pmacduff

I was sure this had been asked before but cannot find the thread or post: Plan allows union employees to make 401(k) contributions only & they are excluded from all other portions of the Plan. The plan is a large plan and files as such with an audit report. My question is: For purposes of the 5500 participant count do I include all union employees or just those who have chosen to defer and have a balance? At this time it does not impact the filing type or audit requirement but could in the near future. thanks in advance for any replies.

Thank you for the responses. I was actually hoping the client might want to use an such exclusion going forward as ERISAtoolkit mentions. But, in fact, when I spoke with the client they want them to be in the Plan and able to participate if the employee desires. I just hope I'm not having to help the client find these people "x" number of years from now when they might be due a distribution and have left the country. It's hard enough to find lost people in the good ole US of A!!!

Our client has hired 3 non residents. These employees receive W-2 wages. Two of the three are on OPT Student Visas (and will be sponsored for H1B Visas) and one has an Employment Authorization Card. The Plan has no eligibility requirements, no exlcusions. Has a safe harbor match formula (graded) but no profit share or other employer contributions. My feeling at this time is that these employees need to be covered under the Plan with the current Plan options in place. Agreed?

Plan fails ADP test. (otherwise excludables have been taken out of the test). must the corrective QNEC go to all eligible NHCE employees or can you exclude the "otherwise excluables" from the corrective QNEC?

easy question for all those veteren ft william users...my 2010 5500 validation is telling me that the 'Sponsor's name is red or blank". I can't seem to clear the error. any ideas? Problem solved...it didn't like the client's name the way I had it! The first 2 letters of the Company name are initials (not separated) and they went in 2009 with no problem. FT William wanted the 2 letters separated; i.e. if the client name was A.S. Smith Company - in 2009 I used "AS Smith Company" and it went through EFAST2 fine but FT Wm wants me to put "A S Smith Company" with the space between the letters. Who knew

Yes - safe harbor is basic match. Relius did give her the 3% top heavy allocation only when I ran the allocation. The nondiscrim testing includes her on Relius unless I mark the "otherwise excludables" box. Everything passes handily, even with her included in the testing - except, of course, the gateway test because she's only at 3%. I just thought of something relative to the current political environment...top heavy regs REQUIRE this client to make a contribution for this person, which is deductible by the client, which in theory will reduce the amount of tax that the client owes. Wouldn't it behoove the government to do away with top heavy and thereby all of those contribution & deductions that are reducing the taxable income of companies? HA HA.

thanks Tom. I was going to double check the nondiscrim testing - just wasn't sure if I could leave her at the 3% only or if I would have to give her the same %tage as everyone else - since the plan formula is a basic comp to comp profit share. Whew - done so many cross tested formulas in the recent past, these old fashioned ones can really throw me!! Thanks again!

I'm not thinking clearly this morning with regard to top heavy. I have a plan with no eligibility for 401(k) contributions (all enter 1st of the month following hire). Plan is safe harbor. Plan is top heavy. Employer wants to make a profit share contribution for 2010. I know as soon as there is a profit share allocation the safe harbor top heavy "free ride" goes away. Profit share eligibility AND allocation is 1 year of service, 1000 hours, last day rule. This Doctor has 5 employees, 4 of whom are eligible for profit share without question. The 5th employee is a participant under the 401(k) portion due to the immediate eligibility, but not contributing. She has worked approx 315 hours per year since her hire date. She is not termed. I believe that she is required to receive a top heavy minimum contribution because even though she has not met the eligibility/allocation requirements for the profit share portion she is a plan participant as of 12/31 (due to the 401(k) eligibility) and therefore must receive a top heavy. That being said - this is a comp to comp basic profit share formula. If the other participants receive, say 15% of compensation, must she also receive 15% of compensation or can 3% only be allocated to her? Am I all wet and she can be excluded entirely from any profit share allocation? any help appreciated

Lou - to answer your question, I think it is because the ultimate responsibility for actual reporting of the payout for taxation falls to the participant. The upfront mandatory withholding was instituted back around 1993 (I think) and I believe was set up because so many individuals were not reporting taxable distributions, Uncle Sam was losing out!! I agree with others that there might be a tongue lashing or hand slap for the Plan if the problem was found, but again it is the participant who is responsible for proper reporting and payment of the appropriate taxes on the distribution. My vote is to do the 1099-R as the payout was done. We have had clients proceed in this manner and never had any backlash. That being said, I do think that if you were talking about a much larger distribution and or tax amount, then I might have to rethink my position....

our hardship forms/plan doc/information specifically states"....for upcoming semester for self, spouse or dependent(s)... so in our case, past due tuition does not qualify. what does your plan doc say about hardships?

