R. Butler

Employer contributions must be made by the due date of the employer's federal tax return, including all valid extensions. See1.404(a)-1( c ).

The short time employees are entitled to the top heavy minimum provided they are employed on the last day of the plan year. See 1.416-1,M-10

We always try the IRS Locator program first, but we have not had the same success as KJohnson. There are several Participant Locator Services. The price varies, but generally cost between $25 to $40 per participant.

Do you read that Corbel update to say that in a Safe Harbor 401(k) situation the top-heavy minimum would only apply to the "otherwise excludibles"? I read that update, but I didn't even connect the safe harbor issue with the top heavy issue. The ERISA Outline Book is fairly clear in its position that the whole Plan would be Top Heavy. Again I don't necessarily agree, but it does seem to me that it is all or nothing. Either you meet §613(d) or you don't.

What the ERISA Outline Book (and I think Archimage) are saying is that a safe harbor that excludes "otherwise excludibles" from the safe harbor contribuiton is not a Plan that consists "soley of a safe harbor 401(k) arrangement." Since it does not meet the "solely" requirement, EGTRRA §613(d) does not apply. Therefore the entire plan is top heavy. Whether or not a profit sharing contribution is made is irrelevant, because the Plan already doesn't meet the requirements of §613(d).

Archimage, Thanks. Clearly Mr. Tripodi does say as you suggest. I'm not sure I necessarily agree, but he is 50 times more knowledgeable than I will ever be. It would seem like an unintended result. The employer could have just excluded the "otherwise excludibles" from deferring and avoided the whole situation. Employer doesn't get a benefit by letting employees defer quicker (other than possibly retention).

Why are you getting this back. Is it because of a failed nondiscrimiantion test or because you exceeded the 402(g) dollar limits?

Do you have a cite for that Archimage? EGTRRA §613(d) seems pretty clear that if the plan consists solely of deferrals and safe harbor contributions it isn't top heavy. I don't see anything in §613(d) that makes this rule different for Plans that exclude "otherwise excludibles" from the safe harbor contribution.

The plan can't lease property to a disqualified person. See §4975©(1)(A). The employer is a disqualified person. See §4975(e)(2)©.

IRS Publication 560 may help you. Also if you search the message boards you will find several prior threads. Starting point is line 15 of the K-1. Adjust as required pursuant to 401©(2).

Thanks.

Company Z owns 72% of Company A. Wife owns 3.75% of Company A. Husband owns .03% of Company A, 1% of of Company Z. Kids owns 99% of Company Z, but no direct ownership in Company A. The kids are attributed 71.28% of Company A (72%*99%), is this ownership further attirbuted to Parents. I'm thinking that this is not considered double attribution, but I'm not positive. I'm trying to determine HCE status.

Generally under the mail box rule a contribution is deemed made when mailed. However, I would be concerned that the trustee is still holding the check. If trustee is holding the check at the request of the employer it wouldn't be deductible.

If individual's spouse owns the other 50% of Company, then her 50% is attributed to him under §1563(e)(5). Does any key employee participate in Co. A's Plan? Are the plans aggregated to pass 410(B) or 401(a)(4) nondiscrimination tests? If the answer to either question is yes then the plans must be aggregated. If there isn't required aggregation you still can permissively aggregate if the plans can be aggregated without failing 410(B) or 401(a)(4). See 416(g)(2)(A).

From the limited facts you have given I don't see that Company A & Company B are related employers. Individual owns 50% of Company B. Is any part of the 50% he does not directly own attributed to him? Is this an affiliated service group situation?

DOL Advisory Opinion 2001-01A talks about plan expenses which may be paid from the Plan and settlor expenses which cannot be paid from the Plan. Settlor expenses are arise from discretionary activities. Plan expenses that can be paid are those that are necessary. You can find several articles on this with a quick search. I put a link to one I printed out a while back. It mentions 5500 prep. as a reasonable plan expense. http://www.cigna.com/professional/pdf/CPA_...A_Blln0301r.PDF

The employer is liable for a 10% excise tax on corrective distributions made after 3/15 (assuming calendar year plan).

No. You may be confusing this with 402(g) excesses This is a taxable distribution in 2003, not 2002. It was distributed after 3/15. Gains on excess contributions are taxable in the same year as the excess contribution (in this case 2003).

Corrective distributions can still be made, but it will not be treated as if made by March 15th for purproses of avoiding the excise tax.

Thank you. Because only 2 actually receive the top heavy contrib. I was concerned that I couldn't use it in establishing the permitted disparity limit. Live and learn.

We use Relius 8.0. We have a top heavy 401(k) Plan. Document amended to use Match to meet top heavy. We are allocating an additional profit sharing contribution. Document provides satisfy top heavy first. We have about 20 participants. All but 2 get sufficient match to meet top heavy. When I run the profit sharing allocation the 2 first get the amount needed to meet top heavy requirements. My problem is that the Relius is factoring the top heavy contribution for those 2 into the minimum permitted disparity allocation (i.e. the top heavy contrib. to those 2 employees is 2%; base contrib. to all employees is 2%, Relius is saying maximum permitted disparity is 4%, not the 2%) Is Relius doing that correctly? I know permitted disparity canot exceed the base. Since only the two are receiving the top heavy, I just assume that it would not be counted as part of the base If the top heavy shouldn't factor into the permitted disparity, how do I make it quit? Thanks for any guidance.

In both cases the document automatically excludes those who became Employees in 401(B)(6)© transaction unless the employer specifically elects to include them.

Similar Situation Company A a wholly owned subsidiary of Foreign Parent with no other US business. In 12/02 Company A sold to another foreign parent. The new foreign parent does have US subsidiaries. Based on my understanding (assuming no other coverage issues) I am O.K. in 2002 and 2003 under the transition rules. Anyone agree or disagree? (With all these ownership changes I haven't been able to concentrate on my new DB career)

A owns Company Z. Company Z has a Plan (calendar year). B owns Company Y. Company Y has a Plan (calendar year). B is A's dad. A is over 21. During 2002 B sells Company Y to A. It seems to me that the transition rules give me a pass on the coverage testing issues in 2002 (and in 2003). Am I understanding the transition rule correctly? Thanks

Thanks for your reply. We contacted our Congressman. The IRS replied that if the area was officially declared a disaster area, that the IRS may issue an extension for the zip codes affected. Otherwise they suggested as you did. FEMA was here Monday, so we should know something in the near future, but we're planning on meeting the 3/14 deadline.