DMcGovern

How much is the overpayment? I believe there is a section in Rev Proc 2008-50 (update to EPCRS) that says you do not have to correct if the total overpayment is $100 or less. (see Section 6.02(5)©). You do have to notify the participant that the amount is not eligible for a favorable tax treatment.

What if it is a prototype or individually designed SEP?

Top paid group election only ranks them by comp - ownership is not a factor. So, you would have the one HCE with the highest comp and the next non-owner that has the next highest comp. However, the top paid election is only a compensation test and does not affect who is considered an HCE under the 5% owner test. So, the >5% owners not included under the top paid election would still be considered HCEs under the ownership test. Total of 4 HCEs

Our document default is to not provide QRWs, but I was curious about your question, so I asked TAG. Their response was that the Roth 401(k) deferrals are permitted to be withdrawn. Here are their cites: Notice 2009-68 Under § 72(t)(2)(G) of the Code (as added by section 827 of PPA ’06 and modified by section 107 of the Heroes Earnings Assistance and Relief Tax Act of 2008, P.L. 110-245), the 10% additional income tax on early distributions described in § 72(t) does not apply to a qualified reservist distribution. A qualified reservist distribution generally means a distribution from an IRA, or from amounts attributable to employer contributions made as elective deferrals described in § 402(g)(3)(A) or © or § 501©(18)(D)(iii), made to an individual who was called to active duty for a period in excess of 179 days. Section 72(t)(2)(G) also provides that any individual who receives a qualified reservist distribution may re-contribute the distribution to an IRA without regard to the applicable dollar limitations on contributions. Notice 2009-75 A designated Roth contribution is described in § 402A, which was added to the Code by section 617(a) of the Economic Growth and Tax Relief Reconciliation Act of 2001, Public Law 107-16 (115 Stat. 103) (EGTRRA), for taxable years beginning after December 31, 2005. A designated Roth contribution is an elective deferral, as described in § 402(g)(3)(A) or © of the Code, that has been designated by an employee, pursuant to § 402A, as not excludable from the employee's gross income. Under § 402A(b)(2), designated Roth contributions made to the plan must be maintained in a separate account (a designated Roth account). 402(g)(3)Elective deferrals – For purposes of this subsection, the term “elective deferrals” means, with respect to any taxable year, the sum of— 402(g)(3)(A) any employer contribution under a qualified cash or deferred arrangement (as defined in section 401(k)) to the extent not includible in gross income for the taxable year under subsection (e)(3) (determined without regard to this subsection), 402(g)(3)(B) any employer contribution to the extent not includible in gross income for the taxable year under subsection (h)(1)(B) (determined without regard to this subsection), 402(g)(3)© any employer contribution to purchase an annuity contract under section 403(b) under a salary reduction agreement (within the meaning of section 3121(a)(5)(D)), and

There may be one problem with specifically naming the individual as excluded in the document. When running the 410(b) test, I believe you would not be able to use the average benefits test. Naming the individual would not pass the reasonable business classification test as part of the ABPT.

The safe harbor contribution may be calculated based on compensation from date of eligibility. It still meets the safe harbor requirement for the plan year, so that participant is considered covered by the SH. You may have an issue with meeting top heavy requirements on these participants, if that is applicable.

In 2010 the participant would be otherwise excludable, most likely not a HCE and would be in the ADP test group. In 2011 the participant would have satisfied the statutory eligibility requirements and is in the group covered by SH, so not subject to ADP testing. HCE/NHCE in 2011 would not be an issue since not in the testing group - only those in 2011 not covered by the SH

Any disaggregated portion of the plan that is covered by the safe harbor provisions would be exempt from ADP testing, but the portion that is not covered by SH would have to be ADP tested. In most cases this testing group does not include any HCEs, and automatically passes.

Sorry to find this months later, but I was wondering what document you have? The Corbel EGTTRA prototype document would exclude any QNEC used in ADP/ACP testing from gateway. There is one exception to the 5% gateway in which you can use the QNEC if it is the ONLY employer contribution and it equals or exceeds the gateway requirement. Other documents may word this differently.

