R. Butler

IRC 72(p)(2)(D) provides that for purposes of applying the loan limits, all qualified plans maintained by the same employer or by a member of a controlled group or affiliated service group are treated as one plan.

I assume by rollover you mean the NHCE has a balance in another qualified plan that he will transfer to this plan. Genarlly rollover contributions are not considered in determining top heavy status. If this is a related rollover (either not initiated by the employee or made to a qualified plan maintained by the same or a related employer) it would be considered in the top heavy test at 12/31/01. Assuming the test done correctly at 12/31/00, you are probably stuck in 2001

Schedule I, Line 4(i) asks if the plan held 20% or more of its assets in a single security...In the instructions it specifically states that you do not check "Yes" for securities held as a result of participant directed transactions. Does this mean that if participant accounts are self directed we will not consider the value of such self directed accounts as being held in a single security? It seems that way to me, but this a pretty siginificant change from prior years so I am just looking for verification.

I am fairly certain that that a required group would not only consist of each retirement plan in which a key employee is currently a participant, but also each plan in which key employee has participated in any of the 4 preceding years.

M R Bernardin, Thanks for the input. I don't know how I missed that, I derived my original conclusion from 1.401(a)-13(d). It looks to me that it is permissable for the check to be cut to the third party, provided the request is revocable and the third party acknowledges in writing (within the prescribed time frame) that he/she has no legal right to the money. The document doesn't prohibit it "per se". It basically says lump sum distributions will be made "at the participant's election". If the Plan Administrator ultimately allows this arrangement, will the distribution still be taxed to the participant? I think so since the participant directs the distribution and it will be revocable up until the check is actually cashed.

We have a terminated participant who will be eligible for a lump sum distribution next month. The participant wants the check payable jointly to herself and a third party. I am fairly certain that this would be an assignment of her benefits. Since she is in pay status this would be permissable only if it is voluntary and only up to 10% of the total benefit. Am I missing anything? Thanks in advance for any guidance.

We just took over a 401(k) plan. The plan is made up of a controlled group of corporations. The prior administator was filing a separate 5500 for each member of the group. I have never seen a situation like this before. How do I correct it? Any input is appreciated.

This my trouble with Moe's analysis, and it could be that I am missing something, Moe seems to be suggesting that because the doctor works for both practices that there is necessarily a "regular association". The S-corp is an entity on its own; it has always been my understanding that the A-org. (in this case the s-corp.) has to perform the services or associate itself with the FSO. If the medical practices do not treat the same patients, if the A-org. performs no services for the FSO, if there are no business referrals, then where is the "regular association"?

I don't know of any reason you can't have a single entry date. I have seen several plans with single entry dates. Now for 401(k) plans, every document I have seen that requires 1 YOS and has 1 entry date, does provide that you enter on the entry date nearset meeting the requirements, thus no employee will wait longer than 6 months to enter after meeting the requirements.

Yes.

Sue Patterson, Its really not that difficult (maybe time consuming, but not difficult) to calaculate true up match on a payroll basis. You just need to keep track of year to date information. Quick example Person A earns 10,000 per month, defers 10%, match rate is 50% up to 5%. Through June 30, earnings would be 60,000, deferrals 6,000, match 1,500 (this (60,000*.05)*.5)....On July 1 Person A reduces deferrals to 1% of pay. Through July 31, earnings would be 70000, deferrals 10,100, match as calculated via the document would be 1,750 (70,000*.05)*.05). Total match due at 7/31 would be the 1,750 minus the 1,500 already paid. You would do the same thing each month. Now in my example I kept the numbers simple, year-to-deferrals were always above 5%. This won't always be the case in real life, but the concept is still the same. If you cumiulative year to date info. you can always calculate the match per the document and subtract out what has already been paid to arrive at what is due. Hope this helps.

A top heavy 401(k) plan requires 21 & 1, has quarterly entry dates. Employees enter on the date "nearest" meeting the eligiblity requirements. There are several participants scheduled to enter 10/1. Since the plan is top heavy, it may benefit the employer to amend the plan to allow only a single entry date (1/1). As long as the amendment is adopted prior to the "potential 10/1 entrants" having met the eligibility requirements, I can't see why this can't be done. Am I missing anything? Thanks in advance for any guidance.

