actuarysmith

Not sure if EGTRRA applies to Simples - although I think it does. However, remember that since you already have a 401(k) for 2002, the Simple plan could not start until 1/1/03 (assuming that you terminated the 401(k) prior to then. Also, you already know if the 401(k) if top-heavy for 2002 based upon 12/31/01 ratio. If any KEY's have deferred to the 401(k), the sponsor is stuck with the Top-Heavy Minimum required contribution for 2002, regardless if they terminate. Finally, I totally concur with your advice - they should adopt a Safe-Harbor Matching Provision. This will likely cost them no more than the Simple, but allow for much higher contribution levels. Some fairly firm client education seems to be the order of the day in this situation. Good Luck!

Why don't you just write the document to look like a new comparability plan, only you won't necessarily be testing it that way? What type of "formulas" are you showing in a profit sharing plan anyway?

I think that you would have to map. The other alternative would be to force participants to fill out new investment election forms. This could be a time-consuming and onerous task if there are many participants, or multiple locations.

I don't have a cite- but I recall reading (or hearing) somewhere that if you named names, the plan could be deemed to be a CODA - since each participant could effectively choose their own contribution rate independently. Following this logic, the participant would then be limited to contributing the 402(g) limit, rather than the full 415 limit for DC plans. Putting that issue aside (although I would love to hear what others say about that), How about putting the three dentists into seperate groups by speciality or ownership percentage, years of service or date of birth. Any and all of these methods would avoid specifically naming someone by name. Same results, but somehow it just smells better.

Okay Potwasher, the gauntlet has been laid down................... I, like the others are firmly convinced that shareholder-Employees in an S-Corp CANNOT participate in a 125 plan and receive tax benefits. Please produce a specific site - or we will wonder if you have been doing something else with pot rather than washing - such as smoking...........................

WM- where are you located? and what multiple of EBIDAT are you willing to pay?

It's the 50K max that is reduced.

I agree with the last post. However, you need to ask yourself are the benefits worth the cost of engaging an attorney? Based upon the amount of money we are talking about - it is probably not worth it. Also, one of my earlier posts seemed to have been interpreted as saying that someone is tryiing to "hide" fees or something. I did not mean to imply anything of the kind. All of the plan sponsors that we work with are very careful to only charge expenses to the plan trust that are reasonable, and allowed by DOL / IRS rules and regs. I believe that most plan sponsors operate the same way. I wish you the best of luck with whatever you choose to do on this matter. I'll bet you never imagined that your "innocent question" would generate so much healthy dialogue............

The gain/loss is not an admin fee. It is an investment gain/loss, net of admin fees. It seems that the administrator has already indicated that the column is the net of both expenses. I think that you already mentioned in an earlier post that this is a shrinking plan (i.e. fewer and fewer participants). Most plan administrators have a relatively higher fixed cost (i.e. base fee) and a relatively smaller per participant charge. As the group size dwindles, the base fee becomes predominant. When this is spread over a small number of participants, it can become significant compared to the actual investment returns / losses. I cannot vouche for the accuracy of the math, I am just saying that the explanation sounds reasonable and it is quite likely that everything is correct. (It may not be shown in the best possible statement format, however) I suppose you could check with a few other participants and make sure that they had similar findings with their statements. Good Luck!

I respectfully disagree with parts of the last post. When a TPA deducts admin fees from plan assets, it is a very common practice to lump this in with investment gains/losses on both the statements and employer reports. Many systems either do not have another "bucket" to reflect this, or TPA and/or sponsors don't want it to be so explicitly illustrated. The investment gain/losses column should be read "Net Gain / Loss of all plan expenses (investment and admin).

At the risk of asking some painfully obvious questions- 1. are the employees (non-owners) full time? 2. are the owners older (on average) than the other employees? 3. any chance the employees are covered by a union? 4. what sort of income levels do the owners have? 5. what is the corporate entity type? (C-Corp, S-Corp, LLC, etc.) 6. What sort of deduction level are they looking for? Your question is too vague to answer without a little more detail............

