pmacduff

For what it's worth...I think you would recharacterize the $1900 so your ADP is ok for 2003/04, right? Now, you also said the participant deferred $16000 so far in calendar 2004 (I assume from Jan - October?), right? If he stops now, then all he has deferred in calendar 2004 is the $16,000 so there is no 402(g) excess. But I do agree that there is a $1900 excess catchup contribution for calendar 2004 so it is my opinion that you would need to go ahead and refund that excess.

"Cool" - this is good to know! [no pun intended (I'm in New York)]. Thanks for the info!!

WMyer - thanks for the reply. Are you sure about that 12/31 date for the 3% SHNEC? Even with the "maybe" notice, I thought it had to be out by 12/01??

OK - my search feature doesn't seem to be working... I have a client with a calendar year 401(k) Plan. They want to amend the plan to safe harbor to avoid the ADP testing. I know it can't be effective 01/01/05 because they passed the 12/01 deadline for notice. Is it true that they must now wait until 01/01/06 or can the plan be amended now and make the safe harbor effective 03/01/2005 as an example? Thanks in advance.

Her $3,000 is not considered catchup until the end of the plan year when you run the ADP and it fails. Any amount up to $3000 removed from the test to pass can be recharacterized as catchup. So it is possible that the owner could end up with "regular" deferrals which could trigger a top heavy.

Thanks Belgarath - Sorry to be so dense - I found out that the "Mrs." is NOT on the Company payroll. I don't think it makes any difference - she still cannot have a SIMPLE IRA plan in her LLC, right? I interpret the instructions to say that she cannot have a SIMPLE without covering all employees in the controlled group. But even before that, I think she cannot have the SIMPLE if the Corporation has a 401(k) because of the exclusive plan rule.

Gary - This original thread relates to my questions, so I thought I'd add on here...We have a potential new client approaching us with a situation where the husband owns a Company (100% we think) & has a 401(k) Plan. Wife is on payroll of the company & either is not eligible or does not contribute. Wife has own LLC where she is the only employee. She contributes to a SIMPLE Plan through her LLC. Can she do this? Since this is a controlled group & the husband's Corp. has a 401(k) Plan, I believe she cannot have the SIMPLE, but I can't find any sites, etc. to back me up. Thanks in advance.

I heard a rumor that the SSA form was going to be "simplified" & the instructions made much clearer in regards to reporting participants initially & when paid out, etc. Anyone else hear such a thing?????

Thanks Tom for the reply. Relius gave everyone the same .07% allocation of forfeitures. This just means that my owner got more in allocated PS to get him to 11.0%, but he was already getting more because of the cross testing, so I think I'm ok. I suppose another way to look at it would be: if I allocated the forfeitures using the cross tested method (giving a higher %tage to the owner) and then allocated the PS to reach my goals (3.67% for staff & 11.0% to owner) then the owner would have a lower allocation of PS and still receive the same total $ amount. Different means to the same end with the total dollars allocated !

I did find a thread on this, but after reading through it, I'm not sure it answers my particular question. I have a small amount of PS forfeitures ($2653). My Corbel doc says forfeitures are allocated with Employer contributions. Plan is cross tested with only 2 rate groups, one for owner & one for all others. Plan is large, has other HCEs (not owners) and has no trouble passing any of the 401(a) tests. The client has given me a dollar amount to allocate. If my staff group has an overall allocation rate of 3.67% which includes forfeitures, then I can give my owner up to 11.0% (3.67*3), correct? Now Relius allocated the forfeitures comp to comp, is that a problem? Or do I have to figure those forfeitures out with the cross testing and allocate by individual meaning hand keying all forfeiture transactions? If I don't then my %tages are ok and all tests pass. Thanks in advance

Here's a copy of the 1099-R instructions...it will depend on whether the loan is a "deemed distribution" or offset. Hope this helps. i1099r04.pdf

I'm sure this is a fairly easy question, but I don't work with SIMPLE plans and I want to be sure I give an accurate answer... Client is terminating his SIMPLE Plan as of 12/31/2004 and starting a 401(k) as of 01/01/2005. There will be "receivable" contributions from December payroll that actually go into the SIMPLE Plan in January. Is this an issue with the SIMPLE exclusive plan rule? It doesn't seem as though it would/should be in practice, but then I got thinking .................any help is appreciated.

