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This would be true only to the extent no deferrals were made between January 1st and June 30th 2012. Notice that this is where the plan year overlaps into another calendar year. If no deferrals were actually made in the calendar year, then the catchup would reduce the amount of deferrals that may be made. HOWEVER, if $2,000 deferrals (in your analysis) were contributed during 2012, then it would not further reduce the deferral amount. Good Luck!

Yes. In fact, they must be recharacterized as catchup since he turns age 50 in the calendar year 2012. Good Luck!

Yes. I'm saying that after I determined that was what you were getting at. I, typically, look at rules in extremes in order to determine a position. I derived my answer as follows: Let's suppose the plan allows all employees to contribute employee after-tax, but is written to provide matching contributions to only the owners. In this instance, everyone is benefiting under 401(m), but the matching contribution would clearly not be currently nor effectively available on a non-discriminatory basis; since it is impossible (under the plans language) for anyone who is not an HCE to receive the match. Even though this hypothetical is extreme, I think it articulates your point; and a clear need that this situation would require testing. Good Luck!

No. "The non-discriminatory rate of match" is more of a function of what is allowed to remain in the plan as opposed to the rate someone actually receives. I say this because this test is performed after all corrective distributions are made from ADP and ACP failure. I see your issue with the logic, because it seems as if a plan can "make out like a bandit" by having a 100% coverage ratio test by simply adding an EE after-tax feature. The direct tradeoff is more people in the test. To your point, Benefits, Rights, & Features must be currently and effectively available on a non-discriminatory basis. That does lend itself to a potential discrimination issue when the "MATCH", itself, is available to a more restrictive group of people. But, look at how this is actually tested, the top ratio needed is actually 50%; to that test is much easier to pass. Good Luck!

No. You are "benefiting for 401(m)" if you are "eligible to make an employee after-tax" contribution, regardless of whether you actually make it and regardless of whether you are eligible to receive a match. Hence, your coverage ratio test would move to 100%. Bringing all those individuals into the ACP test, however, will make it harder to pass. No additional testing would be required. Good Luck!

Just an amendment to terminate the plan That is correct, after all mandatory distributions have been made (i.e. RMDs if you are age 70 1/2 or older. You can actually do it yourself. Good Luck!

He can roll the after-tax source (including the Employee after-tax amounts plus the earnings on those amounts) over to a Roth IRA. This is done by treating the after-tax source (that has been recordkept and tracked separately) as a separate "account or contract" under Section 72(d) for tax purposes. This, effectively, allows the distribution of the after-tax "SOURCE" without having to prorate the basis amount with the entire plan balance; keeping it restricted to after-tax contributions and the earnings on those amounts. The plan "MUST" allow him a direct rollover to a Roth IRA, per IRC Section 408A(e) and IRS notice 2008-30. Good Luck!

"Like". I fall under this category Wait a minute?!? This is going to give me something else ponder.

"Like".

"Like". I was thinking that.

No. There is no double attribution of ownership under IRC Section 318. So, no attribution to in-laws. Good Luck!

That's a good question. You know, many rules are written that "never anticipate" something honest happened to cause what appears to be a potentially blatant failure (I say this term lightheartedly). It appears to be a judgement call in this instance and the importance of retaining your documentation in identifying the however you deal with it can't be expressed enough. With that said, I would err on the side of conservatism (depending on the amount of earnings). Arguably, there is some responsibility to the organization to ensure the check sent to the trust was actually negotiated (as to not wait until the trust and payroll are reconciled at year end). Again, this is merely one argument. I just don't know if I would treat it as a situation where the deposits were not timely separated from employer assets. I would appreciate the arguments to the contrary, but would typically attempt to mitigate the risks when possible. Good Luck!

When attempting to terminate a 403(b) plan, you'd run into the following: 1) Assets must be distributed within 12 months of plan termination 2) This requirement is met easily for contracts funded with 403(b)(1) annuities, as you'd only have to issue the annuity to the participant. 3) When the contract is funded with a 403(b)(7) brokerage account, this can become an issue when there are participants who refuse to consent to a distribution. 4)Terminating a 403(b) "may" (or may not) be an issue when you balance to these rules. 5) There are attorneys suggesting to the IRS to allow the 403(b)(7) account to be distributed to the participant in the same manner as the 403(b)(1) annuity; which would clearly resolve the issue. 6) Unless there are actually 403(b)(7) accounts, you should not have an issue. Good Luck!

