rcline46

So what if top heavy? Owner is getting the larger of 3% or highest allocation to any key. Or keys don't get TH. ADP - passes by regulation, there is NO NCE deferral which means it is not -0-.

To GBURNS, my comment was to those 'professionals' who say no. There is so much misinformation on even the most basic issues that I have to insist that the challengers provide support for their position. That way they become armed and an intelligent discourse can happen. The outcome is usually decided by the challenger self-educating and the challenge melts away. The question of partners participating in 401(k) plans, self-employeds participating in any plan, owners participating in plans comes up with great frequency because everyone stops once they see the word 'employee'. If they would only keep reading their questions would be answered.

Look to the instructions for who can file Form 5500 EZ. That should answer your questions quite nicely. However, being in the business for 26 years, when someone tells me no, they have to support their position. Like the saying goes, I refuse to have a battle of wits with an unarmed person.

Simply put - THEY ARE WRONG! They must come up with the cites, regs, whatever to justify their position. These same idiots keep trying to say partners can't contribute to 401(k)s because they are not employees. They cannot come up with anything to justify their postion. (caveat - domestics cannot have a qualified plan because running a household is not a 'trade or business'.

I still would check that you need the safe harbor 3% fully vested. Its a waste if you will pass the ADP without it. However, if you DO use the 3%, the testing CANNOT use permitted disparity on the 3% portion! That means you develop ebars on the 3% and add ebars for the balance of the base (2%) contribution which means only a 2% PD increase (not 5%). THis will change your results rather dramatically. Hope your testing software is able to handle that or you will have a nasty spread sheet problem.

Chances are if the client is going to contribute enough to get the HCEs (owners) to $40000, then the owners will not be able to fund the 401(k) for themselves, and therefore you will not need the Safe Harbor!

Also look at pensiononline.com proposal system. Inexpensive and easy to use. Remember this is not an administrative system.

In 2002, plans may be amended to place $ in an IRA account in participant's name without participant's signature thereby protecting the assets. Personally, if a participant abandons his account I think they should lose it. You could get into trouble but send it all to the IRS as tax withholding. However, it not 'distributed' in some fashion, the employer will always be on the hook for it.

Assuming a self directed 401(k), and current employees have the right to change investments, then former employees must be given the same right. Why? Because it has nothing to do with employment! It has to do with being a participant!

As always - Read the Fine Document. What does the loan program say? If it is conditioned on payroll deductions, then the loans will go into default based on the new regs. Maybe the document gives the trustee discretion in how to get payment or to change method (not timing) of payment. If the document is silent, then make one allowing trustees whatever discretion they want. Or change the current procedure such as 'when a payroll is not sufficient to make a loan payment when due, the trustee may accept a personal check for said payment'. Make life easy, not hard!

Same as before, age at beginning of year since RMD is 'due' January 1.

I am not an accountant. However expensing plan administration fees as investment fees is dumb in my opionion. All of my partnerships expense as normal business expense, including my CPA firms.

IRS at the ASPA conference said not to count. Simple reason is they received no compensation! And since compensation is based on services performed, then no services performed, therefore not an employee.

You say there are other plans. If contribs in other plans are at least 3% then you have covered top heavy. You do not give TH allocations in more than one plan unless an employee is in only one plan.

I think y'all dancin' here. Funny thing, there is NO deadline in the regs or law. Failure to deposit is a document violation disqualifying the plan. Our practice is to give 1 year (ie 12/31 following 12/31 of year in which T/H is due), then resign with prejudice from the case. That means whoever is then selected by the client and who asks us for information gets notified that a T/H contribution has not been made.

Must be held in brokerage account. If stocks/bonds are DELIVERED to the owner (VERY VERY RARE TODAY) which could have occured years ago - nonqualifying assets.

The tax law changed and elective deferrals are now considered employee deductions. Employer is limited to 25% of gross pay as a deduction (for all DC plans). It has nothing to do with 401(k) testing so the effect on HCEs is nil. The fact that deferrals can be in 2002 100% of pay up to $11000 will mostly be good for non HCEs, but the results in the testing will help HCEs if any non's take advantage.

Qualificatoin is the sponsors / trustees problem, not the service provider. Although most service providers attempt to keep plans qualified thru amendments and testing, and their service provider agreements say what the provider is responsible for doing, it is the fiduciary's responsibility.

But you still have trustee and plan administrator! Trustee responsible for liquidating and plan admin responsible for getting stuff done. Who needs a sponsor?

The brokerage statements must be available for the participants, so they would be proof to match the asset report. Get the statements for proof.

If the plan were terminated, then the T/H is not due (the end of year rule for top heavy). However if the elected 3% non elective and did not use the 'may' version of the notice, they still owe it as everyone is to get it. Refunds are not an option. They should start funding or apply to the IRS for a ruling.

The regs provide for an audit of ALL plans regardless of size! Then there are exceptions in the regs for 'small' plans (under 100 lives) or for short years. The IRS created another exception by saying a 'short' 5500 (old C or new forms) for plans under 120 participants by allowing the previous year form to be filed, which does not provide for attaching an audit. The regs are available on benefitslink.com under the Department of Labor.

It all depends on whether the match is discretionary or stated in the document. If discretionary they do not have to make the match. If stated, then when they make it depends on when they want to claim the deduction. Generally it should be made by 8 1/2 months after plan year end, but it could be later!

Yes, they get an allocation and you have to find them to pay them. That is the joy of standardized prototypes, they are a problem to administer. Make all payments after a 1 year break in service then you won't have the problem.

Exception only if first year is under 7 months, then second year audit must include BOTH years.