pmacduff

Does anyone else have clients who use an eligibility of "6 consecutive months" of service? We have a client under audit who has this eligibility. The Plan allows anyone who works at any time during a month (i.e. even 1 hour) for 6 consecutive months to enter the Plan. The IRS auditor doesn't like the wording of "6 consecutive months". He is claiming that if an employee worked 2 weeks in January and then 1 week in June, those are "consecutive" months for that employee and would count as 2 months toward the 6 months. What do others think?

Great job Dave! Thank you for this wonderful, invaluable resource!

ok - as promised (a day late!)... the Accountants determined A,B,C & D to be a controlled group and not E. Plan is a multiple employer plan to include the Company E employees. So basically Company D is the only "wild card". I think everyone posting (except SMMoran) agrees that that Co.s D & E should NOT be part of the controlled group. Thanks to all who responded!!!

SMM & I were posting at the same time. I don't know...is Co. E included? on Monday - just to further muddle the waters - I'll post what the Accountants have determined as far as CG status of these Companies.

Father and Mother together have only 48% of Company E; none of the children own any part, so I think all agree that Company E is not part of any CG. In the recesses of my brain I was thinking of something I remembered along the lines of "if the same 5 or fewer people own 80% or more..." or something like that. The four siblings own 85% of Company D, but does that have any impact since Mom and Dad have no ownership in Co. D?

Sorry about that, I did know it was age 21...all children are way over age 21 anyway. You said you had trouble following my chart...is the attached Excel file clearer? Generic_ownership.xls

bump...everyone too busy or question too basic??

My head is quite fuzzy right now trying to be sure that the determination of controlled group status is properly applied. I do have the determination the Accountants have made but want to double check. Here are the facts: 10 different owners. 6 are immediate family. all over age 18. I'll number the owners 1 through 11 and code the family relationships with letters (F = father, M = mother, D = daughter and S = son). Employees 7, 8, 9 & 10 have no family relationship. There are 5 different companies; A - E. Company A: 1(F) = 40% 2(D) = 15% 3(S) = 15% 4(S) = 15% 5(S) = 15% Company B: 2(D) = 15% 3(S) = 15% 4(S) = 15% 5(S) = 15% 6(M) = 39% 7 = 1% Company C: 1(F) = 20% 2(D) = 12% 3(S) = 24% 4(S) = 12% 5(S) = 12% 6(M) = 20% Company D: 2(D) = 21.25% 3(S) = 21.25% 4(S) = 21.25% 5(S) = 21.25% 8 = 15% Company E: 1(F) = 24% 6(M) = 24% 9 = 26% 10 = 26% thanks in advance!

In light of this thread - I'm sure I'm all wet but I thought that the burden of proof that an incoming rollover was from a qualified source (whether it be an IRA, prior plan, 403(b), etc.) ulitimately lies with the participant. In other words if the Plan accepts rollovers and the participant represents the incoming $$ as rollover funds from an acceptable source, the receiving plan has no worries....not true??

just curious - why would a software vendor bill based on the number of participants? Is it because they are web based and that would be some type of data storage fee?

I have an owner employee that was key through 2010. In November of 2010 he sold his portion of the Company to another person and retired. He took his full distribution in 2011. I am running the top heavy test as of 12/31/2011 (for 2012 determination) and the system is disregarding his distribution because Relius is showing him as a "former key" in 2011. I did not enter any overrides other than the date he sold/retired and was no longer an owner. I want to be sure that the software is handling this correctly due to the size of the distribution. I guess I thought that his distribution would count for the TH testing in 2011. Do I just have "busy season" brain today?!

ok - I have a non-owner plan participant who turned 70 1/2 on 11/12/2011 & retired as of 12/30/2011. He has been taking monthly distributions from the Plan. A level amount of $2,000 a month for some time now. I don't believe the payments were formally set up as installment payments per se but that's bascially what they have been. If the monthly payments do not cover the calculated RMD, does the participant have to take a lump sum equal to the difference? I know if a participant receives annuitized payments from a plan that they don't have to take the RMD above and beyond, but I wasn't sure about installment payments. In this case the payments weren't based on anything other than an amount the participant chose to receive at the time five or so years ago when he cut his hours back. The amount has never changed. thanks in advance.

Is there a reason that the loan balance cannot remain in the account and the participant continue to pay? In other words, why does the loan have to offset/default?

I'm with Austin. I have a LOT of small employers that are barely eeking by in this economy but are still trying to maintain the 401(k) plan so that everyone (including the owner(s)) is at least saving something for retirement. Many are of my generation (just behind the baby boomers) and it's been drilled into us that there will be no Social Security when we retire. The top heavy testing and required contributions on a deferral only plan are ludicrous in my mind and put an unecessary burden on these small employers. I'll get off my soap box now, thanks for the chance to vent

Yeah - can you believe that...it was one of the first things I checked. She was actually 65, too, & not retiring "early". They don't give an allocation for death or disability either. It's a law firm....nuf said?!?!

