R. Butler

§1.401(a)(9)-8,Q&A1 "...Q-1. What distribution rules apply if an employee is a participant in more than one plan? A-1. If an employee is a participant in more than one plan, the plans in which the employee participates are not permitted to be aggregated for purposes of testing whether the distribution requirements of section 401(a)(9) are met. The distribution of the benefit of the employee under each plan must separately meet the requirements of section 401(a)(9). For this purpose, a plan described in section 414(k) is treated as two separate plans, a defined contribution plan to the extent benefits are based on an individual account and a defined benefit plan with respect to the remaining benefits...."

See page 3 of the instructions. 5500.pdf

See 1.402©-2, Q&A4(f) Q-4: Are there other amounts that are not eligible rollover distributions? A-4: Yes. The following amounts are not eligible rollover distributions: (a) Elective deferrals, as defined in section 402(g)(3), that, pursuant to Sec. 1.415-6(b)(6)(iv), are returned as a result of the application of the section 415 limitations, together with the income allocable to these corrective distributions. (b) Corrective distributions of excess deferrals as described in Sec. 1.402(g)-1(e)(3), together with the income allocable to these corrective distributions. © Corrective distributions of excess contributions under a qualified cash or deferred arrangement described in Sec. 1.401(k)- 1(f)(4) and excess aggregate contributions described in Sec. 1.401(m)- 1(e)(3), together with the income allocable to these distributions. (d) Loans that are treated as deemed distributions pursuant to section 72(p). (e) Dividends paid on employer securities as described in section 404(k). (f) The costs of life insurance coverage (P.S. 58 costs). (g) Similar items designated by the Commissioner in revenue rulings, notices, and other guidance published in the Internal Revenue Bulletin. See Sec. 601.601(d)(2)(ii)(b) of this chapter.

Thanks for your reply. I missed the entry date difference. I agree with your summation of the issue.

Qualified Plan, Assuming no BIS rule then 01/01/05, but I'm confused, how does your question relate to Austin's? Based on the facts Austin gave, he would answer 01/01/03.

Blinky, I am still on board with that conclusion, but I am having trouble defending it. I can argue that Austin is misconstruing each of his points, but when Qualified Plan Boy asks for a cite I can't give one. A year of service is a 12 month eligibility period in which employee works 1,000 hours. I know that the year of service is credited at the end of the eligibility period. So its 11/14/03, employee did work 1,000 hours and is credited with a year of service. I have always been taught (apparently as most of us have) that employee also has to also be employed on or rehired after 11/14/03. However, I can't really find any legal support fot that position. When I think about it seems that I am requiring 3 three things: 1,000 hours during the period, employment on the entry date, and employment on after 11/14/03. However, I can't really find any legal support for that 3rd requirement.

I assume that Sal is referring to his example in 3.c.2.) concerning seasonal employees. That example is not the same as the scenario you have described. Based on the facts that you have presented I agree with everyone else that he is likely not eligible based on the fact that he did not complete the eligibility period. You should however review your documents eligiblity provisions.

Which question?

That wouldn't be a bona fide loan.

After re-reading Notice 98-52 I am inclined to agree with Archimage. As long as the match isn't discretionary your probably OK with 100% on the first 5%. If it is discretionary you are stuck with the 4% limit.

You need to reduce the match formula to 100% on the first 4%. Notice 98-52 syas ACP safe harbor not met if employer discretionary match exceeds 4% of comp.

I'm not sure what you mean by unrelated. If he is sole owner of 2 companies, the 2 companies are a controlled goup. Each company could sponsor a profit sharing plan. Depending on compensation the owner/employee could get a $20,000 allocation under each plan. If its a controlled group situation, it may be better to establish 1 SEP.

What is the cite for that? I've heard that before, but Notice 98-1 specifically states that "Notification to or filing with the Service...is not required in order for the change to be valid." I never actually seen anything that changes that, but again I've heard several people state that a filing is required.

Only give a "maybe notice" if you are using the 3% nonelective.

I really didn't ever come up with a template. I did find a FAQ concerning Schedule Q & Demo 6 on the IRS website. I basically used a format based on those Q&As. The link is below http://www.irs.gov/retirement/article/0,,id=97007,00.html I was completing this for a particular plan that decided not to file. Although I did complete the work, I don't know if the IRS would have found my format acceptable.

Let me shift gears a little. Employer wants to match only for employees earning more than $66,000. Seems to me that this would be subject to BRF testing. It also seems to me on its face (although I haven't seen much data on the employees) that this this is unlikely to pass that test. Am I missing something? This is a fairly large financial service company that thinks they can do this.

I may be misunderstanding what you are saying, but I don't see anything prohibiting a 500% of the first 6%, as long as it the match rate does not increase as the rate of deferrals increase.

Plan would be subject to top heavy minimum contribution requirement. Top heavy pass is for plans consisiting solely of deferrals & safe harbor contributions. See EGTRRA §613(d)

This does not satisfy the enhanced matching provisions. "...under an enhanced matching formula, the rate of matching contributions may not increase as an employee's rate of elective contribution increases." See IRS Notice 98-52, Section V.B.1.a.ii

Won't go to far with this, but .... I don't agree with Bush on every issue, particularly the retirement plan proposals, but there were plenty of reasons to vote for him. He is pro-life; he is for the sanctity of marriage, he supposedly was going to curb so-called social welfare programs (I would propose he hasn't done that.); even though I don't agree with the retirement proposals I am generally for tax code simplification; & although I haven't thought too much about it, I wouldn't dimiss at least limited 'privatization' of Social Security. The only argument I've heard against it is that participant could lose their retirement. First, that is a reason to limit it, but we really need to change the thought pattern that social security is our retirment vehicle. Second, I was unaware that the government was doing so well with the money.

Just to clarify, the restriction against hardship withdrawals would only apply to the safe harbor contributions. Other money sources could still allow for hardship distributions.

Are you saying that you have determined that loan document must specifically provide for it? Did you have a cite or anything? I'm kind of curious myself now.

Couldn't the loan document just be amended to avoid the issue? Does the plan sponsor want to allow refinancing or is the Sponsor trying to avoid allowing refinancing?

Plan year being tested. My understanding is the same TC Walker's. Although I am not aware of a requirement that the allowable deferral amount be calculated by January 31st, if it wasn't calculated by that date the W-2 would need to be amended.

Based on the facts you've given it seems right to me. If Plan requires 1 yr of service and the employee doesn't complete the 1,000 hrs during an eligibility she isn't eligible. (I am assuming Plan uses actual hour method).