rcline46

Nice try, but is it a voluntary amendment? If it is, the by end of year.

Now you confused me! Where did the 7/1/05 come from??? Quarterly entry? Any Profit sharing contribution? You didn't say what the definition of compensation was for the SHNEC, and we did not discuss the entry date for the k portion. Reference an earlier thread on 'comp while a participant' where plan was effective 1/1, signed in May, and deferrals started in August and the participants were notified that that was the start date. So - Comp definition and K entry date will control.

Get rid of the TH contribution, post the Gateway. Now (probably) no one needs a TH and so the situation just goes away!

One of the document options permitted by the IRS is comp for the SHNEC can be based on comp while eligible for that portion of the plan. Soooooo - what does your doc say? Note that deferrals for anyone could not be made prior to 10/1/05. Now the PSP piece could use full annual pay for the contribution.

My impression is that the same 'formula' needed to be used to purchase the insurance. Some considerations you may have no knowledge about: Was only 1 policy each purchased and what were the deposits then? Could they have been purchased at the larger of 50% or 100X back then and not updated? Could there have been a high increment set in the plan? EG increments of 100,000 with a death benefit of PVAB plus face less CSV? There are some interesting permutations that might make it fly.

Randy, you can see how complicated these things get very quickly. If B was already in that other controlled group when it signed on to A's plan there were testing issues which were probably not addressed. This also means that A's plan had to be set up as a multiple employer plan, which it may not have been creating some very nasty document issues and maybe testing issues since A and B had to have separate tests. Or maybe B just became part of the controlled group and that is why it 'withdrew' from A's plan. Details will kill you! WIthout knowing all of the details I would check the documents, amend if necessary, and do a trustee to trustee transfer of all of B's participants to the other plan. I shudder to think of the testing nightmare that was just created. 401(k)(10) is definitely in plan here for B and they just cannot take distributions without disqualifying A's plan and the other plan. Hie thee to the ERISA attorney!

Randy, we need more information. Is company B in a controlled group or affiliated service group with company A? If not then this is a multiple employer plan. Did company B establish another plan? What was the reason company B left the plan?

It is required that ALL plans of the employer use the SAME rule on the Top Paid Group. It is not required in a SH 401k plan to give the SH contribution to the HCEs. What choice was made in the plan regarding that? If the plan does not give the SH to HCEs, and you then change the TPG definition, one could argue that by reclassifying some HCEs and NCEs in order to give them a better contribution, the change is discriminatory. Is anyone affected by the TPG definition? Suggest your client hire the proverbial ERISA attorney ASAP and file suit against the payroll company for malpractice. SUbmit to the IRS. Don't make a contribution for 2005 because of plan problems.

Rev Proc 2005-66

You should know this one cold! You cannot keep someone out for more than 18 months. This directs the use of dual entry dates as the most restrictive.

Discussion of actual fees may be considered collusion and restraint of trade, so we all have to be very careful. The answer lies with: What flexibility are you going to permit in your documents? That is, employee choice of what accounts are going to be involved in corrections, or locked in the documents? What are your controls going to be on distributions? Do you want to verify the recipient account is a valid Roth account or is that the participant's job. How are you planning to handle the payroll functions? There are other considerations, but it is easy to see that Roth Accounts are easily double the work of a normal account. And note that the IRS WILL be asking about them on the 5500. So, you have document fees to consider - normal amendment charge or more? You have annual base administration fees to consider. You have annual per head fees to consider - all or only those with a Roth account. And you have distribution fees to consider- again only Roth accounts or entire plan with a Roth feature. And take over plans! And training and checking on your staff. I foresee significant increases in our fees.

Mr. Holland of the IRS has opined for years that this is the result in this situation. CHeck out the new final 401(k) regs and 415 regs for compensation. Of course you may not read them the same way I do. However, whenever I see 'may' in a sentence, I believe you can also use 'may not'. IE, 'may' does not mean 'must'. And so using any pay after termination is suspect, and if it interfers with the smooth and logical operation of a plan, I won't use it. Others may disagree, but I don't see where the regs REQUIRE the usage, they only PERMIT the usage.

end of year crossover is a special case because the pay is on a different W-2. Within a year I have no problem counting hours and pay for services (but NOT severance pay). When pay is received in a different plan year it is a different story.

Running a household is NOT a trade or business, therefore no controlled group, no ASG, no tax deferred plans of any nature sponsored by the household.

You must look at the definition of a catchup contribution: 1. Amount in excess of the 402(g) limit 2. Amount in excess of the 415 limit 3. Amount in excess of plan imposed limit (such as 10% of pay) 4. Excess contribution from a failed ADP test (SBJPA distribution amount) Do you meet one of these definitions? If not then how can it be a catch up?

So you think admin is a snap? Consider: Failed ADP test - which do you give back? Client option or plan specified? Loan default when source is ROth - not a qualified distribution - earnings are taxable. Failed 402(g) and not returned prior to April 15th - becomes taxable. Oh sure, no additional administrative burden. NOT!!!!

WDIK - the employer told the employees that deferrals would not start until August 1 in their meetings. Does that change your decision.

Yes, the plan says that - standard language in the Corbel VS document, and permitted under 414s. WDIK, I will check on what the employees were told!

The entry dates are quarterly following 1 year of service. Note that this plan is NOT self-directed! It just took that long from date of signing the document to getting the meetings done and collecting the deferral forms.

Well, let us try to determine when the employee first becomes eligible for the 401(k) portion of the plan. I maintain that this could not be before May 15th when the plan was signed, even though the plan was effective on January 1. This is based on rule that they could not defer before the document was signed. Do we at least agree on that?

WDIK - That is an interesting position. Remember that we are discussing 414(s) compensation, and the rules are that it must be non-discriminatory in nature and applied uniformly. Also, the document must permit the use of 414(s) comp (and it does). (Corbel document, no language modifications). Since you are disinclined to use to pay from 8/1, could you elaborate a bit more as to why? This is a self-directed plan and the procedures for self direction (which are required) were not in place any earlier. Does this change your mind?

And I would say no. At the time the check was received, there was no ee/er relationship and the employee was not eligible to defer (see the new final 401(k) regulations and use of compensation for updates). Because they were not an employee, they are not eligible for the Safe Harbor either.

The plan document states that the employer may use compensations from the date an employee became a participant in the 401(k) portion of the plan. Plan effective date is January 1, 2004. Plan is signed May 15, 2004. Deferrals actually started on August 1, 2004. There is NO special effective date for deferrals in the document. It is a fact that deferrals cannot begin before the document is executed, so a valid 414(s) pay would be from May 15th. The question is, since no one could defer prior to 8/1/2004, is compensation from 8/1/2004 also valid under 414(s)? The arguement is that this is the earliest anyone could actually be eligible to defer. Opinions?

You plan document will spell it out clearly. There were several options available when the amendments to RMDs were required. If you don't understand the wonderful legalese, post it here and someone will interpret for you, or go to the document provider and ask them what it says.

jusducki, you have missed the point of the discussion. To answer your question, you did not say if hired December 1 or after December 1 so whether eligible January 1 or April 1 is a question. However, should that person reach an entry date they are required to be in the ADP testing. The question is whether they are part of the 'otherwise excludable' group. They are. My question is on termination AFTER completing 21 and 1 year of service, maybe several years ago.