This plan does have the fail-safe language for coverage and I concluded as chc93 mentions that you can't add more than you need to pass. I then went back and read through the language in detail and it appears that the terminee with the greatest number of hours (which is the younger person) should be brought in first as it refers to hours worked and a year of service (as defined in the Plan). One might assume that normally the last person to term would have the most hours worked but in this case the older person cut back her hours in the last few years preparing for retirement. So...even though she retired after the younger employee termed she had less total hours worked for the plan year.

ok - very small plan with cross tested formula; last day rule & 1000 hours for allocation. There are 7 employees total; 3 HCEs and 4 NHCEs. (One of the HCEs is young and always gums up the non discrim testing.) One of the NHCEs termed and one retired. I have to add one of those back in for coverage testing to pass anyway, the retiree was the last out so first back in per plan provisions to fix coverage. Is there anything that prevents me from adding back in both the retiree and the term for allocation? The termed NHCE is much younger and would help the EBARs for cross testing thereby allowing less to the NHCEs overall. thoughts?

You have to remember that the participant did "receive" the $2000; it was just paid to the IRS as withholding. The participant will receive credit for that amount in the total taxes he/she paid for the year (your item (1) - the "extra" withholding). No different than the tax withholdiing done on someone's regular payroll the goes the IRS; i.e. you don't "receive" those $$$, but they are paid to the IRS on your behalf. So...that being said - I think the whole $10,000 needs to be returned to the Plan. Not 100% sure of the 1099-R correction, but you can find most of these types of situations (corrections) in the 1099-R instructions and/or the General 1099 instructions. my two cents.

our docs (Corbel) define the initial eligibility period as a "12 month period during which the employee is credited with a year of service." Year of service is then defined as 1000 or more hours during the eligibility computation period. If they don't meet that in the first go around, the computation period switches to the Plan year. In your example it appears that the employee met the 1000 hours in his first year of service. Hired April 1st; his plan entry date would be Jul 1st of the year following his year of hire had he not termed. IMHO - I think he has to come in that July 1st.

Yes - severence is being reported on a W-2 form. I am checking with the client regarding other benefits and their exact position on his status. Good thought on the unemployment benefits, too. The client's intention is to allow the former employee to take rollover of his balance. I wanted to be sure that we were all clear on his status with them since the severence was coming through to him on a W-2 and the definition of comp in the Plan Doc is W-2 wages prior to any pretax deductions. The associated hours worked is reported as 0. Thank you for the replies.

ok - employee is let go but given 2 or 3 years of severence pay; therefore still on the books. Employer stopped 401(k) deductions from severence per the Plan provisions. Participant is requesting distribution to rollover his account balance. Since the severence pay is not "earned income" and there are no "hours" associated for plan purposes, can this participant take distribution of his balance? The plan states that distributions can occur as soon as administratively feasible following termination. I guess I'm stuck on whether or not he is considered "terminated" for purposes of payout.

Just wondering how others are mechanically handling auto enroll opt out participants who are refunded within the 90 day window in your pension software. This client is with one of the large 401(k) vendors and I import to Relius. The import (of course) shows the contributions and then subsequent distributions. I don't want these contributions to show on the ADP testing but am thinking that the deposits and withdrawals do need to be reflected in the plan asset activity for audit purposes. (This is a large plan with the required 5500 audit.) I can override in Relius to exclude them from the ADP/ACP testing but wanted to see if anyone does this differently within the software?

Don't you also need at least one HCE in each group?

Yup - that's what we do...send the paper copy to the client, tell them to review, sign and file with their records and that we have filed electronically. When this process first began - I sent each client the hard copy, told them to review, sign and file the copy and then contact me via phone or email to tell me to go ahead and file electronically. Now that I'm caught up, I am sending the 8955 SSA forms with the 5500 forms with the same notation. Most of my clients will not file anything unless I include an envelope or explicit instructions where to mail, so I don't think I have to worry that they will mail the hard copy in error!

I believe that the 2009 info has the 01/17/2012 due date. The 2010 are then due at the regular time with the 5500 filing deadline. That is how we handled our off calendar years and have not had any problems. I think the instructions do cover this and indicate that if the normal filing deadline for the 2010 info is after 01/17/2012, then you can use that date but only for 2010 filings. Therefore you have to do 2 separate filings. If you are going to file them together then I think you need to use the 01/17/2012 date.