ETA Consulting LLC

An audit is require "ONLY" in the event the number of eligible employee in any one plan exceed the limit. You can have two separate plans (99 employees in each) that require separate testing in order to pass, but not require an audit for the Form 5500. Two entirely separate things. Good Luck!

Well, there is a cost-benefit to be considered. I've seen it done a long time ago. There is nothing to preclude you from setting up a new PS only plan entirely separate from the Safe Harbor 401(k) you have in place. You'd still have to account for top-heavy since additional contributions are now being made to another plan. When many companies who ask this question compare the cost they would pay to the terminated employees to the cost of setting up a new plan (e.g. document and implementation fees), they quickly decide against it. However, it can be done. Good Luck!

Good points. The first rule is that you must contribute under a 'definitely determinable allocation formula'. This simply means that any contribution made must be supported by the terms of the plan. You cannot arbitrarily decide that you want to contribute more (even if the pass a test) without first ensuring the document is written to support that contribution. Many prototypes I've seen would have a box to check; stating that in the event the plan is cross-tested then those NHCEs would be eligible for the gateway where they otherwise failed to meet the accrual requirements for additional contributions. At the end of the day, it's a issue of knowing how to interpret your document. I'm not saying this sarcastically, but to express the appreciation of how complex (or simple) this issue may be. Good Luck!

I'm with BG5150 on this one. Good Luck!

I know you did well. Not just saying that. I took it when every answer had to be written; there were no clear answers. The issue was how you reasoned as opposed to getting the correct answer. Sometimes your reasoning may leave out a key component, but everything is sound for the components you considered; you get credit for that. When you think about it, this is what makes consultants effective. We can derive different answers to the same question. After engaging in a discussion, we can determine what we disagree on and why. I, personally, learn more through this process than simply reading what someone else thinks. This approach solidifies my knowledge so I can articulate my position going forward. Sometimes I would say 'I used to think this until I was proven wrong' when explaining my position. Will Rogers once stated that "man gets smarter in two ways; reading and associating the smarter people." That works for me

I didn't answer with "consecutive" in mind. The service spanning rules would apply for any service where there has been a severance of less than 12 months. However, if a severance is 12 months or longer and your eligibility period is 3 consecutive months, then you must start the clock back over after working 2 months and terminating. "IF" you work a Year of Service (as defined, 1000 hours during 12 month period), then you are in. 'Consecutive' does make a difference, but only when there is a severance of greater than 12 months. That's my interpretation. I, now, have an appreciation of the confusion you faced Good Luck!

Keep in mind that when your situation does not fall on any of the schedules for VCP, it does not preclude you from filing VCP. You are merely using the Appendix C Part 1 for the filing; and writing (everything that happened, what you did not fix it, and the changes being made to ensure it doesn't happen again) out in long hand. Those Part II schedules merely streamline the filing process by spelling everything out (for those cases that are most common). Why this isn't one of them, I don't know. My purposes, without re-reading the new version of EPCRS, is to point out that you have the option of filing VCP, even when none of the Part II schedules are applicable. Good Luck!

A year of service for eligibility may be defined as 1000 hours during a 12 month period. When you require "less than" a year of service for eligibility, then how you define that year of service is not relevant. Hence, your requirement is 3 months of elapsed time. The 'employee' worked 2 months and severed employment. Now, had that employee came back to work with 12 months of that date of severance (3/20/2012), then it would've been as if he never left. His service would have 'spanned' across the period of severance. Now, the fact that he did leave, his service will pick back up on his date of rehire (10/25/2013). So, when we works through 11/10/2013, that should complete the 31 days for the 3rd month (October-2013) needed for eligibility. He should, then, enter the plan on 12/1/2013. Keep in mind that you do not require a year of service, so how the year is defined is not relevant. Since you are requiring only 3 months of elapsed time, any severance beyond a year would start the clock back up "at 75 days" on the date the employee is rehired. Good Luck!

Yes. The client would also have 12 months after the termination date to distribute all assets. Termination, being a distributable event, "may" result in participants having to receive 2 distributions in order to be fully paid out of the plan. So, legally, your answer is yes. Administratively, you may have some coordination to do. Good Luck!

I remember the feeling. Do whatever review you feel necessary, but take the day prior to the test off. Go to the bar and take a drink. You'll do well; that's not just empty motivational rhetoric, but based on the substance of your posts. Good Luck!

It "may", but not qualify for the Safe Harbor. I think it must be between 3% and 10% for the Safe Harbor. Other than that, the only requirement for the ACA is that ample time is given for the employee to raise, reduce, or totally elimiate their rate of deferral. Good Luck!

No. If she terminated employment 3 years ago, she wouldn't be included in the Top Heavy Analysis; regardless of whether she's Key or Non-Key. Good Luck!

"IF" you are a key employee of a company, and that company is a member of an afiliated service group; then why wouldn't that employee be a key employee for plans sponsored in that group? Good Luck!

When you have a definitely determinable formula that precludes someone with more than two years of service from receiving a contribution (based solely on service), I'd say there are issues. Good Luck!

