pmacduff

Here are the salaries and alloc.: 3 HCEs: Comp Total Alloc. 401a alloc Age 49 401(a) eBAR = 3.244 $50982 $20144 $3755 Age 61 401(a) eBAR = 1.219 $33988 $18863 $2504 Age 63 401(a) eBAR = 1.035 $53106 $21036 $3912 10 NHCEs Age 48 eBAR = 2.564 $8353 $1070 $448 59 = 1.045 $3640 $195 $195 55 = 1.449 $8988 $482 $482 26 = 15.429 $14958 $1260 $803 44 = 3.554 $21480 $2013 $1153 48 = 2.564 $5192 $438 $279 51 = 2.008 $46167 $5822 $2477 56 = 1.335 $18438 $2649 $989 52 = 1.85 $24109 $3234 $1294 47 = 2.782 $26350 $1717 $1414

everything fails if I test on allocations (even if I impute disparity). I found that if I bump the staff employees profit share up to 6.3% from 5.366%, that adds the 1 NHCE to the ratio percentage group of the 49 yr old and it passes (3/10 over 1/3). That's about 1% additional for the Employer to contribute (plus gains).

Thanks Tom & Mike for all the input. Yes- the 49 yr old is messing everything up. All HCE employees deferred close to the max due to the safe harbor, so the ABT will not pass. The ratio percentages pass for the rate groups with the 2 older HCEs, but the 49 year old only has 2 NHCEs in that group and fails. (2/10 over 1/3). It strikes me that this plan is only giving the HCEs 2% more than the NHCEs, but due to the ages, etc. can't pass the testing. Mike, you're correct, the original test was not using permitted disparity. I tried running the testing imputing disparity, but as Tom mentioned, the change was minimal and the results the same, the 49 year-old HCE rate group still doesn't pass. The auditor has been very helpful working with us on this, so hopefully we can the client through this and move on! Thanks again.

ok - this is a 401(k) plan with safe harbor match and cross tested discretionary PS. Not sure why, but Relius is using all allocations in the ABT, deferrals, Sh match and profit share. But not for all; even among the 3 HCEs, the amount reflected on the ABT report is not consistant?!?! The ABT should include only non-electives. Something must be wrong in the specs, account set up, ee data. I've never noticed this issue with Relius for other clients. I'm going to go through everything on Monday and see what I can find.

Mike - I use Relius. The nondiscrim tests show the ABT failing. Also failing the ratio percentage test and the rate group coverage tests.

ok - same client is being audited for 05/06 PY (off calendar). Bad census data has contributed to some issues w/ regard to the audit and specifically the 401a discrim testing. Ultimately I am "redoing" much of the testing and reports so that all are accurate. Based upon the following census data, can anyone think of a way to help this pass? Plan coverage passes. However there is one HCE rate group (the 49 year-old) that is failing, everything else is good so I'm trying to see what I can do. The NHCEs received 5.366% and the HCEs received 7.366%. 3 HCEs: Age 49 401(a) eBAR = 3.244 Age 61 401(a) eBAR = 1.219 Age 63 401(a) eBAR = 1.035 10 NHCEs Age 48 eBAR = 2.564 59 = 1.045 55 = 1.449 26 = 15.429 44 = 3.554 48 = 2.564 51 = 2.008 56 = 1.335 52 = 1.85 47 = 2.782 Thanks in advance, it's been a LONG week!

yes, but mjb mentioned to "terminate the plan, establish a PS or SEP type plan and contribute..." I was just noting why would the owner terminate the plan and start a new one, when he can amend and utilize the plan he has?

mjb - why would the owner necessarily want to terminate the plan? If he has terminated participants w/bals over $5,000 who want to leave their balances in the Plan and it sounds (from the original post) that the owner doesn't mind if they leave their balances. The OP doesn't say what has happened to the Plan Sponsor...is the owner maintaining that entity? Anyway, I would think it would save the owner some $$ to keep this plan, if possible, and simply amend to have the provisions he wants. Perhaps his plan already allows for a discretionary profit share that he wasn't utilizing. My 2 cents....

Thank you!

Thanks everyone...Bird & Janet - I agree and am going to use the "G" for the total account balance. However, Masteff got me thinking, so I was reading through the Special Tax Notice language and came to the conclusion that the "heart of the matter" would be whether or not the loan balance is considered an "eligible rollover" or not. Nothing I have found verifies or contradicts that one way or another; so I think I will go ahead and use the "G" Code.

