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If you 'short' someone, then you must give them their contribution. However, if the individual has money in the plan that really shouldn't be there, you do not have to distribute it to them if the amount is negligible. So, the key is that no contribution is so small that you would be excused from making it to the participant's account. Good Luck!

You answered your own question. If the plan under-"contributed", then the correction would be an additional contribution. If it were a distribution, then you would think taxable event requiring a Form 1099R. Good Luck!

True. I think the question was whether or not a participant could actually fund after-tax by writing a personal check to the plan. Or, must it be withheld from payroll. My contention is that a participant may, in deed, write a personal check to the plan for purposes of funding voluntary after-tax. The rule that states that you may not defer from Compensation that has already been received applies to 401(k) deferrals only. There isn't an identical rule for after-tax. So, in the obvious absence of any regulations precluding it, and the absence of any plan document language precluding it, you the plan should be fine accepting personal checks from participants for purposes of funding after-tax employee contributions. Of course, you'd want to have administrative procedures to that extent that applies uniformly to all participants. Good Luck!

I don't think there is. I researched this before and came to the conclusion, based previous research, that after-tax contributions may be funded by a participant merely writing a check to the plan. I arrived at this conclusion through the establishing the default as "what you may do until the rules state you cannot". I know this may should aggressive, but consider this. The 401(k) regulations actually took the time to state that you may not defer from Compensation that you have already received. Since that rule is actually written in law, then you'd look for that similar language in the 401(m) rules pertaining to voluntary after-tax contributions. It's simply not there. So, there appears to be nothing in the regulations to preclude you from making after-tax voluntary contributions to the plan by merely writing a check from your checking account. HOWEVER, if the plan's language is written in a way to suggest that you cannot, then I would yield to the plan's language. As we know, most plans are written to specify that deferrals cannot be funded in this manner; I'm not sure what they say regarding after-tax. Good Luck!

I believe it is technically correct as the Compensation used is safe harbor (e.g. Gross net of deferrals). When the rules were originally written, this could never happen as you would meet the 415 limit by merely deferring 20% of pay. Given all the changes since then (E.g. 415 limit is 100% of pay, deferrals aren't included in deductibility limit) with no adjustment to the possibility of an inflated number, I think you're okay. When you're fortunate enough to have a NHCE defer $8,000 out of $10,000, your test is good. When you have an HCE (perhaps through spousal attribution), you may want to test on gross compensation. Good Luck!

I think the OP has made some valid observations with respect to the high prices being charged under the auspices of complex work. I have witnessed this first-hand when working for several TPAs during my career. I also enjoy reading Ary Rosenbaum's write-ups on LinkedIn speaking about the same issues (don't know him personally, but in case anyone has read his blogs). While I've witnessed this at TPAs, I've never witnessed it from an Actuary; as the services of an actuary aren't merely recommended, but required, in DB plans. With that said, it becomes easy to associate one system to with another that is entirely different. I can see how someone could be led to think that an actuary isn't required to think as long as the actuary has a computer software package to do the work. BUT, you'd never hear me come close to saying that. I'm surprised there are still actuaries left after changes made to DB plan under PPA; These changes were complex. So, my hats off to actuaries. But, we have consistently stated on this forum and others about some of these same issues with TPAs, and large vendors acting as TPAs. There is a difference between 1) 20 years of experience and 2) one year of experience 20 times. That difference is depth; actually making a choice to learn beyond pushing the same button for 20 years. I think paytaxesforusa has made it clear that he/she believes members of this board have actually taken the time to learn their craft. That works for me. So, I never associated myself with the "arguably" condescending remarks in the initial post. I can see how an actuary me be rubbed the wrong way, but could also see how that feeling should be quickly dismissed after the explanation of things we've all witnessed. So, let's try to sort through the vitriol and find the substance of the argument without questioning motives :-) Good Luck!

Correct.

