PMC

401(k) Plan maintained by a controlled group - Employer A and Employer B. Plan year is calendar year. The was a change in ownership in October 1, 2012 to the extent A & B are no longer part of the same controlled group and they want to maintain the Plan as a multiple employer plan going forward. Understand the transition rule for coverage but for ADP/ACP would the Plan run these tests with A & B together for 2012 plan year using contributions/compensation for B up to 10-1-12) and then do separate tests for Employer B based on comp. and contributions for October thru December 2012?

Participant's 401(k) plan account includes employee after-tax contributions (post '87 and not Roth). After this individual terminates employment and requests a distribution from their after-tax account, some of that distribution would have to be considered a return of earnings, correct? Could that individual request a rollover to an IRA of just the taxable portion of their account and receive a distribution of just the after-tax contributions made to the 401(k) Plan - no taxable event?

Can a Plan start an EACA mid-year but just not have the 6-month ADP/ACP excess rule applied for the short year but still have the permissible withdrawal rule applied for that year?

Rather than distribute assest to participants upon Plan termination, can the Plan fiduciary decide to transfer the terminated plans' assets to another Plan? Co. A purchased Co.B and Co. B's plan is terminating. Rather than distribute Co. B assets to participants can the fiduciary simply transfer to Co. A plan?

Company A has a non-safe harbor 401(k). Company B has a safe harbor (3% nonelective) 401(k). Company A purchased Company B (still remain as separate entity) and want to merge CO. B's Plan into Company A mid plan year (calendar year for both). Can CO. B's plan even merge into CO.A's? Understand that CO. B can cease the SHNEC only if they prove substantial business hardship or terminate their Plan due to a 410(b)(6)© transaction (and fund the SHNEC up until that time and test). Proving substantial business hardship doesn't appear to be a possibility so that leaves termination. If CO. B terminates their Plan are they REQUIRED to offer participants distributions, or can the Plan fiduciary decide the CO. B Plan assets will be transferred to CO. A Plan? And if distributions are required then I assume there is no problem in CO. B participating in CO.A Plan within 12 months of distribution because of the Corporate transaction?

Employer A sponsored their own 401(k) Plan for several years. In 2009 they transferred the assets of that Plan to a multiple employer plan (sponsored by an HR Services outfit) in which they became an adopting employer. It is a safe harbor plan. Now 2011 (eff. in March) they want to spin-out of the MEP into their own plan. I understand that they would have to ADP/ACP test for the short year under the MEP. A few questions - 1. My thought would be the Plan (2011) would essentially be a new start-up plan for this Employer A with assets attributable to them being transferred from the MEP. This would be Employer A's #002 plan. However, 2. If the 2011 Plan is a start-up (eff. March 2011) and this Employer wants to have a calendar year Plan year, would they be eligible to establish this Plan as a Safe Harbor plan? There would obviously be more than 3 months left in the PY to make elective deferrals, BUT would this Plan be considered a "successor plan" and thereby prohibiting a plan year with fewer than 12 months? I suppose a way around that would be to establish the Plan Year as 3-1 to 2-28 for an initial full 12 months and then change to calendar year in the future if need be. 3. Or, rather than treat the 2011 plan as a new Plan, could it be treated as a continuation of their "separate plan" while participating in the MEP thereby resolving the "successor plan" and short year testing issues. What would the plan number of this plan be? Not 001, that one has long since been dissolved. 002? Thanks for any comments.

2010 not an But this individual wouldn't be receiving a safe harbor contribution for the entire plan year in which he was eligible to make deferrals, only a portion of it. Doesn't that make a difference?

Thanks for the comments but an individual could easily be a HCE under the scenario above. Hired 2-1-10 but doesn't become eligible for the safe harbor match until 2-1-11. His look back year is 2010 and could have comp. in excess of $110k and therefore be treated as a HCEE for 2011. Is this person required to be included in the ADP for 2011 and what comp is used?

