jaemmons

If there are two Puerto Rico employees who are eligible to defer in a US -based 401(k) plan, when testing the Puerto Rico part of the plan, do you have 0 or 1 HCE (1/3 of 2 is .6667)? I thought that you rounded to the nearest integer, so if there are at least 2 Puerto Rico employees, you will always have at least 1 HCE. ???

Thanks Bob!

Plan uses 3% non elective to satisfy safe harbor adp test requirements. No matching contributions are made, but there are employee after-tax contribs. I looked through the final 401k regulations and did not see anything which superceded Notice 98-52. in that the employee contributions must be tested using the current year testing methodology. Does anyone agree/disagree with this conclusion? Thanks

If an employer is paying compensation in lieu of the notice requirements (payments stop the earlier of 60 days after notice should have been provided or the employee find another job), are these payments to be treated as severance payments for retirement plan purposes? I feel that they are, but if someone could clarify or refute my logic, please do so. Thanks

As long as they met the eligibility requirements under IRC 408(k).

No. See IRS 414© © Employees of partnerships, proprietorships, etc., which are under common control For purposes of sections 401, 408 (k), 408 (p), 410, 411, 415, and 416, under regulations prescribed by the Secretary, all employees of trades or businesses (whether or not incorporated) which are under common control shall be treated as employed by a single employer. The regulations prescribed under this subsection shall be based on principles similar to the principles which apply in the case of subsection (b).

From the information provided, it appears that this is a controlled group. As such, any employee of the other company who meets the eligibility requirements under IRC 408(k)(2) must be eligible for SEP contributions by application of IRC 414(b). IRC 414(b) Employees of controlled group of corporations For purposes of sections 401, 408 (k), 408 (p), 410, 411, 415, and 416, all employees of all corporations which are members of a controlled group of corporations (within the meaning of section 1563 (a), determined without regard to section 1563 (a)(4) and (e)(3)©) shall be treated as employed by a single employer. With respect to a plan adopted by more than one such corporation, the applicable limitations provided by section 404 (a) shall be determined as if all such employers were a single employer, and allocated to each employer in accordance with regulations prescribed by the Secretary.

Or this http://www.irs.gov/retirement/article/0,,id=120298,00.html

Is this a DB or DC plan?

Also, if the collective-bargaining agreement states that retirement benefits must be provided in this plan, the employer might not be able to "eliminate" them from actively participating in the current plan. In addition, I don't think that moving to an ineligible class would meet the distribution requirements of the plan, especially if the plan contains a CODA, unless the participate leaves the employ of the employer.

Leonard Witman gave an extremely informative presentation at the MABC in Philadelphia on 5/24 concerning Circular 230. The one item that I thought would immediately impact the benefit profession is the admission of email correspondence in possible litigation suits. Electronic communications were included in the definition of a "covered opinion" in the Circular.

I don't believe that you can use a "pyramiding" approach in determining excise taxes for minimum funding deficiencies. I thought that this approach was for reporting prohibited transactions. In general, if a past funding deficiency is not corrected timely (see instructions to Form 5330), an additional 100% excise tax is assessed. If I read the instructions correctly, you would need to file a Form 5330 for every tax year that the funding deficiency was not satisfied. Of course late filing penalties may be applied due to the fact that they may have not ever been filed. 2000 tax year filing - Line 7a - $30k *10% = $3k for 2001 2001 - Line 7a - $9k * 10% = $900 plus Line 7b -$30k * 100% = $30k Total exise taxes for 2002 filing = $30,900 2002 - Line 7b only - $39k * 100% = $39k for 2003 2003 - same as 2002 2004 - same as 2003 Total exises taxes (not including late filing penalties which may be assessed)= $150,900

Based on what you have given, that sounds like the right approach.

If each division is a separate employer (based upon your reply), an employee who moves from one location to the next would now be employed by a new employer. Unless, there is some other information you can provide, Dan, that would possibly link the divisions together as related employers, comp for the new employer ("small division") for the entire plan year (assuming they are immediately eligible)would be used for top heavy alloction purposes.

Depending on the usage of the real estate, you might have UBTI. However, since we are talking about a home, most likely any income would arise from rent or sale of the property, which should be exempt from UBTI.

Is each division part of the same employer (i.e. - controlled group or affiliated service group)? Also, does at least 1 key employee participate in each division's plan?

Assuming a contribution is discretionary(as this is a PSP), a resolution is usually pointed to for clarification of allocation amounts. Many prototype and volume submitter documents I have seen actually contain language to this affect. IMHO I don't think you have a problem.

stevena, The only piece of advice I can offer, as I was in a similar position 10 years ago, is that if you just take an offer to "cover your bets", you will be looking for another position within a few months. IMHO, it is best to be patient and take the risk that they are going to come through with something, since it sounds like you feel more of a "comfort level" with this firm. If they don't, then you at least know where you stood, instead of asking the "what if?" question. Good luck!

It appears from Belgareth's postings, that the individual was an employee during the disability period, so the compensation should have been eligible plan compensation. Curmudgeon, Please clarify why you feel he is was not an employee, while he was receiving disability compensation payments?

Belgarath, Sounds like they were an employee, and since you previously stated that the plan does not exclude disability payments, the individual should have been able to receive benefits on these payments (e.g. - deferrals, match, profit sharing etc.) based on the plan's definiton of compensation (W-2).

Was the individual terminated from employment when they were receiving disability payments (leaves of absence is not a termination of employment). If not, the disability payments should be eligible for all plan purposes, unless you can find a specific provision which would exclude these payments.

rcline, Thank you for the suggestion. The plan does not have a 414(s) comp definition, but states that adr's are computed using the plan's definition of compensation (which is a non-safe harbor 414(s) definition). Midas, Thank you for your comments. I have always used the "rule of thumb" that you could use a safe harbor defintion of 414(s) comp (e.g. - 415©(3)) comp for all discrim testing (regardless of the plan's definition of compensation) but to use an alternative defintion would require the plan document to allow for the non-safe harbor exclusions.

Plan document refers to the definition of compensation for plan purposes as that which is used for adp/acp testing. This definition is a non-safe harbor 414(s) definition. Absent specific plan language, could the plan administrator use 415©(3) compensation instead of the non-safe harbor 414(s) comp for adp/acp testing purposes or would the plan document need to be amended? FYI - plan uses current methodology & passes 414(s) comp testing. Adp/Acp Fail with non-safe harbor definition but passes with 415©(3).

The deduction limit for DC/DB arrangements is the greater of 25% of eligible compensation (between both plans) or whatever is necessary to fund the DB plan (IRC 412 minimum funding requirement). Restructuring the plans would not impact the 25% part of this limit.

Has anyone seen any updated guidance surrounding the application of the automatic rollover requirements for employer-sponsored plans that cover Puerto Rico residents? In the Federal Register issued on September 28, 2004, there were comments that the IRS and Treasury would be issuing prospective guidance on this issue prior to the effective date (March 28, 2005)