R. Butler

The statement "one could not rollover any portion of a 401-k account while still actively employed by the sponsoring employer" is not necessarily correct. You need to check the plan document for in-service distribution rules. In-service distributions not rolled over are subject to the income tax. Generally distributions not rolled over are subject to 20% mandatory tax withholding. Also, generally in-service distributions prior to the age of 59 1/2 are subject to a 10%early withdrawal penalty. You need to review the Special Tax Notice Reagrding Plan Payments for a more detailed discussion of tax withholding implications. The plan administrator should be able to provide you with one. State withholding rules vary.

That was what the design was supposed to do, but that is a nicer thought than reality. In our experience, particularly with the SIMPLE-IRA, plan sponsors have difficulty indentifying eligibles, rarely provide notices timely & often times have difficulty calculating the employer contribution. Like Bird, any work we do is billed to the employer.

Boy that would be nice, but I don't see that you can't do that. See 1.401(k)-1(f)

Correct. All that formula does calculate the match. User responsible for monitoring comp. & deferrals.

This should work, but I put it together quick so test it a few times. Salary & Deferral are data entry, the match calculates. SH_Basic_Match.xls

This has been discussed many times. You should do a quick search of this topic; you'll find several threads with in depth discussion on both sides of the issue. If the cure period is passed, I don't see any basis to avoid defaulting the loan. You will find some people who disagree.

H & W get divorced. A DRO in good form is issued and processed as a QDRO. It turns out as part of the DRO W gets 1/2 the building where H's business is located. H does not have the money to buy her out. H & W now want to go back to court & get a 2nd DRO. The DRO will give additional retirement plan money to W; H will get building flat out. 1. Assuming subsequent DRO is drafted carefully and has a provision just allocating additional retiement plan money to W & has a separate provision giving entire building to H; does anybody see a problem? 2. Lets says DRO not drafted quite as carefully (We do not draft DRO's, just help the plan sponsor apply plan's QDRO rules); assume it says W gets $xxx amount from retirement plan in return for her 1/2 interest in building. Does anybody see a problem? I'm a little uneasy about this situation. I don't really see a problem with #1, but I'm not so sure if they come back with #2. Thanks for any guidance.

The post doesn't state that otherwise excludables are not getting the safe harbor contribution. You are correct, if it that is the case the answer would change, but again that it is not stated in the initial post & that is a different issue from not providing safe harbor to HCEs.

How could the IRS reason differently? The IRS would have to take the position that the plan does not consist solely of contributions meeting safe harbor. What other contributions are there?

I disagree with part of Archimage's post. I don't see a problem if you have a non-key HCE. The initial post states that the plan consists only of safe harbor contributions. Notice 98-52 states safe harbor contributions have to be provided to NHCE's. Assuming your document has been properly updated for EGTRRA the a 401(k) plan consisting solely of safe harbor contributions won't be subject to top heavy.

In the situation oriecat describing incomplete is wrong.

Sure, safe harbor not required to be given to HCEs. See IRS Notice 98-52; it references that safe harbor contributions must be provided to NHCEs.

The catch up contribution is determined at the end of the plan year. You will find this rule in the final catch-up regs. It is my understanding that this means that the applicable catch-up limit is subject to the limits for the calendar year in which the plan year ends. In your situation the catch-up would be $3,000.

Just the contribution.

Lets be practical here, probably have 2 options: 1. Put the excess payments in a holding account within the plan. Reduce future employer contribs. by the excess amount. Make the employee whole outside of the plan. 2. Treat it as a mistake of fact; return the excess to the employer. Again make the employee whole outside of the plan. I prefer option #1, but does it really matter? Are the IRS & the DOL really going to come down hard on the plan sponsor if that sponsor in good faith chose either of these methods & kept appropriate documentation showing exactly what was done & why?

Lets assume Mr. D is under 21. It is pretty safe to assume mom is over 21. Mom is attributed 100% of ABC. She still only owns 50% of XYZ. Nothing will be attributed from granddad because mom doesn't own more than 50%. Mr. D is deemed to own mom's 50% of XYZ, but again nothing attributed from granddad to Mr.D because Mr. D doesn't own more than 50%. The fact that Mr. D is under 21 is irrelevant in determing attribution from a grandparent. So at most we have 100% ownership in ABC & 50% in XYZ.

Have you looked at the Service Crediting Method in the Adoption Agreement? You should find that Plan Sponsor has made an election on how to convert, days, weeks, months, etc. into hours.

That is a well organized reply FundeK

Thank you for the explanation. I still say its a stretch to argue a state labor law violation. The $1,000 would still be a loan repayment, just a repayment on a defaulted loan. Although the end result is the similar, the employee is not making an after-tax contribution; he is repaying the loan. The employee agreed to repay the loan. The employee is repaying that loan late, as a result its deemed after-tax money. I'm skeptical that a court would give the employee a windfall. I'm curious if the original poster would be willing to tell is the amount the initial loan amount. Unless this just a very large loan, I'd be surprised if the employee will consider litigating issue.

mbozek, I follow the tax claim against the employer, but what possible basis is there for back pay? The employee got paid, it just went to him instead of the plan. I've debated this before on prior threads. I strongly disgree that there is any basis for not defaulting this loan.

There may be attribution from Mr. D to mom if Mr. D is under 21, but there is no attribution to or from granddad. At most mom is deemed to own 100% of ABC & 50% actual ownership in XYZ.

Wait a second, age of Mr. D shouldn't matter. I don't see a controlled group. There is no double attribution.

How old is Mr. D?

The plan does not have to allow catch up contributions. Why wouldn't the plan allow them though?

The position the IRS takes in 9735001 is that benefits are protected once the accrual requirements have been met. The IRS position does not appear to focus on the timing the contribution is actually made, but again on when accrual requirements are met. TAM's apply only to the specific set of facts before the IRS, but they do give insight to their position on certain issues.