Safe Harbor Plan - 3% nonelective. Calendar year/plan year. Eligibility is 21 and 2 months for making deferrals while age 21 and 1 year of service for SHNEC. Monthly entry dates. Designate as separate plans and use the otherwise excludable rule and will have to ADP test the excludable group. How long is an "excludable eligible 'EE included in the testing group? (I understand the top heavy consideration too.) For example - 'EE hired 2-1-10 and enters the Plan 4-1-10 for purposes of making deferrals. Eligible to receive SHNEC effective 2-1-11(one year of service). SHNEC is based on compensation from time eligible to participate in SHNEC. Would this 'EE be included in the 2011 ADP test since they were eligible to make deferrals but didn't receive the SHNEC for part of the plan year (for 1 month's compensation)? If so, would they be tested based one month's (January 2011) compensation? Am I correct to assume if the SHNEC was based on the entire plan year's compensation (2011) this person wouldn't be included in the 2011 ADP because they would have received a SHNEC for their compensation for the entire plan year?

Plan uses an ACA. What they want to do is each year require an eligible employee to decline to make deferrals or they will withold deferrals. So an eligible employee who declines when first eligible will have to decline again the following year and the following year (etc. etc.) or the employer will withhold. Is this acceptable? Any laws (Fed or State) being violated? Once a participant declines under AE isn't it up to them to decide to participate?

BG - that's kind of what I thought and what prompted the question - can't use a QNEC during the first 12 months after failure but wait until after 12 months and can use a QNEC (not a 1-to-1) to correct? The case I was originally referring to has only 1 NHCE whose salary is relatively low. The Plan Administrator just failed to include that person in the test with a 0% deferral rate for a couple of years. They failed ADP for the 5-1-09 to 4-30-10 plan year. Rather than refund all the elective deferrals for the HCEs (minus what could be considered catch-up) why not just wait until 5-1-11 (more than 12 months after PYE) and then make an inexpensive QNEC just for that one NHCE? Granted, most 'ERs may want to refund excesses during the 12 month period after PYE rather than wait until after 12 months especially if there are several NHCEs who need the QNEC but waiting seems to work for this Plan where only one NHCe is getting the QNEC.

Thanks for the response. Yes the Plan is top heavy but the T-H minimum has been satisfied by a PS contribution.

Small plan with 5 HCEs and 1 NHCE. Prior year testing. 5-1 to 4-30 plan year. Come to find out the NHCE didn't make any elective deferrals for the 2007, 2008 or 2009 plan years - ADP = 0% meaning the HCEs ADP fails and wouldn't be allowed to make deferrals (other than catch-up). No corrections have been made yet. Do you agree that since any correction for the 2007 and 2008 plan years would be later than 12 months after the applicable plan year, EPCRS would allow a QNEC to the one NHCEE in an amount need to pass each year's ADP (plus earnings) without any distribution to the HCEs? Don't want to go the one-to-one route. But what about for the 2009 plan year. 12 months haven't passed yet since the end of the 2009 plan year (4-30-10) and since this plan uses prior year testing, it seems if they wanted to correct before the end of the 12-month period, corrective distributions to the HCEs is what has to be done. Rather than that, couldn't the employer just wait until the 12 months has passed and make a QNEC on behalf of the NHCE for the 2009 plan year avoiding distribution to the HCEs?

Employer A and Employer B (controlled group) have been participating in a Safe Harbor 401(k). During 2010 (not sure when) relationship changed and Employer B no longer part of the A/B controlled group. Employer B now wants to spin-off their portion of the A/B plan into their own plan mid-2010 and want that plan to be a Safe Harbor plan (same provisions that were inthe A/B plan). If Employer B establishes the plan year as the calendar year, then the first plan year obviously would be fewer than 12 months. Would this be a "successor plan" for Employer B prohibiting them from establishing a safe harbor plan for the first calendar/plan year (more than 50% of eligibles in the Employer B plan participated in the A/B plan)? Would the obvious solution to be safe harbor for the first plan year be to establish the first plan year as off calendar year and then (if they want/need to) do a short plan year and then go calendar/plan year?

Plan is a safe harbor plan but due to some incorrect system coding a 2007 ADP test was run, test failed and what otherwise would have been excess contributions were returned to 2 HCEEs in 2008 resulting in improper distributions. The affected HCEEs have been contacted to try and get a return of the excesses but not successful so far. If they don't return the excesses, are these amounts (and earnings) still required to be put back into these 2 participants accounts? If these HCEEs have since terminated are they due any additional amounts other than perhaps earnings from the time of the incorrect distribution to their date of termination?