Earl

When I takeover a plan I tell people they don't have to restate, but we will charge extra to: 1. become familiar with the document 2. use the document and 3. will be slower to process data and respond to questions because we will have to research an unfamiliar document each time. I couldn't rationalize a takeover process that did not contain a document review by me, document provision review with client and restatement to my document. Even in the most vanilla of cases.

although "invested into the plan" is a different question

You don't say the partnership %ages, but I think you will find a 415 reg that says the "common" percentage is reduced to more than 50% for application of 415. So assuming 50/50, I think you can do it. there are lots of prior discussions on this.

I would ask the client "what do you want to do?" Then I would tell the participant, "I asked your boss and you should talk to him." (and get the heck out of the middle of that discussion.) Certainly, if the owner/hr guy says let her in, I would not have a problem with inclusion. And if excluding her, I would not have a problem showing the payroll record to the IRS in an audit.

Very much. Thanks

Say you have a non-5305 SEP so you can contribute to both. Would you aggregate the SEP contributions with the Profit Sharing contributions for 401(a)(4) testing? Say the owner is the only one eligible for the SEP but the employees are eligible for 401(k) Plan. Would a SEP contribution kick in a Top Heavy minimum contribution requirement for the 401(k) Plan? Thanks

Sounds like your stuck under the plan design. Lobby your company to remove the 15% limit. That is archaic.

Think of the plan as an umbrella. The umbrella is "401(k) Plan" not "Individual K". When one person is standing under the umbrella you have an individual K. Look at the document of the 401(k) Plan and see what the eligibility requirements are. The plan would only become frozen if the owner stopped making deferrals because he has a Top Heavy plan and will have to make a Profit Sharing contribution to the employee once that employee satisfies the eligibility requirements of the 401(k) Plan whether the employee defers or not.

I tried to do this once. the process of changing a name associated with a TIN was impossible and took months with several follow ups. Now I just get a new number. And I don't worry about the asset registration. I just say use the new number for new accounts and eventually it washes out. Filing a W-9 to change the asset registration is pretty easy though. I will never try to change a name associated with a TIN again.

most investment cos. that I have dealt with won't do the math.

My take on your question is you would use the lesser number because you are not refunding catch-ups. The $3,000 is catchup whether the guy is able to defer $16,000 or $3,001. My question about this issue is suppose there is no ADP or 402(g) or plan limit problem and the Sole 55 yr old HCE defers $8,000. Can you call $3,000 of that catch-up and exclude from cross testing (and potentially enhance the disparity of rates). Could you declare amounts to the HCE and NHCE group that fail and consider that "hitting a limit under the plan or code"? Or would you have to have an administrative provision that somehow limits the HCE to $5,000 so you have a plan limit?

How about going the other direction; shortening the eligibility period. My question is about vesting. There is a 2 year wait and it changes to 1 year and a vesting schedule is added. If someone was hired 04/01/02 they would enter the plan on 07/01/04 under the 2 year wait. If the eligiblity is changed to 1 year as of 01/01/04, they enter the plan on 01/01/04 instead. Is that person 100% vested because they were kept out of 2003 because of the 2 year eligibility? Or are they on the vesting schedule because that was the schedule when they became a participant? Thanks

Thanks to both of you. It is appreciated.

PS Plan with last day accrual requirement. Can I change plan now (in November 2004 but pre-12/31/04) to change the definition of compensation to be period of participation rather than full year (not for TH, just for any additional). I think there is no accrual of anything until 12/31 so it si ok. But I am getting an argument... Thanks Earl

That is a clarifying comment for me. Thanks. So it sounds like if I don't give them gateway then must be tested separately and they are out of both the RPT and the ABT (including the AB%T). I really appreciate your help.

Thanks alot for the response. By ignore I meant 'doesn't show up at all'. So, testing separately I don't have to put the TH mins in the AB%T for the "main" plan, right? But If I get better results I would bring them into the AB%T? but have them excludible for the R%T and NDCT. (doesn't show up at all...) Thanks

Is the election to use the Top Paid group an administrative election or does it have to be in the plan document. I use the PPD/Corbel doc and the appendix A asks for an election. Would it take a plan amendment to change that for a future year. And, what would be the timing on that amendment (I fugure that would be like the timing on a current to prior change - open to discussion). Thank you.

is 90/10 a realistic split? just wondering

I am starting to do the 2004 cross testing projections and am getting confused by the "early entrants" into the 401(k) portion of the plan. Top Heavy Plan 401(k) - 3 mos service ER (SH-NEC & PS) - 12 months Employee is in the 401(k) portion only, but gets TH min, not SH. Cross Testing: Ratio %: only the folks in the ER portion (ignore the TH min ee) Average Benefit Test: - NDC - only the folks in the ER portion (ignore the TH min ee) - AB%T - include the TH min guy (def and TH min) Is that right? Thanks -

ask 'em!

Kind of beat to death here, but one more point... only plan that I know of that could run with only employee contributions (no employer funding) is a 401(k) Plan. Just watch out for Top Heavy (as opposed to ADP discrimination issues).

From the newsletter: "OCPP plan design is a significant improvement on even a new comparability allocation" Huh?

I have: 4 Keys making $500k each plus 4 Employees making $125k - $200k each plus 2 staff making $30k - $40k I want to make no Top Paid Group election (8 HCEs) and exclude Non-Key HCEs. 410b: HCE 4/8 = 50%; NHCE 2/2 = 100%; Ratio % = 200% PASS 401a26: 6/10 = 60% > 40% PASS Non-Key HCEs can use the 401(k), I will amend the 401(k) to exclude the KEYs, although I think non-Participation would be good enough to avoid any TH min in the 401k plan. Looks like I have a winner, do you see any holes in this. Thank you very much for responding and your thoughts.

Better make sure the LP will allow for division of the interest. But you probably did.

Thanks for the reply. What I am trying to do is only have the Keys in the DB Plan and to exclude them from the 401(k) Plan. I think that this will mean that TH mins will NOT be required in the 401(k) Plan. I think that the RAG applies for determination of Top Heavy status of both the DB Plan and the 401(k) Plan but since there is no Key benefitting in the 401(k) there is no TH min in that plan. I was thinking that the RAG would apply to determine the TH status and to whom the TH min would have to go. I was thinking that an accrual in the DB Plan would mean mins to all plans in the RAG. I now think that this is wrong and the minimum would be determined separately by plan. Does this sound right to you?