I would say that: 1) This particular HCE is considered as "benefiting" under each plan. Other HCEs will be considered as benefiting in their own respective plans, and not benefiting in the other plan. However, since this particular HCE is employed with both members of the controlled group, he is benefiting in each plan. Now, we know there is mandatory aggregation of the HCE deferrals since he is eligible for both plan. So, his deferrals in the safe harbor 401(k) plan must be included in the ADP test for the non-safe harbor plan (I am not aware of an exception, but one may exist). In order to avoid this, the non-safe harbor plan should be amended to exclude any HCE who is a member of the other company's plan (as a class). This would serve to treat this HCE as not benefiting under the non-safe harbor plan and will also exclude him from the ADP/ACP test of this plan; leaving him benefiting and eligible in only the safe harbor plan. Good Luck!

No. Gateway is not a allocation condition (nor accrual requirement), but a test requirement. You must allocate plan contributions pursuant to the definitely determinable formula outlined in the plan. The plan "may be" written to allow for the gateway allocation (in which case you would be fine), but you may not arbitrarily allocate to meet a testing requirement when that allocation would be contrary to the plan's written terms. Good Luck!

"New Comp" and "Fail Safe" appears to be contradictory terms. "IF" the fail safe is in the plan, then that would seem to create an accrual requirement that must be followed. However, if it is somehow resulting from a discretionary calculation that may be easily reworked (under the plan's terms with the last day requirement), then you could likely do that. I would imagine you'd have to read the plan closely to determine the most appropriate set (with respect to what has already transpired). Good Luck!

Yes. "IF" the plan is written to allow entry prior to a year of service (as defined by the plan), then any employee who never works the 'year of service as defined in the plan' would be otherwise excludable. Good Luck!

If you're speeding, how do you get caught? Only in the event the police catches you on radar (and possibly some other methods). The question is, was, and always will be, what will happen to you if you get caught; and is that a price you are willing and able to pay. Income tax evasion (abusive tax avoidance schemes) are illegal and punishable by IRS penalties and prison time. That should be empasized in any 'hypothetical' situation in order to avoid being perceived as giving advice on how to game the system. Good Luck!

Two said two contradictory things: 1) We're considering starting a separate plan for the staffers, which would exclude the owners and vice versa. 2)Since neither plan will exclude employees or have allocation conditions on employer contributions Coverage will be an issue. Good Luck!

IRS Form 211. Good Luck!

I know that the IRS has issue a rule disallowing "service class exclusions" where you place all part-time individuals in some arbitrary class (i.e. janitors) and then write the plan to exclude that class. I would use that rule to imply that you may not manipulate the plan terms in order to circumvent any of the minimum age and service requirements. At the end of the day, it would be a measure of risk. The IRS "may" argue that based on the facts and circumstances, you manipulated plan provisions in order to circumvent maximum (minimum age and service rules). Good Luck!

I've wondered that myself. This will likely encompass the addition of many different "Designated Roth" sources on the recordkeeping system. Some of these sources will be eligible for distribution (i.e. when you convert an amount from an account that was previously distributable, but failed to meet the distribution restrictions under Section 401(k)(2) of the Code), then you'd have the Roth Source for those amounts that failed to meet any allowable distribution under the plan. So, I would imagine a 401(k) plan with a Roth, Matching, Profit Sharing, and Rollover source moving to 401(k), Roth Deferral, Designated Roth PS, Designated Roth Match, Designated Roth Rollover, Profit Sharing, Match, Rollover. This will be done to ensure any distribution restrictions/availabilty applicable to any source would continue to apply to those funds after the designation to Roth is made. Good Luck!

We'll, 410(b) would be the applicable test to ensure that isn't done. But, you are correct that such an action would, otherwise, appear agressive. I'm "AM" saying, however, that when you amend the plan to exclude a certain class, then they are no longer "participants" in the plan; and, therefore, not entitled to be treated as such. I 'wish' the regulations stated that "anyone who is a participant at any time during the year" and is employed on the last day; or even there was some definitive defintion of Participant that would mean "any time during the year". If that were the case, we'd be on the same page. I just don't see it with the way the current rules (and documents) are written. "Participant" doesn't appear to be defined as "any time during" but instead "as of a single point in time". Good Luck!

Let me add a few points: 1) The regulation makes it clear that a non-key employee may not be excluded for failure to meet the accrual requirements for a contribution (i.e. 1000 hours). This implies that the individual is still a participant in the plan and would otherwise receive any allocation given if the accrual requirements are met. 2) It also states that it cannot be made based on a required action for the non-key (i.e. requiring them to defer or make mandatory contributions). 3) Where we are hung up is that the Regulation doesn't address what happens when the non-key is no longer a participant in the plan (who would not be allowed to make deferrals or receive any allocation of employer contributions regardless of any accrual requirements). 4) You've corrected me at least 10 times in the past. Each time, you clearly proved me wrong. So I'm open to new information; it only makes me more informed With that said, I just do not see the actual link in how someone who is not a particpant (eligible employee) in the plan at year end would be entitled to the TH minimum. Good Luck!