EBDI

Thanks everyone for your answers. The plan does not shift to calendar year for eligibility. The client requested that the plan be designed to use anniversary of hire date. They are our only client that does that.

This plan has a 1 YOS, age 21, 1000 hours with monthly entry dates. It uses the anniversary date of hire for the first and all subsequent years for eligibility. An employee hires 8/28/16, terminates 9/14/16 and rehires 2/25/17. He does not work 1000 hours in his first year (8/28/16 to 8/27/17). The client wants to use the 2/25/17 date as his hire date. The plan document only discusses the original hire date. I haven't found anything that indicates we could use a rehire date to determine eligibility. If the 2/25/17 hire date is used, he enters on 3/1/18. If we continue with the original hire date, he enters on 9/1/18. Does anyone have any input on using a rehire date vs. the original date of hire to determine eligibility?

I recently found out that a brokerage firm that our client uses for a 401k plan also doesn't withhold for taxes nor will they forward them to the IRS. They will issue a check in the amount of the taxes due if we ask. The federal tax check is sent to the plan sponsor who is then responsible for sending it to the IRS. I was very surprised that they don't offer this service.

Thank you for the responses!

This is a safe harbor 401k plan in which a former employee terminated in 2009 and is re-hired in 2017. She would like to repay the distribution from the plan in order to have the profit share forfeitures repaid into her account. The plan document states the following for rehire after 5 One Year Breaks: After Five One-Year Breaks. If a Participant resumes employment as an Eligible Employee after forfeiting the nonvested portion of his Account balance after 5 consecutive One-Year Breaks in Service (One-Year Periods of Severance if the Plan uses the elapsed time method) and is not fully (100%) vested upon reemployment, the Participant's Account balance attributable to his pre-break service shall be kept separate from that portion of his Account balance attributable to his post-break service until such time as his post-break Account balance becomes fully (100%) vested. A Participant with a balance in his Elective Deferral Account shall be considered a vested Participant for purposes of Code section 411(a)(6)(D)(iii). Why would the non-vested forfeitures have to be kept separate? Does vesting in the returned forfeitures increase with each subsequent YOS? She was 60% vested in 2009.

Tom's suggestion was correct. The system did not restore their previous YOS. Thanks everyone for the help.

Thanks for the advice. I am using ftwilliams. I sent them a help request and they sent me advice on how to override the system. They didn't explain why the system was placing them in the other excludable group in the first place.

The ADP test is run using the excludable disaggregation method. The software I use categorized two re-hired employees as otherwise excludable. Both were 100% vested participants prior to their first termination and entered the plan on their re-hire dates (4/20/16 and 7/13/16). Is the software classifying them correctly? This plan does not use the rule of parity.

If they use compensation from the date eligible in testing, that will include the 7/5 payroll. For that reason, I always encourage my clients to use the first payroll after the entry date to start contributions.

Tom, that is a great explanation. Thanks to everyone for taking the time to help.

David, thanks for the advice!

The plan document does state coincident with or next following. My concern is that from 2009 to 2014, the employee did not work 1000 hours and was under age. In the plan years ending 3/31/15 and 3/31/16, he worked over 1000 hours. Age was met 7/1/15. Does he have to wait until the end of the 12 month period (the eligibility computation period) to enter the plan or does he enter as soon as he is 20-1/2? If he has to wait for the end of the eligibility computation period, the entry date would be the start of the next year which is 4/1/16. If he enters as soon as he turned 20-1/2, then he enters on 7/1/15. If I am reading the plan document correctly, he enters on 7/1/15. Would that be correct?

Plan year end is 3/31. Eligibility is age 20-1/2 and 1 YOS with quarterly entry dates. Eligibility changes to the plan year after the first year. Employee hires in 2009 with a DOB of 1/1/1995. He turned 20-1/2 on 7/1/2015. He has 2 YOS. Does he enter on the date he turns age 21 (7/1/2015) or at the start of the next plan year 4/1/2016?

Mike, Lou is correct about the age weighted and 3% safe harbor floor. Tom, thanks for the suggestion. I will try that to see if it passes.

Can the 11g amendment be used to give a pro-rata contribution to the two NHCE's? I would like to avoid bringing into the plan any of the 3 employees who are not eligible due to the 1000 hour requirement. There are no terminated participants to bring into the plan.

This plan is an age weighted, 3% non elective safe harbor, calendar year 401k plan. There are two HCE's. One HCE is younger than the 2 NHCE's. As a result the rate group test and the average benefits test fail for 2015. Is it possible to give the two NHCE's a higher contribution to get the general test to pass? The compliance software I use indicates it can't be done because they are not in a separate allocation group like a new comparability plan.

I use ftWilliam and I like their plan document. They have great customer service.

If I amend the plan so that it terminates on 12/31, wouldn't I have a problem with a successor plan? The staff are going to continue working for the new firm.

Bird, the plan document does state that upon sale or merger, the company is deemed to terminate its participation in the plan. Otherwise, I would have preferred 12/31.

Thanks justanotheradmin. What threw me off was the plan amendment that stated the plan terminates 12/1/15 and no further employee deferrals can be made after that date. After reading your reply, I realize the deferrals withheld from the NHCE's on 12/1/15 can be deposited shortly after that date as well as the partners deferrals and safe harbor contribution.

Client is a partnership (CPA firm) that is dissolving 12/1/15 and the business is being sold. Their plan is a 401k safe harbor non elective. Normally all 401k contributions have to be made before the plan terminates. Since I can't determine the partners self employed income until after 12/1/15, can they deposit their 401k and safe harbor contributions after the plan terminates? If another firm is buying their business, does the 401k plan need to be terminated before the sale date?

Thanks for the advice. I will encourage the Plan Sponsor to go with terminating on 12/31 entitles them to a contribution.

Some feel that if you terminate on the last day of the year, you are not eligible for the contribution. Others feel that if you worked the last day, then you are eligible for it. I wanted to see what other TPA's and Plan Sponsors are doing.

This is a calendar year 401k plan that has a last day provision in order to receive the profit share contribution. Participant wants to know if they terminate on 12/31, do they get the contribution? Do they have to terminate on 1/1 in order to be employed on the last day?

Unfortunately there isn't a last day provision. I appreciate the suggestion of starting a new plan. I will propose that to the client. Thanks again.