ETA Consulting LLC

I see your point. I "believe" our differences in opinion relate to the fact that you are referencing 402(g) as your deferral limit. My reference is 401(a)(30). In your case, let's assume the participant is in a plan of two totally unrelated employers. In such case, he (the individual) would be allowed a maximum deferral regardless of any other catchup. 401(a)(30), on the other hand, imposes the 402(g) limit across plans of the employer; precluding that plan from allowing those deferrals. Would your conclusion change if you incorporate 401(a)(30) instead of 402(g)?

You are correct. Good Luck!

After the transition period, you would have a Coverage Ratio Percentage of 50%. So, you make a valid point given that the design, itself, would be less likely to yield a more favorable average benefits tests (assuming each HCE contributes a maximum deferral, typically at lower salaries). As a practical matter, you're correct in that the other employees should 'probably' be brought into the plan. Now, you can amend the plan to exclude one of the two HCEs. This will move your coverage ratio test to 100%. Given the fact you just doubled your NHCE base with no change to your HCE base, you will likely have to make changes after the transition period. Good Luck!

The issue, KevinC, is that "IF" the Participant actually deferred at least $900 between 1/1/2012 and 3/31/2012, then he would be allowed to proceed with the maximum deferral. What makes this different is that there were ZERO deferrals between 1/1/2012 and 3/31/2012. In this case, the $900 that would've been refunded "as of" 3/31/2012 will now become a de facto deferral of $900 for the 2012 calendar year. Good Luck!

"Like" It would be different had the participant actually deferred at least $900 between 1/1/2012 and 3/31/2012. Since he didn't, the $900 effectively creates an additional deferral in lieu of a distribution from the plan. Good Luck!

I agree with you. All you're doing is: Operationally, allowing each participant to make a separate election for the bonus payroll. Bonuses are still included in eligible compensation. You're simply going further to allow an individual to make a separate, and distinct, election on that one-time payroll (which is typically subject to a higher withholding). It doesn't affect the overall definition of Compensation to remove it from 'safe harbor' under 414(s). Good Luck!

Sure. You have a transition period under 410(b)(6) to figure out the appropriate plan design going forward. Assuming you can pass 410(b) in an ongoing manner, you can continue to keep them separate after the transition period. Good Luck!

NO. You must "EXCEED THE COMPENSATION LIMIT ($110,000)" and "BE A MEMBER OF THE TOP PAID GROUP". You still have to exceed the limit. In this case, no one exceeded the limit; so your only HCEs will be due to ownership. Good Luck!

No. They may roll it over into an "Inherited IRA" and begin receiving the death distributions from there. Good Luck!

So, you're going to put in a plan and then pay an employee to waive participation. Mathematically, it would cost any employee who decides to participate 5% of compensation; since the 5% raise will represent an opportunity cost. I would, personally, like to see them try it. You try to anticipate what the IRS would counter with (assuming the plan is audited). So, you're going to sell the employees against plan participation; and argue that contributions to an IRA "may" be tax deductible (without performing the appropriate analysis), and forego the certainty of tax treatment with the 401(k) plan. I have an explaination: Technically, a business owner can put in a Safe Harbor 401(k) and pay $4.15 for every dollar deferred up to 6% of salary. If that owner can induce all employees not to defer, then the owner can get an employer contribution of 25% of salary in addition to an elective deferral. When that business owner blatantly stacks the deck to make this happen, or even attempt to 'move slightly in this direction', you have a facts and circumstances argument that the owner is placing his personal interests above those of his employees; a fiduciary breach. Good Luck!

"Like" This is irrespective of any Top Paid group as it pertains to the ownership criteria for determining HCE status. Good Luck!

You have to consider which law is applicable. If it is a plan qualified under IRC Section 401(a), then you must follow the written terms of the plan; per IRC 401(a)(1). Good Luck!

There is no difference in the qualified plan with respect to the "Participant's" eligibility to participate; since Puerto Rican residents (and citizens) are "NOT" considered "aliens". Hence, "eligibility" under the plan is not affected. There are tax implications to the individual as to whether it would be in his best interest to defer with income received in Puerto Rico; since the plan's trust is in the United States. Good Luck!

Either. I would use a local address if this is the address that will handle any correspondence from the IRS or DOL. If the home office overseas is merely going to forward the paperwork to the location in the US, then you can cut out a step. Also, it is likely the US EIN that will take the deductions on employer contributions. You should take extra precaution to ensure the foreign employer doesn't own additional companys (e.g. be careful when you have two companys with nothing to do with each other being owned by the same foreign employer). That has little to do with the "adopting employer". Good Luck!

