Plan of B. Plan B can't really be terminated at this point, A would need to be maintained seperately or merged into A Plan. You can take advantage of the transition period provided you meet the requirements. Hope that helps.

Sorry I can't point you to a specific cite but at several conferences over the years the IRS has addressed this informally from the podium and said not to include the $0.00 comp partner in the ADP/ACP test. I think the logic if I recall correctly was that since they had no comp, they had no effective ability to defer and should not be included with a 0% rate.

yeah but they'd be giving up the employer match to to it. though I have to admit this plan design does sound antiquated, why not just do a ROTH-401(k) and get the best of both worlds?

To me the new rules just seem silly in most applications. The old rules that allowed for a 415 excesss without VCP were much better in my humble opinion. The new rules just seem to punish a plan that has a good year, makes a large PS (or ESOP) contribution and pushes someone past the 415 limit simply because tehy deferred the max 402(g) limit. I mean there are built in mechinisms for refunds for 402(g), ADP & ACP, why not 415? Though I will say with the increased 415 limit to 100% of pay under EGTRRA, we see these 415 excesses far less frequently than when the old 25% pay limit would kick in. I guess the IRS had some logic for eliminating the built in correct in the EGTRRA cycle but damned if I know what it was. So unless the IRS changes it back you either limit allocations by plan doc to avoid the excess in the first place, which seems to punish savers, or do the refund under VCP.

VCP submission under EPCRS.

Standard caveat of read the document to make sure of your groups. But can't you test your otherwise excluables seperately and presumably no HCE will be in that group so your gateway for that group would pass. If you are testing all together for some reason such as to pass 401(a)(40 testing, than yes they would need the 1% to satisfy the gateway, does your doc have language to "top up to meet gateway"? If so I don't think you'd need amendment, if not I think you do.

General followups on the new 2848 that have me a bit confused. Since most of our clients are qualified retirement plans on the 2848 - Do we need seperate 2848s for the Plan and the Trust with the Sponsor (or Admin committee) signing for the Plan and Trustee signing for the trust? The new instruction appear to indicate this is so. Though for many of our smaller plans this is the same person. When the trustee is signing the 2848 do we always need a Form 56 Notice Concerning Fiduciary Relationship as well?

The IRC and treasury regs both have all kinds of weird stuff that I can't believe is "allowable" but I see nothing wrong with what you are posting according to the letter of 72(p) code & regs. Probably violates the spirt which was intended to limit the rolling $50K loan but sometimes the critters don't think out all the details when they write the rules. Based on your theoretical fact pattern the participant never had a highest outstanding loan of more than $20,000 until he takes the final $30K loan. Assuming he pays off the prior loan before taking a new one and no two loans were outstanding on the same day.

I really don't see a problem at all. Many documents put each participant in their own group in the document but in reality when it comes to the acutal allocation one or more groups (usually the owners) get one rate and all other groups (usually the NHCEs) get another rate unless you need to give some NHCE an increase to pass testing.

You are correct. Non-key HCEs must receive the TH minimum. There is no rule that HCEs must get the gateway, that only applies to NHCEs.

Yeah it was the Unemployment Compensation act of 1992. It was supposedly used to fund additional federal unemployment benefits during that particular recesssion by collecting the taxes sooner.

Why restore it at all? Won't it just be considered a forfeiture? Either it will be used to reduce employer contributions, pay plan expenses or be added to a discretionary contribution. In the first two cases you'd just be putting money in now to take out the same amount soon after, in the 3rd case just increase this years dicretionary contribution by the amount of the loss. Am I missing something?

Good info Kevin. Nice story on how the IRs goes about forwarding them. We too have used it with some sucess at times. Seems to be hit or miss when we use it. But we view it more as complying with the DOL rules on locating lost participants than any real expection that it will actually find a lost participant.