R. Butler

179 expense isn't included on Line 15a. You do have to reduce 15a by the 179 expense before carrying over to Sch. SE

No. Complete Part II, Line 4.

The baseball season ends in early May. Signed, Reds fans

I'm not smart enough to follow order of operations. It was amazing enough that I knew a baker's dozen was 13. (And really why is that?) Blinky, in the future please put brackets around your numbers.

Yes. In both cases its possible.

I can't pass using allocations, so I gotta use accrual. A couple more questions. 1. I'm kinda slow, I understand the response in the last post to my question regarding imputing disparity, but I'm still lost. I guess my question was (& really still is) if the document has an integrated formula, must I impute disparity to adjust EBARs in my average benfit test. (In other words can I use 6% instead of 11.7%) 2. If I do have to impute disparity to adjust EBARs, it is my undersatnding that I now have to follow DB rules since I'm using accrual method. Is this correct? Where can I find a good explanation of how to do that? (Relius is just adding .65% to the EBAR, but I'm not going to use anything I don't understand & that I can't manually do on Excel.)

I was afraid it would be considered multiple formulas. Now I'm somewhat lost. We handle some fairly simple cross-tested plans, but nothing 2 difficult. 1. Contribution formula is integrated at 60% of TWB. So does that mean when I do the average benefits test I adjust allocation rates for imputed disparity? 2. Assuming #1 is yes, nobody has compensation in excess of TWB, all allocation rates are greater than 5.7%. I should increase everyones allocation rate by 5.7%? 3. Plan has semiannual entry dates. Comp. prior to entry excluded. Obviously top heavy done on full year comp. When doing the average benefits test, for participants entering 7/1 can I use only comp. from 7/1-12/31. Thanks in advance for any guidance

I've got a top heavy plan. Basic 4 step integration formula. Plan has a last day/1000 hour requirement. I've got 14 NHCEs & 3 HCEs. 3 NHCEs are nonbenefitting, nonexcludable. 2 NHCEs receive top heavy only. I know that the 2 NHCEs are benefitting for coverage. In the basic integrated plan I get the pass on 401(a)(4), but since this is top heavy is this a multiple formula situation? If so I've got to pass 410(b) assuming the 2 don't benefit or I don't get the free pass on 401(a)(4); correct?

Again I think the point that needs to be remembered is that the termination date is not necessarily the last day of the plan year. Absent of some other amendment the last day of the plan year is still 12/31 (assuming calendar year).

Correct.

It is my understnading that terminating the Plan does not necessarily change the last day of the Plan Year. The Plan would have to amended to change the last day of the Plan Year.

I don't know if the 30 day time frame is explicitly stated in the document. §6.4 provides that you can force them out. As mentioned above Treas. Reg. §1.402(f)-1, Q&A2 requires all participants must be provided with a Special Tax Notice at least 30 days, but not more than 90 days prior to receiving a distribution. I would treat it the same as I do a profit sharing forfeiture. The adoption agreement has 2 questions reagrding forfeitures. The first states "AND, EXCEPT as otherwise provided below with respect to Forfeitures attributable to matching contributions..." I interpret that to mean that all forfeitures except for match forfeitures are dealt with under that question. Most financial institutions release a check at the request of the Plan Sponsor.

Regarding 6.9 As I read it the key words are "Notwithstanding the foregoing..." The general rule of 6.9 is that you wait until the later of age 62 or NRA, however, if the balance is under $5,000 you don't have to wait that long. Regarding 6.4 I would send the intial forms out Certified w/ Return Receipt. That way you know whether or not the forms were received. If they receive them & don't respond, after 30 days distribute the money to them. If it turns out you don't have a current address, make a diligent effort to find him. If after that diligent effort you can't locate them, then the document says you can forfeit. I regards to distributions after plan termination I read 6.9 the same way you do, but in reality I don't know who will accept the signature without the participant's signature.

6.9 applies to lost participants. Is the participant lost? If not, 6.4 is the correct section. Assuming the plan sponsor elected in the Adoption Agreement participants with balances under $5,000 can be forced out. Under Treas. Reg. §1.402(f)-1, Q&A2 all participants must be provided with a Special Tax Notice at least 30 days, but not more than 90 days prior to receiving a distribution. In other words you have to give the participant an opportunity to elect a direct rollover. If after 30 days the participant does not respond plan sponsor can force them out. If the participant is lost you use 6.9. If the balance is under $5,000 it can be forfeited only after making a reasonable effort to locate the lost participant. Hope this helps.

It seems to Step 1 should be 170,000*.03=5,100 Step 2 should be 89,600*.03=2,688 Step 3 should be 259,600*.027=7,009.20 Step 4 should be pro-rata using 170,000 as comp. It seems it to me the Step 2 allocation of $5,100 is wrong. Excess comp. should have been used in Step 2, not the 170,000; that just repeats Step 1. Your excess contrib. can't exceed 5.7%, but it can't exceed the pro-rata protion either. Step 1 you are allocating the top heavy minimum Step 2 you are allocating a 3% excess, so that the excess & the base are both 3% Step 3 The total excess contrib. can't exceed 5.7%, so you take the comp. plus the excess comp. and multiply by 2.7% (5.7%-3% excess you allocated in Step 2) Step 4 Excess contrib. done, so now you just allocate anything else pro-rata according to comp.

I am satisfied I know the answers to #1 & #3, but I'm still looking for confirmation on #2. (Really I want someone to tell me I'm wrong.) Thanks in advance for any guidance.

The plan sponsor picks a default rate. The plans I've seen use between 1 & 3%. The participant is given a Salary Reduction Agreement. The Agreement explicitly states that if the form is not returned the default % will be withheld. The Agreement provides options for the participant to elect out or to choose a different deferral amount.

Why is that the case? If it is a non 5% owner & the document so allows then wouldn't the RBD be the later of 4/1 following 70 1/2 or the 4/1 following retirement? In this case that 4/1/04.

I agree with Harwood. See §1.402(f)-1, Q&A2. Q-2: When must the plan administrator provide the section 402(f) notice to a distributee? A-2: The plan administrator must provide the section 402(f) notice to a distributee at a time that satisfies either paragraph (a) or (b) of this Q&A-2. (a) This paragraph (a) is satisfied if the plan administrator provides a distributee with the section 402(f) notice no less than 30 days and no more than 90 days before the date of a distribution....

I'm conservative, if a key receives an allocation, I would provide top heavy minimums. Not everyone agrees with that; they reason that since there is a last day requirement the right to a top heavy contribution has not accrued.

The other thing I noticed is that doesn't seem to answer the question. The question was whether the in determining minimum contribution could the refunded deferrals be disregarded. My understanding is that the answer is no. Deferrals are still used to determine the top heavy minimum, even if refunded.

I agree with you. Unless I am just misreading something the examples at the end are wrong. They seem to know the rule but its not applied correctly.

We have actually had the opposite experience with the DOL, that is why I was surprised the DOL didn't say anything about bgrazetti's situation

I'm not sure I understand your question, but the facts you present don't necessarily present a problem. If the Plan used to have under a 100 participants, but in later years the participant count rises to 100 or more, that Plan can still file as a small plan until the participant count reaches 120. There is no limit on the number of years you can use the 80/120 rule.

Corporations share is attributed to the shareholders. Probably have a controlled group. Are original individuals sole owners of their corporations? If not what is the ownership of each corporation?