R. Butler

That makes sense. Thank you for your help.

Wouldn't it just be an operational failure due to not following the terms of the plan? Unless it was made to a sole-proprieter or a >5% of an S-corp. (or possibly a "party-in-interest" trying to circumvent the terms of the plan), I can't see why it would be a prohibited transaction.

Everyone who meets 21 and 1 is eligible to defer and is eligible for a match, regardless of hours. That provision is true in both plans. Thus if I am not mistaken 401(k) and 401(m) will automatically pass because all nonexcludable NHCE's benefit. So here is a follow up question, since 401(k) and 401(m) can pass without aggregating, if I have to aggregate for the nonelective do I still test ADP/ACP separately.

Company A and Company B form a controlled group, each maintains their own 401(k) plan. Plan provisions are identical. Company A makes a profit sharing contribution; Company B does not. How do I perform the coverage testing? It seems to me that I test Company A by including all employees and treat employees of Company B as eligible and not benefitting. If Co. A passes then it has met 410(B) on its own and I perform all other nondiscrimination tests separately (Co. B automatically passes on its own because no HCE's benefit). Is this correct?

I looked into this a little further and I now agree with Kristina. Part II is for investment and annutiy contracts; Part III is for ancillary life insurance. I learn so much more from this board than I contribute.

I am not sure I completely understand the facts of your specific situation, but the scenario you are describing seems pretty normal. First, the fact that your employer is switching service providers does not entitle you to a distribution under the plan. That is why you can't roll it to an IRA. Second, are you sure you won't be able to redirect the money with the "old" provider once it has actually been allocated with the "new" provider? In many of the "take-overs" we handle, where investment products are switched, the funds are initially invested with the new investment company in similar funds as they were with the old investment company. It is done this way so that the money remains invested while we breakdown the money received by participant and source for the new investment provider. It generally takes us 2-3 days after the transfer to get the information necessary from the prior administrator and to allocate money on a participant level. However, once it is allocated on the participant level, each participant can make investment changes as he/she chooses. Again, I don't have all the facts, but it sounds like your plan does allow for self directed accounts. Check with your employer, you are likely going to find that you will be able to redirect your investments within a few days after the money is transferred over. Hope this helps.

It has been suggested that we may be able to correct this by filing two 5500's for 2000. On one of the them would be a final 5500; we would show a transfer of assets on the schedule I. I know technically there hasn't been an actual transfer of assets, but it may avoid the problem of fututre inquiries. Any thoughts?

Just a guess, but I believe we use the new rules to determine top heavy status for 2002. §613(f) of the act says it "applies" to years beginning after December 31, 2001. What is really neat about this whole act is that it "sunsets" at 2010. If Congress doesn't do something between now and 2010, then in 2011 everything will revert back to today's rules.

Oops. I believe M R Bernardin's most recent analysis is correct and that my initial post is wrong. Only 1 1099-R is required in the scenario prsented. I was careless; I will be more careful in the future.

I would refer you to the 1099-R instructions. You can get it off the IRS web site. Pages R-3 and R-8 are pretty clear on how to handle this situation. Also page R-4 will tell you how to handle any loss.

As previously mentioned you probably need to look to the document. The document should specify which sources can be used for a hardship withdrawal and also when a hardship withdrawal is available. Remember, even hardships are permitted under the document, the document probably specifies what qualifies as a hardship.

It sounds to me like you understand the rules. If distributed by by 4/15 of the year following the year of deferral, the excess is taxable in the year of deferral. If distributed after 4/15, the excess is taxable in both the year of deferral and the year distributed. Earnings are always taxed only in the year in the year distributed. In your scenario, you will issue 2 1099-R's. Be sure to use the correct code in Box 7 (I think Box 7) to designate the correct taxable year. Now I assume that the excess deferrals are in fact distributable (i.e., result from deferrals to one plan; if the excess results from deferrals to plans of unrelated employers, that timely notice given, etc.).