The 5300 is for the spin off plan, not the other plan. ED is 1/1/08 and no determination letter

paragraph 4d of the same EOB section also provides that "The plan administrator is charged with following the terms of the plan and, where the terms are ambiguous, is usually charged with the responsibility for interpreting the document." It also goes on to say that since the IRS generally agrees with using the same testing period for both the top heavy determination AND identifying the non-key employees, most plan administrators tend to agree with this position. In your case, that would mean providing the top heavy contribution to this participant this year, not the following year. But it should be up to the plan administrator to decide and tell you how to handle it. Best to get that in writing from them.

I agree with Belarath's comment on obtaining a legal opinion on this. There can be facts and circumstances that the client is not providing. Affiliated service groups and management groups in particular need to be looked at in depth to determine their status from year to year. Also, it may be possible that the plan covering both companies was a multiple employer plan at some point. That should also be looked at by an ERISA attorney

Assuming that the brothers are also sons of Dad & Mom, are they over age 21?

Since there are no present employees to notify, would you not respond "yes" to providing the notice?

So I was reading the article in the BenefitsLink newsletter from the DOL (EBSA) regarding a new website that they are co-sponsoring with AICPA. I clicked on the link to the website www.choosingaretirementsolution.org and starting checking it out. The section that you can use to help you determine what kind of retirement plan to choose seems to have a glitch in it (I hope). I decided to choose options for a small employer (under 100 employees). You can enter any type of entity, and I also chose that I wanted employer contributions only with a vesting schedule. No matter what the entity, it comes up with no retirement plan options available. I sure hope not! Defined benefit plans do not seem to be provided as an option here. I was surprised that the EBSA would co-sponsor something like this. Anyone else check it out?

Start with PPA Section 116, modifying 409A. Perfect - thank you!

Anyone know of regulations that would limit the amount of contributions to a company non-qualified deferred comp plan if their DB plan's AFTAP is between 60-80%?

Plan uses the elapsed time method for eligibility, with a more liberal requirement than a 1 year period of service. For ADP testing using either disaggregation of otherwise excludables or the early participation rule, do you think it is possible to apply the statutory requirement of one YEAR OF SERVICE and 1/1, 7/1 entry dates? This seems to be in conflict with the document provisions.

Thanks for the reply. I am aware of the minimum and maximums we can run, as well as running the plan under the individual aggregate method to come up with a recommended (more level) funding amount. Maybe I didn't explain what I'm looking for very well. I want to show a client, based on a unit credit method, segment rates, and the current year's minimum funding requirement, the projected annual increases in this minimum. And then, if possible, factor in how use of the funding cushion would affect these same future projected funding requirements.

We used to run our DB plans using the individual aggregate method and 30-year treasury rates. Now we have to switch to unit credit and the [blended] segment rates. These changes take what was a fairly predictable, level annual funding requirement and create potential annual funding increases. And, as I understand it (new to this), the funding cushion amount also may be used to decrease future funding requirements. Basically, is this correct? Would anyone have a spreadsheet using unit credit method that could take a participant(s) age, compensation, segment rates and project out the potential annual increases in the funding requirements (perhaps more data would be needed to do this)? Would it be possible to also include in this spreadsheet the projected effect use of a funding cushion would have on future funding requirements? Any assistance with this is appreciated!

Ok, I'm going to try one more time on this one. The funds that were sent for investment were 1) the regular employee deferrals; plus, 2) an employer contribution that was probably not allocated per the plan document. The additional amounts deposited were from Employer dollars. It would be wrong to treat these funds as employee deferrals and try to "self-correct" through the next deposit.

I don't know if this helps - Corbel's IDP document only allows for a last day requirement if the hypothetical allocation is calculated monthly or quarterly. If the hypothetical allocation is calculated annually, the only options available for allocation requirements are 1,000 hours or no hourly requirement.

Good question! Seems like the accountant would have to answer that one. The adjustments to the K-1 would create the net zero income, but if they elected to defer a certain percentage from their compensation, wouldn't that include the guaranteed payment? Would it not be required to take out the deferrals from those payments?

It is my understanding that some times the guaranteed payments are for services provided to the Employer, thus subject to self-employment taxes. These amounts would be reported on line 14, coded "A", and included in their K-1 as a part of their net income. I would think that such guaranteed payments could have salary deferral deductions applied to them.