Since the #945 form is specifically for withholding reporting, I'm curious as to why you think there would be any type of #945 reporting on an in plan conversion? That being said, here is a copy of the 2010 #945 instructions from the IRS website.... i9452010.pdf

agreed that participant should receive both - as I understand it - any participant who receives ANY type of nonelective contribution is then required to be bumped up to the gateway minimum AND QNECs used to pass the ADP cannot be applied toward the gateway minimum. Therefore the participant in your example must receive both.

I agree with $15,000. I was taught many moons ago that the employer contribution amount on the 5500 "should" match the Employer's deduction on the 1120 return (or whatever type of return the Employer files).

Tom - I just had to smile and chuckle when you mentioned "Mele Kalikimaka" My Grandmother MacDuff had a Hawiian Xmas album & when we were very young and my sister and I used to put the record on the Grandma's old record player and dance around the room to that song. I've always known how to say "Merry Christmas" in Hawiian because of that! What a happy/funny memory...thanks!!

so mbozek, you are saying that per IRS regs a participant can direct the Plan pay the spouse directly? Can you provide the cite? I don't believe that would be allowed in a qualified plan, even to a spouse, unless as my 2 cents indicated the payment was made pursuant to a QDRO.

Benefits from a qualified plan cannot be "assigned" (which is what this would be). Participant has to take the distribution and then I suppose could endorse the check over to the spouse or deposit and rewrite another check to the spouse.

depends on the age of the participant but should be a "1" if under 59 and 1/2 years old. The 2 is used only when the distribution is not subject to the 10% early distriibution penalty. I believe that it might be used, for example, for a disability distribution.

FWIW we also process just as Lou mentioned. our document provider loan policy says "50% of participant's vested balance" which we have always taken to be the whole account, but the participant is then (usually) limited to deferrals and rollover accounts (or whatever sources the Employer chose/chooses in the Adoption Agreement).

I'm with Bird, thanks everyone for the heads up....this way we don't spend as much time stressing that something IS actually wrong and know right away what to do!

with sincere sympathy in this difficult time!

FWIW - I recently (11/02) attended a Corbel seminar by Derrin Watson and he stated that forfeitures could be used to reduce safe harbor contributions "as long as the Plan Document was written properly" in reference to forfeiture allocations. He also said that forfeitures cannot be used to reduce any QNECs used to pass the ADP test.

Tomf - I beg to differ...I believe Sadie Hawkins Day is February 13th, the day before Valentine's Day when the girls get to ask the guys out.... (At least that is the folklore from my growing up years) EDIT: Tom - my bad, it did originate Nov 13th - but I did find the following to back up my fading memory from my youth. Our school always had a dance that day!! "See also: Leap year for discussion of a similar tradition of "allowing" women to propose marriage on February 29, which has also become unofficially known as Sadie Hawkins Day."

ok - so from what "A Shot in the Dark" says - my clients (who are already registered with the EBSA from this year) WILL have to go to a different website (Ft William) to file the return? I guess that means more work for me next year advising them of the new website for filing. I was hoping that wasn't the case Or does the Ft William software notify them via email where to log on?

Ok - this question is directed toward those who used Ft William 5500 software for the 2009 filings (Mr. Poje?) Anyway - we use RGF but did not use the Relius Web Client. We prepared the forms in RGF, exported the *.xml file and downloaded that to EFAST@ (IFILE). The form could then be signed by the client or we could sign and file after obtaining authorization and signature pages from the client. This actually went pretty smooth, all things considered. What is the procedure for Ft William 5500 filing and signing? Most of my clients obtained their filing credentials and signed the form on EFAST2 by signing on to the EBSA website. If we switch to Ft William 5500 software for 2010 does that mean I have to give my clients yet another website instead of having them sign on to the EBSA website to sign and file the form? any info appreciated!

ok -I'm confused. I don't understand what the method of "funding" the Employer's safe harbor contribution has to do with the fact that the safe harbor contributions are 100% vested when made to the plan? Safe harbor contributions are always 100% vested regardless of how the Employer funds them. What am I missing?