Ervin Barham

Thanks for the replies! Mike: Good point, unfortunately the prior actuary is not in the business any longer. If he were, he would be doing this instead of me! Long story... I do have a meeting with another firm to assist me with this, but the more knowledge I have going in to that meeting will help me to follow the logic and understanding the "why" instead of just punching in numbers. Thanks.

I am trying to clean up a mess on a target benefit plan. Document indicates that compensation history is the 10 consecutive compensation periods ending in the current plan year and that the averaging period is the plan year. The averaging period is 5 compensation periods that result in the highest average compensation (consecutive). All of that seems clear enough. However, I cannot follow what the prior actuary used as compensation as the document also references a "fresh start" beginning with the 1996 plan year. Can someone explain in a clear example (I'm not an actuary) what I'm dealing with here? Also is there a spreadsheet out there that I can use to check the work? - the spreadsheet I am using and the prior actuary's numbers don't seem to agree, so there probably is something missing from my limited knowledge. HELP! Thanks! Ervin Barham

Plan Document excludes moving expenses and other fringe benefits from definition of compensation (satifies 414s). For the 2000 plan year, Employer includes those items in calculating the safe harbor match, but did not allow deferrals on those items. Thus, the Employer has made too much of a match for 6 ee's. Plan also failed to follow eligibility in document and allowed all ee's in plan to defer. Possible solutions include: 1. VCP (expensive?) to amend plan for 1 year to include fringe in comp and amend retroactively for eligibility. 2. forfeiting excess match and using to reduce future contributions and amend plan for eligibility under EPCRS. Any comments on either of those solutions or any that I may have missed? I've looked at the notices, but nothing seems to address the compensation issue. The eligibility problem (by itself) is quite clear on the solution. Thanks. Ervin Barham

401(k) Plan has 1 year eligibility for 401k & 2 year eligibility for its P/S. In 1999 the plan allocates a 3% top heavy minimum for all 1 year ee's thinking it is top heavy. Plan discovers in 2001 that the plan was not top heavy in 1999, thus those employees should not have received that contribution. What is the best correction method - reallocate the 1999 profit sharing to those who met the 2 year requirement and have the employer make up any losses for distributions, etc? Is there another way to put this plan back on right road that I am missing? Thanks. Ervin Barham

Typical convoluted govmint logic... My problem is that this is a terminated plan and by March, 2002 not only will there be a final 5500 filed, but the employer will no longer exist. Thanks for the guidance...

Just trying to follow the wonderful instructions! In years gone by, that's exactly what I would have done- will probably go ahead anyway... Thanks.

I need to file an amended return for a 12/31/00 return. Anyone know how long it takes the PWBA to process these returns or how I can "confirm" the processing of the original as per the instructions? If I missed an instruction somewhere, let me know that, too! Thanks. Ervin Barham

Could be. I'll take a look it. Evidently from the posts, I'm not the only one who is frustrated by a lack of good commercial testing modules. Thanks.

Can anyone point me to a stand alone testing module for cross-tested plans? Is there such an animal that doesn't cost tens of thousands of dollars? I have access to a proposal system (which works most of the time), but can't seem to find anyone who also doesn't want to sell me an entire allocation system - which I don't need! Thanks...

Where are the requirements for the privacy notice being sent by banks, etc. prior to June 30? I'm trying to determine if a TPA is required to provide one. Or, if anyone has looked at this already, please provide answer...! Thanks.

As far as the partners writing personal checks, that is a no-no! A long time ago in the early days of partnership 401k's (1988 or so), I found about the same time that the partners were writing personal checks and that the IRS was auditing the plan. To make a nervous TPA story short - the IRS did not disqualify the plan, but you can believe the partners never did that again. Jon is right about his advice since the advent of EPCRS.

