rcline46

In 2004 we used 5.07% for calendary year plans for lump sum distributions. This was grandfathered by PFEA. For 2005 what rate do we use? Do we now use the corporate bond rate, the 5.07% or the 30 year t-Bill for December 04? That law is STILL confusing me!

As to the ERISA thing - ERISA permits plan loans, but loan notes must be enforceable under state law and are NOT an ERISA document. Therefore they are a state document. Since they are a state document, they must follow state rules. The plan is an exempt party, but the borrower is not. Therefore the documentary tax applies. We do not put this into the plan docs nor in the SPD as it is NOT a plan item. Why don't you check directly with the attorneys at Corbel or other pension document firm in Florida?

HOLY COW!! When did #3 happen???? Ok, if it is 'old', we went through an audit where we were questioned on what I thought was #2, and we were well covered there. Auditor never asked about #3, but as long as a participant has a balance we produce 'normal' statements so I think we would be covered. I hope.

"Compensation" in all documents I have read refer to payment for services performed for the employer. No services, no "compensation". Note that it refers to "compensation" required to be reported on W-2, it does not say that which is on the W-2 is "compensation". Also note that the definition of W-2 compensation ends up referring you back to 3401, and disability pay is no where mentioned in 3401.

I was waiting for the more obvious, and to me, in my opinion, but maybe more clear from the regulations, reason to NOT include -0- pay persons. The ADP/ACP testing is required to include all employees who are eligible for the (k)/(m) portion of the plan. So the question is whether the persons in question are (a) an employee, and (b) are the eligible. Employee - using the 20 (or 23) point test to determine if a person who performs no hours of service for which they are compensated leads me to believe they cannot be an 'employee'. Being on the list of possible persons to be asked to perform services does not give rise to the status of 'employee' no matter what they may be called. Eligible - not only does one have to satisfy the age and service rules, and have attained an entry date to be eligible, they must have 'compensation' from which they can make deferrals. This is arguement advanced by Jim Holland. If they have no compensation, then the person(s) cannot make a deferral, or stated a bit differently, is not eligible to make a deferral. Since they cannot even choose to make a deferral, then they do not belong in the test. FWIW, IMHO

Bob DB did not mention if the plan also had turnover, disability, or mortality discounts. If so they also enter into the mix of interest rate assumptions. As poor Bob DB is finding out, everything affects the assumptions.

Had the plan been using current year testing (required in a SH plan) for at least 5 years or since plan had been in effect? If no, then cannot switch to prior year testing, so check that out first. If switch is ok, the any and all matches for the prior year, SH match included, are usable to determine rate for prior year testing.

Safe Harbor contributions are restricted to the same rules as deferrals. Age 60 is not a restriction on deferrals.

My opinion is that funding assumptions have (almost) nothing to do with distributions. Therefore the relationship between current liability and maximum lump sum rates is non-existent. In english please - don't try to tie them together.

recharacterize some of the 'deferral' as employer contribution - say 20% of 14000 or $2800 - might help some.

Look for definition of 414 compensation in document - might get you out.

In a perfect work, pax is correct. In the real world that information just does not exist. And it IS a problem trying to research information. Companies don't have old records and neither do TPAs. I don't have a solution, just tell them the benefit was distributed and point out the letter says MAY have a benefit. And maybe we should try to get the list, but the SSA is by inividual and I bet the SSA can't bring it back by er!

Employee does not pay 10%, employer pays excise tax.

Why worry about minimum cost? What do you get with a maximum cost? You also have the procedure for getting $ back under the quarterly contribution ruling? Never used it so you might have alread covered it.

46. He has the most pleasant way of being irritatingly right. 45. He has memorized the code and all of the regulations.

The answer here could be extensive, but I will do short ones. If you are in a new company that was not in a controlled group or ASG with the old company, you can only be an HCE this year if you own through attribution or by yourself more than 5% of stock, capital or profits. You can contribute: (all based on document rules - must have the document!) 1. $13,000 (plus catch up) 2. All of your pay after mandatory taxes/deductions/reductions 3. % or $ limit in the document 4. % or $ limit established by the company each year. And lastly, if the HCEs as a group contribute more than is permitted in the 401k testing rules, then you may receive some of your contribution back.

Relius 10.0 does the test for you, but YOU have to decide if it is de minimus. Excluding overtime, bonus and commission is NOT a 414(s) Safe Harbor definition. Integrated plans REQUIRE a safe harbor definition. Check your document. HCE determinations require a safe harbor definition. They have to report all the items so proper testing can be done anyway. Allocations can be on ANY definition of pay, and if that definition of pay passes 414(s) you are ok, if not testing can be on any safe harbor definition, if your document provides it. Funny thing about clients - when you tell them they still have to report it, and you charge extra for doing non-SH comp work, and they might be forced into a SH definition anyway, and they could fail that test costing more in contributions, they have always capitulated to us.

If a 401(k) plan is established via a collective bargaining agreement, is it necessary to do ADP/ACP testing? If necessary to do the testing, what do you do if it fails? If the plan were a DB or DC plan you have the 415 limits, but you do not test discrimination under 401(a)(4) because the benefits are negotiated. Are there any cites pro or con?

Well, I agree with the 1/15 quarterly date. If 9/1 you have only the 12/15 quarterly date. However almost everything else is a matter of conjecture as our friends at the IRS cannot figure out how to make it work. Neither can they quite figure out what to do with the succeeding full year! They just say make a reasonable interpretation. With the paucity of recent audits and dearth of DB plans bet a short year has never been audited. Would also bet against them auditing a short year unless the B had some required audit triggers on it. IMHO, of course.

Here we go again! DEFERRALS are not based on the 401(a)(17) limit, testing of deferrals is. MATCH is based on the 401(a)(17) limit, and computed match must be stopped when the 401(a)(17) pay limit is reached.

6% of $205,000 is $12,300, which is under the limit. If done on a monthly basis, then there is no comp limit (say entire 205,000 if received first month). Deferred $13,000 (max!) which is 6.34%, this example works. Got an example where the match would exceed 1/3 of $12,300 (4,100)?

Well, we may have to agree to disagree. The match deposited was greater than the match allowed. This is obviously an error. Now if you want to reclassify it as an employer contribution rather than returning it that's fine. However, I would NOT let it remain for the ACP test under any circumstances because the employee was never entitled to it. It is the same as if another employee's match were put into this account.

There was obviously a mathematical error in calculation of the matching contribution. Return it to the sponsor as a mistake of fact.

YOU MISERABLE @#%$*&^@$(@(^)@$))@) WASTED 15 MINUTES OF MY DAY TRYING TO PROVE YOU WRONG (caps on purpose)

Catchups are available for anyone who would attain age 50 during the calendar year. Classify as catchup.