James Matt Ullakko

Question about minimum distributions: Assume participant is required to take minimum distribution withdrawals for this year. Can this individual waive or modify the federal and or state tax withholding? Also, withholding refresher would be appreciated - rollover eligible drives all of the tax withholding options on distributions, yes? Many thanks, Matt

If you are using pre-approved document and fortunate enough to be using a document database to create your adoption agreements, I'd make the argument to just restate, re-execute, & replace all of the prior docs. Otherwise, you have separate amendments laying around and it becomes a burden to keep track of, for the plan sponsor and the service provider.

What if these pension assets were from Pre-ERISA Money Purchase Plan? Could you invade through in-service? I seem to remember some sort of provision dealing with this outlined in the ERISA outline book, but I'm too lazy to look it up. Anyone know off top of head? Thanks.

Quoting a prior reply from previous post about a month ago: "Years ago the IRS took the position that allowing 401k deferrals to continue after the 401(a)(17) compensation limit had been reached was in effect recognizing compensation above the comp limit and thus disallowed. This contradicts the conclusion I am reading on the replies here, does anyone have a site or other reference to support the allowance of 401k deferrals after the comp limit has been reached?" As I understood the original question - seemed to be asking about very low deferral election in place throughout year - maximum deferrals reached before 402(g) limit exhausted because individual hit the compensation limit. Could this individual continue to make deferrals on compensation earned for remainder of year, even though that compensation is above the limit imposed by 401(a)(17)? It would appear any subsequent deferrals for the remainder of the year are being made on compensation earned above the comp limit, unless it could be argued that the deferrals made thus far were not consistent with what the intended deferral election was to begin with... Any comments?

If you don't mind me asking...what did you have to do in order for the general testing report to indicate pass looking at ratio test and not average benefits test? I am curious to know as we are very likely to be up and running with them for 2005, and I've yet to see an actual cross test in motion on that system. Additionally, anyone use their proposal software?

I should have started my own post... I'll be doing that now.

How about file the return before 7/31 without taking into consideration the profit sharing dollars that have been decided upon to be made before their corporate extended tax return is filed? Meaning does one really have to file amended return in situations where the filing already went out without all those reporting years' worth of accruals factored in? Just pick them up in the following years return and do so consistently going forward?

Yeah they take an equal salary among the highest tier of compensation in their organization. Thank you Tom and Blinky.

Which HCE's have to be picked? Top Paid Group in effect, I understand rules regarding Rounding to be consistent and don't be discriminatory. However, what about this situation: Lookback year comp $200,000 - defers in limitation year $13,000 Lookback year comp $200,000 - defers in limitation year $0 Lookback year comp $200,000 - defers in limitation year $13,000 Lookback year comp $120,000 - defers in limitation year $13,000 Lookback year comp $80,000 - defers in limitation year $0 Lookback year comp $70,000 - defers in limitation year $0 Lookback year comp $60,000 - defers in limitation year $0 Employer establishes policy to consistently round up to whole number if 20% falls on a fraction - they reason that you cannot have a fraction of a person so they will just always include one additional person in the Top Paid Group if 20% is not a whole number. Above information would yield 1.4 so they need to pick 2 HCE's to include in the Top Paid Group. Which two of the three $200,000 earners should they pick? Example in Sal Tripodi's book only address's fraction scenario for how many to include in the TPG. I'm wondering what you other practicioners are doing to choose identically paid HCE's that have varying deferral rates? Any help much appreciated.

Is the 20% mandatory W/D rules clear with respect to installment payments? There are no exceptions for installments are there?

Thank you all for your insights.

Plan's NRA 65 Plan's Early Retirement Age 60.5 --------------------------------------------------- Is it true that normal retirement age must be defined at least 59.5 thru 65 maximum? If plan has early retirement provision, does this mean that the retirement distributable event is the early retirement age (provided that this is 59.5 - 65)?

Thank you for the insight, you are reading right into my situation perfectly. I have not found any languange giving guidance on which plan would satisfy the minimum allocation, but at least that means that neither is stating that the benefit will be satisfied in the other! That sounds like a major design problem. Once again, thank you for your knowledge. Matt

Thank you much, that certainly helps me understand the "money purchase plans may be obsolete" phase going around lately. Thanks.

