PMC

Getting some conflicting information - can an employer change their safe harbor match to an enhanced match during the plan year. For example, calendar year plan year and from 1-1 to 6-30 the plan is providing a basic S-H match. Effective 7-1 the employer wants to use an enhanced match for the remainder of the plan year. Plan is amended effective 7-1 and revised Notices distributed. I thought changing the S-H match (other than eliminating it with proper notice, amendment) during the year was prohibited? And if changing the basic S-H match to an enhanced match is allowed, is changing a S-H nonelective from 3% to a higher percentage during the year allowed (again with proper amendment and notices)?

Correct. I was responding to J4FKBC's comment "This you intend to apply vesting to, and you could apply allocation conditions as well." I didn't think allocation restrictions could be included in a S-H plan using a Matching method to satisfy S-H.

Can a Safe Harbor plan utilizing a matching method to satisfy S-H include an additional Match subject to allocation restrictions as J4FKBC mentioned? I thought the final (k)/(m) regs. prohibited that?

Thanks but from the small amount of info I received the real estate company does have "employees" - not real esate agents. There is no management group or a controlled group but was just wondering if it possibly could be an ASG.

Individual owns 70% of Co. A - a real state company (remaining 30% owned by unrelated individuals). Same individual owns 100% of Co. B - a manufacturing company. The real estate company owns the land on which the manufacturing company sits. Affiliated service group? Does it matter if the real estate company is a corporation or partnership?

Notice 2007-107 just released.

What is your reading of PPA with respect to providing a diversification notice to participants - If a plan already satisfies the diversification requirements, do you think PPA still requires that the plan provide participants the notice informing them of the new rules, i.e. essentially informing them of their rights to do what the plan already allows them to do?

The PPA states a participant directed DC plan must provide quarterly benefit statements and the statement now must provide for the vested accrued benefit (among other things). The PPA (Sec. 508) also states the requirement that the benefit statement show the vested accured amount can be satisfied if the plan provides an annual "alternative notice." Question - I understand the new rules for the benefit statement are effective for plan years beginning in 2007. Does that mean for the first benefit statement for the 2007 plan year? What if a plan is going to use the alternative notice to satisfy the requirement to disclose the vested accrued benefit. Am I correct in assuming that using this alternative notice will essentially give plans until the end of 2007 (or whatever the plan year is) to tell participants what their vested accrued benefit is since it will satisfy the "annual" requirement?

Just wondering which group(s) of employees can an automatic enrollment feature be applied to - 1. As far as the qualified automatic enrollment feature described under PPA, the feature is applied to all eligible employees. Eligible employees mean all employees eligible to participate in the arrangement, other than employees eligible to participate in the arrangement immediately before the date on which the arrangement became a qualified automatic contribution arrangement with an election in effect (either to participate at a certain percentage or not to participate). Suppose an existing 401(k) wants to begin the the qualified automatic enrollment arrangement effective 1-1-08. They are going to start at 3%. What about employees who have an existing election at 2%, or those who have made an election NOT to contribute? They are not eligible employees for purposes of the qualified automatic enrollment arrangement and therefore they cannot automatically enrolled and no employer contributions are required on their behalf? So an existing 401(k) plan that has always required all eligible employees execute a SRA indicating yes/no re- their intent to contribute, can utilize the new qualified automatic enrollment arrangement, get a pass on the ADP/ACP/T-H and yet only start newly eligibles (those on and after 1-1-08) at the 3%, and all others remain at their current SRA elections until modified? 2. The group to which automatic enrollment can be applied seems different under the PPA's qualified automatic enrollment arrangement than what is currently available. Do you agree that if an existing plan wants to include the automatic enrollment and start it at say 4%, that all eligible employees as of the date the new feature comes into being who have made an election to contribute less than 4% (or not contribute), can be automatically enrolled and have their deferrals increased to the 4% - subject to the automatic enrollment notice being distributed timely? Thereby applying this feature to newly eligible and existing participants alike.

Safe harbor plan uses a matching formula which satisfies both ADP and ACP safe harbor. The plan also includes an additional Match which is "not" intended to satisfy the ACP safe harbor. This additional match has a last day requirement attached to it. Is this permissible under the '04 k/m regs. and just test this under ACP? I know the new regs. clarified the fact that an additional match that is intended to satisfy ACP safe harbor can not have an hours or last day requirement. But what about the additional match that is not intended to satisfy ACP safe harbor? Seems odd that a nonelective safe harbor plan can have a match with the restrictions and test under ACP but this would be prohibited.

The PPA liberalized the withdrawal rules for pension plans by permitting in-service withdrawals upon attaining age 62. In reading the Technical Explanation it refers to "pension" plans permitting such a distribution. May be taking this too literal but what about a MPP that was merged or amended into a PSP/401(k) - that MPP account balanced that was transferred had to follow the withdrawal restrictions of RR 94-76. But that MPP account balance is now part of a Profit Sharing Plan. It would seem odd that the MPP account balance that was transferred and now part of a PSP would not be available subject to this new rule but just wanted to check.

