ETA Consulting LLC

When you provide a nonelective contribution to a 403(b), you must satisfy the 401(a) rules associated with it; especially non-discrimination under 401(a)(4). Before we go off on a tangent, this isn't saying "general test" the plan, but merely not discriminating in favor of HCEs (against NHCEs). I do remember a 30% rule for Section 125 plans saying that "Key" Employees (or something) may not exceed 30% of the overall benefit during a year; or their amounts will not be pre-tax. I vaguely remember something like this. Good Luck!

Sure, if there was a bona fide Roth election. You will have to adjust the amounts in the plan as well. It's going to take some work to realign what should've been. I would keep clear documentation of the failure and the correction. Good Luck!

The "Plan Administrator" under ERISA is a fiduciary who typically has complete discretion and power. A TPA is a service provider providing plan administration services on behalf of the "Plan Administrator". It's semantics when someone says they are a "plan administrator". If you closely read the definitions section of your plan document, the distinction should be clearer. I think it's ERISA 3(16) that defines the term "Plan Administrator". Good Luck!

I've often made arguments for and against. The key, however, is knowing where to draw the line. There is "mandatory" disaggregation for union and nonunion. The union line is drawn "not by the title of union", but by the fact that "the benefits on the work or Compensation is subject to Collective Bargaining". With that in mind: "IF" the owner of the Company receives compensation in two forms: 1) So many required hours of labor under the union contract and 2) Compensation for providing management functions to the business; then it is conceivable that the owner could benefit solely from the non-union wages he receives from managing the company. Just think, if you're employed with a company for the first part of a year and then join the union, you are not allowed to aggregate your Compensation for the full year for contribution or testing purposes. The "Chinese Wall" between union and nonunion will preclude you from doing this. The difference here, in my mind, is that the Compensation received for services performed is either union or non-union; making it possible to receive both during a single year (or even simultaneously). Good Luck!

You're not signing under the penalty of perjury that you're correcting everything to your knowledge, but that you are not hiding an abusive transaction. Hence, there is no legal requirement that you "fix everything". "HOW - ever". When I file, I cannot fathom not including every single error that I am aware of (even items that may be corrected under SCP 'since I am already submitting). The compliance letter you receive will only protect you from items you included in the submission. If you happen to get audited while the plan is being submitted, you do not have immunity from those items that were not included in the submission. So, you "MUST" include everything that you know is incorrect. Good Luck!

Correct.

I see. This appears to be under a "streamlined" filing where the employer is seeking relief from failing to report the loan "OR" relief in the form of not having to report the loan. If a Form 1099 has already been issued, this what type of relief is needed? "OR", if the 1099R had already been issued but you wanted to submit for another form of relief, then you'd have to do a long form submission detailing all events with your own proposed method of correction. The streamlined approach is a box. Anything falling outside of that box, you'd submit the long form. In many instances, I submit the long form; even when the filing would fit 99% (but not 100%) of the action listed on the Schedule F. Good Luck!

I read it to suggest this: Let's look at a hypothetical situation where a participant took out a plan loan in 2007 and made no payments since taking the loan. The participant has since terminated employment and taken a full distributions (let's say in 2010), but the outstanding loan was never accounted for. The "net affect" of this error is a plan distribution to the participant back in 2007 that was fully income-tax free. In this instance, since no 1099R was ever issued, you now have a proposed correction; the employer pays the income taxes with no additional 1099R reporting being necessary. Let's suppose the recordkeeper has, in fact, issued a 1099R. In such even, this type of correction would not be needed. I see it as a category of failures that typically occur where there has never been precedent on how to correct. Imagine going back to a form plan participant to explain they have "taxable income" from a plan loan taken 6 years ago. Good Luck!

Keep in mind that 415 Compensation isn't necessarily Compensation during the limitation year; there is a separate computation of Compensation being used for Limitation purposes. The plan's language will guide you. Personally, I hate when the "limitation year" is separate from the "plan year", but it challenges you to go beyond the norm (where 'everything' is based on the same 12 months). Start here and then reevaluate. Good Luck!

I don't think there is; as long as the employees being spun off are employed with the new company. Good Luck!

I would terminate the old plan and establish a new one. The shareholder with the sole account can roll over into an IRA until the new 401(k) is set up; and then rollover into the new 401(k). When you try to link the two companies, you'd have to establish whether they are a controlled group. I think they must actually exist "at the same time" in order for that to be possible. If you were to set up a separate (unrelated) company and they purchase the first company's assets, you may take over the sponsorship of the portion of plan containing their employees through a spinoff (but why would you do that when they are in a separate business). Good Luck!

You should contact the IRS and obtain all your tax reports going back as far as they can provide (possibly 10 years). You want to reconcile the Forms 5498 for all years. If you double deposited in a year, it should stand out. Good Luck

There is no "clear" guidance, but judgment may be applied differently. I'd argue that it's all relative; if you have enough time left before the end of the year to make up the missed oppornuity, then no corrective deposit would be necessary. Since there is no clear guidance, this would be debatable. Suppose you miss deferrals for one week in October. Obviously, there isn't 9 months left in the year; however, there are 9 weeks left. I think the 9 to 1 ratio of weeks remaining to make up weeks missed would be a compelling argument that there is enough time to allow each participant to make additional deferrals necessary in order to make up the missed amounts. Especially when you have 9 months to make up 3 months; a 3 to 1 ratio. With that said, KevinC makes an important point; you have to account for the match that would've been provided had the deferrals been made. If you have an annual calculation, then there should be no issue (as the match wouldn't have been missed). But you should account for match as well as deferrals. Good Luck!

