PMC

I guess the question I still have is, since the 3% Match to the HCEEs doesn't satisfy 401(k)(12) safe harbor minimum, how can it be considered a safe harbor contribution (at least that's what it's called in their current document)? And if not, would it have to be tested under ACP? And since that would be the only Match in the ACP (i.e., HCEE Match) wouldn't that pose a problem?

Thanks. So even though the Match the HCEEs receive is not in a "safe harbor" amount, the HCEE match does not have to be tested under ACP? And since the rate of match isn't greater than what the NHCEEs receive (S-H Match), there is no (a)(4) issue? And the entire plan can be viewed as a "Safe Harbor" plan and exempt from top heavy as well (provided no other provision precludes the t-h exemption)?

Looking at possibly taking over a Plan and after reviewing their current document have a question - Plan was amended to become Safe Harbor effective 1-1-09. The document uses the Enhanced Match of 100% of first 4% for the NHCEEs. The document also states the "Safe Harbor" Match for the HCEEs will be 100% of the first 3%. That formula obviously doesn't meet the minimum for a Safe Harnbor contribution and I understand the HCEEs aren't required even to receive a S-H contribution in order for the Plan to be S-H and the S-H minimums are what the NHCEEs must receive. But would this Match to the HCEEs be considered a S-H contribution and exempt the Plan from ACP? Or would this Match to HCEEs have to be tested under ACP - obvious failure. Would the S-H Match made to the NHCEEs and the Match made to HCEEs be taken together to see if (a)(4) is satisfied?

Resurrecting this - Employee terminates, receives a distribution and forfeiture occurs. Rolls the distribution to an IRA. Is rehired shortly after termination and wants to "buy-back" and restrore forfeiture. The buy-back is coming from his IRA. When the buy back amount is contributed via the IRA rollover, does the buy back remain in his "rollover" account in the Plan? If that's the case and his forfeiture is restored to his account, then what's to prevent the employee from either taking a distribution from the rollover account (provided it's permitted by the plan), or rolling out to an IRA again? Or is that portion of the IRA rolled over to satisfy the buy-back required to restore taken and placed in the employer contribution source from which the forfeiture occurred? Ex. 'EE takes a distribution of $20,000 and rolls in an IRA. $5,000 'ER contributions $15,000 'EE deferrals Resulting forfeiture of $5000 If the 'EE rolls back his entire IRA now worth $22,000, is that $22,000 put in the "rollover" source in the Plan? In which case the plan could permit an immediate distribution or rollover of that rollover source. Or, do you take out $5,000 and put that in the 'ER source and the remaining $17,000 is in the rollover source?

No, A no longer exists. B essentially reemerged as B after bankruptcy as a new company. I was just wondering if for any reason B could actually be considered the same employer as A for applying the successor plan and unrelated rollover rules.

Employer A maintained a 401(k) filed for bankruptcy and terminated the Plan and employees have been given the opportunity to take a distribution or roll over. "A" essentially reemerged as Employer B - different TIN, name, but providing the same product with the same employees and employer B is establishing their own 401(k). Do you agree that B is a different Employer and no issue with successor plan rules? And if B is a different Employer than A, any rollovers would be unrelated?

An Employer provided incorrect data and the Plan failed ADP for the 2007 plan year. Excess distributed to the HCEE. 1099 done reflecting the distribution. Error was discovered in 2008 and using correct data the Plan re-tested and passed ADP. Employer requested and received the overpayment from the HCEE in 2009. Is the correction method for the participant to redo 1040 for 2007 and issue a corrected 1099? Is the employer required to contribute any earnings from the time the incorrect distribution was made until the time of the repayment? Or is a vaiable alternative just to treat the repayment as after-tax creating basis for the employee, no revising tax forms or corrected 1099? Would the employer owe any earnings in this scenario?

Although it doesn't exactly apply in this situation (because the 'EE completed a year of service earlier) but suppose the plan had a 6 month requirement (no hours) and the 'EE became a participant but never completed a year of service. And then the plan was amended to YoS for eligibility, the Plan could keep the 'EE from active participation. Long story short - once a participant doesn't mean always a participant. ERISA Outline book has a good explanation - Chapter 2, Sec. VI, Part E.

