Medusa

I read it the same as RCK.

The plan should specify whether any predecessor service is granted. If it isn't specifically granted, the employees will need to satisfy eligiblity from the date of the acquisition. It is relatively unusual (but legal) for this approach to be taken.

Lori, As long as a bonafide distributable event has occurred, there is nothing to prohibit payouts, absent a company policy to the contrary. Right now we continue to encourage our clients to apply for a DL, because with all the changes in the law, document status is dicey. We are updating for GUST with a snap-on type amendment in these situations, and there is certainly no guarantee that it is adequate. In general we have been disappointed that the DL does not help us much in the event of an audit, but I suppose there could be situations where there are document issues for which protection would be afforded with the letter. And hey, it's all we've got.

There is certainly no requirement to "black out" distributions. Some sponsors elect to do so, so that if the IRS requires changes in connection with getting a DL, there are funds with which to make those changes. As a practical matter, I have never had that happen, and even if it did, it is very unlikely that the IRS would allow any changes other than deposit of additional funds. However, some still prefer the conservative approach.

I'm not sure what the penalties are (although the instructions say there are some), but you should check carefully to make sure that one wasn't filed under a different number. The fact that your client hasn't been plagued with volumes of IRS correspondence indicates that IRS does not reflect a deposit without a matching 945. If you file a 945, they are likely to reflect a 945 without a matching deposit. If you can determine for sure what tax ID number was used on the remittance to the IRS, you will be better prepared to deal with the demanding correspondence you will undoubtedly receive. Last year, I ended up going to Taxpayer Advocate over a situation, and it turned out that the client (a takeover) had filed using their 941 instead of the 945.

Well, at least I apparently did read the question the way it was intended! In any event, I still maintain that there is a vast difference between the ministerial act of completing an enrollment form, and the affirmative act of deferring.

It sounds like forfeitures are occurring before expressly permitted by the plan document, which bothers me a little. Even though for liability purposes you may be holding out only the vested portion, it seems questionable to do so for top heavy determination purposes. The rationale you suggest is a good one if the decision has already been made and now justification is being sought.

Sounds like MWeddell and I are on the same page. The 401(m) regulations (specifically 1.401(m)-1(f)(4)) make a distinction between a "ministerial or mechanical act" and the imposition of a waiting period. You would have to convince me that the distinction is different under 401(a)(4). So far, that hasn't happened.

rcline46: I think the confusion is because while age/service requirements are disregarded in determining optional forms of benefits, the right to a specific rate of match is not an optional form of benefit, but is a right or feature. Rights and features are not able to disregard age or service requirements. See 1.401(a)(4)-4(e)(3)(iii)(G).

I don't think having the match depend on a period of deferral vs. a period of service is significant. I don't agree about the testing groups. The way I look at it, your formula is equivalent to saying that everyone gets the 50% rate, and the people who have the required deferral-service get a supplemental match. How could it possibly make sense that the 50% group could be a discriminatory group. The Service would have no problem with the 50% group in this scenario consisting primarily of HCE's.

This topic has been discussed in other threads, you might want to do a search. You will have to test for nondiscriminatory availability of each rate of matching contributions. In your situation, everyone is eligible for the 50% rate, so that rate is not a problem. The 100% rate has to be tested. You will need perform a ratio % test taking the people who are eligible for the 100% rate over the group as a whole. The result will need to be greater than the safe harbor percentage under 1.410(B)-4.

Right or wrong, it just doesn't seem right to tax the beneficiary, who never saw the funds. I have always reported the loan as taxable to the estate or to the participant's SSN.

Like everything else, it depends on the nature of the contract between the sponsor and the TPA. Many TPA's advise their clients of amendment requirements, but some do so as a contractual obligations whereas others do so as a courtesy. For example, I worked at a TPA where either we were responsible for their documents via our volume submitter plan, or we weren't. And if we weren't, our contract clearly stated that all document compliance issues were the sole responsibility of the client. We were given legal advice that for clients in this category, we were better off giving no advice than establishing a pattern of giving advice and then not following through completely. Don't know if this helps, but that was my real world.

Wessex, did the "major provider" ever get approval on that language? One of our individually designed plans wants to include language like that, and I am curious as to its likelihood of flying.