Assuming coverage requirements are met I don't see why you couldn't exclude the subsidiary under a nonstandard prototype. You cannot exclude them under a standard prototype. There is a general discussion about difference between standard and nonstandard prototypes in the Prototype Q&A #1.

Thorton, You seem to understnad the affiliated service group issue. I agree with you that the A-Org. must perform the services for the FSO. If you have determined that there is not an affiliated service group, then your initial conclusion is correct, the shareholder can hypothetically get 70,000.00. 415 limits, unlike the 402(g) limit, is imposed at the plan level.

We have a 401(k) plan that caps deferrals at 15% of comp. Several participants exceeded the 15% limit raising several issues: 1. I know that 402(g) excesses are included in ADP test for HCE's, but not NHCE's. Does the same rule apply to employees exceeding the plan cap? 2. Are the deferrals in excess of the cap considered annual additions? If the deferrals are annual additions, several of the participants deferring in excess of 15% hit 415 limits prior to receiving an employer profit sharing contribution. Thanks in advance for any guidance.

Although I agree with rcline46, that from the facts presented its not cocnlusive that there is an affiliated service group here, Moe Howard brings up an issue to be considered. There definitely is a possibility that an affiliated service group exists.

Just for anyones information, I contacted Nationwide to get information about their PPA program. The regional sales person basically said they weren't looking to add new PPA's at this time. As many of the posts indicate, the individual I spoke with did confirm that Nationwide intends to cut its PPA's by more than 50%.

My previous post must not be clear. A money purchase plan CANNOT contain a CODA. I did not mean to infer that the opposite was true. Technically I don't believe there is such thing as a "401(k) plan" 401(k) is a feature of a profit sharing plan. I could be missing something, but I disagree with Moe Howard that you must "terminate" the MP plan and a adopt a new profit sharing plan. As long as the annuity features of the MP plan are preserved, I don't see any reason that the MP plan could not be restated as a Profit Sharing Plan. I have seen it done many times.

A 401(k) feature cannot be part of a money purchase plan. A money purchase plan could be amended to a profit sharing plan with a 401(k)feature.

Break in Service rules are defined in the document. You need to read the specific document in question. You need to pay attention to two sections in particular; when the participant would enter and YOS retained for vesting. At a minimum a nonvested participant's YOS before any period of 1 year BIS may be disregarded for vesting only if the number of consecutive 1 year BIS exceeds the greater of 5 or the participant's YOS before the break. Whether or not an employee actually contributes is irrelevant to whether he/she is a participant.

Revenue Procedure 2001-17 Appendix A .05 provides that the employer must make a QNEC to the plan on behalf of the employee that is equal to the ADP for the employee's group (HCE or NHCE). Same is true for any matching contribution. Should also adjust for lost earnings.

We have been contacting various investment companies about their TPA alliance programs. Nationwide is on our lists of companies to call. Judging from the tone of this thread you wouldn't recommend Nationwide? Also, from reading J. David Wright's and sbewley's replies Nationwide probably has some kind of quota or production target it expects TPA's to meet. A vast majority of business we would run through another program. Would Nationwide even be interested in us?

We follow the same philosophy as Hans Moleman.

Contributions should be suspended immediately for the remainder of the 12 month period. The 12 month is still deemed to have began as of the date the hardship distribution was received. Related match and earnings thereon should be taken from the participants' account. We never actually return the money to the employer, but rather employer applies it as a credit against future matching contributions.

Reg. §1.401(k)-1(d)(2)(iv)(B)(4) states that an employee cannot defer for a period of 12 months after "receipt" of the hardship distribution. We have never read an "administratively possible" requirement into the reg. Obviously it would be possible to have deferrals already withheld in transit, but the actual deferral withholding should cease immediately. I'm might be wrong on this, but I don't see how this is ever a prohibited transaction. If the participant continues to defer it would be an operational failure. Generally prohibited transactions involve an imperrmissable use of plan assets to benefit a party-in-interst. Thats not occurring here.