WesleyT

Austin, why do you think those participants are 100% vested today? Can't we wait for the applicable period (the plan year) to end to determine the counts? That would allow us to include rehires of the temporarily laid off as active participants.

Bob Kaplan mentioned in the ASPPA webcast yesterday that the ARA is seeking relief for partial plan terminations if employees are rehired by December 31, 2020. But isn't the applicable period for determining the partial termination the plan year? Which would mean that for calendar year plans, that situation would already avoid the determination that a partial termination occurred. Rev. Rul. 2007-43 gives the guidance that the applicable period is the plan year, but could be longer. It doesn't say anything about it being shorter. Is this requested relief just for non-calendar plans? Or does anyone think that the partial termination applies regardless of rehire in the same plan year?

Compensation currently defined as full year compensation. Plan sponsor wants to amend Safe Harbor plan to use compensation from date of plan entry, effective immediately. Calendar year plan with semi-annual entry dates. Since it is March, the amendment would affect only employees who are not yet eligible for the plan. I would generally apply the same principal of the IRS approved example of changing entry dates...if it applies to future participants only, it would be permissible. Do you agree? Or do you think the fact that the definition of compensation applies to all participants causes us an issue?

I have a takeover plan that only permits distributions at normal retirement. They previously offered a one-time 30 day window in which the terminated participants at that time could receive a distribution of their account balance. Following the 30 day window, the plan reverted to distributions at normal retirement. Despite the short period of time for which immediate distributions were offered, this seems like a 411(d)(6) issue and would be a cutback of benefits. And that would apply to all participants' account balances at that time, regardless of whether they were active or terminated at that time. Do you agree? Any arguments out there that would permit this one-time window?

I have a takeover plan with an odd matching formula. I can't find the rationale that would disallow the formula, but I have some concerns and certainly can't replicate it on my document system. Any specific reasons why this formula is not permitted? 1% of compensation for each 3% of deferrals. Capped at 6%. Operation: A participant who defers 3%, 4%, or 5% will get a 1% match. Those deferring 6% and above get a 2% match. They are operating with a 3% deferral minimum, which puts the minimum matching rate at 1% and maximum matching rate at 2%. Under that fact pattern, it isn't classified as a disproportionate matching rate. The current plan document is actually written wrong, but has one of those fancy 'Other' catch-all boxes for the matching formula. So, if the formula is appropriate, I can change the document for future years. How to deal with the past years is a horse of a different color.

The plan is integrated. The plan only dictates that the contribution shall be determined and allocated at the end of the plan year, unless otherwise elected in the adoption agreement. The adoption agreement has elected to do this on a per pay basis.

A plan allocates discretionary profit sharing contributions on a per pay basis, with no true-up. Let's say the employer has been funding 5%, but wants to switch to 2% prospectively in the middle of a plan year. Does the fact that contributions are calculated and allocated per pay, with no true-up, allow the employer to change the contribution amount at any time? For purposes of 401(a)(4), does this satisfy a design based safe harbor since each contribution amount on its own would satisfy the safe harbor? The plan doesn't have any entitlement requirements for the profit sharing contribution. So, the issue of what benefit has been accrued by participants should be raised. This technically isn't a change of contribution/allocation formula, only the discretionary contribution amount. Isn't each participant only entitled to a discretionary amount determined and allocated each pay period?

WDIK - Thanks. I did see that post, but I didn't get a whole lot out of it...the two posters ended up using different routes. And I don't place a lot of weight on the "level amortization requirements" argument. I didn't see that as an issue. rcline - We don't track the actual payments through our pension software. We have our amortization schedules listed with the financial institution, who then applies them when payments come in. So, we actually end up importing the annual interest / payments at the end of the year. So, our software will work fine in either case.

I have a plan sponsor (with many, many loans) changing the frequency of payroll from weekly to bi-weekly. I'm trying to determine if I should be reamortizing all of these loans. From a technical perspective, I lean towards yes. The loan note and amortization schedule no longer apply. Also, what would an auditor say if looking at the loans? I'm just having trouble doing all of this work for a probable repayment change of pennies each payroll period. As a secondary idea, what do you think of doing a generic plan sponsor initiated amendment to the note and amortization schedule? It would basically say that the payment schedule changed and that payments would be twice the payment listed on the original note (ignoring the minute payment difference). Each participant with a loan could sign the form. That way both parties agree to the change of terms without having to customize a form for each loan. Anyone have any experience with this issue? Thanks!

