R. Butler

I understand the logic, but if they meant "permitted" the same way you are using it is there really a point in that language? I have an issue with the inconsistency. Why does passing the ADP test possibly trigger additonal top-heavy minimums? In this very case if the plan sponsor has little to no participation the ADP test would fail, the deferral would be called catch-up and not count as a contribution for top-heavy purposes. However, this plan will pass ADP. That very same contribuion amount can't be re-classified as catch-up and now counts as a contribution for triggering top-heavy minimums. That does not make any sense. Either the first $5,500 should always be called catch-up wihtout regard to limits or count the catch contributions as a key allocation for top-heavy purposes.

Thank you for the cite. That is what I was concerned about, just couldn't find the cite on my own.

Thank you for your post. I was repsonding to another post as you posted this. I understand the discretionary amendmnet time lines. So there wouldn't be an issue with reclassifying money that is already in the plan as catch-up by creating the plan imposed limit? That would be great.

1. It would help because although catch-ups are counted in the balances they don't trigger top-heavy minimums. 2. This is the real issue. All hce's/keys are at least 50. If the plan is amended now to limit hce deferrals to $500 plus the catch-up when someone has already deferred $3,000 is that a cutback? My inclination is yes, but I'm hoping that I'm wrong. No HCE intends on contributing more than $5,500; there are agreements in place stating that. I'm not comfortable though saying that they can now create a plan imposed limit to reclassify money already in the plan as catch-up. 3. That is the problem the plan won't fail ADP. Plan needs these deferrals classified as catch-up to avoid a top-heavy minimum. Thanks for your reposnse.

This seems too agressive to me on its face, but I'm hoping I'm wrong. We have a take over plan that look like it is top-heavy. HCE's have contributed in 2013, but not in excess of $5,500. How big of an issue is it if we amend now to limit deferrals for HCE's to a low dollar amount plus the catch-up? I don't see that there is a cutback issue to the non-keys because there is a last day requirement for top-heavy minimum. They haven't accrued anything until the last day. I also don't really see a cutback issue to the HCE's because he right to defer is not a protected benefit. I'm uncomfortable because the amendment is really being used to reclassify money that is already in the plan as catch-up when if we let htings play out some of it probably wouldn't be. Thanks for any guidance.

401(k) plan was established in 2013. Plan sponsor wants to terminate the plan now. Two owners rolled money into the plan at inception. The only other money in the plan is 401(k) money of the participants; despite initial intentions no employer contributions have been made to the plan. No loans were ever taken on the rollover money (or any other money for that matter). A couple of questions: 1. Would the IRS have a permanency issue with this plan terminating? Although I know it is subjective most opinions suggest two years for a DC plan with employer money. Not sure why it would be different if there is not employer money. 2. Assuming there is a pemanency issue what would be the cosnequences? Employee deferrals & trust earnings counted as income? Initial rollovers disallowed? Anything else Thanks in advance for any guidance

Never mind on this. I figured out why the associaiton might be conisdered the employer? Thanks though

Local church sponsors a 401(k) plan. The church is a member of a large national denomination. Trying to determine who is the proper employer of the minister, the local church or the national assocation? Minsterial responsibilities are performed for primarily for the local church. For some reaosn there has been a determination that the national associatIon is the proper sponsor, I'm just not seeing it immediately. Is it commonf for the assocation rather than the local church to be treated as the employer? Thanks in advance for any guidance.

