ETA Consulting LLC

You're right in that making the deposit prior to January 1st is 'a safe way, and probably the safest way', but the entire issue arose because some owners really do not know what their income level will be for the year (or whether or not they'll end up with a profit). Remember, if income is zero (or negative), then the 415 limit is zero. So, as a matter of rule, the IRS took a more lax position in saying that you don't have to make the deposit before year end; we'll actually afford you the time to calculate your income and have the funds removed then. You're only required to have the election by that time. That, in itself, is an appeasement from the IRS; or at least a more liberal interpretation of the rule where you cannot make deferrals from income that was already received. At the end of the day, they may not challenge it. But in the event they do, it helps you have something in place to show that, at least, a good faith attempt to follow the rule was made. It's not going to be a perfect process, but all is well when all questions are answered during audit and the IRS moves on the other cases. My experience with the IRS during audit has been that they won't press on issues unless something begins to stick out like a sore thumb. Good Luck!

Well, you asked the question. I was merely attempting to provide a little for insight, but see you have your own ideas. Not being sarcastic, but I never considered this worth the level of thought it is being given here. We know the IRS's position. They just don't want the business owner to make the actual decision on how much to defer after the tax year had ended. What could be offered to appease them is something that will be found out in the event the IRS ever audits the plan and asks the question. We can argue back and forth and what we all think would be an appropriate election, or whether or not one is even necessary. Ultimately, we have to feel secure enough in whatever approach we take in the event the IRS audits the plan and asks the question. I will feel more secure in having done something as opposed to nothing; but that's just me. You know, the could avoid even asking the question or scrutinizing the deferrals to this level. Good Luck!

Anything that is easily documented. He could send an email to his accountant or sign a letter and have it notarized. Anytime you're dealing with 'grey' area, you'd just take reasonable steps to justify the election was not actually made after the tax year end. You'd just be prepared to offer it to the auditor in the event the plan is audited and the question is asked. Good Luck!

So, next year, you'll have to list 12/14/16 as the last 'consecutive even number' date of this century.

No, only the last part is discretionary; which is why the overall amount is limited to 4%. After you provide the basic match of 100% on 3 and 50% on next 2, you may provide a fixed match to meet the ACP safe harbor. This fixed amount is not limited (e.g. to 4%) as there is no discretion on whether or not it is made. The 3rd match (the one that is limited to 4%) would be discretionary. Good Luck!

Just addressing the first question: Regardless of the type of document, a 401(k) provision is still going to be part of a Profit Sharing (or stock bonus) plan. So, if you have a profit sharing only plan, you may easily write to a 401(k) adoption agreement and merely no elect the 401(k) provisions. I write PS only plans to the 401(k) adoption agreements all the time. As for the other questions, if you intend to use some of the special exemptions allowed for governmental plans with respect to eligibility and 'other stuff', then you must use a document that reflects those exemptions; as they are not in your regular (standardized or non-standardized) adoption agreements. Good Luck!

Sure; a form is only a form. You'd just want to ensure the language clearly explains the intent. You'd also want to ensure the all the spousal beneficiary rules are followed in the event the participant is married. Good Luck!

I'm not sure, but I think Mike's point is that everything that is legal is not administratively feasible (or perhaps not possible). It's a redundancy to provide a vesting schedule (e.g. 100% immediate for non-elective), and then say if your non-elective happens to be made pursuant to a Top Heavy minimum, then the vesting for that TH minimum is 3 year cliff (or one of several other vesting schedules). So, now you'd have to actually choose whether it is 3 year cliff, 6 year graded, 5 year graded, etc... How would you draft that into a plan? To your point, jpod, many documents are already written to say "If the plan provides for only deferrals and match, but doesn't provide for non-elective, AND IF a top heavy minimum is made, then the vesting schedule on the TH minimum is 6-year graded. What this does is to assign a vesting schedule to a source of funds that does not already exist in the plan, but comes into existence by the need for a TH minimum. So, IF the source does not already exist, then I agree with you. But, if you already have a non-elective source, then you'll have a drafting nightmare to apply one vesting schedule to some non-electives and another vesting schedule for other non-electives. I 'think' I may have summed your arguments up. Good Luck!

Depending on your service, you may have this done through a series of restatements of the Adoption Agreement. You may leave all other features the same except for plan year end (then complete "short year running from ___ to ___). You're basically using the same adoption agreement, but changing the effective date and the year end. Depending on the document structure, you may have to complete a 'reason for restatement' page on whether it's to comply with PPA or merely to amend the plan. My only point is that there are several ways to do it with what you currently have. Good Luck!

Go to the index. You would find the section that says something like "Plan Compensation: Application to Safe Harbor Formulas." It's in Section 1.97 of the ASCi PPA Volume Submitter. Sorry for the late response. I don't have my Benefitslink set up to email me when additional responses are made. Good Luck!

You know, I applied the principle I've learned a long time ago and actually treated this as if it were my problem; check the plan document. Here's what I came up with. I looked through the language of the BPD I use for my plans, and it appears to address this issue. It says that should the employer use a definition of Compensation for Safe Harbor 401(k) that does not meet 414(s) for that year, then the Employer shall be deemed to have elected to use Total Compensation for that Year. It's an automatic safety that I never knew existed. This may help. Good Luck!