Plan participation isn't protected from cutback under Section 411(d)(6). So, you ARE allowed to amend the rules to make and individual discontinue participation in the plan. HOWEVER, you can't do it retroactively. So, if an individual has entered the plan, effective 1/1/2014, he was a participant as of that date. I don't think there is anything that would preclude you from amending eligibility, effective today, to make it 1/1 and 7/1 following. The individual in question would've merely been a participant from 1/1/2014 - 12/16/2014. I cannot see how this would violate any cutback rules. Good Luck!

To answer your question on that: The argument here is that they are not deferrals made under the written terms of the plan. Therefore, they should not be tested within the ADP test and should not be treated as deferrals for plan purposes. So, if you were to forfeit them and make the participant whole outside the plan, then this would effectively put the plan in the condition had the deferrals not happened. I'm not saying I would agree with this, but understand how their position could be reasonable. Hope it works out for you :-)

Here's what you are missing: Nothing we do is logical or reasonable; EXCEPT for following the written terms of the plan. So, as a practice, we look to the plan or EPCRS for guidance is how to address certain issues. If a participant defers $18,000 in the plan and exceeds the 2014 402(g) limit, the plan actually has written language the prescribes for the distribution by April 15th of the following year. Once you get beyond April 15, the plan's provisions are no longer address your situation; leaving you with EPCRS. In this case, the plan sponsor simply failed to follow the terms of the plan by allowing someone to participate who was not eligible under the plan's written terms. The plan will not have language to address this; which leaves you with EPCRS. IF you believe your issue is corrected under SCP (Self Correction Program), then that is the route you would take. Your contention appears to be that this is correctable under SCP by returning the deferrals and issuing the 1099 while forfeiting the match. The vendor, who I presume is AXA (e.g. 800 lb gorilla), is apparently suggesting that you forfeit the deferrals and match while revising the W-2 forms and making the individual whole outside the plan. I won't make a suggestion as to the viability of any approach, but these are the general parameters I typically use. Hope this helps. Good Luck!

Exactly. Those are your only allowable exclusions. Good Luck!

No. When you implement a SEP, you would use Form 5305. When you look at the language on the form, you will not see the flexibility to exclude employees on the sole basis that they are not owners. Additionally, there is no flexibility to exclude the owner. When you desire this type of differentiation on the level of contributions, you're looking a full qualified plan. For instance, you can implement a safe harbor 401(k) with a 3% Safe Harbor to your employees. This will give you the same 3% employer contribution plus a free-ride on the $18,000 in elective deferrals. I'm attempting not to delve too far into the various plan designs, but to make the point that SEPs offer very little or no flexibility when attempting to offer different contribution levels to different groups of employees. Good Luck!

That would appear to be Vanguard's way of ensuring the Solo (k) doesn't fail to qualify. Keep in mind that setting up a plan has two mutually exclusive processes: 1) Ensuring the plan's document is drafted with the requirement on how it will operate. This may be with 21 & 1 that excludes common law employees as mentioned above. 2) Setting up the trust account to hold the money. This is what Vanguard, Fidelity, and any other fund company does. So, when you ask about setting up a plan, we're likely going to tell you everything possible under step 1 above. You'll like find that those entities operating under step two do no possess the detailed knowledge, but rather operate in a system designed to capture the funds with as little complexity as possible; not that there's anything wrong with that. With that said, you can easily set up a solo (k) plan using all the guidance that we provided in the previous posts. When you do this, ANYTHING that Vanguard or Fidelity or any other custodial company says becomes irrelevant, because all you will depend on them for is a place to park the trust funds. Good Luck!

