ETA Consulting LLC

You cannot change the conditions for receiving an allocation after the conditions have been met. Such a change should be made the 1st day of the next plan year; and should be signed prior to then. Good Luck!

Arguably, yes. Generally, you cannot change the condition for receiving an allocation after those conditions have been met. So, to amend the plan eligibility would presumably allow more people in (causing the ones originially eligible to receive less that they would've received prior to the amendment). Good Luck.

Not necessarily. A single employer plan can cover any employee of the employer sponsoring the plan. You can draft any plan to exclude any non-discriminatory group of employees (meaning you must pass the appropriate coverage the non-discrimination tests each year). Good Luck!

Yes, without language in the profit sharing formula stating the contributions will be curtailed at the 415 limit, then they can. Typically, qualified plans must make it impossible to exceed 415. However, when you "failed to limit the amounts an employee may defer", then you may proceed with allocating pursuant to the plan's formula and then correct the 415 excess under the terms of the plan (presumbly by distributing deferrals (and forfeiting attributable match) first. Some plan documents state you'd forfeit Profit Sharing first. I would say the key here is the read your plan closely and understand that the employer isn't exercising any discretion with respect to who receives what. Once the contribution is determined, then you must follow the terms of the plan. Good Luck!

It's hard to follow the fact pattern. Typically, when a new plan is adopted, the original effective date is usually made retroactive back to the 1st day (i.e. January 1st). At the same time, a provision would be written to state deferrals will not begin until actual adoption. Your fact pattern suggest that someone may have started a plan, but failed to execute the initial document prior to actually beginning the plan in operation. This would appear to be an issue worth correcting. It appears to be worthy of a VCP filing; perhaps to make the original effective date earlier (provided the plan actually operated while the delayed execution was merely a technicality). Good Luck!

Let's supose I worked for this company 5 years while they never had a plan. Obviously, I would've already met the age/service/entry date provisions on the first day. Sometimes, the plan may say everyone employed at plan inception is in; while the age/service rules apply to subsequent hires. Even if it didn't, I'm in. Even if there is a short plan year, say 3/1 to 12/31, I still believe the semi annual entry dates are 1/1 and 7/1. So, anyone who is eligible on 3/1 (the first day of the short plan year), and 7/1, the first day of the 7th month of the plan year is in. This, however, is purely interpretational. The only requirement is that you clearly define your intent in the document and that intent cannot violate 410(a)(1) and 410(a)(4); the age/service and entry date rules. It's like a puzzle. You would have to draft the plan to make it consistent. There is some flexibility. I agree with you on the sales force issue. Remember, they're not familiar with all these rules; it's up to you to train them. When you train one, there'll be another newbie coming in that is even more confused than the first. This cycle never ends. Good Luck!

Off the bat, when you use component plan and average benefits test in the same sentence, you're missing something. The average benefits test negates the component plan methodology for passing 410(b) as you must test ALL plans of the employer together. Good Luck!

Typically, the QDRO process has nothing to do with Bankruptcy. Ultimately, you'll have to work it out with the Plan Administrator. While the plan assets are excluded from the bankruptcy estate, that does nothing to exclude them from the QDROs or IRS tax levies. Good Luck!

Any employee is correct, with the exception of union (as you stated). Good Luck!

Actually, no. Since the profit sharing is discretionary (as it's not a 'pension plan' subject to the funding requirements or written with a fixed formula), then the employee is "not" considered as covered by a plan during the year. However, you'd backtrack to last year. If they made a discretionary contribution for the 2010 year end that was deposited in 2011, then the employee would be considered as covered by a plan during 2011. The coverage on this depends on the deposit actually being made when the contribution is discretionary. It's a special rule that caught me by surprise many years ago, but I'm too lazy to look it up. I would imagine the W-2 rules are written to adhere to this. Good Luck!