Participant rolls his balance out of one plan and into another plan. He has a current outstanding loan in compliance with the loan provisions of the Plan. Plan he is rolling into allows for loans and accepts his outstanding loan balance and will takeover the loan administration. Does distributing plan prepare a 1099-R form for the loan "rollover" and use code "G"? Any thoughts appreciated.

we did check that on the off chance we might find one that way but we assumed if a letter was generated, the forms wouldn't be there and they were not... we were thinking maybe the 2004 forms were fed through a scanner that ate them up!!

JH discloses the TPA Forum comp on the Schedule A every year.

Thanks Belgarath that gave me a chuckle on this Friday afternoon...contact the IRS...too funny !

we have also found by coincidence that our clients receiving this letter filed the 2004 5500 in April and May of 2005, this also made us suspicous....

Yes - but beware in a plan that uses "participation" compensation for the SHNEC allocation...if the plan has more than one entry date...because that person is only getting a 3% SHNEC on their compensation from date of participation and will need to get 3% of their full year comp for top heavy....

Merlin - We are glad we're not the only ones!! Our clients, too, have been calling in large numbers, telling us about the letter/late 2004 filings. Many of the clients that have called are the ones who stay on top of things, so we found it odd that the letter indicates there were prior notifications. If it is a glitch in the system, it will be interesting to see what happens next.....

I have received these acknowledgement letters from the program (am in NY and send to Georgia) but wanted to give you a "headsup"...most of the letters I sent out in 2006 have been SLOWLY coming back to me just recently with an apology from the IRS that they could not process due to more pressing/higher priority tax dept. issues or something along those lines. The letter advises me to resubmit the requests. Although - one of the requests I had was for a terminated plan. We still had about 40 participant left to find and pay out. I had sent those 40 to the Letter Forwarding Program back in November of 2006. They just sent me a letter that those have gone out... Since we previously hadn't heard from the IRS or any participants, we rolled the remainder of the funds into the client's current 401(k) plan to be paid out or forfeited at a later date. I am now receiving calls fast and furious from the former participants and I am processing their payouts. Ironically, we closed the checking account for the old plan back in June, so if they had forwarded those letters more timely, we would have been able to pay the majority out of the old plan checking account and not had to transfer. It wasn't much anyway, but created some more work this way! It does appear that someone (in our area letter forwarding office anyway) has found the piles and is addressing them as quickly as she can...so I'm counting my blessings...

Just to clarify for Frank, if HCE contributed $20,500 and you have already taken $5,000 out in your step #1 ($15,500) and you get to step #5, you cannot reclassify more $$ as catchup and must refund to that HCE, if applicable.

I'm resurrecting this thread from last year as I have a client anxious to know what the limits for 2008 will be... Tom - when are they actually released each year? It looks from your thread last year as though they would be released "a few weeks" from Sept 28th (date of the thread), so I'm guessing in October sometime???

so...the plan can allocate 3.67% to the one Hotel B participant and be done? COOL...everyone agree? As it happens this one Hotel B employee decreased his hours and is now working less than 1000 each plan year. He only had 1 YOS over 1000, with a 2/20 vesting sch, so at this point he is 0% vested in the PS anyway! Gotta love it!!!!

the owner group is receiving an 11.0% allocation, so the Hotel A staff employees are receiving 1/3 of that or 3.67%. so...even if the eligible Hotel B employees are specificaly excluded by definition from profit share allocations in the plan doc, they all need to receive 3.67% of profit share due to the gateway rules?

client does not want the expense of maintaining 2 plans... the top heavy due for Hotel B would be minimal as there is only 1 employee not contributing that would need to receive the 3%. (All other Hotel B employees who are deferring are contributing enough to receive the full 4% SH match).

I think I know the answer, but I need some reinforcement today... YOS eligibility, dual entry dates, safe harbor 401(k) plan, Employer makes safe harbor match contribution. Plan is top heavy. When the Employer does make a discretionary profit share it is a cross-tested formula. There are 2 family owned Hotels (A & B), different Employers, EIN, etc., but controlled group. All owners and HCEs are with Hotel A. Hotel B employees are allowed to defer and receive safe harbor match, but are excluded from the cross-tested profit share allocation. Profit share passes coverage. However because the plan is top heavy, the Hotel B employees who are not contributing and those not receiving at least a 3.0% match rate will need to receive at least 3%, correct? The Employer does not want to give ANY profit share allocation to the Hotel B employees, but I did tell them last year that in a year that they make a profit share or there are reallocated forfeitures, top heavy contributions would be necessary for the Hotel B eligible employees.

so that's a "no" from WDIK...