Lou S.

Maybe, but in theory you shouldn't. We had a plan like this about 4 years ago and never got a letter when we switched from Filing a 5500 to filing an EZ but I don't know if that is the norm or we just got lucky. Worst case is you get a letter and send them a copy of the EZ with proof of timely filing.

What does the partnership agreement say? What is their understanding of how it will be done? How does their accountant think it should be done? I think that B's contribution should not be charged to A as he's really a partner (assuming B owns 100% of the corp). B's wife it sort of depends on if she is a real employee or if she is on the payroll for other reasons. If she's a real employee and they split the employee contribution 50/50 then B's wifes contribution should be allocated 50/50.

Good question. Not sure what the "offical" position is on this but unless the employer or particpant can provide pre-2002 deferral info we would limit the hardship to the information we had on file.

Aren't you missing that the software already treated $1,600 as cacthup in the prior FYE? Either you weren't allowed to recharaterize that and should have refunded it or you were allowed to recharaterize it and can't count it as catchup in the next FYE.

I agree with you but the regs don't always say what the people who wrote them want them to say, much to their chargin later on. It would be an interesting question for a conference to see if a macth that satifies the ratio test at every level of deferral but has an increasing rate at one or more steps could be an acceptable ADP safe-harbor, even if it fails the ACP safe-harbor and requires testing.

Because that would have made too much sense. hmmm. the more I look at this the more you may be right

As others have noted to be safe harbor you'd have to be non-increasing rate of match at all levels as deferral rates increase. If they still want to macth half of the first 15 something like 100% first 3 50% of next 2 (3-5) 35% of next 10 (5-15) would still work but obviously this is an increase of some sort for all who are deferring less than 15% and you'd still need to test some or all of the macth in ACP since you are matching over 6% of pay. edit - hmm see Sieve's prior post and my next one - I may be wrong on the whole nonincresing as rate increases as Sieve points out in the sematics of the regs...

Presumably new Doc had been funding those contribs from his company as a participating employer no? Wouldn't he have just spun off the balance to his new company vested and non-vested? If he was just an employee of old doc, then no he's now a former employee of old doc and an employee of the new company.

The way I read the regs (and I could be wrong on this) is that you get a $16,500 402(g) limit and $5,500 414(v) limit on a calendar year basis. The fact that Non-CYE plan testing gets screwy shouldn't effect the ability to put in $22,000 from 1/1 - 12/31 if you are catchup eligible but what gets recharatized, how, and when, along with what may or may not need to be refunded is why I hate Non-CYE 401(k) plans.

For over $1,000 you should just establish a rollover IRA, send the funds there and make it the nonresponsive participant's problem. I don't see where you can send him a check less withwholding any more as the DOL/IRS changed those rules a few years ago. Also at this point the withholding is quite late.

His July 2009 should be $16,500 + $5,000 catchup. So the $16,500 woul go in the 2/28/10 test. Which it looks like you failed and you recharateize $1,600 as ctachup. He is still allowed to put in the $22,00 in 2010 but you have already used up $1,600 of the catchup for the 2/28/10 test so $18,100 (since $3,900 is charaterized as catchup 7/2011) so you have a $5,500 catchup for calendar year and you are OK. But you didn't have to make a refund for 2/28/10 becuase of recharaterization - esentially you sort of got a $7,100 "catchup" for the FYE ending 2/28 due to timing of how you hit the 402(g) limits between CYE and FYE. What you are doing is pushing the problem into future years as more and more of the $22,000 is going to go into the test if deferral patterns of HCEs and NHCs don't change. It looks like your system is working fine.

Thanks, I believe you are right. I think I was confusing the partnership return with the partners individual 1040.

Having a minor brain cloud this morning. For calendar year tax payor do I have the timing of deductible employer contributins correct - Corp (regular c or sub-S) 3/15 - extended 9/15 Partnership (or LLP) 4/15 - extended 10/15 but must fund by 9/15 (I think that chnged 2 or 3 years ago if memory serves) Sole Proprietor (or single member LLC taxed as sole prop) 4/15 - extended 10/15 can fund by 10/15 Am I wrong on any of these dates? Thanks

Tom, let's say the formula is implemented and the BRF tested and it fails. What is the correction? I would think the correction would be an amendment to increase the match for one or more groups until BFR is passed.

I would agree with this. edit - assuming it is a 1 man plan with no employees.

You might (or very likely) have difficulty passing discrimination testing on BFR as well as passing the ADP/ACP test, but leagally I don't think you have a problem drafting that match that way. Also are you going to be doing the match on election or ADP? Because people under age 50 effetively can't contribute over 10% of pay once pay is 10 times the 402(g) limit and people over age 50 can't once pay is over 10 times (402(g) + catchup). That won't be a problem form discrimination because you can always discriminate againce HCEs but it might not sit well with an owner making over $245K who is "only" getting a 50% match.

Benefit, right or feature. The additional match is listed in that Tres. Reg that I quoted previously. You could so long as you do not match deferrals in excess of 6% of comp and match itself does not exceed 4% of compensation... ...and does not increase as the rate of match increases. The design in the OP pretty much fails outright on numerous levels.

I think you are well out of self correction as this goes back potentially 10 years. Pretty sure this will fall under VCP or walk in CAP. Agree with all those who recommend qualified ERISA counsel.

depends on what your document says about allocating QNECs

How is a QDRO distribution to an alternate payeee reflected in the top heavy testing? Is this considered a distribution to the participants account or alternate payee's? Is it considered an in-service subject to the 5-year look back, or like a distribution in the current year to a "terminated participant" subject to 1-year look back, or is it ignored altogether? Is there anything in section 416 Q&A that I'm missing on this, I didn't see anything directly on point.

Austin, as long as the refund isn't more than the IRA limit, there is nothing wrong with leaving it in the IRA as a non-deductible IRA contribution.

http://www.irs.gov/retirement/article/0,,id=135668,00.html Along the same lines as GMKs link.

An new plan or conversion of existing 401(k). A new plan (or conversion of PS only) you can implement traditional SH as long as you have at least 3 months of effective deferral for the ees, so for a calendar year plan implement prior to 10/1. For a conversion, you need to give notices out 30 days* before the year starts and adopt prior to the year begining, unless you are doing a "maybe notice for the 3%". *some execptions apply On PPA safe harbor, I'm not sure, I assume the time frames are the same but you know what they say about assumptions.... My understanding is that you are already at 6% and don't need the 1% annual bump.

On its face I agee with Austin, seems like a staright forward PT. So unless there is PT exemption the Trustee can point out that allows them to do this I'd stay away. If it is covered by a PT exemption then sure you can do it but again, make sure you have your disclosures in order to the client and let them know of the potential conflict of interest.

Very timely just got one of these today. Thanks for this thread and the linked one by Tom Question about the 1099-R though (referenced in linked thread), the 1099-Rs went out in January and we are doing the test in February, do you prepare an amended 1099-R? And if yes what if you use a bundled provider that is reluctant to prepare corrected 1099-Rs? Any thoughts appreciated.