pmacduff

Tom P. or anyone using Relius...when imputing disparity for non-discrimination testing in a Safe Harbor 401(k) Profit Sharing Plan which utilizes the 3% SHNEC, does the Relius software "know" to only impute on the PS when I check that box or should I be testing "by hand"?

Also - just remember no free ride on top heavy with the PS allocation going in.

check your plan document. ours has the option for the top-heavy to go to all employees OR just non-keys. if the non-key option is in your document, I would say that this client would not have a top-heavy contribution due. If the option was not in the doc, I think they would have to make the TH for the 2 key ees. are they making a contribution anyway > 3% whereby this would be a moot point?

Client cannot change to small plan filing until the participant count drops below 100 (once the plan has filed as a large plan). Once it does, they can file as a small plan until the count goes above 120. Remember, too that it is the beginning of the plan year count. I have a client in this same situation who will be able to save lots of $ not needing the financial audit! hope this helps.

Alf - Excellent question...in looking at the definition below from the form 5500 instructions one could argue that PBAs are no longer "provided" in your plan because the "option" is no longer available. However I think I would include the feature as long as there are participants with PBA accounts. This sounds like a matter of semantics ! I would like to hear what others think...... "Participant-directed brokerage accounts provided as an investment option under the plan."

We list all features per the Plan Document regardless of whether or not they are being utilized.

Help! I am working with an auditor for the first time on a mutual client's 5500 form (over 100 parts. - long form - audit required). He is telling me that the 2003 ADP refunds MUST be put on the liability line on the 5500 form. We have always reported the ADP refunds on a cash basis in the year they are distributed. He says that if they are distributed before March 15th, then they have to go on the 2003 5500 form as a liability. I do report the contributions for this plan on an accrual basis, but have never done that with the refunds. I reread the 5500 instructions and don't seem to find a concrete answer. My feeling is that it could be done either way...Any opinions appreciated!

Thanks Tom - I also finally found the answer in Sal's book. We have taken on a client who was in the midst of an IRS audit from 1999 & 2000, they did the refunds but didn't do them until October! We are working with the IRS agent to finish up the audit and this question had come up.

Client failed ADP testing. HCEs took refunds, but they weren't processed until October. HCEs had losses on their accounts, so refunded $ was actually less than original amount. Does the Employer pay the 10% excise tax on the 5330 based upon the original amount or the actual (lower) amount refunded. Any cites? Thanks in advance.

No you don't have to reduce the others to 20%. You can discriminate against HCEs. If the Employer wants the full 25% deduction, you would just allocate the additional $ to the remaining employees uniformly (i.e. they will each receive >25%). You should also check the document to be sure there aren't any limitations other than the regs. Your document may also tell you if the excess is reallocated to all others or reduced. We use Relius and have to tell it whether an excess of Employer PS is reallocated or reduces the contribution. Hope this helps.

So - when I process the plan for 2005, will I need to enter some sort of override for this participant/owner in his census info? If I'm remembering correctly, in Relius, the following year (2006) when he is 66, the software will increment his NRA to 66 if the plan NRA is 65 so again - I'd want to override each year? As always, thank you for all valuable input and information!

The owner in a cross-tested plan will attain the plan's NRA (65) next year. He has no intention of retiring at this time. What impact does this have on the non-discrimination tests & his EBAR? Will he still be able to contribute the max if the tests allow? This seems like it should be pretty easy, but I'm sensing there may be issues because he is 65. Any input appreciated!

I would just correct the 1099-R form and issue 2 showing one as the refund of deferrals ($2900) and one with the balance ($14100) as a hardship withdrawal. Neither are eligible rollover distributions anyway, so you don't have any issue there with the withholding. I would not take any more $ from the plan since the participant already received more than the failed test required. I believe you need to show the $2900 as a contribution excess to tie back to your test & correction. My opinion is that this is a mechanical correction for the plan reporting the distribution of $ correctly. I suppose the hardship paperwork should also be modified and an explanation attached as to the decrease from the original amount.

I have a terminated participant in a Plan who rolled both her plan balance and her loan balance to her new Employer's Plan. (Yes, her new Employer's plan accepts loan balance rollovers and ok'd the transaction). For 1099-R reporting purposes, would you simply prepare a 1099-R form with code "G" for her entire balance including the loan? It seems unnecessary to prepare 2 1099-R forms when both would be coded "G". I looked in the 1099-R 2003 instructions, but it only says that a loan balance could be an eligible rollover, not how to code it.

I think you have to include it on the Schedule I to balance. We report the default with the regular distributions when it is reported and taxed as you suggest. The beginning participant loan balances include that loan, so you somehow have to account for removing the balance from the Plan.

401(k) Plan allows for participants to roll $ into their account from prior QP and conduit IRAs - plan doesn't get much more specific than this ^ regarding rollovers "in". Participant's husband dies. Would there be any reason that she cannot roll his QP balance into her 401(k) Plan? I know this may seem obvious and I am 99% sure that this is ok, but with all the recent changes I wanted some reinforcement.

