rcline46

Yep, SAR is to be distributed to ALL participants.

A fiduciary (trustee) has the obligation to review and remove 'poor' performing funds from the list of choices. This would be a 'prudent man' action. Not permitting a prudent action by language of the document would seem to be a reason for not allowing the document to be qualified. Custom document, submitted, with the language specifically noted, and I dont think you will get approval.

I don't know a lot about 412(i) plans, but don't forget one could always use a Salary Scale to provide funding for an anticipated benefit.

Because you simplified, confusion abounds. I read your OP that NO HCEs in either company were eligible for the plan, that they were excluded. If NO HCEs benefit under the plan you get an automatic pass for coverage and participation. Are you saying that HCEs were eligible for only one of the plans? Both of the plans? In a 401(k), coverage is usually very easy to pass since any eligible is considered to be benefitting. ADP/ACP testing is another matter.

I bet your document says for periods under 3 years, use the months involved (definition of average compensation). Its fun reading the document.

No SH match for HCEs, discr match not to exceed SH match or 4% whichever is less, no testing, works for me.

An SMM only needs to be distributed to those affected (just like the SPD). Since it usually has personal information, I would NOT distribute it.

Also check the Participation Agreement itself, it may give some aid in how to terminate it.

You can always write a lower formula for the HCEs, as long as it is done before the year is over.

Your TPA or CPA should be able to answer your questions. If you don't have a TPA, get one. No company should handle a qualifed plan on its own, there are too many traps. And if your CPA does not know how to handle partnership income in a plan (see 'Earned Income' for crying out loud) get a new CPA. Same goes for the TPA - if you have one and they can't answer your questions, fire them. And who is making sure your document is up to date with all amendments?

There is nothing which prevents you from following the instructions to file the proper Form 5500-EZ (or not). The plan document is trickier, as you will have to monitor the document provider to make sure your document is always up to date. It is often quite difficult to determine what amendments are needed when, and if you are terminating a plan, what amendments become accelerated. Since the plan is expected to have a short life and you are not maximizing the deductions, one would be curious as to the actual advantage of the plan vs. tax exempt investments. However, that is between you and your financial advisors.

In return, I pose the following questions: Why are you limiting yourself to 401(k) + Catch up? YOu can also do profit sharing up to the lessor of 25% of her w-2 pay or $30,500. All Solo-K plans should permit this. If not it is a bad plan. Did your 'Financial Advisors' tell you about the additional amounts? Most 'Financial Advisors' are merely investment brokers who know nothing about qualified plans. They have prototype documents in their pockets but do not understand them. I am assuming your wife has no W-2 employees - is this correct? Who is going to make sure your plan is kept current with all required amendments? If you are not going to hire a professional to monitor your plan, why did you hire a professional to monitor your investments?

Do you engage a CPA to do your corporate taxes? What does your agreement with the CPA state about their work papers? Are you less of a professional? If not, then use similar language.

Having been supplied with such convoluted language in the past, we flat out reject such DROs as being impossible to interpret. Why not use plain English? For Example: The interest of the alternate payee will be 50% of the contributions to the plan plus any earnings or losses on said contributions between date1 and date2, said amount to be adjusted by any gains or losses on said amount from date2 until distribution or segregation. It is far better to actually SAY what you mean, than to let lawyers gobbledygook it all up.

I will confirm that any discretionary, non-SH match which exceeds 4% of pay must be tested. If the contribution on which the match is based may exceed 6% of pay, it cannot be a SH match.

It also makes a difference if the contributions were considered MANDATORY or VOLUNTARY contributions. Again, this should be addressed in the document.

It is NOT permissible to elect catch up only. About the only time you would be matching on a catch up is if the match extended beyond 6%, OR if you are able to allocate (a la new comp) the maximum $ amount to a person, and then the deferral becomes a catch up due to failure of 415. As mentioned earlier, it is certainly possible to have a per pay deferral which will exceed the 402(g) limit at the end of the year, and if pay is large enough, it will be matched. However, when the match is cut off when the 417 limit is reached, and deferrals continue, at the end of the year you will not actually be matching the catch up.

Check the document under the loan provisions. Most documents state that the loan is treated as an investment of the participant taking the loan only (a 'self-directed' investment).

Assuming you are correct in that the purchase agreement was silent there was definitely malpractice on the part of the attornies, IMHO. You need to hope that the 'no liabilities' clause will hold up. What happened to A's plan? If distributed and no receivable was on the 5500 (to prevent it from being a final) I hope for your sake that there are written directions to ignore the receivable. If the plan is not yet closed, then A must still be open to handle the wrap up of the plan. If some participant complains to the DOL - watch out!

We cannot discuss fees on this board.

The details are in the purchase agreement in the section involving qualified plans.

I agree with Tom. This is not (a)(4) testing, and there are special rules (cited above) for ADP and ACP testing as to whom to include. This is what makes 401(k)s so exciting - they are special (with apologies to the 'church lady').

My understanding is that the EMPLOYER determines how the fringe benefit money is spent. The employee does not have a choice.

I have two attorneys giving me different answers to this question: A group of employees is specifically excluded from receiving a matching contribution. The 410(b) test for the 401(m) group passes easily (90% level) so coverage is ok. When we determine who is to be included in the ACP test, are the excluded employees in the test with -0- match, or are they not in the test at all? My opinion is that they are not in the test since they are not eligible to receive the match. Which attorney can I give a cite to support my contention?

Yes, an amendment is all that is necessary to remove the contributions based on the information you provided. No active employee has yet reached the end of year, so they have not yet accrued a right to a contribution. I would notify the participants of the change in match, but it is not required.