cpc0506

For S-Corp, definition of compensation is w-2 wages. You cannot use net earnings as comp.

I was under the impression that you COULD NOT use company email addresses and had to use personal addresses. And you also had to send an initial request to the personal address it see if it is ok to send the notices to their personal email address.....

You mention that American Funds is ready to go, but is anyone else having the problems we are having in that the American Funds informnation in MANY instances is wrong! from money types to vesting to addresses...... to name just a few.

If anything, you are discriminating against the HCE's (since they usually cannot put that high of a salary deferral percentage away) which is always ok.

You are still going to have to disclose information the minute you allow participant direction on the 401(k) piece. FWIW, as long as there are plan assets, there is still a plan and disclosure requirements still exist.

Sorry, we are the TPA and funds are with Strategic Alliance (John Hancock) and have been contacted by the plan sponsor on what needs to be done to make sure the loans are repaid timely.

We have a client who is changing their payroll period from weekly to bi-monthly. The plan has loans. I would think that the loan has to be re-amortized to allow for bi-montly instead of weekly payments. What are our obligations? Does this require new paperwork for the particpants? A new promissory note?

Great wording. Hope you don't mind if I use it. Thanks.

You cannot allow catch-up without allowing regular contributions first. The funds can be re-classifed as catch-up only if the plan is failing testing or exceeds limits. I might have amended the plan to limit the amount of deferrals for HCE to $5,500, but don't believe that you can state that deferrals are limited to catch-up only. However, you still run the risk of failing ADP Testing and not all of the funds being re-classified.

We have become the new TPA for a plan that has lumped 401(k) money and the safe harbor match money into the same account for a number of years. I have gone back to the prior adminstrator of the plan (a CPA firm) to ask for a split of the account between EE and ER funds. They are balking at providing the information. Can anyone give me guidance on how to proceed? I told the CPA firm that sources should be separate for a variety of reasons, least of all hardship withdrawals and in-service distributions. Any other reasons?

Amendments to Safe Harbor plans mid year are tricky. Amendments to the plan during that plan year that effect the plan design generally are prohibited. Although there is some thought that expanding coverage under a safe harbor plan during the year may be ok. But you are only changing coverage for salary deferral and not the safe harbor match. I would like to hear others' opinions on this. Nothing is ever simple....

Revenue Ruling 2004-13 clarified rules for a 401(k) safe-harbor plan to be exempt from being top heavy This guidance made it clear that the determination of whether a plan is exempt from the top-heavy rules is to be re-determined each year. In all the examples in the ruling, the safe-harbor matching contribution is used to illustrate satisfying the top-heavy exemption; note that the safe-harbor nonelective contribution may also be used. This ruling clarified through specific scenarios when a safe-harbor plan is exempt from being top heavy and when it is not. The safe-harbor 401(k) matching contribution plan will not be exempt from being top heavy: 1. When the employer makes a discretionary nonelective contribution; 2. When forfeitures are allocated to participants accounts in the same manner as nonelective contributions; and 3. When employees are eligible to make elective deferrals upon hire but are not eligible for the match until after one year of service is completed. This is explained in detail below. According to the ruling, a safe-harbor 401(k) plan will not be exempt from the top-heavy rules if it permits immediate or short eligibility for an employee to enter the plan for elective deferrals, but imposes a longer service requirement for the employee to enter the plan to receive safe-harbor matching contributions. I am not aware that this rule as changed. Can anyone else confirm?

If the plan is top heavy, the safe harbor exemption would not apply. You would be required to provide a top heavy minimum to those eligible to make salary deferrals and not eligible for match.

The policy we are adopting in documents that if each participant in our group, there are no requirements for an allocation. That was the employer can choose 0% allocation to those not employed on the last day of the year and/or less than 1000 hours. And if the plan is failing gateway, the employer can give contributions to those who would initially not met the client's policy and there is no need to amend the plan. Is anyone else doing this in their documents?

The plan sponsor is looking to us for advice....

We recently became the TPA for a plan that has a Hartford Document. The document was restated for EGTRRA timely. Client provided end year census data. Client has been making match contributions based upon a specific definition of compensation. We questioned the amount of match calculated based on the plan paramaters we entered into our system from the EGTRRA document. We learned that the Client has been using the same definition of compensation that was in the GUST document and all prior documents. When the document was restated in 2009 by Hartford, a different definition of compensation was used in the EGTRRA restatement. As a result, the definition of compensation used in 2009 and 2010 and 2011 has been wrong. (Not sure why the auditors did not pick this up as it is an audited plan??) What recourse does the Client have? Is VCP the only option? How would you handle this situation? Can we restate the document with an effective date of 1/1/2009? Can you do a retroactive amendment?

Hello. I have a 401(k) plan that was established in 2011. Salary deferral Only. There is a 2 month wait to enter plan. Plan terminated 4/15/2012 as there was a merger of corporate assets and the company no longer exists. Problem: Plan was not subject to audit in 2011. But 1/1/2012, due to the relaxed eligibility requirements, there were more than 120 active participants at the beginning of the plan year. Is the plan subject to audit? Is there any regulation that exempt the plan from audit?

I don't believe that you can require more than 1000 hours to get a contribution or level of contribution. You are doing that with your formula. If a participant works 20-30 hours a week, they are worked more than 1000 hours.

Hello. I have a client who inititated a 401k plan effective 1/1/12. The client sponsored a DB plan, which they intend to terminate sometime in 2012. If there are rollovers from the Defined Benefit Plan to the 401k plan, are the rollovers considered 'related rollovers'?

Thanks for this insight.

I am not sure if you can use forfeitures to make up the 'lost earnings' though. Anyone else feel this way?

Only assets in a new plan right now are unrelated rollover funds. Owner/Employee A takes a loan from the plan. Now my top heavy test is indicating that the plan is top heavy because of the existence of the loan. Top Heavy test is excluding the remaining unrelated rollover assets, but not the loan. Is this right?

I have a new client that has taken the 401k assets that were part of a KSOP and established a new 401k plan with these assets. THe only money left in the KSOP are employer securities/cash that are Profit Sharing. Match or old Money Purchase Money. They established a new 401k plan with a new plan number 002, but listed the effective date of the plan the orignal effective date of the KSOP? Does this seem correct? Is that how a spin-off is handled? The new 401k plan will also accept any profit sharing/match/money purchase funds that an employee chooses to diversify (when eligible to do so). Are these rollovers to the 401k plan considered 'related rollovers'? Do they carry J&S if the funds are from the Money Purchase piece of the ESOP? Thanks for any guidance you can provide.

Not sure I agree. Don't you have to do a coverage test for the different levels. The formula may be discrimininatory to nhce.

If the plan was a calendar year plan, there would not have been an audit required since the first plan year was less than 7 months. The plan for 2011 will need an audit.