R. Butler

401(k) Plan with Cross Tested Profit Sharing. My coverage ratios in the rate group testing ratios exceed 70%, so I shouldn't have to worry about the Average Benefit % Portion. However, when I run the Gen Nondisrim Test results say I fail, because once you include deferrals the Average Benefit % Portion would fail. Since I don't have to worry about that part is there anyway I can get Relius to show me a passing test?

Here is another thread where the issue is discussed. There are several if you do a quick search http://benefitslink.com/boards/index.php?s...opic=10321&st=0

I'm sure you are correct about the broker's prototype, but if the broker referred the client, the TPA might be stuck.

I'm not sure I understand. Why would you need your volume submitter if thr broker is insisting on thir prototype?

That is a good point that I just missed. Their ultimate conclusion rests on the maturity date, but as you point out the reason they gave me focuses on the 5 year limit. I'll will try that. Thanks.

It was a 4 year loan. I didn't look into the specific thing you suggest, but it wouldn't make sense to me that they would allow that. Thats the heart of the issue. The recordkeeper's position is that there is no cure period. Once the loan reached the maturity date the loan is in default. If the recordkeeper was allowing for a cure period the participant could just pay the loan off. I may take a stab at the suggestion anyway, just try to trick them into into inconsistent position. Thanks.

I did refer the recordkeeper's legal department to the Q&A FundeK posted. I actually have a conference call with them today, but I don't expect that they will change their position. I may disagree with their position, but again I do follow the reasoning. Although that Q&A may give us incite, it is informal guidance. I know there is informal guidance on other issues that I disagree with & do not follow. I had to take this issue up with the recordkeeper simply because they never stated this position in any of their policies. It is not stated in loan distribution papers & since we prepared the loan document based on the recordkeeper's known policies, there isn't anything in the document limiting the cure period in these situations. The participant was not notified until there was already a default. Given all this, I felt this issue was worth taking up.

I'm unaware of any exceptions.

No one has ever confused me with Derrin Watson, but at first glance I don't see any controlled groups. Neither Grandma, Dad or Adult Boy own more than 50% of A,B or C thus no attribution. Without attribution there isn't enough common owenership to get you to a controlled group.

Mother Nature evicted them?

Prozac maybe a little too far. Here the recordkeepers reasoning "This is the explanation that we received from our law department on our loan monitoring: Section 72(p)(1)(A) sets forth the general rule that an amount received as a loan from a qualified employer plan will be treated as having been received by the participant as a distribution under such plan, unless the loan satisfies certain requirements. Specifically, Section 72(p)(2)(B) provides that a loan must be repaid within 5 years unless such loan is utilized to acquire a principal residence. The regulations promulgated under Section 72(p) explain that "a deemed distribution occurs at the first time that the requirements of Q&A-3 of this section are not satisfied, in form or in operation." See Treas. Reg. 1.72(p)-1, Q&A-4. Furthermore, "f the loan initially satisfies the requirements of Section 72(p)(2)(A), (B) and © and the enforceable agreement requirement ... but payments are not made in accordance with the terms applicable to the loan, a deemed distribution occurs as the result of the failure to make such payments. See Q&A-10 of this Section regarding when such a deemed distribution occurs and the amount thereof." Q&A-10 reflects that if an installment payment is not made in violation of Section 72(p)(2)© (the level amortization requirement as opposed to the 5 year term limit under Section 72(p)(2)(B)), a deemed distribution will occur at the time of such failure unless the plan administrator allows a cure period. In that instance, "Section 72(p)(2)© will not be considered to have been violated if the installment payment is made not later than the end of the cure period, which period cannot continue beyond the last day of the calendar quarter following the calendar quarter in which the required installment payment was due." In other words, a cure period may apply to prevent a default in the event the loan fails to satisfy the level amortization repayment requirement (due to a missed payment) but it does not apply to extend the term of a loan beyond the 5 year statutory limit." I don't necessarily agree with there conclusion, but I fought the good fight & just probably will come out on the short end of the stick this time.