The employer will "likely" be required to contribute amounts to your account for each year you were denied the opportunity to defer to the plan. The amounts will likely be calculated as a percentage of your salary of each year. That percentage will likely be 1/2 of the average of all percentages of those rank-n-file employees who actually contributed. Don't read too much into the mechanics, but expect that the employer will likely contribute to your account. No. You should enroll immediately if that is your desire. Once has nothing to do with the other. The employer's make up contribution will be calculated up to the time you were actually given the opportunity to defer (which is the time you were advised that you are allowed to enroll; regardless of whether or not you actually enroll). No. However, should you not get satisfactory, then your local DOL office will step in. The violation is that your employer failed to enforce your rights under the written plan. But, given them a chance to correct it. If you feel you are being jerked around, then contact the DOL. No. Waist of time an money. This type of "failure" occurs often in the industry. Many employers inadvertantly exclude employees. Fortunately, the IRS has created a correction procedure for employers to implement. Many employers are happy to implement it. Should your employer attempt to "jerk you around", just contact the DOL. However, first give the employer a chance to correct.Fact patterns are important. A little patience for the employer to make good would go a little longer. I answer these questions in this manner because the advisor who educated the employer on the failure will "likely" educate the employer on the recognized method of correction (making an employer contribution to your account in the plan for each year you were not advised of your right to defer). Now that you know "what the advisor would likely do", just sit back for a while and allow the play to unfold. Good Luck!

No, no, no You must allocate employer contributions pursuant to the formula written in the plan. Typically, the plan will say "everyone will receive the same percentage of salary or same dollar amount". You'll likely never see a plan written to say everyone who has an insuarance policy will receive an employer contribution in the amount of the insurance premium for the year. Hence, it's a no go. Good Luck!

Good Luck!

You know, there is important distinction between 401(a)(30) and 402(g). Catchups are, typically, defined as an excess of the 401(a)(30)limit; which is the 402(g) limit to all plans of a single employer. Under this method, one plan doesn't have to worry about (nor incorporate) what any plan of any other employer is doing; leaving it totally up to the participant. Barring written language in a plan to actually impose a limit based on what was contributed to another plan, then there would be little precedent to arbitrarily make those amounts catchup just because deferrals were made to a plan of another employer. Just something to consider. Good Luck!

Yes. However, the problem is that this amount "may" not be made pursuant to a consistent formula defined in the plan (i.e. everyone receives a contribution from the employer of the same percentage of salary). So, the employer cannot arbitrarily decide to make a contribution to one employee and not others if the language in the plan doesn't support it. Good Luck!

"Like". You know, that is the only answer. Despite what the law allows, you must follow the terms of the plan. Sometimes, in haste, we quickly answer based on understanding of law. The only correct answer is to follow the terms of the plan. Good Luck!

Technically, the "PLAN" is a separate legal entity from "The Employer"; even though the Employer sponsors the plan. Hence, nothing from a Plan perspective would change. I think this is consistent with the underlying foundation of qualified plans. Good Luck!

Yes. There is no required withholding for this amount (when it is the only amount being distributed during the year). You weren't even required to provide the notification, since there is no required withholding. He can take the $200 check and roll it over. Good Luck!

Yes. You must suspend the employee contributions under all plans of the employer. Good Luck!

That is a subject of endless debate. The best you would get is that "there is a possibility" that those amounts 'could' be treated as CODA. Now, if you have a partner who is much older, you can clearly provide a maximum percentage and pass the rate group for that class. However, if you have a older partner and a much younger partner, then placing them in the same class would make it more difficult for the test to pass. Here is where you would clearly want to push the envelop and create separate classes. The "POTENTIAL" would come into play if the older partner would receive a zero allocation when he could've maximized with no additional contributions to the NHCEs; and this happened to coincide in a year he had to pay for his daughter's wedding. You can see where, based on facts and circumstances, an argument can be made that the partner effectively made an election to not receive the allocation for the year. In the end, it's an endless debate. Good Luck!

There are two rules that come immediately to mind: 1) Disallowed investments for IRAs; and 2) Prohibited transactions. Your question is whether the IRA may invest in a loan (note) to a charity. This type of investment is not, specifically, excluded from the types of investments an IRA may have (it's not a rug or work of art, metal or gem, stamp or coin, ect...). So, technically, such an investment is allowed; SUBJECT to certain overall rules. A prohibited transaction is "ANY IMPROPER USE" of IRA assets. There is no specific list of items that would comprise an improper use, but there would be an easy argument that a loan to a chartity that does not bear a resonable rate of interest "may" constitute an improper use. I answer the question in this manner as this is ultimately a measure of risk. You can find proponents of a argument (such is a recommendation you received from the charity) stating that everything is legitimate and perfectly legal. They are right, subject to accounting for every potential item that "may" constitute an improper use of IRA assets. If your strategy is eventually challenged by the IRS, this would be the likely ground on which the challenge would be made. They won't likely argue a note can be issued to a charity (as that is NOT listed as an item that an IRA may not invest in). You "may" open a solo (k) plan and purchase a life policy. You may also make the charity a beneficiary for a portion of your death benefit under the plan (subject to spousal consent on that election). Not sure how that would impact your estate planning, but I believe there "may" be an unlimited charitable deduction on items gifted to charity. I'm not sure (as estate planning isn't my forte'). Good Luck!