R. Butler

I'm going through the Average Benefits Test on this. Just to be clear: 1. Are the components (401(k), 401(m), 401(a)) tested separately for the modified facts and circumstances test? I believe so, but Relius confuses me appearing to only show results for 401(a) component. 2. I know that all components are aggregated for ABP test. 3. Assuming I am correct on #1 and #2, 401(k) portion meets the unsafe harbor percentage, but 401(m) does not? Do I aggregate for ACP and test separately for ADP? Thanks for any guidance.

Thanks for the replies. Each plan does benefit key employees; not the same key employees, but that is irrelevant. I was fairly certain of the answer, but because other administrators apparently arrived at a different conclusion I was just looking for some verification.

Company A owns 80% of Company B, thus a controlled group. Company A & Company B each have their own plan benifiting their own employees. We have just taken over the adminsitration of Company A's plan. Prior administrator never aggregated for top heavy. Current administrator of Company B's plan is not aggregating. I hope I am missing something, but it seems to me the Plans must be aggregated for top heavy. Am I wrong?

If the Plan does not contain a Break In Serivce rule employee enters immediately upon rehire (per ERISA Outline Book). If the Plan does have a break in service rule it seems to me participant would retroactively to rehire date if he/she completed a YOS during the first 12 months of reemployment.

Dental expenses could include medical expenses. If the expense is deductible under §213(d) it is valid for hardship purposes.

Controlled group, 2 members (A&B), 2 separate plans. I set up both plans under the same employer. List all employees in both plans. I am trying to do coverage testing for Company A. All of Company B's employees are put in an excluded division. Relius is treating all employees of Company B as eligible, but not benefitting, regardless of whether age and service requirtements have been met. I am fairly certain that Company B's employees still have to meet age and service to be included in testing. How can I make the test work properly? I know can get around this by taking such employees out of the excluded division, but I would rather not do that. I want to carry the employees forward each year and I am afraid I'll forget to put them back in the excluded divsion once age & service have been met. Thanks in advance for any guidance.

We have a Plan that has informed us considering terminating their 401(k) at the end of this year and doing a SIMPLE-IRA in 2003. They have until 12/31/02 to update their 401(k) document. If they decide to terminate the 401(k) in 2002, do we have to still put them in a new document or can we just use "tack on" amendments, similar to how we have handled it the past few years?

Company A owns 80% of Company B. Company A & Company B have separate 401(k) plans. Company A has 4 benefitting HCE's and 44 benefitting NHCE's. Company B has 5 benefitting HCE's and 6 benefitting NHCE's. It seems to me that Company B's plan can't pass 410(B) on its own and thus the plans must be aggregated for testing. We have just taken over the administration of Company A's plan only; Company B remained with the prior administrator. I have nondiscrim. tests from the past 5 years. The plans have never been aggregated. I have a copy of Company B's test for 2001 and the administrator did not aggregate. (The other administrator involved is national investment firm. I know they are aware of both plans; the same people actually administered both plans until now.) Am I missing something? Don't they have to be aggregated?

We have just taken over an age weighted plan. We need to get the document amended by 2/28/02. Due to time constraints, we hope to put them in our nonstandard document and attach a resolution to adopt an age weighted formula. Any problems with that? I don't see why we can't, but maybe I am missing something. Thanks for any help.

Company A acquires 100% of Company B stock 01/01/01. For determining HCE's in 2001, do I consider compensation earned by Company B employees during 2000? It appears to me that I do (414(q) says apply controlled group rules before applying 414(q)), just want to double check though. Thanks for any help.

Plan excludes an eligible employee for several years. Debatable whether the error is significant. If sponsor decides to be conservative and file with the IRS, what is the filing fee? I have never had to file and I am having difficulty understanding the fee. It seems to me for fewer than 10 participants it is somewhere between $2,000 and $4,000. That seems extremely high. Assume sponsor is aggressive and just relies on self correction. The IRS later audits and determines error is siginificant and sponsor couldn't self-correct. My research suggests that IRS would probably just resolve under Audit CAP. The correction has already been made. Assuming the IRS accepts the correction already made, what is the potential penalty amount? Cost of correction is about $20,000. Thanks for any help.

Thanks, I will try your suggestion. The error is occurring in the heading of all of the Report Writer Reports.