You would have to compile several rules together to get where you need to be: 1) A matching contribution is not treated as forfeitable merely because the contribution to which is relates is an excess contribution (stated loosely). 2) However, after all excess contributions are distributed, you may not have a discriminatory rate of match. From here, you can already see that if the employee is an NHCE (which is likely since he's a new hire), there is no forfeiture required. However, you must follow the written terms of your plan. If the plan say's forfeit, then you should forfeit. However, if the plan remains silent, then you shouldn't forfeit without it being written in the plan. If the individual is an HCE, then there is additional analysis required. Good Luck!

That sounds correct. You're simply using compensation for the (match) eligible period only; which has nothing to do with the deferral eligibility period (for testing purposes). You are including all employees who were eligible to receive a match (even if they didn't defer), during any part of the year. You're just looking at not testing the entire year of compensation (which could lower the percentages in the test). Good Luck!

It really has nothing to do with the definition of compensation. It's clearly an issue of defining the group of employees who are eligible to receive this type of contribution. This is a coverage issue and tested under 410(b). The reason you don't have that on the deferral portion is that 403(b) is subject to the universal eligibility rules (employees expected tow work 20 hours per week, with a few exceptions). Employer contributions is totally up to the employer (this is how much and this is who receives it). Once you pass 410(b) and ACP, then you're golden. Now, when you are testing under ACP, then the definition of compensation used must be non-discriminatory. This opens the door to exclusions (where you don't have to use compensation during the entire 12 month period; especially when the participant wasn't eligible for the entire 12 months.) Good Luck!

The non-elective is limited to 2%; and 2% is the only non-elective amount that can be made. The matching contribution is 3%, but may be reduced to 1% for any two of a rolling five year period. Good Luck!

No. I'm not saying that; as I am confused on the fact pattern. I am under the impression that the plan was taken over by the new employer. The TEFRA election should state the plan it applies to; and should remain in effect since the plan is in existence. Now, if the employer sponsors another plan (and has two plans), then the election should not apply to the new plan. Sorry for the confusion. Good Luck

A SEP "may" use aggregate employer contributions instead of balances when determining the top-heavy ratio.

It should remain in place provided it is for the same plan; barring some language in the election stating otherwise. Good Luck!

A 'related rollover' is a 'transfer'. It's not really a rollover in that the employee would not have the option of rolling it over to another IRA. So, you would ask the question, can he roll it over to another IRA, or just take a cash distribution if he wants to? If the answer is yes, then it would not be a related rollover. If the answer is no, then it would be a related rollover (since it is really a transfer). Good Luck!

When you return the money, the deferral is deemed to have not been made. If the contribution is not made pursuant to the employee's election, then it cannot be an elective deferral. Hence, the auto deferral (in orde to maintain the integrity of the election) must provide the participant an option to elect not to make it. You're only saying "if you do nothing, then you agree to defer this amount". When you don't give the employee that option, then it's not an elective deferral (and does not get a match). Good Luck!

No. It's still a voluntary rollover. A SEP is treated as a traditional IRA for all distribution purposes. Nothing changes. Now, if he were to maintain a SEP and a 401(k) plan (why would he ever do that?), then the contributions to the SEP during the year will be combined with the balance in the 401(k) plan in determining whether those plans are top heavy. But, to rollover a SEP into a 401(k) plan will "NEVER" be considered a related rollover. Good Luck!

I took, as passed them both, back during the Summer. I'd bet dollars to doughnuts nothing has changed. They're basically testing fundamental concepts (i.e. failure to issue an SPD is a criminal offense, not a criminal offense) type of stuff. They'll be asking that question 5 years from now. Good Luck!

Absolutely not. The SEP is a traditional IRA where the taxpayer is in control. Good Luck!

Well, it's not severance. Being retention, it applies to the employee working (as opposed to leaving). Why wouldn't it be considered eligible compensation. We know, at least, it's included in 415 Compensation. Good Luck!

You are correct. They will basically place themself into an ineligible class that is not a statutory excludable. Good Luck!

I don't necessarily disagree with you. I probably agree with you more than I disagree; except for the cost being a deterent from VCP. We often see posts here about IRS auditors challenging Self Correction methods. I think we could agree that VCP should be part of any analysis; and not necessarily write is off without considering the actual costs. Good Luck!