pmacduff

ok- back to basics...I'm starting to forget everything including my name and it's only Jan. 8th!! Anyway I have a client with some partners who "own" less than 5% (all partnership percentages are coded in the system). The 2006 compensation for these particular partners was less than $100,000 (but not by much). When I run the ADP test on the plan, they are not showing as HCEs in 2007. (They might possibly "help" the ADP test if they were in the upper group.) They are in the top 20% in 2006 for 2007; shouldn't they be HCEs in 2007? I think I have everything coded properly in the system..... any help appreciated!!

Bravo

By law you have a right to the Summary Plan Description (SPD) upon request. If you do not have a copy, you should request one from the Trustees. That will spell out the distribution provisions of the plan as previous posters have mentioned. If you ask for a copy in writing and are not provided with one, you can contact your local Department of Labor office and they will for sure see that you get one. I know you may not want to "create any waves" at this juncture, but you really need to understand and be privvy to the plan provisions in order to know what the actual plan distribution provisions may be. Account balance size can also dictate when a person is eligible for distribution by plan provision (i.e., lower, smaller balances might paid out quicker than those over $5,000). Another thing to bear in mind is that the plan is valued (usually) at least once each year and includes all participants in the valuation. So...if an Employer is determining contribution amounts for some (even if not all) participants based upon a variable that is not known until after the year ends, that could hold up the process for the whole plan. As another poster mentioned, some clients don't make the prior year-end contribution until well into the next year and have set their distribution policies up accordingly. By no means is this meant to be a defense of your Employer and any actions made contrary to the actual plan provisions. It's just a reminder that there are so MANY variables in Qualified Plans that can affect the situation(s) you describe....

our client's was profit share and not match...but we just had a client go through an IRS audit and the reviewer allowed the contribution correction for the participants who were missed (there were only 2) to be taken from the plan's forfeiture account along with the associated earnings. I know the profit share is discretionary, but thought it interesting that this was an acceptable fix to the IRS. This plan stated that ps forfeitures are allocated along with any current contribution declared.

Here in New York we're on a party line.....maybe we can pick something up from another caller* BTW - Happy Holidays to everyone on these Boards and here's to a healthy and prosperous New Year!!! *just realized that there are some out there who probably have no idea what a "party line" phone line is...when I grew up, we lived in the country and actually shared our phone line with a few neighbors. You had to pick up the phone and make sure no one was talking before you dialed your call.

If you put in any non-elective ER contribution and the plan is top heavy, then employee #3 will need at least 3% for top heavy. Is the PS formula cross tested or comp to comp or something else? which SH match are you using...the basic formula of 100% up to 3% and 50% of the next 2% or a straight 4% or something else? Can't give you numbers without more info....

Has anyone been able to get the penalty waived or reduced?

I have nothing concrete for you but since the regs require the notice so that the participant can determine how much they wish to contribute based on the SHMAC info, my opinion is that you only need provide it to the participants as they become eligible to receive SHMAC.

FWIW: If they say that "IRS rules state that..." and "IRS mandated restrictions" do not allow them to do this; then they should be able to provide you with a cite or regulation #. Even if they won't set this one plan up...you might lead them to realize the error of their ways for the future!!!

How are the excess asset allocations treated from the DC plan standpoint...as "contributions" as opposed to "forfeitures" or something else? I would think that would help answer the question.... 'Course I haven't dealt with DB Plans in FOREVER and few if any SIMPLES. Sorry I wasn't more help, Tom!

I did not read the OP carefully; sorry. I thought it was an example of a plan investment where the minimum investment amount was, as an example, $10,000 to purchase shares. Most participants would not have the $10,000 minimum. I misinterpreted that the requirement was referring to "high net worth individuals" investing and not necessarily the amount necessary to invest. Again, my apologies.

but even if the spouse has a high income and/or participant has the rich uncle's $$, that wouldn't be available to defer into the participant's 401(k) plan. So....even if the NHCE IS a high net worth individual outside his/her employment, that doesn't affect the qualified plan in the original example! just my 2 cents.

ok - I'm bringing this back up. We have a client who is very reliable as far as filing his forms timely, etc. The client received the IRS letter re: the 2004 return as all others have been receiving. (BTW - this particular return does NOT appear on freeerisa.) The client pulled out the company file copy and saw it was signed timely (would have been the same day as it was filed). They did not send it certified (which brings to mind another question, we strongly recommend each client file certified, but don't really know how many do...what do others see??) Anyway, the client made a copy and returned it to the IRS with a response letter per the original request (again, the response was done timely - back in August, 2007). The client is now receiving a followup letter from the IRS stating that the IRS received the response and 2004 form and since it was filed late are accessing a $15,000 penalty for late filing. As a side note, this client just went through an IRS audit of the 2005 form 5500 and plan year. The client does not remember if the auditor asked for a copy of the prior and subsequent 5500 forms (which we normally see them do). We assume that this is 2 different divisions of the IRS and the plan auditor would have had no way to know that the 2004 return was missing from the IRS records; he just reviewed the 2004 form the client provided...makes sense? Should the client send a letter stating that all previous and subsequent 5500s have been filed timely and that the client requests reduction or waiver of the penalty? Does this fly anymore? We honestly believe that the client filed this form timely and who knows where it is?!?!?! Anyone?? What would you advise the client to do??

just a note...the 5500 forms go to the DOL first (EBSA), then the DOL forwards them on to the IRS, which is how they get posted to freeerisa...