Although I agree that 96-01A can only be relied for the specific facts set forth in the opinion, doesn't ERISA §§514(a) and 514(B) and they do seem to state that ERISA would preempt state law in similar sitauations?

I know that this topic has been discussed extensively, but there does not seem to be a consensus. We have a plan that allows loans, requires repayment via payroll deduction. Participant wants to stop payroll deductions and default on the loan. Can the employer allow the particicpant to rescind the payroll deduction and default on the loan? In prior threads, the main concern was state law. Many threads suggested that state law required the payroll deductions to stop at the participant's request. In Advisory Opinion 96-01A, doesn't the DOL suggest that state law is preemepted by ERISA?

I agree with all of the above posts. Just a thought, if the turnover is really high, the basic 21 & 1 plan entry requirements may prevent many from entering. Also if plan is not going to be top heavy, you might want to consider a 5 year cliff vesting schedule.

I really don't have much experience with Nationwide, but from this thread and from speaking to them about the PPA program, I am not sure they care what they have done. The individual I spoke with was a regional sales manager, he talked as if the current PPA's were Albabnians and Nationwide was Milosevic. He went so far as to refer to their current policy as a "cleansing process". One thing I have learned from this thread, be careful about relying too much on one investment product, alliance program, etc.

On the Schedule I, where do I put life insurance premiums paid during the plan year? I was always under the impression it would be listed on line 2(h) as other expenses, but now I'm not so sure. The instructions for Line 2(e) seem to indicate that it should be called a benefit paid. Any guidance is appreciated.

Code 4B definitely applies to life insurance in a DC plan. Page 18, Example 3 from the 2000 instructions applies directly to this situation....You do complete part II of Schedule A. The insurance companies that I am familiar with actually give me the information line-by-line, I have to do very little but copy the numbers. You might try contacting the insurance company, they may provide something similar.

It is double attribution. There is no attribution to Son #2.

QDROphile, I generally don't disgaree with your posts, but in this situation the TPA returning the money is not the best solution. The difference between the comptroller catching the excess and the TPA catching the excess, is that comptroller catches it before the deferral is segregated and becomes a plan asset. Again, the DOL is clear that the deferral becomes a plan asset as soon as it can reasonably be segregated. In this scenario the deferral has already been segregated. There may not be a problem if the TPA returns the money, but there could be. The TPA is not failing to assure compliance by depositing the money and then correcting via the specified procedures provided in the law and the document.

John A., There may be a risk in having to amend 5500's, but I am not overly concerned. It is not too difficult to ammend for the one question. I am much more concerned over 5330's. Should I file if money deposited 5 days after payroll? 8 days? 10 days? Obviously I am concerned about not filing when maybe I should be, but also I am concerened about filing when maybe I don't have to file. The DOL really should set forth a more objective standard.

I don't disagree with Emiliano's response, but I generally answer the question based on the 15th business day. I explain the DOL's position to all clients. I urge them to remit ASAP after every payroll period. However, a "reasonable" standard by definition is subjective. It is very difficult to convince employer's that there view of "reasonable " is incorrect. The DOL really needs a much more objective standard.

It looks like I misunderstood the original question. I did not realize that the excess had not yet been deposited to the investment account. Having said that, I am not sure my answer changes. If this a situation where the participant exceeds 402(g) in just one plan, the payroll administrator probably should have caught it. This is different than catching it in the payroll department. The DOL is clear that deferrals become plan assets as soon as they can reasonably be segregated, in most cases that is within days. In this case the deferrals were actually segregated; a check was sent. This is such an easy thing to correct via normal measures, I just don't see a reason why any TPA would hold the money.

Excess deferrals are distributed to the participant and reported on a 1099-R. If the excess is not distributed by April 15 following the year in which the excess occurred, it may not be distributable until a distributable event occurs for the participant. In either case the excess does not revert to the employer.

Employees who change job status to an ineligible class are prohibited from participating. You are correct, they will continue to accrue vesting credit.