rcline46

For (nearly) all purposes, a 12/31 val is equivalent to a 1/1 val (I know, new entrants, but accrued benefits are the same for actives). Assets don't change. I would therefore equ/ivoc/ate to say use the 12/31/06 val as if it were a 1/1/07 val. And yes I did say equivocate and not equate.

The last time I played with the little qs and match to the life expectancy tables, I discovered that the tables were set for when 2/3 of the population was dead, that is, only a 33 1/3% chance of making it to life expectancy - this was back in the late 70's or so, and I still don't believe my results.

Sorry, Teri, not Toni! Janet - It works like this - Profit Sharing for owner was calculated incorrectly - based on actual pay not limited to 401(a)(17). This is an operational error. To much put into plan. Causes 415 violation. However, if the operational error was corrected, no 415 violation. So we have an improper 415 violation, which is fixed by the usual give back unmatched deferrals, then matched deferrals and related match. This affects (improves!) the ADP test and ACP test. The Safe Harbor formula is for the profit sharing, not this new fangled ADP/ACP Safe Harbor stuff. A comp to comp profit sharing allocation is considered a safe harbor formula providing 410(b) is passed. This is going to be a lot of fun to straighten out. Improper givebacks once the operational failure is cleared, revised ADP/ACP testing and catchups. Order please! I might retire on the fees for this one!

Janet - the operational failure would (may) clear the 415 failure, which in turn would change the ADP ACP testing, which was already done. Sigh. And where does an operational error fall into the testing order? And Robin, who is the Toni lady? You say that hind cite is not possible (its a pun folks!!!!) - any other clues? Interesting fact - formula in document is a comp to comp allocation, therefore a Safe Harbor formula and plan (a4 part) easily passes 410b, so there was 'no need' for a4 testing. TPA is engaged for specific tests only as each test is priced separately. This one just keeps getting funner and funner.

If this had been corrected in 2005, and the HCE did a rollover, then part of the rollover would have to been disgorged as an impermissable rollover, but that is NOT the plan's problem! I would think notifying the participant, sponsor and rollover destination of the impermissable rollover and issueing coreected 1099-R forms for 2004 (since it was distributed prior to 3/15/2005) is the only correction needed.

Say you have a plan with Profit Sharing contributions, forfeitures, employee deferrals, and a matching contribution. In no particular order you have 402(g) violations, 415© violations, ADP and ACP failures, and just to make life interesting, it is an off calendar year. (This has been happening for at least 5 years). These failures were all corrected timely according to the plan document. Is there any citable authority for the order in which to make corrections? For advance credit - consider that in addition to the above failures, there is also an operational failure which occured in each of the above years in the Profit Sharing contribution which has just been discovered. Correction of the operational failure will change and maybe eliminate most of the prior failures. And yes, the client is being billed.

CHeck your document for special inservice at NRA, it may already be there. If not, add only for those at NRA.

Assuming this is NOT an HCE, amend plan to allow 'Mr. x' to join the plan immediately, and no one else.

Why would you do an open enrollment? Just follow normal eligibility and you don't have a problem. Once should avoid creating problems for themselves. However, the type of plan you start will give you problems. If a SEP plan, you could use a 2 year wait, but no employee deferrals. In a SIMPLE you only really have a compensation limit, and an expected limit at that. They should spring for a Qualified plan without open enrollment.

If the person was a participant, and was paid prior to the time he needed to be reported on an SSA, then getting the SSA would not work (7 mos into the 2nd year after termination!). If he WAS on an SSA, and then was paid, he would be reported as a delete on a subsequent SSA. Better choice is to check distribution records to see if they were paid.

It would automatically satisfy 410(b) and 401(a)(4). I would be happy to hear an exception to 401(a)(26).

A 412(i) plan is a defined benefit plan. 401(a)(26) says that a db plan must benefit the lessor of 50 employees or 40% of the employees. 9 time 40% is 3.6 which means 4 employees must benefit. You are saying 2 employees. How are you passing 401(a)(26)?

Most software will print a detailed EBAR calculation page, and you can then check each number in the calculation from that page.

In my opinion, following the bouncing ball. Group allocations say the contribution is to the group and allocated in ratio of pay. What if your contribution just happens to take some in the group over the 415 limit? Now go to the document and find out what you do when someone exceeds 415. The document should permit you to reallocate the excess. Since the group is all that is involved in this allocation, reallocate the excess in the group only, based on pay. Relius does this very nicely. I think this fits in the document and is acceptable.

What I heard at the DB IRS Q&A session was that a terminated plan would not become subject to PPA.

You might have just blown up both plans! You cannot aggregate a Safe Harbor and non-safe harbor plan. I would not want to be the 'consultant' on this case because there just might be a malpractice issue here if you cannot get the plans to be tested individually. Time for both the client and you get your own ERISA counsel and get under client-attorney privilege and cease public discussions. IMHO of course.

Have the agent show you the regulations which PROHIBIT you from using alternative definitions of compensation. Request the agent get technical advice or speak with another agent. The agent is incorrect. It is an unfortunate fact the we in the industry are responsible for providing the agents with their 'post graduate' education.

Ahhh, the fine nuances of what it said! 'or was taxable' as you pointed out is the operative phrase here, and you need an attorney to give you the 'correct' interpretation. IMHO if the participant did not report the premium as taxable, then they the premium was not taxable. They should have been given a 1099-R if the policy were in a plan, or have have in included on the W-2 if group term. The IRS would have matched up the 1099-r and found a failure to report. The penalty for failure to report is inclusion of death proceeds as ordinary income.

Failure to include cost of life insurance protection (PS 58 or group term) makes the proceeds taxable.

I would still like to see some numbers (or document language). A match of 2% of Deferral Contributions means like a nothing match! Suppose an employee defers 5% of pay. .05 times .02 gives a match of .001. If the employee makes $30,000, this translates to a match of $30! Second, unless there are some peculiar deferral limits in the document, catchup contributions are not determined until either (a) the 402(g) limit is exceeded during the year, or (b) the year is over. Catchups are NOT determined on a per pay basis. Payroll systems may have a regular and a catchup field identified, but that is a payroll issue and not an ERISA catchup issue.

I would have to see some numbers, but I cannot figure out how a match of 100% to 2% could ever possibly include a catch-up contributon unless it were specified to be calculated on a per pay basis.

The concern is that 'an integrated allocation is considered a safe harbor formula and needs not be tested under 401(a)(4)' while correct, might lead some to not do ANY testing. After all, it is a 'safe harbor' plan. By requestion the 401(b) tests you have some assurance the plan has been tested.

However, you DO need to see the 410(b) testing for all three plans. The plan might fail there. The three plans are 401(k), 401(m) and 401(a).

Of course the trustee can't produce a signed amendment, the trustee is not permitted to sign those amendments, only the plan sponsor can sign them.

You must read the document provisions on Leased Employees - usually found in the definitions section of the basic document for prototypes. You will find some surprises there!