Lou S.

It varies quite a bit. And depends on a number of factors including but not limited to: if you have a smaller local auditing firm or one of the bigger shops do it, if you qualify for what is known as a "limited scope audit" or if you need a full scope audit, if you have non-traditional assets, if the auditors find "issues", etc.

If they are eligible to make elective deferrals they are a participant in the Plan. Whether or not they have an account balance because they chose not to make elective deferrals is irrelevent. You still count them as a participant for purposes of Form 5500.

You mean beyond 5 years of phantom tax deductions? If you are taking them through EPCRS the Plan should be fine assuming the IRS is happy with your correction methods. But they will probably need to file amended tax returns for the company for each of the last 5 years where they took deductions for contributins not made.

That's awesome. I'm going to have to remember this one. Agree on all your other points.

Your understanding is correct. see, IRC §416

Doesn't VCP imply some correction will be done? In this case it sounds like no correction will be forth coming as the sponsor appears to have no ability or intention of funding the required contribution. Maybe Walk-in cap where you negotiate a penalty and then try to have it discharged in bankrupcy? Posibly as part of the CAP agreement? I suppose the IRS could disqualify the plan, especially with respect to HCEs so they can't rollover the distributions. I have heard of anlogous cases where top-heavy plans went out of business and the IRS allowed them not to fund but I believe that was under audit and not some formal program and i don't have all the facts as I did not directly work on it. I do agree that ADP testing should be done for the year no SH is being made. Presumably we are talking about the 2011 year? At any rate, good luck.

I'm pretty sure your HCE and Key-EE are determined at the employer level. The QSOLB rules just lets you ignore the other other lines of the employer (by treating the EEs as excludable) when doing your descrimination testing. But the plans I work with are generally to small to consider using the QSLOB rules.

...and most of asppa too! Hey just because I don't like the tax code and the basic structure of US retirement policy planning, doesn't mean I don't understand it and try give my clients the best advice I can within that framework, and that includes the deferral only clients too.

Perhaps you don't have a clients who run small businesses? No, that's pretty much all we do. And we do have a lot of deferral only plans. I think they are BS personally and the IRS should just say if you have a deferral only plan the deferral limit is the same as the IRA limit and there is no testing. But I'll get off my soap box now.

I'm probably in the minority but I've always felt that deferral only plans are the ones that are ludicrous.

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?