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Ultimately, the plan sponsor must take responsibility to ensure the participants rights under the terms of the plan are enforced. With that said, the 1/2 of the missed deferral (calculated at the average rate for the other members of the allocation group) would be made plus any matching contributions that would've been made on those amounts. Remember, this is a preferred method under SCP, but the IRS "MAY" be more lenient under VCP. The plan sponsor may seek recourse from the payroll provider that created the error. It's possible under VCP given the potential hardship it may create for the plan sponsor when trying to correct under the "preferred method" outlined in Rev. Proc. 2008-50. In theory, VCP submissions are entirely negotiable between the employer and the IRS. I'd give it a shot. You may attempt to see what you can get from the payroll provider (dependig on how large they are, they may have E & O to cover these types of damages). Good Luck!

Good question and is likely an interpretational issue with the plan's document. At least one plan I remembered had language identifying that matching contributions will be made for only those payrolls during which deferrals were withheld. This would clearly mean that no match would be given on the bonus compensation paid 'during or on the last day of' the payroll period unless deferrals were actually withheld from the bonus check. Without such explicit language, different employers (on the same document) may end up doing it differently. Good Luck!

Okay, now I understand the argument Was it always "a participant" at year end or "employed" at year end? At least I got the gist of the argument.

Seeing as how the TH determination date is the last day of the preceding plan year, you'd normally know that a TH minimum will be required should a Key Employee benefit under the plan. Also, this would appear to be written into the language of any plan document; so, irrespective of the regulations that 'may' govern what may be written into the plan, you should follow the plan's terms (as we know they will likely not provide for something the regulations doesn't allow when stating how the TH minimums will be provided). I guess I'm basically saying, just follow the terms of the plan. Any other approach being used would, at least, have to be written into the plan. Good Luck!

Entirely legal. Plan Participation is not protected from cutback. Therefore, there is no rule saying once you're allowed plan entry it cannot be taken away. When the employer does this, the plan (as a whole) must continue to pass the non-discrimination tests. Since you're still employed, there is no severance of employment to allow for a distribution and rollover to another plan or IRA. It's just a matter of 'potentially' bad employee relations or other factors, but entirely legal. Good Luck!

That puts me back at $25K to $50K :angry: :lol:

I would've never thought to ask this. I'd bet the owner gets paid at the end of every month. The obvious result would be the owner being able to defer from 100% of his payrolls while the other employees being able to defer from only 50% of theirs. Good one. I typically try to figure out why someone would ever imagine attempting to do something. Kind of disappointed in myself that I didn't think of this. Once you figure that out, it's often much easier to explain to the client why it won't work Good Luck!

I am assuming you're saying they have a 401(a) Qualified Plan and a 403(b) Tax Sheltered Annuity. The answer would be no. Each plan would file their own Form 5500; subject to whether each plan is subject to Title I of ERISA. Good Luck!

Whatever the strategy, I can tell you that $50K each is not enough. Life insurance is one of those things that you only wish you had more of when the unfortunate happens. Funeral expenses alone will eat up alot. Also, for lack of a better analogy, you have account the impact of one horse being left to pull a wagon that was previously pulled by two. You'd want the house paid off; so that the one remaining doesn't have to make a house payment. If you rent, you'd want enough to purchase a house so the one remaining doesn't have to make a rent payment. You'd want the car paid off. You'd really want to defray expenses for the foreseeable future and not go into an immediate financial strain. At least $250K; especially when you're young and rates are relatively lower. Just my way of thinking. Good Luck!

I don't disagree with you Poje. In the event someone from one of the IRS regional offices challenges it, you could actually show documentation where the IRS stated publically to a room of pension professionals that this was their approach. When looking at the rules, there are a few holes here. It would be 'nice' to get those addressed (for professionals who may not be affiliated with ASPPA).

Pushing the "LIKE" Button. Just follow the terms of each plan. No need to look to do anything differently. Good Luck!

From 2012 ERISA Outline Book, p. 6.209 (emphasis mine) Other plans may have longer suspension periods (such as one year). I stand corrected. Thanks for this. I used to know it, but forgot

This is good info, as my approach would have been to resort to testing: 1) You must follow the terms of the plan by making the contribution in the amount (and based on the definition of Compensation) defined in the plan. 2) If the definition of Compensation happens to fail 414(s), then you lose your safe harbor 401(k). 3) On what authority, under the terms of the plan, would there be to make additional contributions (in order to preserve Safe Harbor). My first time hearing this 'informal' approach. I wish ASPPA would encourage them to provide something we can use: (i.e. something that one IRS office may accept while another one rejects isn't a good approach). I do like the approach, but would like for it to be consistent. Question, does that correction involve retroactively amending the plan to a safe harbor definition (or one that satisfies 414(s) )? Would this be under SCP or would a VCP application be required since it is a retroactive amendment? This is what bothers me.