Plan was amended to be safe harbor effective 1-1-09. Plan had reallocated forfeitures but was changed to reduce when amended for safe harbor. Only employer contributions made are those used to satisfy safe harbor. The Plan does have some forfeitures (on old non-safe harbor $) that need reallocating for the plan year ending 12-31-08. The plan otherwise would have been top heavy for the 2009 plan year based on the 12-31-08 determination date. Question - since the plan is safe harbor for 2009 will it be exempt from top heavy for the 2009 plan year if forfeitures are reallocated in 2009 for the 12-31-08 plan year end? It would seem to be the same as if a PS contribution were made early 2009 for the 2008 plan year - the plan would be exempt from t-h in that situation, wouldn't it. It's the plan year for which they are allocated and not in which they are allocated that would affect top heavy exemption?

Thanks Janet. Follow-up question- In order to restore the forfeiture the employee must recontribute the amount of the distribution. Since the time this individual rolled over their distribution to Co. B's plan the amount of the distribution from Co. A' plan has decreased in value. Does this employee now have to make up the difference with an after-tax contribution and tracked as such in the Plan? I assume the plan would have to permit after-tax contributions. If the plan sponsor doesn't want to do this, then the participant is essentially out of luck and the forfeiture can't be restored?

Individual terminated employment from Co. A less than 100% vested, forfeiture then created and rolled over the distribution to Co. B's plan. Individual is reemployed by Co. A and wants to buy back and restore his account, recontributing the amount of the distribution ('ER $). When the individual recontributes to Co. A's plan is that amount placed in the employer contributions source? Or would it be considered a rollover from Co. B's plan and placed in that source and would it satisfy the buy-back?

403(b) for a 501©(3) with matching contributions and they are interested in safe harbor to avoid ACP. The Matching contributions must fall within the parameters of contribution minimums and maximums for matching contributions to avoid the ACP test under 401(m). These Matching contributions are not being used to automatically satisfy ADP since there is no ADP test. Do these matching contributions used to satisfy ACP have to be immediately 100% vested? I understand the other requirements for ACP safe harbor, i.e., no allocation restrictions, no hardship w/d need to be satisfied but wondering about vesting, since additional Matching in a 401(k) could satisfy ACP without being 100% vested. Thanks

Employer wants to convert existing Safe Harbor plan to a QACA but they want to keep their existing Safe Harbor "Basic" match formula. The existing Basic will provide a 4% contribution for those contributing 5%. The QACA minimum will provide 3 1/2% for those contributing 6% and according to the QACA rules there must be an automatic contribution escalation from 3 to 4 to 5 to 6%. Couple of questions - Since the "basic" safe harbor contribution will meet the QACA minimum (3 1/2%) once the participant contributes 4% (automatic increase from 3% to 4%), must the plan automatically increase the participant contributions from 4% to 5%? And then from 5% to 6%? The new QACA will only have to be provided to those existing employees who have made no election to participate (or not), and to newly eligible employees as of the QACA effective date who make no election. Is that correct? Vesting - since existing participants are 100% vested in the Safe Harbor Basic contribution, must those participants continue to remain 100% vested in the new QACA contributions? EOB Sec. XIV, Part C, 1.d.3 says yes but just wondering if anything changed since that printing. I seem to recall there was some discussion that the QACA could be viewed as a "separate contribution source" from the regular safe harbor and therefore the 2 year vesting could apply. Thanks

Plan includes an EACA - default contribution percentage of 3%. Effective 1-1-09 the Plan wants to amend to a QACA with the default contribution percentage set at 6%. For those participants who were automatically enrolled under the EACA at 3% and have made no election to the contrary, must they be increased to 6% once the QACA becomes effective in 2009?

Individual has an IRA and is also a participant in his company's 401(k). Individual is age 74 and is still actively employed by his company. Individual has been taking the MRD from his IRA but now wants to roll over the remainder of his IRA (minus the MRD for this year) to his company's 401(k) to avoid MRDs from his IRA in the future. Any problems? Couldn't find anything prohibiting this but seems too easy to avoid future MRDs from the IRA.