I don't know, but let's walk through it. We know that the standard for Compensation on which deferrals may be made does not have to meet 414(s), but merely be 'reasonable'. Hence, Base Compensation (excluding things like bonuses) will meet that standard. However, that standard does not appear to apply to anything else. So, lets assume you have a payroll of $3,000 which includes $1,500 in bonuses and you elect to defer 6%; which will equate to $90. Your SHMAC will, then, be $60; where it would've been the full $90 if all Compensation was used. If you apply this line of reasoning, then you would appear to have a problem. I, personally, would be interested in hearing other opinions. Typically, when I design plans with Safe Harbor 401(k) provisions, I try to use Safe Harbor definitions of Compensation as that would be consistent with eliminating the tests (I do admit that this is a potentially worthless piece of commentary, but just keeping my thoughts aligned). Good Luck!

Well, if the document was executed in June and the eligible employees were provided "timely" safe harbor notices "concurrent with the 1st 90 days", then the safe harbor would appear to remain in tact. It would appear as if the failure would be in not enforcing the participants' elections (or rights to defer) in a plan that just happens to be safe harbor. Depending on the actual series of events, it may go either way. Good Luck!

I understand your point and agree, but for potentially different reasons. Everything catches bundled plan providers off guard. Most clients I acquire are from a service failure of a bundled provider. When designing a plan, you have to understand how it is going to operate and the design the plan to avoid these pitfalls. "IF" you know the Top-Heavy exemption is important, then you know the alternatives to include in the plan design in order to prevent a $100,000 surprise to your client. Not being argumentative, but if you see the potential of the plan 'blowing up', then you add your value by eliminating that potential. Good Luck!

It's always a plan design issue. Keep in mind that you may use the $3500 forfeiture to allocate a safe harbor match under 401(m)(11); you know the one that does not have to be 100% vested. This will ensure that all contributions continue to fall under the ADP [401(k)(12)] and ACP [401(m)(11)] safe harbors. Good Luck!

I, too, think the issue has been resolved for some time and understand that different individuals are at different levels of understanding on certain issues regarding retirement plans. I am constantly getting corrected when I repeat information about DB plans (which I know nothing about) that I received from other actuaries. Enough for that But, I would like to point out a different approach that may be used to address some of this confusion. It's as simple as referring to your plan document to see if there is a clarifying statement on the issue. I use ASCi (DGEM). Their BPD is written to say: "In determining the amount of a Participant’s Salary Deferrals under the Profit Sharing/401(k) Plan, a Participant may defer with respect to Plan Compensation that exceeds the Compensation Limit, provided the total deferrals made by the Participant satisfy the Elective Deferral Dollar Limit and any other limitations under the Plan." I understand that not all documents do this, but I like the fact that they addressed this issue head on in theirs. I guess my point is that when you're doing research, It would help to check the plan document to see if there is a clarifying statement on the issue before conducting a lot of additional research. Just a suggestion on an approach as issues come up. Good Luck!

No. When they actually start below 100, and therefore use one of the small forms; they are allowed to remain using that small form until their beginning account actually "EXCEEDS" 120. The 80 is like a "will never happen". If you're above 100 AND using the Schedule H, then you may continue to use the Schedule H in the event your number falls below 100 (like why would you ever want to). However, should it actually reduce below 80, then you must move to the small form and save yourself some audit fees. Good Luck! "Edited to say: Bill does make the correct point that you must actually count the number of participants on January 1, 2015 to see if it exceeds 120."

Even PBGC status for DB plans is a 'once covered, always covered'. It just doesn't apply to ERISA. That is interesting. I would keep in mind that even though Forms 5500EZ aren't required in certain situations, I continue to make it a practice to take the few extra minutes to file them; keeping in mind that the 3 year Statute of Limitations is provided only to the extent the return is filed. So, there is value in continuing to file it; regardless of the asset level. Good Luck!

Unfortunately not. I believe this is a potential loop-hole, but that is the way the rules appear to be written. There are inconsistencies in the rules: 1) Mandatory disaggregation between Union and Non-Union with respect to non-discrimination testing. 2) Non-Union employees are not required to receive the top heavy minimum allocation (but there is no cite to suggest that there balances are disaggregated for Top Heavy determinations) Simply putting the non-union in a separate plan would solve your problem. It would seem only logical that giving them an allocation pursuant to a collective bargaining agreement shouldn't negate the free-pass on top heavy, but I cannot find anything to support that. I do not believe mandatory disaggregation in other areas accomplishes that. I would welcome additional insight on this issue for myself. Good Luck!

The plain language of what constitutes ERISA is clear. So, when it becomes the case that the plan no longer covers anyone other than the sole owner, then it is not subject to ERISA. I'll go with that until the Government issues plain language to the contrary. There is no current language to suggest "once ERISA, always ERISA." Good Luck!

"IF" they are filing Form 5500s, then that would seem to imply that they have, indeed, elected to be subject to ERISA. That in itself would constitute an election, wouldn't it? Good Luck!

I may have the facts confused, but here's what I gather from your OP: 1) Plan Received DRO for amount (X) to be separated from participants account. 2) Plan Administrator Qualified DRO; now a QDRO for X amount. 3) Those funds, "X", have been separated from the participants account and are not longer reflected in the participant's account balance. Given 1, 2 and 3, your question is how long does the participant have to wait for receiving a distribution in light of something that is going on with the Alternate Payee. If my facts are correct, as stated, then the participant should be free to take a distribution under normal terms of the plan as it would appear the QDRO process (as it pertains to the participant) has been completed. Good Luck!

Yes. Good Luck!

It cannot. Good Luck!

I cannot imagine using anything (electronically) other than the SF if it is not subject to ERISA. Good Luck!