401king

It's my understanding that there must be a 30 day notice for suspending safe harbor contributions. Additionally, all contributions would need to be funded through the end of that 30 days. Basically, you're out of luck for 2009.

The payroll is per pay period bi-weekly. Conveniently the employer stated they'd never received the forms; unfortunately for them their signature is on the employee's deferral agreement. It's unfortunate that he called to request the distribution because he was laid off, so clearly the company is struggling. Now they're looking at about a $3,000 bill to fix the problem; an expense that could have cost them $2,000 over three years.

An employee elected to defer $25 per paycheck in mid-2006. His deferrals were never taken from salary; plan has been Safe Harbor (basic match formula) for the whole time. He terminated employment earlier this year. He never noticed the deferrals were not taken, and called recently for a distribution, only to find he didn't have an account balance. So, I believe the correction is to have the employer contribute the full match that was missed (+/- gains/losses) and 50% of the missed deferrals as a QNEC (+/- gains/losses). My question is to the time period which should be looked at. Can we assume that the employEE should have noticed this mistake when filing his 2006 taxes? Or do these corrections need to be made from the date he signed up for deferrals through his termination date? The examples I've read only seem to refer to a single plan year, in which the examples seem to assume that the error was noticed after the year ended, as opposed to after the employment ended (3 years later). Thanks in advance.

Thanks, Kevin. That reference point will come in very handy in the future, I predict.

I thought 6% was the maximum %-of-compensation for any type of safe-harbor contribution (match or PS). Is that incorrect? Does it only apply to the SH Match formula?

Thanks, Sieve. It appears now I'm going to have to look into an Affiliated Service Group issue, but first I'll need to find out whether or not the two companies actually do business with each other and, if so, how much.

Here are the facts: Company A: Father owns 100%, son 1 (VP of comp. A), son 2, son 3 all receive W2 compensation from Company A Company B: Son 1 owns 100% and receives W2 compensation from Company B (W2'd from both companies) -- no other family members work for Company B. Based on this simplified scenario, could you tell me if there is a control group here? Would Son 1 be considered a 100% owner for control group determination because of attribution? OR Would the Father's will actually come into play to determine whether or not Son 1 is creating a control group (i.e. Father leaves 80% of comp. A to Son 1)? Thanks in advance.

Yes, I'm actually working on the same situation right now and it is possible. The institution I established the IRA with simply needed a W-8BEN for tax purposes because this individual was a citizen of Israel.

Plan excludes hourly employees. Participant will go from being a salaried employee to an hourly participant in October. I think the assumption is correct that he will no longer be able to participate in the plan as he is in an excludable class. For testing purposes/matching, what compensation should be used? Full year comp? Or comp up to the date he becomes hourly? Any input is appreciated.

I had the same question as you: Does the anti-cutback rule apply to the entire source, or the funds that have been contributed to the source (where if it were the latter, creating a source ER2 would solve the recordkeeping issue). As the above post states, the guidance from the IRS and DOL is unclear, and can seem contradictory. We found that the anti-cutback rule applies to the entire source, not simply the funds.

Are you referring to a hardship distribution? If it's a loan, I don't believe there is any need to provide proof of possible foreclosure.

Would both of you be using a withdrawal amount (from the overcontributed account) adjusted for gains/losses? I would think you would have to.

This is probably more of a question on the process of true-ups than it is a question on the safe harbor aspect. Employer overcontributed for one of the participants. It's my understanding that a true-up can only result in an additional contribution for participants, and not the distribution on any excess contributions. Is that correct? If so, should we just leave the overage as a safe harbor contribution or change the source to discretionary and run ACP?

Yes. Discretionary is truly that: Whatever you want to do (of course, you're still going to have to pass ACP).

Is it the average? Or the greatest contribution % of any KEY (not HCE)?

I'm under the impression that he deadline for making the contribution is the last day of the following plan year. Unfortunately, I'm bad with sources, but would you happen to know where you found something saying there's no deadline?

I have always been under the assumption (which is backed by the document system I use) that forfeitures can never be used to cover EE contributions. Could someone please clarify if I am under the wrong impression, as a whole? Is it simply the docs that I use (DATAIR) that don't allow the forfeitures to offset EE cont.?

Thank you, Laura. That is exactly what I need to correct the other admin's opinion on the matter.

Company A has merged with company B. Company A has a SIMPLE 401k, company B has a traditional 401k. There is only one active participant in the SIMPLE 401k sponsored by company A (more than one employee, though). The administrator of company B's 401k plan is planning on terminating the SIMPLE in July because of the mindset that the company cannot sponsor a 401k and a SIMPLE 401k. The administrator continued to say that the sole participant in the SIMPLE will not be allowed to defer into the traditional 401k plan because "it would then be a continuation of a previously terminated plan." The participant wouldn't enter the Trad. 401k until Jan 2010. Two of these statements don't make sense to me (and it's likely I'm wrong on both): 1. My understanding is that a company can sponsor a Trad. & a SIMPLE 401k if the circumstances are due to a merger or acquisition. 2. The idea that this participant wouldn't be covered until January 1, 2010 seems to me like they are removing a benefit that was acquired while employed with the company. Any thoughts on this would be helpful, thanks!

Trust me, this is another case of a 401k provider not explaining any piece of the puzzle. Granted, the trustee should have done his own research and asked questions, but I can assure you he was not aware when frontloading the deferrals. Anyway, thank you all very much for the opinions.

Here's the scenario: Company is on a per-pay period compensation computation period; safe harbor match is funded on a per-payroll basis. Currently there is no true-up provision. One partner decided to defer 100% of the first few paychecks to max out 2009 contributions early, so their match calculation was for the respective payrolls. Example: 1/15 payroll - Comp: $11,000; deferral amount: $11,000; Safe harbor match: $440 1/30 payroll - Comp: $11,000; deferral amount: $11,000; Safe harbor match: $440 So as of 1/30, the participant has maxed-out ($22,000) and received a total match of $880. Because their is no true-up, this person is not entitled to any additional match. So, if we amend the plan mid-year to allow a true-up, can we look at the annual numbers, or are we stuck looking at in on the micro-level of truing up each pay period? In short, would the plan run into any issues getting this partner the full $9800 match (4% * 245,000) or is he stuck with the $880 (assuming we amend to allow annual true-ups)?

Did they include the SHNE as an expense on the return? If yes, then it sounds like they'd have to file an amended return removing that contribution. Contribution must be funded by the last day of the next plan year, in this case they have until 12/31/2009 to fund the contribution (if funded after 3/15, then deductible in current year). This is what I recall being the correct deadlines.

First, if it is a child then just set the age requirement to be 21, then it would remain a 'one person plan' because the child wouldn't become a participant for at least a few years. My understanding is that all plans are subject to ERISA guidelines regardless of the number of participants. Second, if you are establishing a one-person 401k, why a safe-harbor contribution? That is rather limiting for the employer and they should be passing all testing requirements as there are no non-key/nhce to compare them to. My two cents; I might not even be answering the question you've asked.

Thanks, QDRO. I understand your skepticism, and was surprised myself when I heard about it. There's a good chance I don't have all of the details, but I think I/you have the gist of it.

Personal relationship. This is something that I've never had to deal with personally; she is getting no assistance from her company, though, and I am trying to assist in helping her resolve the situation (if there is any resolution).