Thanks for the responses. Lori - from the small amount of info. I have on this - any amount included in the employee's pay will be for either the employee or the employee's family member. So it won't be restricted to job-related educational assistance and it will be made based on some qualifications (TBD) but not restricted to managers or HCEEs. Would this precelude it from being considered a fringe benefit that would fall under 15-B and be able to be included in the safe harbor fringe exclusion for comp. in your estimation?

Employer will soon be adopting a program whereby they will be providing employees some compensation for educational purposes. The specifics of who would qualify and what they consider "educational purposes" are unknown to me at this time. But they did say it would be for employees OR family members. Their Plan currently uses a safe harbor definition for comp. and excludes fringe benefits. They want to exclude any payments made for educational purposes from their definition of compensation. IRS Pub 15-B describes fringe benefits for educational assistance as being for the "Employee." Do you think this form of "compensation" paid to the employee could be considered a fring benefit falling within the safe harbor fringe exclusion? Or would the fact that it could be for the employees family member preclude it from being considered a fringe benefit within 15-B?

Participant has a loan for a 5-year period and has made the required payments. They now want to renegotiate the loan interest rate to see about lowering their payments and continue to repay at the same frequency and within the original 5-year period. Are there any pitfalls in doing this? Would this constitute a new loan and if yes, would there be any need to take into consideration the outstanding balance of the existing loan (E Outline Book indicates no need). Is this as simple as just using the new interest rate on the remaining balance for the remainder of the 5-year period?

Can an employer require employees to make a specified percentage of deferrals to its 403(b) Plan as a condition of employment? Would this violate the CODA definition? Same plan - the employer makes an employer contribution on behalf of all participants. If the above is acceptable (i.e., mandatory deferrals permitted as a condistion of employment), would the employer contribution be considered a Match because only received if deferrals are made or would it not be considered a Match because all participants receive the employer contribution, it's just you have to make deferrals to even be employed and a plan participant?

What happened to the Q & A column on Davis Bacon Plans? Any other good sites with info. re- these plans?

Plan satisfies ADP/ACP safe harbor contribution requirement by using the basic matching method. The plan also permits a discretionary match and if made will be restricted so that the ACP safe harbor will apply. Can the discretionary Match that satisfies ACP be withdrawn due to hardship? I see where employer contributions used to satisfy ADP can't be withdrawn due to hardship and QNECs and QMACs, but not the ACP safe harbor contributions. Would they be considered QMACs and therefore prohibited from w/d due to hardship?

Plan has been making a matching contribution on a periodic basis throughout the plan year (5-1 to 4-30). The matching formula is 50% of deferrals not to exceed 3% of participant's compensation. Compensation is "plan year" compensation. Two HCEEs hit their deferral limit mid year. Corresponding match therefore stopped. Although the plan document does not specifically address true-up (either yes or no) upon reviewing the plan language the sponsor is interpreting the plan so that it requires using the full plan year compensation in determing the match. The Sponsor wants to retroactively apply the true-up for the 2006 plan year (and all subsequent plan years). Do you see a problem with applying it for the 2006 plan year if the sponsor determines they were not interpreting the plan provision properly and the additional match should have been made? Any additional true-up match would be made to all affected participants (NHCEEs and/or HCEEs). It would be counted for 415 purposes for the 2007 plan year so have to make sure no 415 excesses. Another factor is this is a safe harbor plan (using the 3% nonelective to satisfy ADP) and this Match in question satisfies ACP safe harbor. If the additional true-up match can be made for the 2006 plan year, could it be made only to the extent when added to the 2007 total match satisfies the ACP safe harbor limits (no match of deferrals in excess of 6% of comp.) for 2007? Want to remain within the confines of ACP safe harbor and not have to test any match. Thanks.

Safe harbor plan uses 3% nonelective to satisfy contribution requirement. The plan also includes an additional profit sharing contribution with 501 hours or last day requirement. Understand the safe harbor nonelective and additional PS need to be looked at as one contribution source to make sure a uniform allocation rate is provided and 401(a)(4) is satisfied and that the plan basically has to satisfy 410(b) to do that. Does the fact that the additional PS contributions automatically satisfies 410(b) (no employee exclusions)make this a moot point?

Saw this and just wanted to know if 1.401-6 (b) comes into play in these situations.