I am asking for someone's help clarifying some of my interpretations regarding minimum benefits for all Top Heavy defined contribution plans for which a participant is covered. And I have a couple of questions following... We are testing a companies' Profit Sharing and Money Purchase Plan. These are paired plans. If I interpret correctly the minimum benefit for all defined contribution plans maintained by an employer is 3%. So, if someone is covered under more than one Top Heavy Defined Contribution Plan the minimum benefit is satisfied by either the non-elective cont. in Profit sharing plan or the required cont. in the MP Plan, provided it is at least 3%. It is not required for each plan to make 3% cont. 1. So, is it always the case that the 3% minimum can be satisfied in either the MPP or the Profit Sharing Plan for any year in which either plan is Top Heavy? 2. Does it need to be stated clearly in Plan Document which plan the minimum benefit will be allocated provided either or both paired plans are Top Heavy? What does it really mean to have a paired plan? Are there some kind of testing advantages for having paired plan or is this just a referrence type of notation indicating that the plans are maintained by the same employer? Any help is much appreciated!

Thank you both for your help on this. I think the 1 to 1 QNEC with the HCE excess being distributed is the route we'll probably take. I have one more question about the 10% excise tax. I read that the time requirement to file Form 5330 is 3/15 following the regulatory correction period of 12 months following plan year end tested. For example, 1999 testing failures corrected October 2000 using 1 to 1 QNEC and distributing excesses to HCE's would require 10% excise tax to be filed prior to 3/15/2001. What if you make distributions to HCE's after 12 month correction period and do not file 2000 Form 5330 prior to 3/15/2001? Do you then file these excise tax amounts on the following year's 2001 Form 5330? Thanks, Matt

Thanks for your responses. I'll hope that the plan can use the APRSC...

Due to some Third Party Administration testing tracking problems... A very small 401(k) Plan didn't perform ADP/ACP test for PYE 12/31/1999 -limitation year 1999. Test was performed for 1998 and 2000. ADP/ACP Test fails for 1999. If the corrective distribution for 1999 limitation year failure is made after 2000 plan year end, is IRS Rev. Proc. 98-22 the best option to correct? If so, does anyone have experience using this method "permitted plan sponsor self-correction of certain qualification failures" ??? Any help is much appreciated! Matt

The applicable match with applicable earnings would have to be returned too...? Suspension would begin date of first contribution returned...? Thank you for your responses...

A Plan adopts the safe-harbor hardship definition. The plan has allowed elective contributions to a 401(k) arrangement for a participant that should have been suspended due to hardship reasons. I think as long as the hardship suspension of one year OCCURS it is okay that elective deferrals are allocated to the participant's account subsequent to taking the hardship w/d. But how long can contributions keep coming? When looking at the regs. I believe it states that the suspension must occur as soon as administratively possible. What is the timeframe for as soon as administratively possible? At what point would the elective deferrals be treated as prohibited transactions?

I am trying to confirm when employer profit sharing non-elective contributions are deemed credited to a participant's account for a particular limitation year. The regs say: An amount is an annual addition if it is credited to a participant for a limitation year. An amount is credited if it is allocated to the account of a participant under the terms of a plan as of any date within that limitation year. See Reg. 1.415-6(B)(7)(i). In general, EMPLOYER CONTRIBUTIONS are not deemed credited to a participant's account for a particular limitation year unless they are actually made no later than 30 days after the IRC 404(a)(6) period for the tax year within which the limitation year ends. See Reg. 1.415-6(B)(7)(ii). Is is correct to inerpret this to mean that a plan has until 30 days after the due date for their 2000 tax return to make non-elective contributions that are deductible for 1999 and also count as annual additions for 1999?

Thank you Michael!

