30Rock

What is the correction for a safe harbor plan that in years prior to 2012 calculated the safe harbor match on annual pay rather than pay period? They remitted the safe harbor each pay period but then at the end of the year remitted a true up contribution because at one time prior to 2005 I think the plan was at a prior vendor and the document did allow this annualized pay. The plan then switched to payroll based until 2012 when it was amended to use annual. They now want to correct the prior years. Does this blow up the safe harbor and ADP and ACP testing is needed, or can we just forfeit the excess match, which of course is not that easy since some employees have terminated. Thoughts!

Also did you see the PDS document does allow for installments to be accelerated if they are based on life expectance using the uniform table I think.

So Oldman your answer is No? This distribution commenced years ago, so I see no way to change it?

Thanks OldMan. I have both a 401a plan merging with a 401k plan and they want to freeze it in its entirely and not 100% vest. I am concerned. There is no talk of ever making contributions, all future contribuitons go into the ERISA 403b plan.

Does anyone recall the regulation that discusses discontinuing all contributions in a defined contribution plan, and essentially the dangers of not 100% vesting all account balances? Are there any IRS Q&A's on this subject? Thank you

Can a top hat plan participant change the dollar amount of his installment payments? I am not sure if they are being made monthly, quarterly or annual. Does it matter if the formula is life expectancy or a dollar amount or account balance based? The document does not have any language concerning this. Thanks!

I have 2 401k plans that are merging 10/15. The plan to merge has a last day of the plan year rule, the plan year is calendar year. Does the plan that is merging has to allocate the match as of the 10/15 merger date since essentially that is the last day of that plan's year? It seems to me they would need to since they chose a weird date to merge the plans. Thanks!

Is VCP available for a 403b plan that wants to retroactively amend the plan for something? Thanks!

Thanks Tom you rock!!

I totally agree, it makes it too complex To answer the other person, there is no eligibility, but there is a tiered match with 0% for years of service less than 1.

I guess I see your point. So it is just a salary deferral change practice, not an allocation condition? But still, sort of restrictive.

I would like to add that the HCE's have been excluded from the match, so actually ACP, coverage and BRF testing will not apply. Is there any issue with contingent benefit rule by having the match dependent on whether they have a salary deferral election in place on 1/1? Thanks

A client would like a year of service graded match formula with 3 tiers, the 3rd tier being after 10 years the match increases to 100% up to 4% of deferrals. However to be eligible for any match during the plan year, the participant has to be deferring on January 1st of each year and then the match is funded each payroll period. If they are not deferring on January 1 but start deferring later in the year, they will not receive the match. Is this formula valid? I could see January 1 being kind of like a reverse last day rule, but in this case they have to be employed and deferring on January 1. Does anyone see any problems? Is this just a matter of coverage testing under 410(b)? Thanks!

In 2008 Tom Poje wrote the following. Is this still current under the final regs? Question 10 from the 2008 ASPPA Conference: If matching or nonelective contributions to a §403(b) plan are used in the average benefits percentage test to satisfy the IRC §410(b) coverage requirements, are the §403(b) deferrals included in the average benefit percentage calculation as well? You should exclude salary deferrals from ABT test. See Treas. Reg. §1.403(b)-5.

We have a plan where the sponsor now tells us that company 1 and 2 are not related, but they have been using a prototype and treated as a single employer plan. What are the consequences of not knowing a plan was an MEP - document becomes individuall designed until it gets restated onto a volume submitter, what about 5500's - I think an MEP files one but may have to identify they are an MEP? The plan was safe harbor so ADP and ACP testing was not necessary. any thoughts would be appreciated!

Can an ERISA 401k plan that is not subject to QJSA requirements require spousal consent on normal distributions when a married participant terminates employment? I have seen spousal consent for plan loans and hardships, but do not see how it can work for distributions on termination of employment. Essentially the spouse could prohibit any distribution until RMD's become payable. Thanks!

I have a plan that is considering using the QSLOB rule. However, I am struggling with the gateway test which requires coverage testing on an employer wide basis. With this test being necessary, how will QSLOB testing help my plan pass coverage, if I still have to pass this gateway? My plan fails ratio % and average benefits test - both parts. Thanks!

Let me explain better - A. Non ERISA 403b - no testing required B. Tax Exempt of controlled group has safe harbor ERISA 403b using the safe harbor match - fails coverage on a controlled group basis

The plan is both tax exempt and governmental, therefore dual status. They are thus governmental until IRS issues other requirements

Let me explain better - A. Non ERISA 403b - no testing required B. Tax Exempt of controlled group has safe harbor ERISA 403b using the safe harbor match We have to test for coverage on the match to see if ERISA plan B can stand alone. It cannot because Plan B does not cover enough NHCES - Plan A is not participating So we need to pass coverage - it fails ratio % and average benefits test. One fix is to cover employees of Plan A, but plan sponsor will go nuts over that solution. Or try to pass ABT by bumping up the NHCEs in Plan B. Question is can we aggregate the 2 403b plans to pass coverage, which it will. Once you aggregate for coverage, you have to aggregate for nondiscrimination - I realize Plan A does not have testing. And Plan B is safe harbor and cannot be aggregated with a non safe harbor. So what can we do????

They failed coverage - the ERISA 403b has too many HCEs and not enough NHCEs. So if you understand coverage, if you fail you can elect to aggregate with another plan. THis is the cheaper option. Can I aggregate a safe harbor with a governmental?

We have a hospital (tax exempt and governmental) with a 403b plan and this hospital owns a tax exempt that has their own ERISA 403b plan. The ERISA plan is a safe harbor plan. The ERISA plan fails coverage on a stand alone basis, but if we aggregate it with the non ERISA plan it passes. Once we aggregate, what happens with testing issues where a safe harbor plan cannot aggregate with a non safe harbor plan? Does this rule even matter since neither plan is subject to ADP or ACP testing - the governmental 403b is non ERISA so no testing, and the ERISA plan is safe harbor so no testing. Any thoughts?

So it just comes down to 410(b) coverage testing?

A plan has immediate eligibility however the matching contributions have a 1000 hour allocation requirement for employees coded as part-time ineligible for benefits. So each year this group must work 1000 hours to get the match however full time employees do not have any allocation requirements. Is this a permissible allocation condition that just requires coverage testing under 410(b) or possibly could it be construed as a disguised service condition? Your thoughts are appreciated!

We have had this issue come back and it is unclear. DOL needs to issue guidance. At a recent ASPPA webcast Bob Toth said no 5500 should be necessary. But again, plan sponsor should consult with their legal counsel.