An employee is a participant in a 401(k) plan that excludes union employees. Last year, the employee changed to union status. The union employee is clearly not able to take a distribution (no distributable event), but is he eligible to take out a loan? Does his union status preclude him from this feature? The plan document only addresses "Change in Status" with respect to Years of Service, Years of Vesting service, and eligibility upon a subsequent status change. Thanks for any help! Wes

Unfortunately, my reason for wanting to allocate the contribution in 2008 was that the owners are going to max out in 2009. So, if all contributions are going to be annual additions for 2009, it will all have to go to NHCEs anyway. It sounds like the easiest thing will be to allocate in 2009 and avoid the possible terminated employee issue. Thanks for your help!

I have a corporation that files taxes on a calendar year basis. 2008 taxes were filed timely without an extension. No deduction for employer contributions was taken. They now want to make a contribution for 2008. 2 questions: 1. Is the 30 day allowance to allocation contributions for prior year based on 3/15 if no extension was filed? Or based on 9/15? 2. If they did decide to allocate a contribution in 2008 and deduct it for 2009, could they also deduct the 2009 contribution on an accrual basis in 2009? This would result in the deduction for 2 plan years in 1 tax year. The deduction wording appears somewhat ambiguous, but it seems the alternative would be to perpetually deduct employer contributions on a cash basis. Thanks for any help! Wes

In this market, we have seen PMC's question arise constantly. According to the document, the forfeitures are determined as of the last day of the plan year. Most of our plans' default funds are Balanced funds, though, and the forfeiture account has suffered significant losses since the end of the plan year. WDIK - It seems that contributing extra money goes against the document timing for determining the forfeitures. But if you don't have the employer contribute extra money, how do you account for the loss? Do you account for it as an investment loss for those participants getting a share of the contribution? Also, when our forfeiture accounts have gains, we generally use it as a forfeiture for the following year. In those situations, the employer is getting the credit for the investment gain. Anyone else care to share their thoughts/practices?

The plan sponsor currently provides an enhanced Safe Harbor Match formula of 100% of the first 6% of compensation. They want to cut back to match only 5% instead of 6%. If I follow my guidelines set forth in Treas Reg § 1.401(k)-3(g) and change the match prospectively, do I have to do ADP/ACP testing? My new formula still satisfies the safe harbor rules. But the regs seem to suggest that any reduction would invoke ADP/ACP testing for the year. Thanks!

They have a Volume Submitter document, but with an amendment to add New Comparability. So, that technically makes it an Individually Designed plan. We will be restating their document to a true Volume Submitter document before the end of the required correction period. The rules refer to a current advisory letter. If I finish the correction after restatement, it would be a current advisory letter. But, since the operational failure was clearly related to the prior document, that strategy probably wouldn't hold up.

Good call, Kevin. My document does require contributions by the tax return due date. Since all of my participants are affected, it is clearly a significant failure under the Self Correction Program. Unfortunately, this client never applied for a Favorable Letter of Determination, so they are not eligible to use SCP for a significant failure. Looks like VCP!

I have a related scenario: My client didn't yet make his Safe Harbor contribution for the plan year ending 12/31/07. My understanding is that he gets the full 12 months to deposit the contribution and adhere to the safe harbor status (a whole seven days left!). This would allocate the contributions for the 2007 year, but they would be treated as annual additions for 2008. And that even though he can't deduct the contribution for 2007, he could deduct the contribution for 2008. So, the only thing I would have to worry about is what Mike mentioned about a possibly terminated employee with no 415 compensation for 2008. Do you guys agree? Thanks for your help!

Facts: A partnership maintains a 401(k) plan in which the partners have previously never contributed. The partners now want to contribute deferrals periodically from their draws. The plan provides for a per pay match with no true-up. The plan accordingly defines compensation for matching contributions based upon pay periods. The partners want to avoid implementing a true-up if possible. Question: How do I determine the match for the partners (what compensation is used)? Is it just based off the draw? Technically, the partners could have earned income that is lower than the draw. Does that matter? Thanks in advance for any help.

Let's say the withdrawing attorney didn't work for the sponsoring employer, but was just part of the ASG. He can still be removed as a participating employer, but now he wants to start his own plan. How does the attorney get his money? He doesn't seem to qualify for a distributable event. Would the assets be eligible for an employer directed transfer from the ASG's plan to the attorney's new plan? (Subject to the protection of the 411(d)(6) benefits)

Does a plan termination trigger Required Minimum Distributions for non-owners? Example: Participant (72 years old, non-owner) is still employed. Plan terminates as of 12/31/2008, assets to be paid out late in 2009. Does this require the participant to take an RMD as of 4/1/2009? Or does the participant's actual distribution trigger the RMD?

There are clear instructions on how to calculate the earnings on late deposits of 401(k) contributions. However, I have not seen anything which stipulates how these earnings are to be allocated. I am dealing with a plan that has assets invested in a pooled account. Would you agree that, if all participants would normally share in any investment earnings, these earnings should be allocated to all participants and not only to the specific participants affected by the late deferrals? Can you point me in the direction of anything that confirms this method? Thanks!