R. Butler

Suppose employer has a 06/30 fiscal year end 401(k) plan. Employer wants to amend to a SIMPLE 401(k). Can employer amend to SIMPLE 401(k) effective 07/01/08 & make a short plan year from 07/01/08 and make a short year from 07/01/08 through 12/31/08? The exclusive plan requirement throws me with the SIMPLE 401(k); although this an amendement to an exisitng plan, I want to be certain that for exlcusive plan purposes this really isn't looked at as 2 separate plans, a regular 401(k) and then a SIMPLE 401(k). (I know employer can amend to a short year now & then adopt a SIMPLE 401(k) effective 01/01/08, but employer may not want to do that.) Thanks in advance for any guidance.

Prospective client informed us od an employee who was suspicious of a safe harbor 401(k) plan & signed a Waiver of Participation. I understand the issues with waivers (i.e. doucment must allow, irrevocable, etc;). My question relates to a safe harbor plan specifically. Assuming the Waiver of Participation is valid I don't see any reason the participant still can't use safe harbor 401(k) rules. I've looked & don't see anyhting in the safe harbor rules that would prevent such waivers. Am I missing anything? Thanks in advance for any guidance.

Controlled groups can include unincorporated businesses. On the facts you have provided there doesn't appear to be a controlled group. A owns 50% of AB partnership A owns 100% of A LLC That doesn't fit into the definition of parent/subsidiary or brother/sister. Beware of affiliated service group rules.

I have had a brain freeze & want to amke sure I am thinking about this correctly. A, B & C have been part of a brother/sister controlled group. A is sold in a stock sale & is no longer part of the controlled group. The sale took place last week; we were informed today. I'm quite confident that employers will move slow enough where nothing will change in the way they operate their plan for a month or more. Ultimately I do kniow that B& C will continue the plan. The document does contain grace period provisions for 410(b). My question is the ADP/ACP test. It seems to me I perform amy single ADP/ACP test from 01/01/07 through the date of sale & then in a separate ADP/ACP test from the date of sale through year end for A and for B/C. I'm kind of hurried on this particualr issue & just hoping for some verification. Thanks in advance for any guidance.

Roll it over. If we keep cashing out our 401k's we will be eating cat food when we retire.

Thanks. I agree with you, but I was hoping for some guidance to the contrary. I've searched for a fair amount of time & can't find any.

Plan adopted by an LLC covers only the 4 members. The LLC is taxed as a partnership. Are they eligible to file a 5500-EZ? I'm leaning towards no, but its weak lean. Probably more out of caution than anything. Thanks for any guidance.

Another consideration for choosing pre-tax over Roth might be tax credits. Obviously the Roth results in higher Adjusted Gross Income than Pre-Tax. Depending on an person's financial situation choosing the Roth may bump someone out of certain tax credits.

I actually had read that & pretty much got lost, but let me give it a crack to see if I have any clue. 1. I don't see that I can meet (8)(1)(iv)(D)(1). The plan uses a basic age-weighted formula, so I'm thinking one year bands. I have 20, 25 & 30 year old all receiving the 3%. The way I read it there has to be an increase with each band. I don't see that I meet that. 2. Maybe I meet (8)(1)(iv)(D)(2). If I'm understanding correctly I look at the oldest person receiving the minimum & if that person's EBAR is greater than or equal to the EBAR of each person receiving more than the minimum contribution than I meet the exception. So if the oldest person who has been bumped up to 3% has an EBAR of 10% & all of the employees receiving an allocation of more than 3 only have EBARs of 5%; I meet the correction. Do I have some sight or am I still totally blind? Thanks

I've got a basic age weighted plan that has a 1,000 hour/last day requirement. There are 5 NHCE's. One terminated with more than 501 hours . One worked less than 1,000 hours, but gets the top heavy minimum. The other 3 get an allocation, but out of those 3, 2 of them are bumped up more to meet top heavy minimums. I want to avoid the gateway. Age-weighted plans are generally exempt from the gateway, but are the top-heavy minimums nullifying that exception? Thanks in advance for any guidance.

