R. Butler

IRC 404(h)(2) contemplates an employer having both a SEP and a qualified plan. Publication 560 instructs employers when Form 5305 can be used. Appleby is correct that form 5305 can't be used if employer maintains a qualified plan.

Forfeitures cannot offset employee deferrals.

MR Bernardin, Thank you for you reply. I was fairly certain that we couldn't rely on the extended certification period, but since the document provider told me otherwise I wanted to double check. One question, where do you get the 2/28/02 date? I haven't seen that date, I have assumed 12/31/01. Thanks in advance for your help.

To be eligible for the catch-up you must have already contributed the maximum deferrals allowed under the plan. A plan cannot restrict deferrals in such a way that it would prevent a participant from receiving the full safe harbor match. Therefore, before a participant is even eligible to make a catch-up contribution, he/she has already received a sufficient match to meet safe harbor.

A safe harbor 401(k) plan does not have to match the catch-up. I really don't even see a scenario where they would be matched in a safe harbor plan.

We are sponsoring a document for the first time. Essentially we are putting our name on a document of a major provider. Although the provider applied for IRS approval prior to 12/31/00, we did not apply until last month. The provider tells me we can still use the Certification specified in Rev. Proc. 2000-20 becuase they applied prior to 12/31/00. The provider says it is irrelevant when we applied for IRS approval. Is this correct?

I am not the moderator, that would be LCARUSI, but thanks. In response to your other post, I don't have a cite, but we always allocate earnings to the forfeited match. If nothing else, it seems to be the most sensible approach.

I am not following the question? To avoid the true-up the document should define match compensation on a payroll basis (or something to that effect). If match compensation is defined over the entire plan year or the portion in which the employee is a participant (or something to that effect), true-up match must be given.

They are definitely HCE's for the reason GregSelf indicates.

You need to review the specific document. It will define compensation for purposes of matching contributions. I have seen some prototypes that provide for matching on payroll basis, but not all have that option.

Does anyone know of good reference material for Prevailing Wage Plans? I have just a limited understanding of such plans and need to learn more.

We have an individual that worked for a state government for much of 2001. He maxed out under the 457 plan. He quits his job with the government and is now self employed. Can he establish a SEP for the self employment during 2001? I don't see why not, but I am not confident with my knowledge about SEP plans.

I don't see a basis for forfeiting the $370 match accrued at year end if he is currently employed. From your facts it seems to me that at a minimum, his account balance should be $370 and his vested balance should be $92.50. My thought related to the amount originally forfeited. If the match had already accrued at the time of the initial distribution, has he truly been paid out? If not, should there have been any forfeiture initially?

Stays in his account and continues to vest. Follow up question, did he accrue the match prior to forfeiting? I am assuming your document reads forfeitures occur at the earlier of payout or 5 consecutive one year breaks. If he was entitled to additional money at the time of the initial distribution, has he been paid out thereby triggering a forfeiture?

Notice 98-52, Section VIII.B. provides that the nonelective contribution cannot be used for imputing permitted disparity. Why? I don't know.

The Notice really isn't part of the SPD, but you can satisfy much of the information by cross referencing the SPD. See Notice 2000-3, Q&A 8.

I don't see any reason you can't establish a MP plan for 2001 and merge into the PS plan at 12/31/01. You definitely need a document and you will have to file a 5500 for 2001. You should be able to deposit the MP receivable into the merged PS plan.

I'm fairly certain QJSA not required every year, but see Notice 97-75.

The administrator doesn't have to investigate the participant's ability to pay too hard. As long as the administrator doesn't have evidence to the contrary, he/she can rely on the participant's written representation that the need cannot be met from other sources.

Probably O.K. to allow the hardship withdrawal under the safe harbor deifinition. Downpayment on a new home would satisfy Part I (immediate and heavy financial need); administrator should determine if Part II (is it necessary, i.e. can the need be satisfied by other sources) is met. Unless the administrator has knoweldge to the contrary, he/she can rely on the participant's written representation that the need cannot be relieved through other sources.

I wouldn't bet the house on changes by year end. Fortunately for me most of our plans our small to medium sized; worse case scenario I can manually go into the Census and pick my key employees. I hate to do that because it eliminates a cross check, but you gotta do what you gotta do.

There does need to be two separate tests. The interesting question is how are administrative software will handle that.

I don't see anything that prevents a cross tested profit sharing contribution in a safe harbor 401(k). It is my understanding that a benefit of the 3% safe harbor contribution is that it counts in testing allocations under or benefits under 401(a)(4). I would caution that a Safe Harbor match with an additional employer contribution doesn't appear to automatically satisfy top heavy under EGTRRA.

For SIMPLE IRA's compensation is defined in 6051(a)(3). Basically it is compensation subject to withholding under 3401(a). Compensation does include salary deferrals under the plan. If employer uses a nonelective contribution the 401(a)(17) limit does apply. If the employer uses the match 401(a) (17) does not apply.

A cure period is really just a grace period.