rcline46

Testing all plans together is the 'safe' way, but not the only way! Of course if testing together and all tests pass no need for anything else. But if you have a failure, life becomes interesting. Can you say 410(b) group? Can you say 'required aggregation group' or 'permissive aggregation group'? What if the plans of the members of the CG have different plan year ends? You need to read the regulations carefully if any of these items crop up.

Since a 403(b) is NOT a qualified plan, we cannot just extend QP knowledge. I would suggest reviewing the proposed (soon to be final) 403(b) regulations to see if this type of match is mentioned. You have an increasing match based on increasing deferral levels.

It looks like a 'mandatory contribution' to me. Employee must contribute POST-TAX to receive the employer contribution. Check the rules to see if the ee contribution is pre-tax or post-tax.

Note that the rule for suspending deferrals for 6 months is a Safe Harbor Hardship W/D rule. If the plan is NOT using the Safe Harbor rules, then deferrals do not have to be suspended.

On your first question, check the document, it might say the deferrals are returned for the 415 violation. Very important to read the document. On your second question, if the plan calls for end of year, 1,000 hour requirement to receive a contribution AND the plan is self-directed, you cannot allocate money deposited under the terms of the document (profit sharing side) and so the contribution could be construed as an operational failure. Not good. If the plan is a Safe Harbor plan, the SH contributions could come in timely. And you absolutely cannot take PSP money for the HCEs only! This is a discrimination issue and the IRS would not look kindly on the practice. Just say no, OR make no allocation requirements for the er contribution, and only permit the gateway contribution amount to be contributed for everyone.

Mr. Baker made sure I don't get emails anymore. Nice man he is. I may be remembering something that never was again. It's one of those luxuries that comes with age.....er........ experience. Maybe it was a report from a conference, or something in prototype plans, where the number of HCE groups was to be limited to some multiple of NHCE groups. Must have been a trial balloon and it got a quick burst.

I recently read an article that the IRS is planning to limit the number of HCE rate groups based on the number of NHCE rate groups. However, no amount of my searching gets the article to appear. It may have been in Dave's newsletter within the last 2 months. Anyone else remember reading this, and more importantly, a link to it? Thank you.

IN RA 11.1 there is a report under Query that lists hardship amounts.

A search using "virgin islands" was unsuccessful. Bummer. I did find that USVI plans are subject to Title I of ERISA as are all plans of possessions and territories. I know that plans in Puerto Rico have different rules than mainland plans. What I have not been able to locate is anything that tells me if USVI plans are subject to the same IRS rules as mainland plans. Does anyone have any information or cites they can share? Thank you.

Ok J4FKBC, you got me. I did not ask for cites. For other readers, check IRC 406 and 407 to see how it can be done.

Considering that the mandatory contributions MUST be credited with 120% of the Federal Mid-Term rate each year, which tends to be higher than the asset earnings (your experience may vary), the accrued benefits will accumulate rapidly. I would not view this as a good thing. Also, if the plan is currently underfunded, you may already be in the situation where the accumulated mandatory contributions exceeds the asset value, and this is worse! Be very very careful here.

A US citizen is paid by a foreign subsidiary of a US Corporaton. This income is taxable as 'foreign income' for purposes of US income taxes. Can we use this income to determine benefits under the US Corporation's qualified plan(s)?

The vesting methodology you are referring to is known as 'Class Year Vesting'. This has been prohited in qualified plans since 1974 with ERISA.

And although not directly involved in DB plans, who is going to tell the partners and sole-props that their deferrals must be in the plan by Jan 31 (on calendar year plans)?

No prototype will provide for such. Normally you would put the union into a different plan for many reasons. If you insist on one plan, you can modify a volume submitter plan, and decide if the change is enough to make it individually designed. In any case, the VS document should be submitted to the IRS for a letter. Have fun with that since you are in the cycles and must submit a draft document incorporating all the things on the list published by the IRS.

In a word, no. The regulations clearly state it must be on an employment year basis. On trick, if you allow NO credit prior to the effective date of the plan, and the effective date is the first day of the plan year, at least your initial participants are on a plan year basis.

Most employers pay the fees of the plan and deduct under reasonable and ordinary expenses. This is not a contribution to the plan.

Lori, first you must determine what the document says is the computation period for year of service for vesting. Generally you will have 2 choices - Plan year basis (and 1000 hours) or elapsed time. If the plan uses plan year of service - then in your case, the period of 7/28-12/31 will not count because it is under 1000 hours (unless the plan uses a lesser hour count). If the plan uses elapsed time, then it must be counted on an employment year basis and hours don't count at all. The 'switch' you are thinking of only applies to eligbility.

Relius>Reports>query>fund balances... You can select a report the prints only participants with account balances. With a little imagination you can use the export file to drive a mail merge. RIght now it is a 'standard' report I think, so you can't get to it to modify the report for your uses.

Oh dear, see what happens when you don't provide all of the information up front? If there were money purchase plan assets transferred to the profit sharing plan, that is the plans merged and it was not a rollover, then the spousal rights in the money purchase assets cannot be removed by amendment. The same holds true if the mppp was amended into a profit sharing plan. So, the amendment could only affect the PSP monies, not the MPPP monies assuming they were in the plan, and the attorney is correct. If this is the case, the Trustee and the Plan Administrator have a problem. THe only salvation would be to prove the spouse enjoyed the use of the distribution, and get a spousal consent signed now. Spousal use of the distribution could be argued to be consent, but it is not going to be easy. Note this is ONLY for the MPPP monies. The PSP monies are ok.

First, you need a third party to value the business. There are several that specialize in partnerships, LLCs and so forth. Either your accountant, yellow pages or internet would be a source for names. Second, if the purchaser(s) are also involved with the plan sponsor or as trustees to the plan, it will be a prohibited transaction. You will need to apply for a PT exemption and/or private letter ruling to avoid some nasty results. And the always good advice - get an attorney whose practice is primarily ERISA to guide you.

You are forgetting the 4 rules that permit a PSP to avoid the QJSA rules. The important one here is that the spouse MUST be the beneficiary of 100% of the account balance unless she/he signs a waiver. So no the REA rights have not been eliminated, they have actually been enhanced from 50% to 100%. The ability for the participant to assign a separate beneficiary for 50% of the benefit is one reason many practicioners feel it is important to have the QJSA in the plan.

What everyone is saying is that a DEFAULTED loan is not a repaid loan. It is still owed to the plan and is still the debt of the participant. Actually, once a loan is defaulted, at some point in time it becomes a DEEMED distribution which means taxes are due, but you still owe the loan. YOu need a distributable event to distribute the loan so that it is cancelled. In other words, don't do it. If you want $50,000, gross it up for the taxes. Or do the IRA bit.

As pointed out earlier, finding an operation failure is difficult. The employee was given the opportunity to defer. There IS a failure on the part of the employer to neglect to respond to a request of the employee, but I don't see an operation failure on the part of the plan.

If the employER wants to make a correction, the 50% or 100% of actual election is fine. I don't think this falls under EPCRS in any shape or fashion. And after, oh lets say 3 months, I don't think it is an employer issue, I think it becomes purely an employee issue. They have to bear responsibilityl here.