Logan401

I would like further clarity when they say that the new law in 2015 can now allow SIMPLE IRA plans to accept transfers from traditional plans. What are they implying by the word "transfer"?

Short question, hopefully the answer is as well. Can a 401(k) now be merged into a Simple IRA Plan? I know you can rollover a 401(k) to a SIMPLE IRA, however, I cannot find topics on plan mergers. Thank you

In the event an employer wants to merge a prior plan that contained life insurance policies in the accounts of its participants into a successor plan that does not permit life insurance, what options does the client have in regards to those life policies?

I have an additional question about this topic. This new client had a prior plan that had 6 different allocation groups. The 6th allocation group contained employees hired after a certain date, and are to be provided with a $0.00 allocation. Most of the 6th allocation group participants fall into the otherwise excludable category, and others do not. Is it possible to give a $0.00 to those who are not excludable in the 6th allocation group, as long as it passes the 4101(b) coverage test?

Using the original post example I made, if the profit share eligibility is 1 month of service, and employees are eligible but excludable, can the NHCEs receive 1% if some of the HCEs received 4%?

Thanks Tom. If in the event the participants received a nonelective allocation such as a SHNEC, the participants would then be required to receive the minimum gateway since they met the eligibility requirements for profit sharing. However, if the profit sharing had a one year waiting period, and deferrals and Safe harbor were one month, participants who have not met the eligibility for profit sharing would not need to receive the minimum gateway even though they receive a SHNEC allocation. This is the way I understand how the gateway works.

If a plan has the same 1 month of service eligibility requirements for profit sharing as it does for deferrals, must the NHCEs all receive a PS minimum gateway allocation in a cross tested plan if they satisfied the one month wait? Can you disaggregate otherwise excludables in this case? So, those that did not meet the statutory one year wait can actually receive $0.00 allocation? I was under the impression that this would apply only if there was a separate one year wait on the PS component. I would like clarification on this.

In the poster's initial question when using option # 1, when would the participant enter the plan based on a 11/25/2015 date of hire?

Treas. Regs. 1.401(a)(4)-8(b)(1)(vi)

I am guessing we can assess that fact that it is not required based on the General Rule?: (B) For plan years beginning on or after January 1, 2002, the plan satisfies one of the following conditions - (1) The plan has broadly available allocation rates (within the meaning of paragraph (b)(1)(iii) of this section) for the plan year; (2) The plan has age-based allocation rates that are based on either a gradual age or service schedule (within the meaning of paragraph (b)(1)(iv) of this section) or a uniform target benefit allocation (within the meaning of paragraph (b)(1)(v) of this section) for the plan year; or (3) The plan satisfies the minimum allocation gateway of paragraph (b)(1)(vi) of this section for the plan year. So, under (3), since an HCE is not required to receive the minimum gateway, he is allowed to receive $0.00.

It would pass after restructuring, so the ABT would not be necessary. I am more concerned that we all know that the rules allow for this, however, the exact reg. concerning this type of disparity is not discernable when reading 1.401(a)(4)-8. How are we assuming this without verifiable proof? (I'm playing devil's advocate if you haven't guessed!)

I have reviewed the regs and have not come across any language that insinuates that a $0.00 allocation to one HCE in his own group is allowed if the rest in each of their own groups are receiving an allocation. I have read previous message boards with the same topic, but nothing substantial to back up how it is okay to do this. If there is anyone aware of the permissibility of this, please help!

The plan document is governed by IRS regulations which are incorporated within. I am trying to pinpoint a Treasury or IRS reg which allows this.

Under what regulation allows this to happen? I understand that the same is true for NHCEs if there are no HCEs in the plan that you can give it to a select few. The client in this case is concerned that eligible participants that did not receive an allocation can possibly seek legal action, so they want to confirm that this is legitimate.

If in a New Comparability plan where each participant is in their own allocation group, is it permissible to provide an HCE with no allocation?

What if there are 5 HCEs, and only one NHCE in a plan & you would like to use restructuring rules? Can this be done? I believe that each employee can only be considered in one component. How does that work if there is only one NHCE? Here's the information on the plan: HCE 1- 2.12 EBR 13.21% PS HCE 2- 2.94 EBR 13.21% PS HCE 3- 3.92 EBR 4.40% PS HCE 4- 10.44 EBR 4.40% PS HCE 5- 8.87 EBR 4.40% PS NHCE 5.90 EBR 4.40% PS Thank you

If there are no HCEs in the plan, and each participant is in their own group. Can some of the NHCEs receive an allocation, and others do not? There are no key employees in the plan.

What about the allocation groups being definitely determinable prior to the beginning of the plan year. Does that have any bearing at all when it comes to amending for New Comp?

My question pertains to the ability to amend a profit sharing formula if the plan has the last day rule requirement. Suppose the last day rule requirement is in place. I understand that you can amend the allocation method prior to the last day of the plan year. However, can you amend the method to New Comparability? I thought that the allocation groups have to be stated in the adoption agreement prior to the beginning of a plan year. Please correct me if I am wrong! Thank you

Tom, thank you so much for your input and showing me the way. I will light a sparkler in your honor tomorrow!

Okay, think I got it. Don't give up on me. Let me know if the fog horn sounds!: Example: HCE1: 20% allocation 5.8 EBAR HCE2: 5% allocation 20.00 EBAR 10 NHCEs: 5 have EBARS >= 5.8, & each receive 5% allocation Accrual component test HCE1= ½ 5 NHCEs with EBARs >= 5.8= 5/10=1/2 So, 1/2/1/2= 100% Allocation (contribution) component test: HCE2= ½ 5 NHCEs with contributions >= 5%= 5/10= ½ So, 1/2/1/2= 100% Both component plans pass

Tom, for the numerator are you only using the HCEs & NHCEs that are actually in the component plan? So, in this example, it will only be one even though HCE2 may have a >= benefit than HCE1? Just want to be clear on the numerator. Thanks!

Hi Tom, I did understand it the first time you explained it when you used the term rate group test. I understood that to be all employees included in the denominator within each component plan. However, after your 4:13 post yesterday I interpreted it differently. I believe I am grasping it very well now!

Okay, now you have me confused! You stated previously the following: you are forgetting the rule 'treat everyone not in the component plan as includable and not benefiting' so you have component plan accrual basis (assuming the NHCE in the rate group) 1/10 NHCE ratio 1/2 HCE ratio this is only 20% for the rate group test. But, if only one HCE is in the one accrual basis plan, would it not be: HCE1 tested on accrual basis with one NHCE: 1/1 NHCE ratio 1/1 HCE ratio 1/1= 100% HCE2 tested on allocation basis with 9 of 10 NHCEs 9/9 NHCE ratio 1/1 HCE ratio Result = 100% Maybe the boat left without me?

I should have stated 4/10 NHCEs so we do not have to bother with ABT. And, just so I understand, when splitting groups of EEs into different component plans for testing, the groups themselves must be rate group tested using ratio test and ABT if necessary.