rcline46

The rule applies to the new 401(k) feature, so you may use it for the first year PROVIDING you are using prior year testing!! If you are using current year testing then you cannot use it. If you need it the first year, then do prior for the first year and switch to current for second year (if you really want current).

Short answer is no - relying on the IRS rev ruling on this. However, should you want to go for a letter in the future the current rules require all documents back to the last letter. This would extend you back before the GUST document, and old documents are hard to get! Will the IRS relent and only require back to Gust? Who knows. And this uncertainty is causing some to submit VS and Non-Standardized Prototypes just to be safe.

rffahey, what you have is the result of something being done that may be absolutely correct on a cross-tested basis, and may have been done exactly to the agreement you/client had with the service provider. All they had to do was plug the numbers into some software and report the answers. However, they obviously did not do the best job for your client. you must get a new provider ASAP. The current one has absolutely no idea what he/she is doing.

I have not seen the answer to this part of the problem: Plan permits catch ups in 2002 - non calendar year plan 402(g) limit is $11,000 for 2002, contribution is $12,000 And to make it interesting - assume a single contribution of $12,000 in December 02. Therefore, I believe there is a $1000 catchup for 2002 for exceeding 402(g). The question then does this catch up apply to the 8/31/02 year end when the contribution clearly is AFTER the end of the plan year. Now in 2003, at 8/31 an adp test is performed. Between 1/1 and 8/31 this person deferred say $6,000 for a total of $18,000 in the plan year. First, I think the $1,000 for 2002 catchup comes out. Now we are dealing with $17,000 for the ADP test. Note to fiona - this only works if the 402(g) limit is exceed in the CALENDAR year. I agree you cannot go back and create a catchup where no 415/402 limit was exceed. Now two possibilities - no failure, no catchup off the $17,000, but $6,000 in for 2003, so they can contribute (14,000-6,000) or $8,000 and get a $2,000 catchup as part of the $8,000. ADP failure for $2,000 (or more), $2,000 catch up and they can contribute (14000-6,000) for $8,000 more. THey are in the same position as if calendar year.

I think there are two concerns, funding and distribution. For funding, the benefit needs to be reasonable, and a 'full' age should be reasonable. For distribution, based on the 'old' SSRA reduction factors, calculating to the month should be exact enough. The concern is that one tends to use the 'funding' benefit for the 'distribution' benefit because who wants to calculate it by hand?

I think you are faced with 2 problems, funding and distribution. For funding, a 'reasonable' benefit need be produced, so the 'nearest whole year' benefit should be quite acceptable. For distribution, the benefit must be calculated exact - ok nearest month is exact enough considering the 'old' pre SSRA reduction factors. The concern is the tendency to use the 'funding' benefit for benefit distributions, because who wants to recompute benefits by hand?

The piece you are missing - OWNER or EMPLOYEE - the CBA only covers EMPLOYEES - In every case where we have a union, we get a copy of the CBA just to check everything.

First, there is no such animal as a union exclusion. Never has been. There IS an exclusion for employees whose retirement benefits have been the subject of good-faith bargaining. Check your documents. Once you have this firmly grasped, then you can determine if the owner, who is a card carrying union member, is actually represented by the union in the bargaining for retirement benefits. Answer that question, and you have your answer for the plan design.

Foreign company employees US citizens in the US. Of course they pay US income on W-2s. But you have confirmed they can establish a US Reitement plan. Off to ASPA - be back on on Thursday!

mbozek, Slightly different question - offshore company has US citizens paid w-2 income. Are you saying they cannot establish a US plan, US trust, US trustee for those persons? I could not find anything in RIA to preclude this from happening. BUt then again I usually can't give the 'right' search criteria.

I am also interest in other replies, but we follow this rule: If hours and service are required - BOTH must be satisfied to become eligible. Note that if an age is added - if the hrs/svc is satisfied - they remain satisfied so upon rehire and attaining age they enter immediately. In you first example, BOTH were not satisfied, so the person is treated as having never become eligible and therefore starts over. In you second example of service only, if terminated and rehired we look to first anniversary of employment for satisfaction, then switch to plan year. So again the person must requalify.

Note that a 'Solo 401(k)' is nothing more than an advertising gimmick. It is a real, full up qualified plan with a 401(k) feature and everything that goes with it. Anyone in the business has had these since the mid 1980's. It's just the 'extra' in the deferral (but not annual additions) that has increased their popularity.

What Mike said. Plus - did deferrals ever exceed pay for any period? Exceed 100% of pay or whatever the plan limit is? Is retirement tied to years of service meaning 1000 hours in a year?

Remember the $10,000 is only if the plan allows, and if a self directed plan it most likely does NOT allow. You did not tell us if the balance INCLUDES the current loan or not. It should include the loan to do the math correctly.

A QNEC is still an employer contribution, still gets used for TH under the rules, and still is used in a4 testing, and since it goes only to NCEs it very efficient. It has properties the SHNEC doesn't have, like EOY/1000 hr rule. I am without resources right now - so I can't verify the "with and without" a4 testing item. Corbel/Relius testing only includes it.

Does the document have a QNEC in it? A QNEC to NCEs only to pass ADP might be less than 3%! Or a 3% QNEC passes and covers TH! In fact, we have found a regular QNEC is more efficient that a Safe Harbor, especially in a New Comparability plan.

I went back and re-read 401(a)(31) and 411(a)(11). Since the under $5,000 may be distributed 'without consent' I just don't see how 402(f) comes into play to give a rollover notice. If you go on to read the new a31, after the new regs are out, the trustee must notify the participant of where the money went on force outs between 1,000 and 5,000. This (to me) cements the idea that a rollover notice just is not required. I don't find the fact that the IRS has not specifically stated this at all a problem. I think they think it is obvious because it is a force out.

I would think the 'force out' rules trump the rollover notice rules. If you can force out amounts under $5,000 why would you have to give any notice? Note I agree it is 'nice' to give notice, but I do not think it is required.

Do irrevocable waivers of participation by the Amish rise to the level of a religious order, which then keeps them out of testing completely? Note that the Amish also do not participate in the Social Security program.

A client employs several Amish carpenters. These carpenters irrevocably waive out of the plan due to their cultural/religous beliefs. For thos not familiar with the Amish, they also do not participate in the Social Security program. When it comes to testing compliance in the plan can these people be totally ignored under the religious organization rules or must they be included as zeros in the calculations?

We use both the VRU and Web modules. Their functionality has been greatly expanded and the work very well. You will need a T1 line (or two depending on number of clients). The web gets a lot more use than the T1. Would recommend you get a competent web page designer!

The 3% compensation would be the same as before, except 401k contributions are NOT subtracted. That is Net Schedule C less 1/2 fica less 404 contribs (max 20% of final number).

pax - rhetorical question - cuz if a man is in the woods, he is hunting and he would NOT be speaking! So he couldn't be wrong!

PAX is correct. In fact the accrued benefit can be reduced in many ways, including requesting it thru the service! Or if the formula (integrated) causes it to happen, compensations were incorrect.... The point I was making is that one cannot just 'reduce' the accrued benefit to fit funding.

Add my 2 cents worth - 411(d)(6) prevents ANY reduction in accrued benefit. ERISA 4000 series on plan terminations permits distributions 'to the extent funded' so the IRS must agree. PBGC allows this to be applied to substantial owners first. Just a suggestion - NRA 80 as a funding assumption might do the trick - if the actuary will go along. (or some younger age).