Ervin Barham

Any group of employees can be excluded from a non-standardized plan and that does not present a problem as long as you pass coverage under 410(B). ADP/ACP testing is done on the basis of "eligible employees" for the plan, providing you pass coverage separately for each part and each plan. You don't indicate how many total employees there are, so you could take a look at a separate plan, but it may prove difficult. This is not my area, but you may want to go at this from a QSLOB (separate line of business). This takes some expertise to know and follow those rules. Good luck.

It's too late. The plan must have been amended prior to December 31. You might take a look at the instructions for Form 5310-A so that next year (assuming you still want to change) you can make sure everything has been taken care of.

My experience has been that these are normally charged as "extra" services. Generally this is done on an hourly basis. Of course, I'm in the consulting business so my experience may be a little biased...

Suggest you talk to Datair - Lanning Hochhauser or one of his associates should be able to guide you through their thought process. [This message has been edited by Ervin Barham (edited 03-08-99).]

If my poor ancient brain will remember that far back, I seem to recall most documents had to be restated. Since it's impossible to know what you are looking at, I suggest you (or your client) contact the insurance company to see if that client is on their list as having adopted a proper TRA document. If it was properly done, a copy should be able to be produced. If not, seek legal help immediately as there may be a problem.

You don't say what kind of plan you have, but in my quick reading of the top heavy info I have readily available, I did not see anything specific. Absent any other guidelines, then the normal rules for making a contribution should apply. You can check Treas Reg. 1.416 and the section on contributions to see the specifics of what you are looking for.

I suggest you contact Datair directly. They have a cross tested document that works in conjunction with their prototype plan.

It is possible to do what you are asking, but there is more to it than just amending the allocation section. Bill is correct in that the plan cannot rely on the notification letter and will be considered an individually drafted plan. Most prototype sponsors (PPD, Corbel, etc.) have already developed cross testing language that will fit and look feel and act like a prototype, but will be considered an individually designed plan and have language to reflect that. I would suggest you contact one of them to get what you're looking for. They may even have a better solution!

You don't say what kind of plan you have, so here's some general information: There is not a whole lot you can do with this once you become top heavy. If this is a profit sharing plan, if your plan document allows, you can elect to make no contribution or a less than 3% across the board contribution. If this is a 401(k) plan, you will have to make the 3% contribution if one key employee deferred at least 3%. If it's any consolation, you are not the first employer to complain and wail about the top heavy contribution. We've been waiting since 1986 for someone to figure out this is a mess and repeal this.

Sort of like a giant eraser came down and corrected the ADP before it happened! Since the regs are pretty clear on the correction methods and the reporting, I would think this would cause major problems if discovered.

Check your plan document carefully. It should spell out the recognition of service with members of a controlled group. Does it recognize service between group members or transfers between companies? The plan document will govern, but based on your comments, it appears that the employee would be eligible to defer based on the salary of the participating company. Since the new company is not a participating employer, you have no basis for making a contribution by that employer. Thus, compensation with the new company would be counted once they become a participating employer. I failed to mention previously that if the document is a standardized document, the new company may be covered anyway - check the plan document! Yes they are treated as one employer for certain purposes, e.g., coverage testing, top heavy, etc., but would still have to follow the plan's terms as to who is eligible. You may have eligible employees who are not covered. If this employee deferred in 1998, you will have a lower ADP, since you would include total compensation for that purpose. The biggest issue is coverage. This presents a tricky practical situation as you've described, so check plan document carefully. There may be other viewpoints on this. I hope this helps. [This message has been edited by Ervin Barham (edited 01-29-99).]

No. If you have a less than 1 year eligibility provision, then you cannot have any hour of service requirement for eligibility. Thus, your part-time employee would be eligible if they have worked 6 months, but check your plan document.

Employer makes several amendments to plan and restates. The prior plan had an immediate distribution policy, but new plan is completed by checking a 1 year break before distributions. This is obviously a 411(d)(6) protected benefit. Employer failed to catch the change. No terminated employees during this period. Employer wants change plan back to immediate distributions. Any thoughts on this method of correction? Is this a CAP issue?

Why not merge the plans as well? Then you only have to deal with one plan. I would think the decision as to which plan would "prevail" would be based on the features (investments, recordkeeping, etc.) that the sponsor thinks is appropriate.