Thought Tom worked the Dorsa. Just a curious observation that means nothing. "Like". I know the feeling. I typically do not hold much regard to an informal statement from an IRS personnel when their statement directly contradicts the written Regulation (IRS personnel makes mistakes in interpreting the law too). I understand your point to mean that there are actual well written regulations addressing how to determine if an amendment could be made mid-year to a Safe Harbor 401(k). I read those, ONCE. I, personally, have to read a Regulation at least 5 times to get it to fully resonate (but that's just me). I do, however, appreciate what you're saying; and the written Regulation should be enough to make that determination.

This is a topic of constant debate. It is another instance where KevinC had demonstrated a higher grasp in other posts. I would argue that you could amend the plan in this instance to remove the last day requirement as the safe harbor notice likely stated that "you may" receive additional profit sharing contributions in addition to the safe harbor contribution. I cannot conceive, in this instance, how this amendment would not be allowed. Good Luck!

This is the contradiction, anything obligated cannot be limited under 402(g); which is totally elective. Correct. Good Luck!

Also, you cannot forget the 5% owner requirement; anyone who owns more than 5% of the employer in the current or preceding year is an HCE; regardless of compensation. This is what, typically, makes the Partners HCEs. Good question on the Compensation determination, though. Good Luck!

Like Benefitslink has become somewhat of an institution for our industry. I've enjoyed the reading the forums and tapping into the knowledge of experienced individuals; even to gain understanding of arguments that I don't agree with in order to be more fully informed of the actual argument. I think it is time, however, to modernize the forum, WITH THE ADDITION OF THE "LIKE" BUTTON

In that case, it wouldn't count against the 402(g) limit. It's the old "Pick Up" contribution situation where the "mandatory" contribution is not "elective" and doesn't count against the elective deferral limit. However, it is made by the employer but designated as an employee contribution; making it subject to FICA until another governmental plan can "pick up" in the contributions as non-elective. So, even if it is a 403(b), the fact that it is mandatory means it does not count against the 402(g) limit. Those amount will be treated as deferred compensation until a governmental employer "picks the up". From there, they would be treated as nonelective. IRC 414(h) would be your reference. Please don't ask how can you have a pre-tax mandatory employee contribution. That's what make the "Pick up" situation so wierd. Good Luck!

If the ORP is not a 403(b), then I can't foresee an issue with him maximizing the deferral to his own 401(k) plan. Good Luck!

I really don't think it matters. I say that because 1) the plan does not have a profit sharing contribution (NO), but 2) a 401(k) is, technically, a feature of a profit sharing or stock bonus plan (YES). I imagine that 100 plans that are 401(k) only would have some percentage not include 2E in the pension codes and an offsetting percentage (1-%) including the 2E. I would include it, but would certain respect a decision not to. My reason for including it would be because it is a feature of a profit sharing plan, which implies that if the plan would become Top Heavy for any reason, a non-elective 'may' be required despite the fact the plan is not set up to make profit sharing contributions. Arguably, until such time as a non-elective is made (for whatever reason), you may decide not to include it. Good Luck!

Sure, if they are excluded from eligibility to make deferrals. Good Luck!

"Like". Even though I wouldn't agree because of the aforementioned reasons This goes to show that even though we agree on many issues, we often disagree. In my mind, this is when it becomes imperative that the IRS offers more specific guidance. It could be argued that if plan that uses a 3% nonelective, and guarantees a fixed match on top of that would have compelled someone to defer earlier in the year if the individual realized the matching contribution would be 100% vested as opposed to a 6 year graded. Even though everyone is better off in all instances, a time-frame for becoming 100% vested "may" impact the individual's willingness to defer. It's just an argument. At the end of the day, I couldn't imagine an auditor challenging it (so I sort of agree).

I agree, but my comments were intended to structure an approach to answering the question as opposed to suggest something as minor as changing the sponsor's name would constitute a significant change. I was thinking along the terms of amending the plan to add an additional matching contribution when the plan (nor the notice) made no mention of a match. I agree, it was more of an idealistic approach to add reason. Just think of how "MOST" operational items could be amended to provide for things that are contrary to what we mentioned in the safe harbor notice. Some items may "clearly" be amended during the year while other would straddle the line. My approach was merely to help distinguish "some" clear cut items as opposed to providing a definitive answer. "Like"

With respect to what KevinC has documented, I would think a reasonable approach would be to determine if such amendment would contradict anything provided in the notice issued prior to the plan year (or if the next notice would change as a result of this amendment). If nothing would change in the notice that was provided, then it should be safe to create the amendment. Good Luck!