Thanks. Its been a long, long day, so I may very well be missing something, but it seems to me Ms. Perdue doesn't really give a definitive answer. In fact by citing the court case she provides strong reasoning against saying default. Again its been a long day & I may be missing something. In any case, thats not really my issue here. The recordkeeper is strictly focusing on the maturity date. The post by FundeK more directly addresses my issue. Thanks again.

Does the adoption agreement only provide for set vesting schedules, or does it also have an "Other" option where the plan could put 0%, 20%, 40%, 60%, 100% for the top heavy? I don't reacall seeing a prototype that didn't have an "Other" option. If the adoption has an "Other" option, why not just make the top heavy schedule 0%, 20%, 40%, 60%, 100%? Regardless of what the underlying language in the document says, why is this a battle worth fighting?

Just to clear up the initial question a littlle bit. The recordkeeper wants to default the loan, not because a payment was made outside of the cure period. They want to default the loan because at the maturity date there is still a balance. I don't know that I agree there was a default due to failure to make a required payment within the cure period. Any payment participant makes is going to be applied to the oldest payment due. Isn't that true even in commercial loans? If I miss the $300 August payment on my student loan, but I pay $300 in September, student loan co. applies that $300 to the August payment. I'm not 60 days behind on August & paid for September, I'm 30 days behind on September.

Does the document allow for different exclusions for each source? If so just amend to exclude owners from profit sharing source only.

Participant takes a loan in May 2000. The maturity date is June 2004. Particpant missed a couple of payments at some point in time & in June 2004 was a month or 2 behind. The loan document echo's the law as far as cure period goes. Should this participant default unpaid balance in June 2004 because loan has hit maturity or should participant get the benefit of the cure period? Thanks in advance for any guidance.

I do remember reading in the ERISA Outline book that some practioneers feel that this changed after EGTRRA. The reasoning was that elective deferrals are now deducted separately from employer contributions.

That is somewhat surprising because IRC § 408(p)(2)(d) simply states that you can't accrue a benefit under another qualified plan. A plain reading the Code section actually seems to contemplate this situation "...if the employer (or any predecessor employer) maintained a qualified plan with respect to which contributions were made..." D) Arrangement may be only plan of employer (i) In general An arrangement shall not be treated as a qualified salary reduction arrangement for any year if the employer (or any predecessor employer) maintained a qualified plan with respect to which contributions were made, or benefits were accrued, for service in any year in the period beginning with the year such arrangement became effective and ending with the year for which the determination is being made. If only individuals other than employees described in subparagraph (A) of section 410(b)(3) are eligible to participate in such arrangement, then the preceding sentence shall be applied without regard to any qualified plan in which only employees so described are eligible to participate.

There is a store on Sannibel Island, She Sales Seashells. Is Sally the owner? Could Butch be covered under her plan?

It doesn't matter. Any college football game is great. Miami(OH)-Michigan is good enough. Besides the BIG game is Sunday when my beloved Kentucky Wildcats challenge the hated Louisville Cardinals. My wife & I had our first child in May. The boy & I watched our first College Gameday together last week. It was one of those moments a dad never forgets. The boys only 3 months, but somehow he knew it was a special moment.

I got so upset about Mr. Holland I couldn't finish Blinky's post. I really couldn't understand what she meant by "wiggle room". I sort of thought she was asking whether the $50,000 could be increased because Jill wasn't deferring. Who knows? What I do know is that I am ready for a good long weekend of college football.

I'm getting lost in some of the discussion. I interpret the initial facts to mean that both Jack & Jill are elgibile for both employee deferral and employer money. Jill does not make deferrals, but Jack does. What is the maximum deductible employer contribution? -- Its $50,000. The $50,000 does not include Jack's deferrals, but it also its not increased by amounts Jill could have deferred. Now my answer would not change even if Jill was only eligible for deferrals, although I was not aware of Mr. Holland's recent comments. As Belgrath points out 1.410(b)-3 states that an employee is benefitting if he is eligible to defer. Although not clear, many professionals interpret 1.410(b)-3 as modifying the rule in RR 65-295.

Would 77-9 apply? Per the post tthe person receiving commissions is the employer. I didn't think that PTE 77-9 covered employers. I may agree about PTE 79-60, it would probably be worth looking into.

Yes

Yes. Its fairly common.