R. Butler

I've asked this under 401(k) board, but its more of a document question. so I will ask it here. I've got a Parent/subsidiary controlled group. Two employers A & B; each maintain its own Plan. B can't pass coverage on its own, so we aggregate. Now here is my problem, since I aggregate for coverage, I've got to aggregate for ADP/ACP. A uses current year testing; B uses prior year testing. Can B retroactively be amended to use current year? B has already amended for GUST, but I am hoping that since we are still within the remedial amendment period that its permissable to do that retroactivce amendment.

Assuming divorced in 2003, she will still be an HCE in 2003 & 2004.

1. No it is not O.K. 2. Two issues jump out. Prohibited Transaction possibilities & Discrimination issues since NHCE's don't have the same opportunity to invest.

I've got a Parent/subsidiary controlled group. Two employers A & B; each maintain its own Plan. B can't pass coverage on its own, so we aggregate. Now here is my problem, since I aggregate for coverage, I've got to aggregate for ADP/ACP. A uses current year testing; B uses prior year testing. Can B retroactively be amended to use current year?

You might get people to disgree with me, but I only see the following options to correct a failed ADP test: 1. Distribute the excess contributions 2. Recharacterize as after tax 3. QNEC 4. Shifiting Also keep in mind that some of these options might not be available depending on what your document says. Always read your document; it should tell you how to correct.

I see said the Blind Man.

Tom, Are you saying that there is a way elirpa can keep that employee from being classified as an HCE? If so, how do you arrive at that conclusion? Are you saying that you can exclude compensation prior to participation for HCE determination purposes? I am confused about what you are saying.

No.

Its $40,000 for 2003. When was the material printed? Could they have been projecting $41,000 for 2003?

They can't make a repayment date retroactive to a date before the loan existed. You should have completed loan paperwork which tells you when repayments are supposed begin. Hypothetically, I suppose they could have already treated this as a deemed distribution, but I doubt it. You can do as Appleby suggests in option #3. I would get that ball rolling ASAP & I would also check your loan papers or get a copy of the loan document & find out what events constitute default & when a deemed distribution occurs. You want to make sure this is taken care of before there is a deemed distribution.

There may be other other issues, but along the same lines as JanetM was suggesting why can't you just pay it back? It seems from your post that you still have the check & since you still have the check I am guessing that its a new loan & probably not currently in default. How long ago did you take the loan? Is it already in default and beyond the cure period? Do you still have the check?

I'm going to say it depends. What does your document say? Can loans be repaid after termination? If so, then I agree with Blinky. If loans can't be repaid after termination then I'd problably agree ljr, the loan would be offset and you have an actual distribution.

Oops. That didn't work. Let me try again. http://www.benefitslink.com/boards/index.p...t=16501&hl=loan If this doesn't work. The thread is called loans for the elderly. Just type in Loan for your search, narrow the search by using my user name and by searching Distrib. & Loans forum.

This thread may help. http://www.benefitslink.com/boards/index.p...t=16501&hl=loan Why would you have a 20 year loan? Generally the maximum loan period is 5 years; the only exception is a home loan.

I tend to agree with those that report it, although my boss disagrees so we don't report it. The best reasoning I've seen for the possible exception is in the following post: http://www.benefitslink.com/boards/index.php?showtopic=15630

Archimage, I see your post after rcline's. I agree with with your attorney. It depends on how the plan defines comp. and as I read rcline's post again, rcline probably would agree (although I am just assuming). rcline actually gave a definition of comp. in his post which led to his conclusion.

rcline46, Are you saying that in Archimage's situation you can't use full year comp.? Doesn't that depend on how the document defines comp.? It seems to me that if comp. is defined as the calendar year ending within the plan year you can use the full year's comp. (I am assuming that this is a calendar year plan).

Are you putting your mustard hollandaise sauce over fish? Perhaps your dining on one of Blinky's relatives? What kind of fish are you Blinky? Perhaps I have eaten one of your relatives.

Yes.

Can't have a five year cliff. Generally you will have a 3 year cliff or a six year grade.

In regards to the 3%, the question isn't necessarily what the NHCE's are defering its whether the Plan tests using prior year or current year. If the plan uses prior year testing fro ADP, than the HCE group can automatically average 5% in the 1st year. Are the HCE's excluded from participating in the document? If they are not excluded then there really is no error. You simply do the ADP test. If you fail make the refunds. And if you only have 1 HCE deferring, you may not even fail, particularly if you are using prior year.

Do the partners want to make a one time irrevocable election not to participate or are specific partners just not wanting to participate for this year?

I found those notes. We were concerned about the Deemed CODA, not because of the pre-funding, but in addition to the pre-funding one of the partners wasn't wanting to make a full contribution each year. That would be a Deemed CODA under IRS Announcement 94-101 §441.3.

Thats correct, but I still can't remember why we thought that. Even without that issue you have discrimiantion problems as the other posts have mentioned. See 1.401(a)(4)-1©(8). "...(8) Allocation of earnings. Notwithstanding any other provision in Secs. 1.401(a)(4)-1 through 1.401(a)(4)-13, a defined contribution plan does not satisfy paragraph (b)(2) of this section if the manner in which income, expenses, gains, or losses are allocated to accounts under the plan discriminates in favor of HCEs or former HCEs..."

I've researched this before, but for some reason I can't find my notes. The situation I researced involved a partnership. In addition to the nondiscrimination issue, we concluded that if the plan was audited there was a strong possibility that the contributions would be classified as deferrals. If I can remember where I filed those notes I'll try to post something that backs up that conclusion.