Thank you so much for your reply. I do have a few follow-up questions: First of all, sorry for my lack of knowledge, this inquiry is the result of ASC's compliance testing software not combining the deferrals and eligible comp. for a particular HCE - when aggregating each plan together for testing purposes. Instead, this one HCE shows up twice on the HCE listing erroneously reducing the ADP for the HCE's. I wanted to make sure that I edited and combined, the comp and deferral amts., from each plan this particular HCE participated in correctly. I copied in your comments and put a question after... 1) All 3 members of the controlled group are considered a single "employer" for testing purposes, so employees of all three are in the denominator of ratio percentages when you do coverage testing. - I am clear on this. 2) You permissively may aggregate 2 or more plans. In other words, you may elect to treat them as a single plan for testing purposes. If this is required, then it's usually called mandatory aggregation. Plans must be aggregated or disaggregated in the same manner for 410(B), 401(a)(4), top-heavy, 401(k), and 401(m) testing. 2Q(1) I can see that you must have the same set of HCE's for coverage and non-discrimination testing. 2Q(2)However, I am still unsure when permissively aggregating 2 or more plans, if the deferral amts. and eligible comp. from each plan the HCE was eligible for are combined(irrespective of whether or not the HCE actually contributed) - I would assume that eligible comp. and deferrals are added together from each plan the employee was eligible to contribute. Is this correct? 3) If you test the plans separately, then Reg. 1.401(k)-1(g)(1)(ii)(B)(1) contains a special rule aggregating HCE deferrals to all plans for each of the plans' testing. A similar rule applies to 401(m) testing. 3Q(1)- Is the eligible compensation from each deferral arrangement the HCE is eligible to defer also combined? 3Q(2)- Can you clarify the exception to Reg. 1.401(k)-1(g)(1)(ii)(B)(1) where combining the deferrals (and eligible comp. amts?) to calculate an HCE's deferral % under each arrangement does not apply, if the arrangements are part of plans that are disaggregated under the coverage rules. I am interpreting this to mean if you disaggregate "otherwise excludable employee's" for coverage and of course for all other tests as required to maintain consistent HCE population, then you can avoid having to combine deferral amts. in a related employer situation... Not so sure I'm understanding this exception at all... Thanks, Matt

Here is an outline of the surrounding issues: In dealing with permissively aggregating three plans together in order to satisfy NOND testing. Assume that the plans are all designed the same with matching benefits, rights, and features... Three members of a control group Plans A,B,C. I assume that mandatory aggregation is applicable here for the HCE's and NHCE's combining eligibility and all the rest, which could increase the count for NHCE's. I don't understand how the HCE's would look on paper. Meaning, assume an employee is considered an HCE based upon 5% owner. This person has comp of: Plan A $40,000 defers - $2,000.00 Plan B $100,000 defers - $5,000.00 Plan C $20,000 defers - $1,000.00 When looking at this person under permissively aggregation scenario would the following be true? The person would be an HCE and counted one time on the aggregated test. The comp would be totaled and the deferrals as well? 160,000 and 8,000 giving 5% deferral%? How would this look if mandatory aggregation was applied to these plans being tested separately? Any way to avoid combining comp/deferral amts. for the HCE's? Thanks for any help!!!!!!!!!!! Matt

I am hoping someone can clear a few questions I have up about the options you have for running Coverage and ADP/ACP testing for related employers, for which I am making an attempt to detail below: Here is an outline of the surrounding issues: I am testing three members of a control group and this first discussion deals with trying to get the plans tested separately AND without having to apply mandatory aggregation of the HCE's. Here's my understanding of the rules, generally speaking related employers are always treated as single employer for NOND and coverage testing. It is allowable to test each separately if they have separate workforces and maintain separate 401(k) plans. However, the HCE's are subject to mandatory aggregation combining their deferral amts in each plan they participate in order to calculate their deferral %'s in each plan. Backtracking a bit, to determine who are HCE's for related employers 415 comp is considered the employee's compensation from any member of the the related group. Three questions about this... 1. I found an exception to mandatory aggregation in some of Sal Tripodi's materials that the HCE's do not have to be mandatorily aggregated if the arrangements are part of plans that are disaggregated for coverage. Does this mean that as long as you disaggregate for coverage that mandatory aggregation of HCE's does not apply? Unfortunately, I am also having a hard time understanding what it truely means to disaggregate for coverage purposes 2. Assuming that mandatory agg. is applicable, then when combining deferrals to come up with def% in each plan is compensation combined as well? 3. Is this only compensation from which the employee was eligible? ------------------------------------------------------------ The second discussion involves permissively aggregating the three plans together in order to satisfy NOND testing. Assume that the plans are all designed the same with matching benefits, rights, and features... Three members of a control group Plans A,B,C. I assume that mandatory aggregation is applicable here for the HCE's and NHCE's combining eligibility and all the rest, which could increase the count for NHCE's. I don't understand how the HCE's would look on paper. Meaning, assume an employee is considered an HCE based upon 5% owner. This person has comp of: Plan A $40,000 defers - $2,000.00 Plan B $100,000 defers - $5,000.00 Plan C $20,000 defers - $1,000.00 When looking at this person under permissively aggregation scenario would the following be true? The person would be an HCE and counted one time on the aggregated test. The comp would be totaled and the deferrals as well? 160,000 and 8,000 giving 5% deferral%? How would this look if mandatory aggregation was applied to these plans being tested separately? Thanks for any help!!!!!!!!!!! Matt