We have upgraded to 7.0 (SP 2), standalone verison. On one of the stand alones Crystal Report Writer is dropping a digit from the year, 2001 prints 201. Does anyone know what causes this and how to correct it? Relius support has been pondering it for nearly a month and can't come up with anything.

If you haven't updated I'd consider waiting until a slow part of the year. We had many difficulties with the update. It took us over a month to get it operational and pmacduff, there are still quirky things occuring that just never happened before.

After reveiwing Rev. Proc. 2000-20 several times I am satisfied that for RAP purposes, employers are eligible for the extension if they are prior adopters of a protoytype that was timely submitted to the IRS for approval. Similar to the certfication, once an employer has the RAP the Rev. Proc. does not require that the employer actually adopt that prototype. I don't see any reason that the employer can't adopt any prototype, regardless of when filed for IRS approval. I'm a little confused by K. Johnson's last post. If an employer adopts my plan before 02/28/02, they don't need the extended RAP because it would have adopted timely anyway. Am I missing something?

A plan can suspend the safe harbor match. See Notice 2000-3, Q&A 6 for details Although the match doesn't have to be deposited until the due date of the employer's federal tax return, it accrues as the employees make deferrals. You can't revoke and avoid paying the portion that has accrued. I don't see any reason why an employer that suspends in year 1, couldn't do a safe harbor in Year 2. Hope this helps. Rick

We have a takeover plan. Investments currently are not participant directed. Employer wants to allow participants the option to either self direct or to allow the employer to continue to direct investments. If a participant initially chooses to allow the employer to direct investments, that participant could later change his/her mind and later choose to self-direct at any time. Can the plan sponsor still avail themselves of 404© relief, assuming all other requirements are met?

Thanks. I was having visions of working 16 hour days, even on Christmas. I don't know how I missed that initially.

Alf, You may have just made my life much easier. I just went back and reviewed again Rev. Proc. 2000-20, §19. I now see clearly the part about prior adopter's. We have several plans in various prototypes. To ease administration and increase revenue we decide to sponsor our own document. Not all, but many of the employer's current document providers, actually did file with the IRS before 12/31/00. Based on §19.05 it appears, just as you stated, that if an employer is merely switching prototype providers they are already deemed to have adopted any plan maintained by the former plan sponser that was filed by 12/31/00. Thus, certifictaion not necessary regardless of the prototype they actually adopt. Am I understanding correctly? Thanks for your help.

Hypothetically we could have the employer certify their intent to adopt another prototype. My reservation for doing the certification under Rev. Proc. 2000-20 is that your expressing an intent to adopt a particular plan under a penalty of perjury. I have difficulty having clients sign a certification that we know beyond any doubt is false. We are looking into somehow modifying the certification.

Probably better just to amend the existing profit sharing plan. It is my understanding that as long the only contributions to the plan for a given year are safe harbor contributions meeting provisions of 401(k)(12) or 401(m)(11) the plan won't be considered top heavy for that year. If you terminate the plan the profit sharing plan you must provide for 100% vesting. If the employer makes contributions besides the safe contribs., then the plan would still be subject to top heavy requirements.

I see several possible problems with an ineligible rollover distribution theory (as an argument to the intial post in this thread): 1. If the money was rolled prior to the time the participant had exceeded the 402(g) limit then it wasn't an ineligible rollover. 2. Even if the money was rolled after the 402(g) problem, the participant never gave notice of the excess. Now that Plan A doesn't exist, it would appear to be too late. 3. Since Plan B acquired Plan A would Plan B be deemed to have notice of the excess? (Maybe a stretch, but a thought.)

I agree with Shafter, 1.402(g)-1(e)(2) provides that the participant notifies the plan that there are excess deferrals. The regs do not impose a "Last In First Out Rule". At least in response to Hadden2001, I don't see why the employee couldn't defer under Plan B and collect the better match.

I understand QDROphile's point. He is correct that there is no statute that specifically states that forfeitures cannot be applied against employee deferrals. We have researched this issue for a client and based partly on the advice of several attorneys, we advised the client that it could not be done. At a minimum this is a safer approach.

The biggest reason is exactly what MWeddel suggests. We have verified this with several attorneys. Also, wouldn't there be at least a possibility that the doument doesn't allow it? Although the the IRS may consider deferrals an employer contribution, every document I have seen clearly distinguishs employee deferrals from other employer contributions.