PMC

What happens if fund in which the forfeitures are placed loses money? For example - suppose Plan states forfeitures are to be reallocated. $1000 of forfeitures are placed in a fund and that fund is only $900 at time they are to be reallocated. If participants have accrued a right to "forfeitures" under the Plan, does that mean the employer must make up the $100 so that participants get the forfeitures they have an accrued right to?

Does anyone have, or know of, a chart illustrating the different provisions applicable to ACA, EACA, QACA?

Co A has a 401(k) and was purchased by Co B in an asset sale. The 401(k) was not part of the sale and is in the process of terminating. Co. A has a couple of 'EEs who are age 70 1/2. Am I correct in that those 70 1/2 employees would have to take a MRD from the Co. A's plan? Or does it matter if Co. B purchased Co. A prior to the termination of A's plan and they (A & B) would have been considered a controlled group and therefore those 70 1/2 employees have not yet terminated employment from the controlled group yet?

Back to the original post - in reading the regs. again, they are explicit in that elective deferrals included in a permissible withdrawal are not tested in ADP for the year for which the contributions are made. For many plans that do testing early in the year, that's going to require some re-testing.

Yes. You have ACAs, EACAs and QACAs. EACAs are ACAs, QACAs are EACAs but not all EACAs are QACAs. And ACAs may or may not be EACAs or QACAs.

Proposed Regs. indicate "permissible withdrawals" are not taken into account for ADP/ACP for the plan year for which the contributions are made. If a participant is automatically enrolled in Nov. '08 and 2 months worth of deferrals are made for Nov. Dec. and 2 weeks in Jan. '09) and then in January '09 takes a permissible w/d, the automatic deferrals made in Nov. and Dec. '08 are tested in ADP/ACP for '08. A permissible w/d wouldn't occur until '09 and any deferrals made in '09 would not be subject to the '09 tests. Correct?

Understand. Thanks for the responses.

Austin - but it wouldn't be the same employer (2 SPs) terminating the Uni-K plans that is establishing the new 401(k). You still see a problem?

Two sole proprietors each of whom maintained a 401(k) - Uni-K. They have since formed a new S-Corp and now want to establish a new 401(k) for the S-Corp and its employees. Question - do you think it best to terminate those Uni-K plans and do a direct rollover to the new S-Corp 401(k)? Or merge the existing 2 Uni-K plans into the new S-Corp plan? I understand the net effect will be the same for the former SPs but everything communicated to me so far has been "merging" the plans but I'm a little leery about the shape (document/amendment wise) of those two Uni-K plans and would rather suggest establish the new plan, make sure the existing Uni plans are compliant, terminate them and affect rollovers to the new plan? Any thoughts either way? Thanks

Under PPA, does the 90 day revocation apply to all EACAs or does the EACA have to be a QACA?

Employer A maintained a plan - number 001. Employer B maintained a plan - number 001. Employers A acquires Employer B now a controlled group and both entities continue to maintain separate plans. What is the plan number for Employer B's plan? Still 001?

Safe Harbor plan using 3% nonelective. The plan was prepared with an effective date of 7-1-07. The document defined the first plan year as a short PY (7-1 to 12-31). The 3% nonelective is based on compensation for the plan year. For the first year that means from 7-1. Can the plan be amended now to state the first plan year will be from 1-1 thru 12-31 and still retain its Safe Harbor status inasmuch as the S-H Notice already distributed defined the first plan year as a short PY? Also - if the Safe Harbor Notice already distributed didn't mention a Match (other Employer contributions), can the plan (same plan as above) be amended to include a Match without jeopardizing the Safe Harbor status?

Family owned business - 5 individuals all of whom are more than 5% owners. No other employees. Sub-S corp. and from what I've been told they receive W-2 income. Any issues with establishing a 401(k) for this employer? Would it be considered an employee benefit plan with no common law employees?

Thanks for the reply. I understand a default provision can be included, but doesn't the terminated plan have to allow participants to receive a distribution? But if they make no election that's when the default is applied. Or is it a matter of timing - establish the ERISA 403(b) first and then have the plan sponsor exercise their fiduciary authority by transferring the PSP's assets/account balances to the ERISA 403(b) plan?

403(b) funded with individual contracts. The intent is to establish a new 403(b) funded by a group investment arrangement, including employer contributions mid-year (7-1-07). The employer wants to go safe harbor for ACP (employer contributions in the 403(b)) mid-year. Are the rules applicable to 403(b) safe harbors the same as 401(k) in that there must be at least 3 months left in the plan year for a new plan, UNLESS the new plan is a successor plan, in which case must be 12 months. Would this second 403(b) arrangement be considered a successor plan? Is the solution to make the second 403(b) plan year 7-1 to 6-30 and then change the plan year in subsequent years if needed?