New start-up plan. Employer employs a number of seasonal employees. Generally hires them in March and then lets them go in October. They complete 1000 hours of service during that period. The employer then re-hires most of those same individuals back the next March. Those employees hired back will have completed a year of service so a year of service for eligibility won't keep them out. Have thought about reducing the eligibility service requirement from 1 year to 6 months and just one entry date (January 1) which would keep employees out since they wouldn't be employed on the entry date (1-1) BUT for those have completed a year of service (which is most) and are re-hired the next March, they will become eligible as of their date of re-employment regardless of the plan's entry date. Plan won't pass coverage using ratio percentage test but haven't reviewed for ABT. Any suggestions on how you may have dealt with these seasonal situations? Thanks

Understood the automatic enrollment feature must be a plan provision but was wondering about the automatic contribution escalation and if that MUST be included in the plan (rather than just in employee notices)? And if so, how is this being covered by current Prototypes?

Anyone have any comments?

WTF

This is a separate question from the qualified automatic contribution arrangement under the PPA. Currently many plans that utilize the automatic enrollment feature also use an automatic contribution escalation feature. The automatic enrollment feature is a plan provision. What about the automatic contribution escalation feature? Prototypes have the automatic enrollment provision but haven't seen any with the automatic contribution escalation feature. Do you think the ability to automatically increase deferrals must also be a plan provision? Or do you think if a Prototype (which gives the participant the ability to change deferral amounts) simply provided for language to change deferral amounts such as "at such times as established by the Plan Administrator in a uniform and nondiscriminatory manner" AND an annual Notice (included in the AE notice) is provided to employees describing their ability not to have the contribution escalation applied to them would be acceptable? If not, how are Prototypes currently dealing with the automatic contribution escalation feature?

The new 403(b) regs. indicate that a 403(b) plan can be terminated and distributions made only if no contributions are made to an alternate section 403(b) plan within 12 months after the distribution of all the assets. The regs. don't seem to prohibit the termination of the 403(b) and distribution of assets and immediate establishment of a 401(k) for an eligible employer. Is this correct as of the effective date of new regs?

Participant terminated employment in 2002. Attained age 70 1/2 in 2004. Required beginning date was 4-1-05 so needed to receive a distribution as of 4-1-05 and 12-31-05. Participant did NOT receive either distribution. The participant died in 2006. The participant's non-spouse beneficiary is going to elect distribution over lifetime. What about the excise tax? Who pays? Participant's estate?

Employer maintains a safe harbor plan. They are acquiring a number of new employees via an asset purchase. They do not want to provide the safe harbor contribution to those newly acquired employees and have been told they can operate part of the plan as safe harbor but yet go through all of the testing requirements for the "non-safe harbor" part of the plan. I have never heard of 1/2 safe harbor plan. Any comments? Same employer as above wants to include a related employer (does not rise to controlled group or affiliated service group) creating a multiple employer plan. Their intent is NOT to have the part of the plan for this other employer be safe harbor. Since each employer in a multiple employer plan is basically considered maintaining a separate plan for testing purposes, can a multiple employer plan operate as safe harbor for one employer and not safe harbor for the other?

The concepts/provisions of Notices 98-52 and 2000-3 are included int the Final 401(k) Regs. and those Regs. supercede those Notices. Whether it was an oversight on the IRS part, I don't think the Regs. require current year testing for a non-ACP Safe Harbor contribution which is part of a Safe Harbor plan (ADP). 1.401(m)-2©(3). When reading the 2006 ERISA Outline Book, we noticed this apparent discrepancy between the Notices and the Final Regs., notified Sal and he was going to check with Treasury whether the change in the final Regs. was an oversight.

Back to the original post - if the plan has a safe harbor contribution but also includes a match that doesn't satisfy ACP safe harbor can the plan use prior year for the non- safe harbor match? Under the pre-'04 final regs. seemed like no. But under the new regs. seems like yes. 1.401(m)-2©(1) states if the Plan satisfies Safe Harbor for ACP under 1.401(m)-3 then must use current year. However, for a Match that doesn't satisfy ACP Safe Harbor, 1.401(m)-2©(3) states can use current or prior year for ACP regardless of what is used for ADP. But if that is done, then it limits the plan with regards to recharacterization, shifting deferrals to ACP and use of QMACs. So even though permissible, may not be a good idea.

Thanks all.

Controlled group 2 Employers maintaining separate plans. Calendar year plan years. Employer A has a non-Safe Harbor 401(k). Employer B has a Profit Sharing Plan (no (k) feature). Do you think it's permissible for Employer A to merge it's 401(k) into Employers B's plan and at the same time add the (k) feature and safe harbor to B's plan during the current plan year. It will be done with more than 3 months left in B's plan year?

Any updated word on Roth 401(k) model amendments? I assume a Plan will be able to treat regular before-tax deferrals and Roth 401(k) contributions differently for some provisions, e.g. in-service distributions, loans. Allow them from one source and not the other. Anyone operating that way pending amendment clarification?

GBurns - re- your question what would the rate be used for - in connection with allocating a PS contribution via permitted disparity. Someone was arguing that the disparity could be the OASDI rate 6.2% because that was greater than 5.7%, and we were telling them it's the greater of the Old Age portion of the OASDI rate and it isn't greater than 5.7%. Just wanted to know what part of the 6.2% was represented by the OA part. Thanks for the responses.