I, for one, did not intend to imply that benefits are a "gift" or that any employer should be "lauded" for removing and then reinstating a lessor benefit with fanfare. However, I was raised to be realistic (or some may say cynical ). In this day & age & economy, I think that my employer cutting or changing benefits is always a real possibility. I don't take anything for granted. Also - don't we all have free will to look for another job? My experience and exposure is all to "the little guy" employers who try to make a living, get ahead and still take care of their employees. Sometimes this means cutting benes in order to keep things going. I see the owners who don't take paychecks in bad/slow times just so that everyone else gets paid. I'm aware that this is very different in large company situations, but I just can't believe that all of the HR Departments & Benefits Managers @ big companies spend their time thinking of ways to cut benefits for employees. My last 2 cents..............

I'm with quinn...I live in Upstate NY & have seen many times in the past how the Kodak employees cried about their annual bonuses being cut year after year. I know personally people who just expected that bonus every year....crazy! Now look how many have no job at all. Having been in the workforce for 25+ years, I'm amazed at the benefits that are taken for granted until they are taken away. I know that employees need to be protected from unscrupulous employers but the small employers I've had & seen (esp. in this line of work) are trying hard to keep their companies going/profitable AND trying to do well by their employees. If my employer covered all of my health care and then decided that I needed help to pay some of the costs, should I be "up in arms"? Do I assume that because it's always been paid, that they have no right to take it away? I don't think so. I try to be thankful for every benefit I have and hope that I can help my employer be successful and profitable which will benefit us both!!

The audit requirement is based upon the number of "plan participants". When you file the 5500 for the Multiple Employer Plan (it is one plan) and there more than 120 "particpants" you must have an audit. Even though you are testing each Employer as a separate plan, there is really only one plan in which all are participants. I don't think you will find it anywhere as a separate issue because, again, the audit requirement is based upon the number of plan participants which is all encompassing in the multiple employer plan. Hope this helps.

yep I think I see now - maybe the client didn't deduct it for 2003, so they want to deduct in 2004??....anyway...without more research, FWIW, I agree with you. If the allocation was done as of 2003 and used in 2003 testing and then deposited timely (before 03/15) I would say it's a 2003 annual addition. If they treated it as a 2004 annual addition, it would count for this year and 2003 testing would have to be "redone", right?

Do you mean 2004 and 2005, not 2003 and 2004? If so, what is the purpose of it being an '05 deductions but an '04 allocation? It wouldn't appear to make any sense....

In my humble opinion, you want to regurgitate everything from all the Study Materials. If you are a good test taker and have studied months as you mentioned, you should do fine. Do you currently do administration on a regular basis? I had been doing administration for awhile when I first took the exams, and found that I was "overthinking" on many questions. In the real world, there aren't always black & white answers, even in our field. So I would suggest trying to avoid the "yeah - but what if...."! It's not always easy, but you can sure be proud when it's over!! Best of Luck

Hey Harwood - thanks for the info! I had always thought that you only received that benefitof no 10% excise @ age 55 if you annuitized. Here are the instructions for form 5329 and it states your point clearly on page 2, line 2. i5329.pdf

Why not just remove the loan provision prospecitvely and avoid the whole problem? It's not a protected benefit...

If the Trustee is concerned with participant loans, why doesn't he/she have the loan option removed from the Plan (prosepctively, of course)? Why was it in the Plan to start? Also - if the Trustee is advising against it, why is the loan being approved? I'm confused.......

Not for the 63 year-old but yes for the 58 year-old. As far as I know, the only ways to avoid the 10% premature penalty if you are under 59 1/2 when you file your personal return is if you are totally & permanently disabled or if take your distribution payment as an annuity. hope this helps

ok Tom - what's next...that CD release with the "scarecrow" on the cover? How about that fold out insert with the words to your latest pension songs? I bet you could take it platinum.... I, for one, did know this was all in good fun!! By the way - I heard a rumor that the first game for the Red Sox next season is against the Yankees..............oh boy!!!!!!!!!!!

hey you guys...take it easy on Tom! There aren't many topics in our line of work that wouldn't put a few hearty souls to sleep, right??

Thanks for the conference info Tom. I just received my "ASPPA" pin in the mail today introducing the new logo! The Shakespearen reference is funny because in the 9th grade my teacher, Mr. MacKay, always made me read the part of McDuff. He really got such a charge out of that! I found it even more humorous because his name & my were MAC but McDuff in the play is actually MC. I never really bothered about it, but my Grandfather was VERY particular about correcting those who would try to spell or pronouce our last name Mc ("mick") instead of Mac "mack" !!! Archimage - it sounds like Tom was full of straw....