501©3) Employer currently has separate profit sharing plan ('ER $) and 403(b) plan (only employee deferrals). The PSP will only make contributions to employees who participate in the 403(b) (ACP required). Employer (or someone advising them) now wants to have one plan - an ERISA 403(b) - Not interested in a 401(k). Can this be accomplished by - 1. adding 403(b) deferrals to the qualified PSP? Does this mean the existing 403(b) elective deferrals must remain in the existing 403(b) plan unless they can be rolled via an eligible rollover distribution? OR, conversely 2. add an employer contribution to the existing 403(b) plan, terminate the PSP and rollover distributions to the 403(b)?

Plan document only permits one outstanding loan at a time. A couple of participants were allowed to take out a second loan while their first was still outstanding (within limits for subsequent loans). Can the employer retroactively amend the plan back to the period for which 2 outstanding loans were in existence? Require VCP filing? If not, the alternative?

Since these employees "signed up" for elective deferrals and presumably indicated a percentage or dollar amount to be withheld and it wasn't, is the correction the same as exclusion of an eligible employee (1/2 ADP and whole match)? Or should the entire amount the employee elected to be withheld be contributed?

What if the non-safe harbor plan is amended/"frozen" as of 6-30-07 (ADP/ACP tests to be done) and the safe harbor plan is amended as of 7-1 to let those who were participants in the non-safe harbor plan in the safe harbor plan and then merge the plans as of 1-1-08 (assuming the plan year is the calendar year for both).

Why couldn't they merge the non-Safe Harbor 401(k) into the Safe Harbor 401(k)?

Employee executed a salary reduction agreement requesting X% be withheld but throughout the plan year (calendar year just ended) a lessor percentage was actually withheld. The employee (HCEE nonetheless) didn't realize the error. Should the correction method under 2006-27 be followed with respect to making up the "missed opportunity" similar to not including an eligible employee? Or should the entire difference be made up by the employer? Or no correction?

Thanks for the replies. But I thought a plan contribution needed to be allocated to participants' accounts within 30 days after the 404(a)(6) deadline in order for those allocations to be considered 415 annual additions for the limitation year. Reg. 1.415-6(b)(7)(ii). Although the contribution in question was made to the "plan and trust" in a timely manner, it wasn't allocated to individual participants within the 1.415-6(b)(7)(ii) time frame. If this is correct, then the allocation to participants accounts shouldn't be counted as an annual addition for 2005. ?? The 415 issue above aside, doesn't this employer have a qualification (operational) problem because the 2005 contribution wasn't allocated to individual participants within the time specified in the document? Unrelated question - are QNECs and employer contributions made to correct an EPCRS issue considered annual additions for the limitation year in which they are contributed?

Situation where a plan was in the process of transitioning from one carrier to another in Feb. 2006 and the employer sent the broker the 2005 PS contribution rather than to either the old or new carrier. Contribution was made by the employer before their 2005 tax filing date (3-15-06 no extensions) and was claimed as a deduction for the 2005 year. Contribution was held at the brokerage in the name of the plan. The problem (one of them any way) is that that 2005 PS contributions still hasn't been allocated. 1. Can it be allocated for the 2006 year or does it have to be allocated for the 2007 year? 2.It would be considered an annual addition for the year allocated? This would present another problem because there may be some employees who would have ordinarily received an allocation of the 2005 contribution if allocated by 4-14-06 (1.415-6(b)(7)(ii)). But if they terminated before 2006 (or 2007) and have no compensation for the year allocated they exceed 415. Is this correct? Is there any way to get those employees who may have terminated employment before the year of allocation any part of that 2005 contribution? Is outside the plan the only recourse for those affected former employees.

MPP with plan year of 11-1 to 10-31. No restrictions (LD or hours) on receiving the employer contribution (5% of comp.). Employer wants to amend to PS/401(k) effective 5-1-07. 1. Can the employer amend effective 5-1-07 and fund the plan based on compensation earned up to 5-1-07 (204(h) notices, etc. to be done)? Or 2. Does the employer have to continue to fund through the end of the plan year (10-31-07) based on compensation through that date (204(h) notices etc.)? Have received a couple of different opinions that #1 is acceptable based on 1.412(b)4© which basically states no contribution due after the date of plan termination. But those supporting #2 state that if there are no restrictions on receiving the contribution, once a participant accrues a right the full contribution is due for the entire plan year. Now I suppose you could amend the plan year to end 4-30-07 which would make this all moot but absent the plan year change any thoughts?

Daily valued 401(k) plan. Employer wants to include treasury stock as one of the investments. Understand the PPA requirements but what other issues might you have encountered with including treasury stock as an investment?