Jim - The Employer chooses a date during the plan year to test coverage, the date for the coverage tests in this plan is 12/31/2003. If an Employer CO left the plan during 2003, there are no employees in the plan on 12/31/2003 for me to test. The IRS agent told me to use the last available data I have for that Employer CO to test coverage, even if it was not on 12/31/2003. 12/31/2003 is the date the rest of the Employer COs in the plan use for the coverage test so I was thinking I needed to be consistant. Though I suppose since each employer is tested separately, that's not a issue.

Tom - I do agree with your logic - my problem is how to complete the Schedule T! Will I need to do an attachment because of the otherwise excludables? Does it make any difference that they were gone on my testing date of 12/31/2003? I'm under the impression that this plan is ok, I just don't know how to complete the Schedule for coverage! As always Tom, thanks for your input & enjoy your weekend!

Tom - Two of the 3 NHCE were over 1000 hours in 2003 but none had worked 12 months. In the plan doc a YOS is 12 month period over 1000 hours. In any event, all were hired and termed in 2003. Since my determination date for Schedule T coverage is 12/31 - should I count the 2 NHCEs who did not defer as benefitting? They weren't there on 12/31 so I guess that confuses me. As I mentioned, if I complete the lower portion of Schedule T with the data as I see it, the percentage computes to be 0, not 100%, therefore failing. Help!

Spoke with the IRS again....I was told that if an employer leaves the multiple Employer Plan and either starts a Plan of his own or transfers to another MERP where a Schedule T will be completed for PYE 12/31/2003, then it is not necessary for me to complete a Schedule T with my MERP return. If, however, an Employer leaves the Plan and does not transfer to another plan but all participants are distributed, then I must include a Schedule T. He said to use the last data available from those Employers. As he mentioned, the Schedule T's purpose is to show compliance for coverage, so it makes sense that I still need to report on that Employer's coverage for the plan year. Now - I have yet another Schedule T question... An employer has a plan with safe harbor matching to pass ADP/ACP testing. No one is deferring except the owner. His wife is working& drawing comp but not deferring. He had 3 other employees during the Plan year, but all terminated within the plan year. None had chosen to defer. The 401(k) portion has immediately eligibility, but the Employer chose to use the "year-of-service; age 21" exclusions for the safe harbor match. I know that the 401(k) piece meets the 3d exception on the Schedule T. But the 401(m) is where I begin to get fuzzy! Using the date of 12/31/2003, my counts for the bottom of Sch T for 401(m) are as follows: 4© 1 = 2 4© 2 = 0 4© 3 = 2 4© 4 = 2 4© 5 = 2 4© 6 = 2 Relius Gov forms computes the % in 4(d) to be 0%. Does this mean it fails? Must the HCE take a refund of the safe harbor match he put in for himself? Thanks in advance.

Ok Susa - you have my curiosity piqued!! Right now I am finishing up some December year-end work and then will be jumping into quarterlies, but at some point, I know I will have time to review this and see what I can come up with. I have a feeling it would be the MFS link as you mention because that also uses a *.csv file. I will keep everyone apprised of my progress. JKHarvey - I was talking about the Financial Interface a couple years ago with one of my Manulife reps re: the cost factor. I don't remember him telling me that it costs the vendor anything. We TPAs are all paying for the Allocated Link software/maintenence through Corbel. Perhaps Corbel does charge the vendor something as well but I do know, like you, that for some reason American Funds has not been included.

Jim - Thanks for the reply. I now see and agree that all participating employers as of 12/31/2003 need a Schedule T - even those with no balances and no one deferring. I spoke with the DOL who referred me to the IRS technical department. After a long time on hold and 3 different people telling me they would get me a "Schedule T expert", I finally talked to a gentleman who, although definately no expert (!), read through the instructions with me and agreed that it was not necessary to prepare a schedule for all 82 employers. I can list those on another page who meet an exception with their Company name, EIN and exception. I will prepare a "T" only for those not meeting an exception. I will file for those Employers who left during the year, even if they had no balances or no one deferring. The employers who left during the year, no balances or all balances paid out - if they did not meet an exception, the balance of the schedule is all zeros because there are no employees. (ie., all of the numbers are "0" in the bottom of the schedule.) I guess that is why I thought they wouldn't need a schedule. Do you believe that is how I should file them??

Thanks quinn - I guess my problem is that I DON'T want aggregation, I need to test them all individually. This is a PEO plan that was "single employer" but went to multiple employer in 2003 under the transition rules and per Rev. Proc. 2002-21. I can perform all of the ADP/ACP tests individually, but couldn't find a way to test individually for top heavy. Sigh........................

I have a multiple employer 401(k) plan for which I need to test approximately 82 participating employers individually for top heavy. I use Relius Admin software. Does anyone have any ideas on an efficient way to accomplish this? I'm about to tear my hair out because I really don't want to have to do this by hand - but it's looking like I will have to. I appreciate any input.

I still haven't been able to get a clear idea of how to do the Schedule Ts...does anyone have any thoughts?