For plan years after 1997, self-employed's matching is not subject to the deferral limit of $10,000. Thus, a proprietor or partner can defer 10k and receive a match. (Taxpayer Relief Act of 1997) Your plan may have to be amended. I have not seen the PAB, so it's hard for me to believe they goofed that big, but there was a change.

I've used both. I preferred the RIA books to the CCH books. But, with the advent of CD-ROM, I prefer the CCH CD to the RIA CD. I understand that RIA has now changed the search engine, so it may be better now. You should have no problem getting a salesperson!

Is this for a plan year beginning after 12/31/97? If it is, the new 415 rules kick in and you don't reduce the comp, so the participant would be receiving 23%. If this is not, this is one of those where there is no "correct answer". My information is that you could probably return enough of the 401(k) deferral to allow the participant to receive the top heavy contribution. You can look at Treas Reg 1.415-(6)(B)(6)(i)to see if that helps. I hope this helps.

Without knowing your specifics, generally the answer is yes, you can rollover a traditional IRA to a Roth. There are some rules that you cannot rollover any required distributions after you attain age 70 1/2. Generally, you will have to pay income tax on the rollover amount. If your income is less than $100,000 for 1998, it may make sense to convert your IRA in 1998. There is a special rule that allows the income to be computed as if it were over a 4 year period. Since I am not a financial planner and these comments are of a general nature, I would suggest that you talk to your CPA or a financial advisor about what's best for you. There are also some Web sites at the various brokerage/mutual funds that can assist you with the calculations and some more details. I hope this helps.

I believe it is the plan administrator is responsible for the withholding. Sometimes the plan administrator can transfer the responsibility to a trustee (Treas Reg 31.3405©-1, A-4 & A-5). You don't say whether the insurance company is the trustee, or whether an individual(s)is/are serving in that capacity. It is not unusual for an insurance company to send the entire check to the "plan". Mutual funds also do this. Sometimes companies maintain a plan checking account to handle the distributions. In response to your other questions: The plan should send the withholding on a timely basis anyway to avoid the penalties. The employer (if they are the plan admin) can make that up out of its pocket and hope that the participant pays them back. If the withholding is timely made in this manner, you can code the 1099 as normal. There may be other thoughts out there with different ways this has been handled.

I have the same question, so it's not just you. I may be seeing the answer, but not realizing it. Treas Reg. 1.401(k) refers to any defined contribution plan as noted in Section 414(i), but specfically excludes ESOP's and SEP's. Simple plans are not specifically excluded. Here's the definition as found in 414(i)for a defined contribution plan. "IRC, PEN-CODE-VOL, SEC. 414. DEFINITIONS AND SPECIAL RULES. Subsec. (i) Defined Contribution Plan.-- For purposes of this part, the term “defined contribution plan” means a plan which provides for an individual account for each participant and for benefits based solely on the amount contributed to the participant’s account, and any income, expenses, gains and losses, and any forfeitures of accounts of other participants which may be allocated to such participant’s account." Can someone help us out?

Is this "contribution account" a part of plan/trust assets? If so, you could certainly transfer from one "fund" to another inside the trust. If, however,(and your question would lead me to think this is the case) it is just an account of the employer, then no, you cannot pull those out of the plan and return them to the employer. If you do, you have violated the terms of your plan and probably disqualified your plan in violation of the exclusive benefit rule. Most often, these are just held until they can be used to reduce the contribution in accordance with your plan's terms.

Hold your nose! Check ERISA Section 4975 and the applicable regs for a list of the prohibited transactions and the applicable examples given. One of the prohibited transactions is the furnishing of goods, services or facilities between the plan and a disqualified person. This area can be tricky, so a good attorney/consultant in your area can glean all of the facts and help make a final determination. I hope this helps!

Have you checked the "yellow pages" located elsewhere at this site? There are several companies listed that should be able to handle that or that you can contact for more info.

Of course participants read the SPD.... Anyway, most of the documents I've seen explain that the employer can make contributions as it determines to the different classes of employees and then go on to explain how the formula works, depending on the exact document language. Personal opinion here - your thoughts about the employees are one of the downsides of cross-tested plans that tend to get glossed over in the sales pitch.

Pension Publications of Denver has a good 3 day fundamentals class that you may want to take a look at.