actuarysmith

Maybe this has been answered above, but my head is spinning after a phone call. Have a 401(k) plan that was comprised of three auto dealer stores with common ownership. The owner sold off two stores and retained the third. One of the Non-Key Employees with a rather sizeable balance was initially part of the two stores that were sold off and her assets transferred with her. About two months later she went to work for the store that was retained by the owner and moved her assets back into that plan. Question - would her assets be added back in for purposes of determining top-heavy status?

super late to the party here. I was interested in a very related matter. Let's suppose you have a scenario where an employee is contributing a very high percentage of their compensation. (i.e. they earn $30,000 and contribute $24,500 - not too common, but sometimes with a second income). then it turns out the employer wants to make a generous profit sharing contribution which would then cause this participant to exceed the 415 limit. What happens next? is the Profit sharing contribution limited to remain under 415? (so the employee is penalized for deferring so much), OR is the full profit sharing allocated and the 415 overage is treated like an excess deferral? The employee would be taxed on the distribution, but would get the full employer profit sharing amount.

I disagree. I don't think it is required at all to do 12 months. If a plan is profit sharing only at 1/1/18, and the employer wants to add deferrals and safe harbor provisions later in the year (no later than 10/1 of course), then both the deferrals and S/H contributions could start on the same date and run thru the remainder of the year. S/H contributions are not required to run a full year. hence the minimum three month requirement.

Has anyone had any experience with the following (or similar) scenario? Plan effective 1/1/18 with profit sharing provisions. Elective deferrals are added effective 3/1/18, but the plan sponsor wants to offer the 3% employer non-elective safe harbor contribution effective 1/1/18 (i.e. for the whole plan year, even though deferrals are only allowed for 10 months). this hardly seems like it would violate anything as they are being more generous than necessary, but I cannot find any authority for allowing such an arrangement. Thoughts anyone?

A little different twist here - what about an amendment to decrease a contribution credit for an HCE for the prior year, adopted within 2-1/2 months after the PYE? I know we do not have a discrim issue as we are talking about an HCE. but not sure when we trip 411(d)(6) issues here.

I am not sure this works unless you consider all four groups as a controlled group. A/D - controlled group A/B/C - controlled group ERGO (A/D)/B/C - controlled group

why are you merging the two plans? Is this due to a merger of two firms? or a newly developed controlled group issue?

Not sure if the opening thread is intended to imply that you should not or cannot split a plan (say 150 parts) into two totally identical plans in every respect (and aggregate for testing / coverage / etc.) such that each plan is below 100 parts and therefore avoids audit requirement. thoughts?

What happens if they file their corporate return earlier than the extended deadline? I think they have to fund by the time they file their return. Correct?

Part of my point was that there is NO distribution from the plan. The funds that were initially contributed as deferrals by Key's would be removed from their accounts and placed in a retainer type account to be used as employer matching or non-elective contributions. The W2's for the affected Keys' would reflect that they had not made any deferrals to the plan for the 2011 year. There are no distributions being made from the plan. The question (and underlying idea) is would this approach be acceptable, and would it eliminate the top-heavy minimum requirement of 3% of compensation?

I am still unclear if there is any definitive answer to the question posed- If it is still 2011, and you make the discovery that it is top-heavy before the year closes out, could the employer leave the funds contributed by the key ee's in the plan - but recharacterize them as employer non-elective or match to be used for all participants - and adjsut the payroll records for the keys to refelct that they did not defer to the plan? In other words, it is almost the same question asked above - but with the difference being that the funds remain in the plan. They are not returned to the key employees. The payroll records would have to reflect that no deferrals by Key ee's have been made, and they Key ee's would have to somehow be made whole for the dollars that actually went into the plan (which would now be used to fund other employer contributions)

I concur with Blinky.

The safe harbor regs are very clear on this point= if the ONLY employer contribution to the plan are safe harbor matching contributions, then the top heavy minimum is deemed to be met. This is true even though a number of participants (non contributing) did not recieve an allocation

You have until the year-end following the plan year in which the two organizations became part of a controlled group. Therefore, let the SIMPLE plan run out the current year and then create a joinder agreement to let the employees of company B participant in the plan sponsored by Company A in the following year.

I believe that as long as you pass coverage, you can exclude them from a safe harbor contribution.

This is a DOL issue - NOT an IRS discrimination rule. I doubt the DOL makes any distinction between HCE's and NHCE's when deterimining compliance with timely deposits. An HCE may be a participant and not an owner or officer. They may not have any control over remitting deposits. The DOL should protect them just like any other participant.

This is a question that you really should run by the client when setting up the plan (as opposed to making the selection for them). We have had the experience of including this provision, having a new hire roll funds, shortly thereafter terminate. We then dutifully provide the distribution forms to process the distribution out of the plan. The employer then gets a bill for the cost of the distribution to a Non-participant. Get the problem?? This may be less problematic in the future now that the IRS & DOL have apparently agreed that a plan sponsor can charge this distribution fee to the specific participant. One other question that follow the rollover question in the prototype is whether or not they can take a distribution at any time, or only if they otherwise have a distributable event. We normally choose the distribute anytime rule - we have felt that there would be Heck to pay if a participant decided that they later wanted the rollover funds moved but hadn't terminated employment,etc.

Go see this other post - this has been discussed ad nauseum......... http://benefitslink.com/boards/index.php?showtopic=23366

It is called a contributory Defined Benefit Plan. Used to be much more common. It is a recordkeeping nightmare. Personally, I would recommend to menagement to eliminate any further employee contributions and amend the benefit formula, if necessary.

Why is this post still going? I thought we all agreed that the HCE should be excluded from the test. Now, grab the hand of someone next to you and join me in singing kum bye yah.

This problem could be self-corrected. SCP

While theoretically true, unless your model SEP contains language that allows for an integrated contribution - you will need a custom drafted SEP document.

I checked an online dictionary with the following results- Professional - Engaging in a given activity as a source of livelihood or as a career. Credential - That which entitles one to confidence, credit, or authority. As someone who meets the apparently more stringent definition espoused earlier (i.e. Enrolled Actuary) - I consider those individuals who hold APA & QPA designations to hold professional credentials. As I read through the prior posts I felt like I was standing in the middle of a group of guys comparing the sizes of their wing dingers...........

Not if there are only HCE's eligible for the plan..............

Use the same plan number when restating. This is one of the more inappropriately applied plan specs. used by financial advisors - they use a new sequence number when they should not. Technically, if you use a new sequence number you have another plan (and another document and another form 5500 etc.)