I don't know if there's a limit on the number of overtime hours or days per week you can be asked to work. I believe this would be more a matter of state law than federal law. However, you should be asking whether you are properly classified as exempt. The DOL has very strict guidelines about what kind of employees may be considered exempt, e.g. professional designation, supervisory responsibilities, etc. At a place where I used to work, a disgruntled former employee made a complaint to the DOL. They audited and found that almost 90% of the people we'd classified as exempt could not be! They then went back and calculated three years worth of overtime pay for each employee based upon the employee's own representation of their work hours, whether or not track had been kept. Unfortunately, I was one of the ones that they decided was correctly classified as exempt, so no big check for yours truly. In any event, it may be worth a phone call to the DOL to get some information.

Thank you, Tom. I was kind of headed there myself and had recommended that to the broker/TPA. The two components ARE actually combined in one plan document. The attorney-author's volume submitter plan is structured that way (not my favorite, but what can you do). However, the intention all along was that they share a trust. The broker is beating up the insurance company telling them that they are failing to comply with ERISA - but I don't think they really are.

I have a client with a plan that has a 401(k) profit sharing component and a money purchase component. Although the two components share a plan document, they got separate determination letters and the intent was to file separate 5500's. The money purchase component was just added in 2000. The document provides for only a single (combined) trust. The trust assets are invested in a single group annuity contract (bundled product with separate subaccounts for each money type). Is the insurance company obligated to provide separate Schedule A's and financial schedules for each plan, or since there is only one group annuity contract, are they required to prepare only a single Schedule A and set of financial schedules? The insurance company feels that their obligation goes to the contract level, whereas the sponsor and recordkeeper do not want to have to split the information out themselves. This can be nasty, as in the case of reportable transactions. A cite would help. I am attempting to head off a "developing situation". As a last resort, we will try to do something with reporting as a MTIA, but the sponsor really does not want to have to be responsible for 3 5500's.

Sorry, I misread the question originally. I agree with MWeddell.

I do not think you need to be that specific. Our volume submitter plan, for example, says: Employer Matching Contributions may be made in an amount up to 100% of a Participant's Elective Deferral (or such larger amount as the Employer may determine) made during the period for which the Matching Contribution is made. The Employer may limit the amount contributed to a specified percentage of Compensation deferred.

I am looking at a nonstandardized Fidelity prototype right now that has this option to be checked off on the Adoption Agreement: Discretionary Matching Employer Contribution - The Employer may make a basic Matching Employer Contribution on behalf of each Participant in an amount equal to the percentage declared for the year, if any, by a Board of Directors' Resolution. The Board of Directors' Resolution may limit the Deferral Contributions matched to a specified dollar amount or percentage of Compensation.

The fidelity/ERISA/surety/fiduciary bond is required when the plan has assets and at least one non-owner is a participant. What may confuse the issue is the availability of fiduciary liability insurance, which is not required, but which some plans or fiduciaries have taken. The difference is that while the ERISA bond protects in the event of fraud or dishonesty, there are other types of fiduciary breaches as well for which protection might also be sought. Click here for a link to a Benefitslink Q & A column question on the same issue.

I disagree with Howard Heller's post. The regulations under Section 401(a)(17) regs require that "a plan may not base allocations, in the case of a defined contribution plan...on compensation in excess of the annual compensation limit." While I normally prefer to stop at the primary reference source, I did check the ERISA Outline book which clearly states that the match must be limited to $3,400 in this case.

I do not see the change as a problem. I do see retroactive entry dates as a problem in a 401(k) plan, but no doubt you have found some way to deal with that?

The short answer, without knowing more about the situation, is yes. Matching contributions can be applied toward the top heavy minimum only to the extent they are not needed for ACP testing. This is likely to be mimimal or nonexistent if you have HCEs in the plan.

If the design involves HCEs, I would be wary of BRF issues. In particular, effective availability (rather than current availability) would be a concern, especially since each employee might be subject to individual performance criteria for this purpose, based on experience, breadth of responsibility, compensation level, etc. If the end result of the design is that HCEs are benefiting and NHCEs are not - well, I would not sleep well. I am thinking more about the article I mentioned in my previous post. After racking my brain, many of whose cells have died since I read the article, I seem to recall that the structure proposed by the article involved only profit sharing, and not 401(k) at all. The concept was similar though - the allocation was based only on bonus compensation. Again, it only worked because no HCE's were part of the program. If HCE's were involved, I think you would have to general-test or prove that your compensation definition was nondiscriminatory.