Alf

jehmig's point is very important and does not appear to be as easy to deal with as it seems. If an employer knows in advance what the HCE's limit will be for a year (it uses prior year testing, for example), it can't just treat any deferrals above that percentage as catch up contributions beacause of the way the new (post 1996) rules for return of excess contributions work. If the HCEs will be limited to 7%, but those over age 50 put in more to try and make a catch up, the money will be returned (or characterized as a catch up) through the ADP test not to those who deferred more than 7%, but to those who deferred the most money. The only way I can think of to deal with it is to prior year test and amend the plan each year to state the actual HCE limit so that the ADP limit becomes a plan limit. Even then, the numbers probably won't match up perfectly because of demographic changes, compensation changes, etc. during the current testing year.

1) Match on CUs can be different, but it would be subject to (a)(4) testing. If the match on CUs is the same, you don't have to pass (a)(4) on the CU match. 2) You can match CUs or not match CUs. I think that answers your question. If you don't match CUs, you don't combine the deferrals for purposes of the plan limits. 3) You can still be matching contribution safe harbor and no ACP (not nonelective safe harbor) with a match on CUs as long as you do not exceed the matching contribution limitations set forth in the ACP safe harbor rules. If you are a matching contribution safe harbor and have to ACP test for some reason, I think that all of the match is tested in the ACP test, because it means you did not meet the ACP safe harbor test at all (I think, you better check this one).

Ok, I'll bite. What are ACH contributions??

The IRS is on record that they will be flexible on the certification requirement, but that a plan that is not eligible for prototype status cannot certify to get the 12 month extension.

Now that we all agree that most of the employers will be eligible for the 12 month extension automatically (w/o certification), can those employers adopt R.Butler's new prototype plan before the 12-31-02, even though it was not filed with the IRS by 12-31-00? I guess they could adopt anything and be treated as individually designed plans, but can they maintain prototype status by adopting a prototype plan that was not filed by 12-31-00, but was subsquently filed and approved by the IRS?

The 2001 act expanded rollover distribution rules and required 402(f) notices to include a discussion of the potential restrictions and tax consequences that may apply to distributions from the receiving plan that are different from the distributing plan. Because these major changes have to be written into distribution notices beginning on January 1, 2002, the law requires plan administrators to make reasonable attempts to comply with the new notice requirements until the current version of the IRS safe-harbor notice in IRS Notice 2000-11 is updated.

The IRS has stated that the certifications don't have to be signed under penalty of perjury this time around, but I understand your concern. However, many employers who are simply changing prototype sponsors or who have had a particular plan be discontinued by a prototype sponsor don't need to certify to get the 12 month extension because they are deemed to have adopted any plan maintained by their former plan sponsor that was filed by 12-31-00. Assuming a sponsor is entitled to the 12 month extension (certification or automatically), can they then adopt your plan during their extended remedial amendment period and maintain prototype status even though you did not file your plan as a prototype sponsor by 12-31-00? The question I have basically is does the prototype plan that is adopted by the individual employers who need GUST 2 restatements during the 12 month prototype extension have to have been filed with the IRS by 12-31-00, or can it have been filed with the IRS in 2001?

R.Butler, Although your employers can't use your document to get the 12 month prototype extension, can they certify their intent to adopt another prototype plan that was filed by 12-30-01 and then adopt your plan within the 12 month extension period?

Of course!! I forgot about the controversy regarding the effective dates of the adjusted amounts for HCE determinations. Perfect response!! Thanks for the help.

Any official information (or educated estimates) about whether the $85,000 prior year compensation amount will change for 2002 determination years?

Pension222 is right on, I believe. Has anyone heard whether the IRS is going to finalize these regs soon so that they WILL be effective 1.1.02 for all plans? Is there some 90 day rule that has passed, so that they won't be effective 1.1.02 even if they are finalized this year?

I agree that an amendment is probably smart. Technically, the plan has to reflect all laws in effect as of the plan's termination date, though, so suggesting an amendment conceeds that the plan should be reterminated, doesn't it?

One important key that the DOL focuses on is that the bond must list the plan as insured without any dedcutible applying to the plan. If the policy just names the employer, it is not sufficient no matter how much money is involved. My guess is that their 10M policy doesn't list the plan as an insured or payee and it is not an ERISA bond.

All the IRS requires in reviewing determination letter applications is that participants who have not received distributions by the proposed date of termination should be fully vested. This is even too generous in certain circumstances because it goes way beyond the affected participant standard where the sponsor is going out of business, but we have never had any incentive to fight the IRS on it.

Not on your facts. Only employees can defer under a 401(k) plan and only compensation paid to employees is eligible compensation under a 401(k) plan. The date that the employee stopped being a statutory employee is the key, not just whether compensation is reported on a W-2.

Time's-a-wasting. The que at the IRS is going to be huge later this year. I would think that the more rapid response time would be worth more than the reduced user fee. Plus, if you don't have a letter, I am not sure you can wait until after 12/31, can you? Follow-up Question 2: Has the IRS opened the program up for rulings on the new new comparability rules yet?

One that comes to mind quickly is that the IRS position is that it is not a "mistake of fact" or other circumstance that would allow the sponsor to take the contributions back, so you will have to have a method for using the contribution that plan year (apply it against last contribution of the year or expenses, or reallocate it).

It only applies to 410 and regular 401(a)(4) testing as far as I know. There is no answer from the IRS on how to test either plan in a mid-year acquisition/divestiture situation. "Testing together" may not be defensible if you mean that post-spin off compensation/deferrals are only going to be tested in the pre spin-off plan because that gives the spun-off plan a free pass, doesn't it? We split the deferrals/compensation between the two controlled groups based on the acquisition date. I would just be consistent between the two plans.

I think it would cause constructive receipt problems, rather than anything under 401(k). The IRS would say that the election to defer wasn't made before the beginning of the period in which the services are to be performed.

Yes. I think that the distributions have to be taxed. The individual took an intitial distribuiton that was probably rolled over to an IRA. These IRAs are still in place when other funds are used for the buyback. If the buyback funds were not taxed on distribution, the individual would be getting twice the tax deferral, wouldn't they?

It is probably being treated as a partial termination. Enough people are being terminated that they are treating the terminations as a partial termination of the plan. Only those employee affected by the partial termination are entitled to full vesting. If you are not terminated, your account will be merged into the new plan and you will not be fully vested.

There are not any specific limits on loans from safe harbor contributions. The IRS position is that safe harbor contributions are not eligible for hardships, but loans are available if the plan permits them.

You might be getting multiple employer pension plans confused with MEWAs. As I understand the rules for MEWAs (and I am by no means an expert), 50% or greater common control is assumed to be enough to avoid the MEWA label, but the code rules for pension plans require 80% common control to avoid multiple employer plan status. Any disagreements with these general statements?

There wouldn't be any legal restrictions on this practice (sorry - no cites), but it would be an administrative nightmare, especially considering some of the state laws out there dealing with beneficiary redesignations upon divorce (even considering the recent supreme court decision). Keeping up with one beneficiary for each participant is difficult enough, isn't it?

I have never heard of any requirement that the amount requested be enough to satisfy the hardship. I don't think that's an appropriate requirement.