Kevin1 - not neccesarily - only under certain loan policies - they would need to check their particular plan's provisions. 99% of our client's loan policies no longer have that language regarding the max of $10,000 and outside collateral. Do others still see that loan language around a lot?

Belgarath - I'm with you, I'm no attorney, but I do feel for the client and what they are going through. Not sure if I mentioned before, but this is a 3% SHNEC plan; the employee contributed some in the past, but the bulk of the account was Employer funded. (about 20% is employee portion and 80% is employer). The client, while acknowledging that they probabaly could not withhold payment, was hoping to delay the payment pending the trial outcome. My question to SRP...you mention ERISA in your post/case, was your case under State or Federal court? This client's case would be State (actually Local??) court and if I'm reading mjb correctly, if said State or Local court awarded the client the 401(k) account it really wouldn't be valid anyway??

I think that the attorney was referring more to something that might be in the distribution date definition that would state if a participant was terminated for cause the Plan/Administrator could "delay" distribution; not necessarily that the Doc would state that the participant would forfeit the plan balance altogether. This client wanted to "delay" the distribution until the case went to court; but was pressed for time due to the distribution date definition in the Plan. The client was more than likely going to reach the plan's distribution date way before the case went to court and there was some sort of outcome. As I mentioned in the OP, I was "grasping at straws" because I did feel for this particular client in this situation. I wondered what others had found in similar cases if there ever was an instance where the Employer prevailed with regard to the plan balance and according to SRP there has been at least one....

We compute it as in your first example: (take the total vested balance of $10,000 times 1/2 = $5,000 then reduce by the current outstanding loan balance of $2,000 leaves $3,000 left for a new loan.) I've heard the argument that the current outstanding loan balance has no vesting per se, so you would start with the $8,000 but we consider the current loan as part of the vested account balance. sorry I wasn't much help, huh?

Kim - They don't post the SSAs on freeerisa because of the soc sec numbers.....

Mike - similar but not related.....we're trying to maximize the owner in a small off calendar plan year. Owner over age 50 contributed $16943 in 401(k) deferrals for the 2006/2007 plan year. To maximize his profit share amount, am I correct in thinking: 415 limit is $45000 - I can't work off of the total with catchup ($50,000) because he didn't contribute the whole catchup amount, is that right? Can I add the amount over $15,500 and then would have an overall total of $46,443 leaving me $29,500 for ps? I know this should be basic, but I can't get my arms around it today! Thanks in advance.

I have searched the boards as I believe that Tom Poje answered this one at some point in the near past, but I can't seem to find it. I have a 401(k) plan where the plan doc excludes bonuses from compensation for purposes of 401(k) deferral contributions & nonelective allocations. As far as ADP testing, the doc defines compensation for ADP testing as 414(s) comp. If I use bonuses in my definition of compensation for ADP testing, the test "fails by less" than if I use the compensation off which deferrals were calculated. It's not a great amount, but enought to reduce the required refunds for the HCEs. Is this acceptable?

JG44 - here are the instructions for the 2007 W-2 forms. I think you will find your answer on pgs. 11 & 12. Hope this helps. iw2w3.pdf

no problem, glad it worked out!

ok - it will import the total overall G/L into the one fund name you set up if you marked the "import to one fund" section under "processing options". Anything that you check mark on the screen will NOT import, so it's the opposite of what you said. If you red checked the G/L, then it would import everything but the G/L. So be sure and mark only what you don't want to import. If you click on the help screen while you're there, it has a lot of good info. Once you process the import, the transaction will show on your transaction screen. It will read "allocated link" and autmatically posts with the period end date from the JHancock file. You can then go in and run reports and they will reflect whatever you imported. If you reverse that transaction, it will reverse your import and will remove the transaction completly from your transaction screen. So...yes - anytime you import through the interface, it is completely reversible by simply reversing the "allocated link" transaction. It disappears and you have to import again. I think you'll get the hang of it pretty quickly, I did. It is a great timesaver!! Let me know how you make out.

I have a small client who always waits until the last minute to get us the information to complete the 5500 form for his Profit Sharing Plan. (yeah I know, one of MANY small clients, actually). In any event, this particular client wants me to set him up with EFAST filing so that we don't have the worry about getting him the form timely to physically sign and file by midnight on October 15th. I know that the EFAST-1 form needs to be filed, I assume by the client? Would I then be able to file his return from my office if he provided me with the password data he receives? Is there a way for us as a TPA to obtain authorization as TPA? We obviously don't sign any of the 5500 forms which leads me to believe that for now anyway, each client that wants to do this must be set up individually, is that correct? I figured with everything going the e-filing way in the future, it is time to start this with some of our smaller clients so that we can get the feel of how this works before it is required. Any thoughts appreciated.