I read that to stay that vesting must be on the quarterly statements. Is that how you read it? Thanks Never mind. I read further & as long as the participants are given the information necessary to calculate their vested benefit at least annually the requirement is satisfied. Thanks

I read that to stay that vesting must be on the quarterly statements. Is that how you read it? Thanks

Participants self-direct & under PPA must receive quarterly statements. Do those quarterly statements have to contain vesting or is it sufficeint that vesting be included on an annual statement only? If I could get a cite to the correct PPA provision that would beneficial. Thanks in advnace for any guidance.

You do need to look at individual company in relation to every company on a one-to-one basis. For example in your facts A & C are part of a controlled group irregardless of whether B is part of that group.

One more thought, I haven't seen Co. A's document, but it could contain language allowing Co. B to continue to be a participating employer through the 410(b)(6)© transition period. If that is the case is it reasonable that Co. B could adopt a plan at any time during the transition period & then spin the assets into the new plan?

Company B was a wholly owned subsudiary of Company A. On 07/31 Company B is sold to one of the employees in a stock sale. Prior to the sale Company A sponsored a 401(k) plan, Company had also adopted that plan. The buyer of Co. B contacted us yesterday & wants to spin-off the assets into a new plan sponsored by B. Company A's position is that since the new plan was not effective as of the date of sale, the assets cannot be transferred & that there is a distributable event. Ideally these issues should be decided prior to the sale, but I'm not so sure I'd go as far as Company A's position. I've researched & I just can't find anything definitive enough to satisfy me. Thanks in advance for any guidance.

What I am trying to verify is whether they could even possibly merge the plans in 2006 & maintain safe harbor status. In 2007 they'll change to one formula & merge, but its my undersatnding that neither could amend the formula during 2006. And if neither plan can amend the formula for 2006, then they can't be merged during 2006 & maintain safe harbor status. Is that correct? Thanks

Co A sponsors a safe harbor 401(k) with basic match. Co B sponsors a safe harbor 401(k) with an 100% up to 6% safe harbor match. Co. C will be formed. Co. C will purchase both Co. A & Co. B in asset sale 10/01/06. They are hoping not to terminate the plans & trigger distribution. They want to maintain safe harbor status. They are not adverse to merging the plans. I don't see how they can merge the plans in 2006 & maintain the safe harbor status because they use different match rates. Even if they were willing I don't see that they can increase the match rate under Co. A's plan to 100% up to 6% in 2006; it wouldn't meet the uniform formula requirement for the match. Am I missing something? Is there any reason Co. C couldn't maintain both plans for the remainder of 2006 just to maintain the safe harbor status for both plans? Thanks in advance for any guidance

I think rcline is saying that you really don't have a new 401(k) plan. It seems that really what the client is doing is firing Paychex and hiring a new adminsitrator. They will amend out of the Paychex document into a different document. If rcline (& myself) are understanding the post correctly its just a continuation of the old plan.

We have a taken over a plan that filed their 5500 lasr year about 15 days late. Its a large plan & they did not attach an audit (doesn't sound to me like it was completed.). They did not use DFVC. They received a notice form the IRS today assessing a penalty of $175. (Evidently the IRS hasn't noticed yet that the audit is not attached.) The Department of Labor has not sent any notice. If they hurry, can they get the audit completed & refile under DFVC? I've reviewed the program & seems to me that they would be O.K. to do that as long as it is done prior to the DOL giving notice. Thanks in advance for any guidance.

I've heard it suggested, but I really don't the see the reason for doing it. We do not add any kind of attachment. If there are late deposits we are already telling the IRS that a correction been made on the 5330.

Good news. The IRS released Rev. Rul. 2006-38 essentially stating that for purposes of calculating the excise tax under §4975 amount involved is the only the interest.

Schedule P is never mandatory.

Supposedly guidance is imminent. I really didn't even know there was an issue until the conference. On a better note Sal Tripodi mentioned in his presentation that the DOL will likely issue a safe harbor time frame for remitting deferrals. He thought that the safe harbor would be somewhere between 5-10 days. If deferrals were deposited within that time frame they would be deemed reasonable. Mr. Tripodi thought that the guidance would come out around September.

I am attending a employee benefits conference this week in Cincinnati. Martin Pippins from the IRS stated that the DOL & IRS differ on how to calculate the "amount involved". The IRS position is that the "amount involved" is the interest & the DOL position is that it is the principal. He indictaed that guidance would be issued within the next few weeks, but would not tell what the guidance was going to say. Has anyone heard what that guidance will say? Thanks in advance