Actually, a plan consisting of only 403(b)(1) insurance annuity contracts could easily terminated in this manner; making a full distribution of all assets within 12 months by issuing these contracts. The 403(b)(7) brokerage accounts would run into problems with certain state laws. I think the issue, currently, is that they have started another 403(b) plan; which appears nothing more than a continuation of the current plan given the IRS's required enforcement of contracts after 2005. (The 2005 date is loosely stated. I didn't look up the actual reference, but it was around that time.) Good Luck!

I just love it when fact patterns change "Deleted Comment" Good Luck!

Sure, a plan can do whatever it wants as long as the provisions are written within the plan. There's nothing precluding a plan from saying 'anyone whose last name begins with X shall not be able to defer in the months of January and February'; as ridiculous as that sounds. The caveat is that it must continue to pass the appropriate non-discrimination tests; and many practioners often disagree on whether or not certain provisions need to be tested (or which tests apply). The question here, and always, is why would you do that? There would, generally, be logic or reasoning behind anything a plan does. What would be the benefit of extending the suspension period beyond 6 months. You may, if the plan is written that way, but why? Good Luck!

You may not need an amendment for this potentially costly option. As it currently stands, if a participant received an amount they were not entitled to under the written terms of the plan, then you can retrieve those funds (or issue a corrected 1099-R) to show the excess portion was not eligible for rollover. You'd then only reimburse the plan for that amount. Any proposal to give all other employees the excess that was given to one participant would appear to be more costly than necessary. Good Luck!

Sure, that would prove that the non-elective contributions are non-discriminatory, but does nothing to help you 'deem to' pass the ADP test. Given that you have two standards here: 1) Pass the ADP test; and 2) Show the Non-elective contributions are non-discriminatory, I would change the defintion of Compensation to ensure it meets a Safe Harbor. It defeats the purpose of SHNEC when you test the Compensation and have it to fail, resulting in you having to perform the ADP test anyway. Good Luck!

The IRS has rules regarding which 403(b) accounts "must" be included as part of the plan for compliance purposes. These are different from the DOL's rules on which participant accounts must be included on a Form 5500; where transition relief is a big factor when there aren't any additional deferrals being made to the contracts after 2008. Of course they are, given there are few exceptions to the universal availability rules on deferrals. Not now. A 'termination' is followed by a full distribution of assets within 12 months. 403(b) plans have historically had problems terminating because of this provision. Also, there is still some back and forth on distributing the accounts for several brokerage accounts under 403(b)(7) where the IRS rules allowing the employer to distribute the contract isn't necessarily supported by the state laws governing the brokerage accounts. I am not sure where this has evolved, but it appears to be a non-issue since the plan is not terminated. You're not going to move a participant's contract to a new provider without the participant's consent. Remember, the IRS has rules on which plans must be considered as part of the plan for compliance purposes. These contracts will likely continue as part of the new plan and will not move until the particpiant actually makes an election. Good Luck!

Well that is one way a document may allow for match to be calculated (typically referred to as a payroll period match). Under all instances, you'd still have to account for ensuring you do not provide matching contributions on Compensation Exceeding the 401(a)(17) limit. Good Luck!

Typically, this provision is used to make the employee a member of an 'ineligible' class of employees. When this is the case, then the employee isn't even considered in the ADP test at a zero deferral percentage because he is not eligible to defer to the plan. He would, however, be considered in the 410(b) test as non-excludable but not benefiting. Since we are talking about 'governmental plans' the non-discrimination rules do not apply. My immediate question is what are we trying to do here?

Are you asking are there any issues due to them being a 'holding company'? No. Good Luck!

You could do that, but you must account for other parameters (i.e. attribution rules) that may still have him treated as a 5% owner during 2013. Good Luck!

I do not think there is a de minimis exception. I know it defies logic, but I believe the idea of requiring this to be done is the intended punishment. In many calculations, the earnings aren't that substantial. Good Luck!

Your plan year began in 2012. It's a short plan year that BEGAN in 2012 You'd use to $250K limit when prorating. Good Luck!