AndyT

I wonder if this holds true after 1/1/09 when the attached regs take effect that states disregarded entities must start reporting their own payroll? What do you think? Final_Regs_for_Disregarded_Entities.pdf

No that cannot be done, as far as I know.

Carsca, In your example, the plan cannot forfeit the 40% until the participant actually receives the distribution. Most plan documents read something like this: Forfeitures will occur the earlier of (a) when the vested account balance is distributed to the participant or (B) 5 consecutive one year breaks-in-service. They usually add that if the participant is 0% vested, the forfeiture occurs at the time of termination.

Carsca, Clarification, the forfeiture does not occur when a participant terminates (unless he or she is 0% vested); it occurs when they receive the vested portion of their account balance. I don't have a cite, but I know it's out there (probably under Code Section 411 or the Regs for 411). The IRS approves plan documents daily that have the immediate forfeiture provision. I would say at least 90% of defined contribution plans have this provision rather than the 5-year wait. Andy T.

Is there any similar program to the CPC / QPA program that is focused mainly on executive compensation? Thanks for any leads.

A non-5% owner may defer (assuming document allows) age 70 1/2 distributions until after retirement. What if a full-time salaried employee reduces down to 5 hours per week? How about 1 hour per month? At what point is the person considered retired or separated from service? I couldn't find anything in the plethora of IRS Notices released back in 1996 and 97. Did I miss something?

At the very end of the proposed Regs, the Plan Aggregation and Restructuring rules (Regs. 1.401(a)(4)-9) are amended to comply with the new gateway requirements. In particular, the Plan Aggregation changes only deal with DB/DC aggregation. It appears that ordinary aggregation of 2 DC plans remains unchanged by the proposed Regs. So why not have 1 plan for HCE's and another for NHCE's? The plan for NHCE's would not have the gateway requirement, since it does not cover any HCE's. You would then aggregate the plans for 410(B) and 401(a)(4) testing. Am I missing something here? Will the IRS close this loophole in the final Regs? By the way, do IRS officials read these message boards? :-)

Richard, What concerns you the most - writing classes out of the plan or having the classes defined by salary ranges? My editorial: As long as the tax code remains this complicated and inherently unjust by punishing higher incomes, I am going to do my best to find creative ways within the law to create tax deferral for those who want it. BTW, I personally am an NHCE, so I am not biased. :-)

Earned income for a sole prop. is not known until after the end of the year, and thus, the deferral contribution cannot be made until such income is known. Also a sole prop. has no employees to give notices to and allow enough time to make a deferral. With that in mind, does the Oct. 1 deadline for adopting a SIMPLE IRA really apply to a sole prop.? Why not use the SEP guidelines and as long as the SIMPLE IRA is adopted by the due date of the sole prop's tax return, then it is o.k.? What do you think? Is the 10/1 deadline too clear to ignore?

Tracy, thanks for your reply. Do you think amending the plan every other year or so (maybe every year) to adjust the salary ranges for inflation increases creates any problems?

Can classes be defined like this?: Class 1: Participants making between 20,000 - 25,000 Class 2: Participants making between 15,000 - 24,999 etc. Also, with the proposed Regs, it appears permissible to carve out classes of employees and exclude them from the profit sharing contribution altogether (write them out of the plan), since the Regs do state any leeway with the 1/3 / 5% gateway. Would this design work under the proposed Regs?: All employees making over $25,000, except for Owners and Officers, are excluded from the profit sharing contribution. Class 1 includes Owners and Officers. Classes 2 and on are broken down by compensation ranges like shown above. What do you think? Is it too aggressive?

A PS plan currently states that forfeitures do not occur until the terminated participant has 5 consecutive 1-year breaks in service. Therefore, the plan is carrying forfeited balances for terminated people back to 1995 or so. The plan sponsor wants to amend this provision to forfeit balances upon the earlier of 5 years or when the vested balance is distributed. Once this amendment is adopted, are we able to forfeit all those old balances immediately? Forfeitures are reallocated at year-end (12/31). It just seems a little odd to me that all the forfeitures from the last 5 years will be reallocated in one plan year. Does the amendment have to be effective prospectively? Are there any 411(d)(6) or 401(a)(4) issues to worry about?

This would be a prohibited transaction, correct? The brokerage firm is a party-in-interest and they are essentially loaning money to the plan. Has there ever been a DOL exemption for something like this? ------------------ Andy Treece

Have the employer adopt 2 profit sharing plans: Plan 1 covers the "targeted group" and excludes everyone else. Plan 2 covers everyone else and excludes the targeted group. Aggregate the plans for 410(B) and 401(a)(4) (most likely utilizing cross-testing). Would the IRS debunk this based on their proposed Regs? ------------------ Andy Treece

I realize this section is for "multiemployer" plans as opposed to "multiple employer," but I thought my question might pertain to the former as well. SCENARIO 1: Companies A and B have adopted the same plan; they are unrelated employers. Employee X makes $50,000 for each company. X is not an HCE for either company, correct? SCENARIO 2: Same facts as above - Employee Y owns 10% of A and 0% of B. Y is an HCE for A, but a non-HCE for B, correct? SCENARIO 3: Same facts as above - Employee Z earns $100,000 from A and $0 from B. However, Z performs services for B, and B reimburses A $50,000 for those services. Is Z an HCE for A and B, or just for A? Any insight would be much appreciated. ------------------ Andy Treece