You've failed to allow individuals to defer when eligible. If you enroll them now, they would have more than 9 months in order to catchup those missed amounts. There shouldn't be an makeup contributions because there is enough time for those individuals to defer a little more in order to make up for that missed opportunity. Good Luck!

I would challenge them to show me that language in the plan document. When we say a plan is "Qualified", we are saying that they are established and operated pursuant to section 401(a) of the Internal Revenue Code. The FIRST rule in 401(a)(1) is that the plan must be operated pursuant to the terms of a written plan. These are the basics. In many instances, the first argument you would make is "show me that language in the plan". You'd even see that written on this board many times; "what does the written plan say?". If the individual refuses to reference the plan, they are proving to be an unreliable reference. Good Luck!

Arguing with ADP? Are you referring to the test or the company; major differences. You are correct that there is no "separate bucket". All the concept of catch-up does is to increase the limit on what an individual who is age 50 or older may defer. It's still a deferral. You must exceed "a plan or statutory" limit in order to utilize. Good Luck!

He must take is first distribution by December 31, 2014 based on his single life expectancy. This is because she died before her RBD. Now, he can roll over directly to his IRA. When you determine his age, you can calculate the best option (which his likely to roll over anyway). When he takes a distribution as beneficiary, he's using the single life expectancy. If he takes an RMD from his own account, then he's using the uniform life expectancy (calculated at his single and a spouse who is exactly 10 years younger). Good Luck!

You may want to read that one again. If he is not the one that would be otherwise required to take the refund of deferrals, then he would not be the one considered to have exceeded the "Plan Limit". I say plan limit because it's the plan's ADP test. You must be the one who has exceeded a Plan or Statutory limit in order to be considered for catchup. Hence, if you're not otherwise required to take a distribution for a failed test, then you have exceeded that limit. Good Luck!

I think you may be using "compensation" too many times. Let's suppose: 1) Your providing a uniform allocation to all employees (prorata) 2) However, the definition of Compensation used for providing the allocation is not safe-harbor (excluded bonus & overtime) 3) When you run the Compensation Ratio Test to show the compensation is non-discrimintory, it fails. From here, you have the option of testing the actual "Contributions" provide to each employee against 415 Compensation (or any defintion of Compensation that actually satisfies 414(s). Since you're having to provide additional testing (on a prorata formula) due to the fact Compensation is failing 414(s), you may consider revising the Compensation used to make the contributions in future years. Is this consistent with your situation or question?

I don't think that would work. One of the requirements for starting a Safe Harbor 401(k) during a plan year is that no one must be currently participating in a deferral arrangement for that year. Those employees are already eligible and deferring into another 401(k) arrangement. Good Luck!

Just set up a 403(b)(7) account for each pastor. The universal availability rules do not apply since you're a church. Also, the 403(b) is not required to have a written plan because you're a church. Just ensure each pastor adheres to the contribution limits each year. It's pretty much auto-pilot from there. No stress; not much potential for error. Good Luck!

The answer was no. However, your formula provided a coverage ratio percentage of 100% since everyone in the plan received a nonelective contribution. However, that alone does not satisfy nondiscrimination. This is why we started on crosstesting, because there is clearly a need for additional testing. You cannot have a formula providing 3% to NHCEs and 3.5% to HCEs and think that is okay merely because everyone has received a contribution. Additional testing would be necessary.

It is not my intent to thrill or trigger any emotional state of any member on this board. What I am attempting to do is understand a position (without the introduction of other issues not pertaining to what we are addressing). I think I have articulated my questions in an attempt to understand how you get to cross testing without the gateway.

I think several members (KevinC, not sure if it was M.Preston) have made several comments on this type of issue. When you issue a "maybe" notice, you are still a Safe Harbor Plan in that you actually issued the notice. Now, if you make an amendment to the plan that would change some information in that notice that was issued prior to the beginning of the year, then that would seem to negate the possibility of being safe harbor for that year. Previous arguments were to what types of amendments are allowed. Some took the position that any amendment could be done while maintaining safe harbor. Some (including myself) argued that very few. My argument, in particular, is that any amendment that would change information that was previously included in the safe harbor notice issued to employees would create an issue. Not sure if you'd get anything definitive, but you should get extensive insight into what the different arguments are. Good Luck!

Okay, Poje. We have two out of three. Let's go for 3 out of 3. 1) We agree that allocations testing is not converting to straight life annuity (hence no cross-testing). 2) We agree that the rate group (defined by the allocation rate) passes the midpoint. 3) The average benefits test may be done on an allocations basis or utilizing cross-tested rates. I've never said anything to imply avg. ben means gateway. What I am saying is the usage of the cross-tested rates as opposed to the allocation rates is what imposes the gateway requirement. Mike is saying that ship as sailed, because you're beyond the definition of the rate group (which was already done on an allocation basis) and that any cross-testing does not need the gateway because the rate groups have already been defined. I have alway held that "any cross-testing" in the absent of established exceptions for broadly available or primarly DB, etc... would require the gateway. I understand Mike's argument and going to research that point. Is that also your understanding?