I think that a plan can hold physical gold. See 408(m) pertaining to collectibles treated as distributions. The plan should use a custodian. Although he didn't actually end up investing in gold coins, we did have a plan sponsor that considered investing in gold coins and he didn't to use an independent custodan. We recommended against that. 408(m) Investment in collectibles treated as distributions (1) In general The acquisition by an individual retirement account or by an individually-directed account under a plan described in section 401(a) of any collectible shall be treated (for purposes of this section and section 402) as a distribution from such account in an amount equal to the cost to such account of such collectible. (2) Collectible defined For purposes of this subsection, the term “collectible” means— (A)any work of art, (B)any rug or antique, ©any metal or gem, (D)any stamp or coin, (E)any alcoholic beverage, or (F)any other tangible personal property specified by the Secretary for purposes of this subsection. (3) Exception for certain coins and bullion For purposes of this subsection, the term “collectible” shall not include— (A)any coin which is— (i)a gold coin described in paragraph (7), (8), (9), or (10) of section 5112(a) of title 31, United States Code, (ii)a silver coin described in section 5112(e) of title 31, United States Code, (iii)a platinum coin described in section 5112(k) of title 31, United States Code, or (iv)a coin issued under the laws of any State, or (B)any gold, silver, platinum, or palladium bullion of a fineness equal to or exceeding the minimum fineness that a contract market (as described in section 7 of the Commodity Exchange Act, 7 U.S.C. 7) [2] requires for metals which may be delivered in satisfaction of a regulated futures contract, if such bullion is in the physical possession of a trustee described under subsection (a) of this section.

Facts are as follows-- Person A owns 100% of Management Co. Managment Co. derives 45% of gross receipts from Co. Z. Co. Z is owned 40% by Person A, 30% by A's brother (Person B) & 30% by somone unrelated. Person A & Person B also own 5 other businesses 50/50. Managament Co. derives about 20% of its revenue from the 5 businesses ownerd 50/50 by the brothers. The goal is for Management Co. to adopt a plan without having to include any of the other business. My concern is whether Co. Z needs to be aggregated with the other 5 businesses when determining from where Management Co. derives its revenue. It is my understanding that under 267 the brothers are related persons. I'm unclear though about whether there needs to be a certain degree of common ownership between between Co. Z and the other 5 before all businesses are considered related. Under 1563, Co. Z wouldn't be part of a controlled group with the other 5 because there isn't 80% common ownership. Does that same 80% threshold apply when using 267©? Am I analyzing everything else correctly? Thanks in advance for any guidance

Participant requests hardship. Check is issued, participant dies 3 weeks later. Mail was slow or something & the check was received on the date of death and not cashed. Does that check get returned to the account or can it be reissued to his estate using a constructive receipt argument? The beneys under his estate are likely different than those under the 401(k) so this is a nightmare situation for the plan sponsor. Thanks in advance for any guidance.

No, but in this case there is no evidence that the participant wouldn't be able to repay. My concern is that the IRS would view this as a terminated plan & treat it as a taxable disitribution. Thank you both for your replies.

Sole proprieter sponsored a retirement plan. She had no employees, so she was the only participant. She has not contributed since 2011, but has not terminated the plan. It is doubtful that her business will continue. She wants to keep the plan open and take a loan against her balance. I don't see that she can do that under the circumstances. Am I missing something? Thanks in advance for any guidance.

Key employee takes a loan from the unrelated rollover source. Does that loan now count in the top-heavy determination or is still excliduible. I would think it is still excludible, but can;t find anywhere it deifnitively says that. Thanks in advance for any guidance.

Thank you. I understand everything in your repsonse. You were very concise, but informative. I guess I'm still having trouble with the idea that we can reclassify something as catch-up for 2014 that hasn't actually been deferred yet in 2014. I have no issues with the particiapnt deferring the full 23,000 in 2014 if he chooses.

Plan year 03/01 - 02/28 Plan fails ADP testing at 02/28/13 & $1750 of HCE's deferrals are reclassified as catch-up. HCE defers $23,000 during 2013 (evenly across all paychecks). It seems to me that we can classify $3,750 of that as catch-up at 12/31/2013. (The $5,500 less the amount used at 02/28/2013) HCE defers $4,500 in January & February of 2014. Plan fails testing @ 02/28/2014 and a large refund is required. The system is reclassifying an additional $5,500 as 2014 catch-up on top the $3,750 that we already reclassified for 2013. I think I can use $4,500 as 2014 catch-up, but I don't see that I can use more than the deferrals made during 2013. Basically I'm think the ADP test should show $19,250. ($23,000 less $3,750 for 2013 catch-up). Up to an additional $4,500 could be called 2014 catch-up and used to reduce any refund Am I missing something? Thanks in advance for any guidance.