Interesting question for something just taken over. Plan starts in 1999 with short plan year. Deferrals and match are small with low participation (refunds made). No P/S made. Based on deferrals & match, plan would be top heavy. However, if full 3% top heavy is made only to the non-keys, this would make the plan non-top heavy. Since this is the first plan year, the P/S contribution should be counted. The P/S contribution was not made within the 2000 plan year, so there are some corrections that have to be made. Any thoughts as to whether the plan is top heavy for 1999? Thanks! Ervin Barham

Calendar year plan calculated ADP/ACP tests and made correction of ADP/ACP amounts. Only problem was that they forgot to calculate the losses the plan "earned" during the year. Should this be treated as an "overpayment" and corrected by contacting the employees to retrieve those funds, if possible? Thanks.

Nope, you are not missing it. It's not there.

If my ancient memory serves me correct, this may be a holdover from the early days of 401k before after tax contributions were counted as part of ACP test. And no, I've never used it!

Non-profit plan sponsor wishes to consolidate its C/T Money Purchase Plan and its 401k plan (non-integrated). Since it is a non-profit, the 15% deduction rule doesn't come into play here. However I am concerned that by merging the two plans, and restating the P/S to be a cross-tested plan, that we may be running afoul of the IRS February 28 deadline since the P/S currently does not have a cross-tested feature. Any thoughts out there? Thanks.

The most obvious answer is to check the plan document. Some plans will only allow loans from certain sources. If it is silent, then your loan documents should address this, preferably by having the participant electing which source. Some loan documents automatically pro-rate the sources. Check with your plan provider about the loan forms. The short answer to your question, though is yes, but check your documents.

I have gotten 1 or 2 determination letters for one person plans using standardized plans using PPD's adoption agreements and GUST amendment. I am in agreement with Dave Baker on the hindsight issue. However, if memory serves me correctly, these have been doctor plans with substantial assets.

The new corporation should adopt a new adoption agreement which "continues" the plan of the partnership. Check with your plan document provider as to the specific requirements needed to complete this. This should be done as if the corporation were adopting a new plan - which means it must be completed by the last day of the plan year.

Check out any of the following sources: Pension Publications of Denver (Corbel) CCH Panel Publishers RIA All of them have resource materials that you can get either on CD rom or in notebook form. Also check the resource page/yellow pages elsewhere on this site.

I have worked with these on many plans. A couple of points: 1. The plan document needs to authorize the commingling. There are prototypes that allow the Employer to combine plans. I am not aware of the creation of a master trust. 2. The IRS instructions to the 5500 allow that if plans are commingled, they require a breakout for each plan for reporting purposes. 3. Your concern about the proper allocation of assets is valid where you have a 401(k) plan. The manual breakdown should reflect some type of weighting for the 401(k) contributions. Again, the plan document should give some type of guidance. I have found it easier with a 401(k) plan to recommend to the sponsor to have separate accounts.

Yes, I would, but I tend to be very literal when it comes to those types of things. There may be others who would be willing to go with that much leeway, arguing that 145 days is "administratively feasible". If this is a daily plan, it's going to be hard to argue that one.

You can have a plan allocate to different profit centers, but it will have to be tested under the 401(a)(4) rules for non-discrimination in addition to passing coverage. You may have to amend the document to an individually designed plan, although some prototypes (PPD)will allow you to do this. As to your second question, you will have to pass coverage with respect to the 401(k) & match features. Since you state that the companies are in 1 plan already because of coverage, this isn't going to help.

I agree that you are correct based on the wording you gave. This issue came up a lot in the early days of 401(k) plans. Part of the confusion on the participant's part comes (usually) from the way the plan is explained in verbal meetings. Some one will say that they are going to match "60 cents on the dollar up to 4%". While that is not what the document says, your participant will take that and run with it. Make sure that the SPD and your informal materials, such as plan highlights, enrollment forms, etc., don't mislead the participant.

My first reaction is that you would use the 12/31/99 IRA balance. Since the RBD is not until 4/1/2001 and the plan was distributed prior to the beginning of the distribution calendar year (2000), then you would look to the IRA. The IRA would be the latest valuation in the lookback year (1999). I have not researched this extensively, however. I suggest you do a search on this site for further help. [This message has been edited by Ervin Barham (edited 01-18-2000).]