I'm with Bird on this one. I can also understand how Andy may be taken back by the suggestion that he should charge less for his service. I would be the first to argue that an Actuary is at the top of the food chain in our industry. There are things that require an actuary (i.e. Schedule B or SB for a DB plan) while other things may be done by any competent pension professional. When you ask for a DB plan, you WILL NEED an actuary. With that said, your goal should be to fund your plan at a level that far exceeds what you could easily achieve through a solo(k) plan. If your goal is to fund $52,000 or less, then the solo (k) plan may be the most effective plan. However, you may wish to fund a personal retirement account with amounts exceeding $150,000 per year. In such cases, the actuary's fee is miniscule in comparison to what you are trying to achieve. There are those cases where you may use a your Highest Three Year Compensation as a base to fund a DB plan with amounts in excess of $100,000 in a year while your Compensation during that particular year is very low (i.e. only $15,000). I'm not an actuary, so my elevator doesn't go that high on DB. My point is that in many instances the services of an actuary may be overkill when considered against your objectives. When you lead, however, with a staunch critique of prices without a full understanding of the skills that are necessary to implement that plan, then emotions fly (not that I'm a psychologist). This is where Bird's point comes into play. It's very important to know what you are getting compared to the alternatives. Good Luck!

Is he a "resident" alien or a "non-resident" alien. Does he have any US Sourced Income? Is the income he received from services provided outside the US?

Where did he receive his income once he became a nonresident alien? Where was he working?

The PW is a method of allocating the non-elective contribution. I wasn't addressing that, but merely interpreting what Sal was, apparently, saying in the item you posted. As for PW, I've always looked at that as a mere profit sharing formula (i.e. you could allocate prorata, integrated, by allocation group, or by PW). Beyond that, it's a mere non-elective contribution. "IF" there were some special use allowed by these contributions, then it should be written into the documents language. Good Luck!

When you are using prior year testing, you're comparing two things: 1) ADP for NHCEs in the prior year and 2) ADP for HCEs in the current year. For item 1, NHCEs in the prior year, you are using "ONLY DEFERRALS MADE BY THE NHCES". Should you decide to use QNECs in the ADP test, where would you use them? The only place allowable would in the current year; but you're only testing the deferral rates for HCEs in the current year. Why would you do that? Good Luck!

The fact pattern presented by newplananalyst has nothing to do with whether or not an individual is terminated (and began to take RMDs as a result) and then is subsequently rehired. In such instance, the regulations are not clear, perhaps because it was never anticipated an individual older than 70 would be rehired. However, the regulations are very clear that your 5% owner status is determined only in the year you turn age 70.5. If you are a 5% on in the year you turn age 70.5, then your RBD is April 1st of the following year. Any subsequent changes in ownership would not eliminate your requirement to take your RMDs. Good Luck!

He was a 5% owner in the year he turned age 70.5; so he's RMD all the way through. Good Luck!

The documents are constantly being written for enhanced convenience, but certain rules (i.e. coverage) are pretty constant. Sometimes, when you hear a question without the context, it makes you start to wonder; 'wait a minute, why is a mechanic asking me for instructions on how the change a spark plug'. Obviously, that would be a bigger issue giving the propensity of problems in this particular area. With that said, I've noticed these changes in the documents. They used to provide only the options that were 'statutory excludable', but now seem to provide for many more. Then again, I've seen the 'leased employee' line for many years; and they're not statutory excludable (barring the 414(n)(5) plan). Good Luck!

If the 401(k) Covered ALL EMPLOYEES, and your 403(b) contains a provision excluding employees covered under another arrangement, then the 403(b) would, in effect, exclude ALL EMPLOYEES. You would either exclude this class or not. You cannot exclude all employees other than HCEs on the basis that those employees are eligible to defer under another arrangement when the HCEs are eligible to defer under than arrangement as well. Hope this helps. Good Luck!

403(b) is subject to universal availability. However, one the exceptions to the universal availability requirements is to exclude any employee who is eligible to defer under another vehicle (i.e. 401(k) or 457(b)). So, by writing the 401(k) to exclude the CEO, CFO, and Director of Finance, you achieve two things: Have them excluded from the ADP test in the 401(k) plan while having them as the only employees who may defer under the 403(b) plan. I cannot detect an issue on the surface. Good Luck!

That two year provision will not work for the 401(k) Source. It only pertains to the Match and/or Profit Sharing (e.g. non-deferral) sources.

If the employee never works 1000 hours during the applicable 12 month computation period, then he'll never get a year of service; and will, therefore, never meet eligibility for the plan. Good Luck!