I think you are referring to the 12 month prohibition on establishing a successor plan. (So as to not artificially provide distribution options without a distributable event). I believe that this rule is in the 401(k) regs and only applies to terminating a 401(k) and setting up another qualified plan. I know that a Simple is not considered a replacement plan. However, you are asking about going from a Sarsep to a 401(k). i don't think there is any such analagous rule. Go for it!

Not enough information. where are you located geographically? what will be the client load? (client numbers, revenue) what do YOU pay other DC administrators in your office? is the DB experience relevant? P.s. you may want to get a copy of ASPS's financial survey. They include fee schedules, salary surveys, etc. According to this survey DC plan Level I Median base salary was around $36,000. DC plan Level II Median base was around $45,000. However, this can vary considerably depending upon whether or not you are in New York or Idaho.

Be careful not to exceed the loan limits when you are granting this new (second) loan. The max loan amount is the lessor of 50% of the vested balance or $50,000 reduced by the maximum outstanding loan balance held..... etc. This means that if the prior loan was close to the limit, even if it is paid back, there may not be room to allow another loan so soon..............

Can you say "prohibited transaction"? Loans to participants are excempt from the PT rules only if they adhere to certain parameters. One is that they bear a reasonable rate of interest. Do you know of any commercial lender anywhere that offers a 0% interest rate on loans?

I think that the problem is cellular static (ha ha). You both need to get Sprint PCS.

Are you not both saying the same thing? Under the old Corbel standardized prototype, you were not allowed to impose any hours requirement if you were requiring less than one year of service. With the new (GUST) prototype, they do have a slot to impose service (and hours) for a period of less than one year. However, there is always the caveat regarding someone who accrues 1,000 hours in a year.

I concur with the others. This is one of those cases where the code (416) overrides whatever your document says. If you are in a prototype, I bet that it addresses this issue anyway. check under the top heavy section.

Richard- I think you may be correct. In that case, I would recommend that you file your plan. No user fee would apply, but you would have a letter. Is this a great country or what?

I was under the impression that the waiver of the User fees applied to plans effective after December 31, 2001. It applies to requests made during the first five years. It is limited to employers with less than 100 employees.

I agree with these threads - and disagree with your recordkeeper. How in the world does supposedly not responding to a letter that may have never been received an "irrevocable election"? In the future, these letters should always be sent certified mail. Second, what does your document say? The document must state that balances under $5,000 will be cashed out. The "may" language is no longer allowable. If the recordkeeper cannot prove the letter was received, and if your document says that balances will be cashed out - AND the participant claims they want to roll over the funds, then I would have the first check voided, and re-issue. With all of that out of the way - I have hunch what really happened (because I see it all the time). The letter probably was mailed out, the participant ignored it or failed to take action. Then when the check finally arrived (minus) withholding, they panicked and claimed they never recieved it. Without proof of delivery, I don't see that you have any choice but to re-issue. If your recordkeeper absolutely refuses, the participant can still roll the proceeds within 60 days. They could choose to make up the amount taken out for withholding out of personal funds. (They would get it back later as a tax refund when filing the 1040 return)

Tell the client that next time they are pulled over for speeding,they should tell the officer that they weren't really speeding - they just rounded down the number on the speedometer........................

R. Butler- Your understanding of the issue (non-model SEP, 25% comp less Db funding) is indentical to mine...........................

I've always wanted to have the power of an attorney! (ha ha)

I have heard of one other approach- (I won't vouch for its' credibility). There are one or two business organizations that will "buy" the plan assets at a somewhat discounted value. They turn around and merge the plan with an underfunded plan and create a way for the other sponsor to get a fully funded plan. This organization makes it money from the "spread" between the discount and whatever they charge the other sponsor of the underfunded plan. Since there is a steep excise tax on reversion, and then normal income taxes to pay, the sponsor of the overfunded plan ends with much more in their pocket at the end of the day. Since I honestly don't remember the names of companies (and I hate it when people use this site to advertise), I cannot supply you with any names. Maybe you can ask around. Good Luck. P.S. I agree with the earlier comment that suggested that you make sure you really do still have an overfunded plan!