Plan sponsors filed their taxes based on cash basis deposits. Turns out they owed a somehwta sif=gnifican tmatching contribution to a couple of employees. Plan sponsor does not want to pay to have the tax return amended and will deduct on the 2014 return. Will they count as annual additions for 2014 now? Thanks in advance for any guidance.

Employee has loan. He is injured at work and is out on a leave of absence. He is receiving workers compensation. Plan allows loan repayments to be suspended during unpaid leave of absences. I'm thinking plan sponsor can suspend payments. Workers comp, doesn;t count as wages for other plan purposes; I don't see why it couldn;t be disregarded for puproses of laon repayments either. Am I missing something? Thank you in advance for any guidance.

Can anyone recommend a good training program/courses for cafteria plan administration? Something similar to programs that ASPPA & NIPA have for retirement plans. Thank you in advance for any guidance.

Co. A sponsors a safe harbor 401(k) plan using the match to meet safe harbor Co. B sponsors a safe harbor 401(k) plan using the 3% to meet safe harbor Co. A purchases Co. B in mid-2013 in a stock purchase. Each company has continued to maintain separate plans. Thye want to merge those plans now & Co. A plan provisions. Had they done this in 2013 I think we would have been okay under Treas. Reg. §§1.401(k)-3(e)(4). Are we still okay to merge the plans in 2014? We are still in the transition period, so I'm inclined to think it is okay because the plan merger is still due to the business transaction, they just didn't address the plans as quickly as they could have. Thanks in advance for any guidance.

Thank you for your response. I used 414(s) because the document provides that regardless of the definition of compensation for allocations I can use any definition meeting 414(s) for ADP/ACP purposes. (As a caveat I don't see that it matters in this situation. For allocation purposes the plan uses 415 safe harbor & the same question arises in regards to the auto reimbursement & COBRA are inlcuded). Under 414(s) & the 415 safe harbor definitions it is my understanding that the auto expenses are included as compensation if they part of a nonaccountable plan. (The easiest way to detemrine whether the auto expense plan is accountable or nonacocuntable is whether it is comp. on the W-2. Reimbursements under an acocuntable plan shiuldn;t be on the W-2.) I'm a little less sure on the COBRA. My initial thinking is that it is a fringe & is inlcuded if included in income. Thanks for any guidance.

It is my understanding that 414(s) compensation would include auto expense reimbursements and cobra reimbursements which are includable as income on the W-2? Am I correct on that. Having a little discussion with a plan sponsor; I guess their prior providers told them that such expenses did not count as compensation even though reported on the W-2. Thanks in advance for any guidance.

We just became tpa for Co. A's plan. Co. A is an S Corp. Person A is a 3% owner on 01/01/2013. On 09/01/2013 Person A becomes a 6% owner. The 2013 K-1 will show pro-rated ownership of 4.25% (or something right about there.) Prior tpa forwarded us the 2013 ADP/ACP test which has Person A as an NHCE. I spoke with plan sponsor about it. They are hoping to avoid refunds and want to assert that Person A is an NHCE for 2013 because the pro-rated ownership on the K-1 is less than 5%. Does anyone see any validiity to that assertion? I don't see it. It is my understanding that if an employee is a more than 5% owner at any point during the current plan that employee is considered an hce. I thought it would be worth a stab in the dark though to try to find a valid argument supporting the plan sponsor's "hoped for" result. Thanks in advance for any guidance.

If the sole propreiter did not take the deduction for the contribuiton on the tax return would it be permissable to just forfeit the contributions adjusted earnings?

LLC taxed as a sole proprieterdhip showed a net loss for 2012. The owner made 401(k) contributions & receieved a match during the year which need to come out of the plan. Is this treated as an ineligible contribution and forfeited or distributed back to the participant as an excess annual addition or excess deferral? Thanks in advance for any guidance.