jaemmons

Yes, as long as you satisfy the "de minimus" test under IRC 414(s)(3). See IRS Notice 98-52

No, both plans do not have to be safeharbored. The business being acquired does not need to maintain a plan prior to the merger, in order to apply the aforementioned coverage rules for retirement benefits. However, you can test for coverage to see that at least 70% of your NHCE work force is receiving comparable benefits between both plans OR you can just setup the new plan to be a safe harbor 401k. The latter of the two may be easier, but I just wanted to give you another alternative.

No it wouldn't. Keep in mind that although they are considered "one" employer under IRC 414(B), they can be disaggregated during the transition period, as defined in IRC 410(B)(6)©(ii) and tested as individual plans covering only their respective employees. By disaggregating the two companies and setting up two plans, each covering their respective ee's, you will not violate coverage for any BRorF, as long as each plan satisfies coverage on its own. Therefore, one plan can be safeharbored while the other is not. However, as I previously stated, you will need to make a decision with your client after the transition period as to whether or not the plans can stand on their own, based upon coverage issues. Another question...Are both companies in the same industry? If not, you may want to look at testing for a QSLOB under IRC 414®. If they can qualify as separate lines of businesses, they generally don't have to be considered one employer for coverage and nondiscrim testing purposes and you can keep one safe harbor plan and one "regular" 401k. Just something else to think about...

As long as each company satisfies coverage on its own before the merger, I would use the transition rule under IRC 410(B)(6), which would allow you to disaggregate the two companies for most plan purposes until "the last day of the 1st plan year following" the date the merger took place. This would allow you to keep the safe harbor plan only for the one company and test for ADP compliance in the other company during the "transitional" period. However, after the period has expired, you must then test to see if you can keep two plans (i.e.-coverage requirements for benefits, rights, and features). If you satisfy this test, you can still keep separate plans, but if not, you will need to merge them together. However, regardless of whether you keep two plans or one, for top heavy purposes, unless both plans are safe harbored and have no other ER $'s going in, you will need to mandatorily aggregate them for TH determination purposes. I am glossing over what I believe to be the important issues but if you want more detail let me know.

I don't know of a specific cite in the Regs or Code, but every participant in a top heavy DC plan must receive the TH min if they are still employed at the end of the plan year. The definition of "participant" is any employee who benefits under the plan. Since elective deferrals are considered in determining what the TH min is for the current plan year (Regs 1.416-1 Q&A 20), if an employee is eligible to defer and is still employed at the end of the year, they would receive the TH min for the plan year. They do not have to be eligible for PS or match in order to receive TH mins, because TH min are required contributions and in DC plans are allocated to those participants I indicated above.

I agree with Stephen. You need to look at the document as to whether or not refunds correct 415 violations. The only amounts you can refund, if the document allows for it, are employee deferrals. Any employer monies that cause the participant to exceed the 415 limit are forfeited and held in suspense for future usage. These monies are benefits that the participant is NOT entitled to receive and refunding these monies back to them will cause the plan to violate IRC 401(a)(16) which is a qualification issue.

No. I answered the ESOP and Life Insurance questions. I read the 403b ?'s but did not feel comfortable enough to answer them. How about the plan design ?'s?? I thought every one of them could have been a Profit Sharing 401k.

Under Reg 1.401(k)-1(d)(3) a successor plan is any DC Plan, other than an ESOP or SEP, that the same employer maintains during the determination period beginning on the date the 401(k) Plan terminates and ending 12 months after final distribution is paid. Since a SIMPLE 401(k) is considered a DC Plan, if it is established according to your message, I would say you have a successor plan in place and old monies cannot be disbursed until another distribution event occurs (i.e-termination of employment, death, etc.) However, there is a "2%" exception to this rule, but you would need to determine if it applies.

I did. I thought that the questions were challenging. Hopefully, I answered enough correctly to pass, but as you know we'll find out in about 8weeks. My only concern was that I felt there wasn't enough time to go back and check calcs. I thought there may have been too many questions.

I believe that administrative expenses (i.e.-payments to a TPA for compliance, document, or reporting work) are not considered to be a settlor expense. Since paying for a TPA to monitor and help the plan maintain its tax qualified status is necessary for the ongoing operation of the plan, as long as the expenses are not unreasonable, I don't see where you would have a problem offsetting with forfeitures.

I have seen plans charge these type of accounts the same fee that the average IRA custodian would charge in their demographic region, as long as the monies are rollover eligible. However, you must be sure that these type of fees are allowed to be charged to plan participants (language in the document), the amounts are considered reasonable and not excessive, and are charged in a uniform fashion to all employees who decide to leave their accounts in the plan.

You may want to speak with someone at McKay Hochman (tele # 732-492-1880. You may have to pay a small fee, but they should be able to assist you with writing an accurate brochure. They are a subsidiary of Newkirk Products who is the industry leader when it comes to providing communication materials to plan sponsors and employees.

Keeping it simple, I would say that since he had already accrued a portion of the year-end match for the plan year, regardless of whether or not he had taken a payout, it vests at 25%. The "balance to the credit" of the terminated participant, includes vested accrued employer contribution allocations, which may be paid to his/her account at a later date. If you didn't allocate it back to him at the 25%, you may be violating the anti-cutback rules.

Yes. Top heavy minimums need to be addressed separately. Although you can offset t/h mins by amounts contributed as part of a PS allocation, you must still make sure and provide t/h mins to all non-key ee's who are eligible to participate and who are still employed at the end of the year. Even if the employer did not contribute a PS for the year, the plan is top heavy, and a key ee defers to the plan, they would still be required to deposit the t/h min contribution, in order to satisfy IRC 416 allocation requirements.

It depends upon when the securities are being sold, what sources were used to purchase the securities (were after-tax ee $'s used), whether the distribution is a lump-sum as outlined in IRC 402(e)(4)(B). If the er securities are sold at or before the participant takes the distribution, then I would say yes, unless another exception under IRC 72(t) applies. If the securities are sold, after the participant takes their distribution (they received the er stock as part of their initial payout), I would say no, because at this point, the er stock has become part of personal assets and not part of a qualified retirement plan, assuming the stock wasn't transferred to an IRA account. It's at this point that long/short term capital gain rules apply and the excise taxes don't.

Since you more than likely use the ABT for the general test, you must use the annual testing option, as prescribed under Reg 1.410(B)-8(a). Also, you must use the same testing option for 401(a)(4) testing, and since the ABT must use an annual method, I have always interpreted that end of the year data satisfies this requirement. If your plan year changes and causes a "short plan" year to occur of less than 12 months, I don't see why you wouldn't be able to cross-test a new comp allocation. The only issue I see is making sure that, if necessary, you are limiting and prorating any and all 415, 401(a)(17) and 401(l) limit(assuming you may use imputed disparity).

I agree with MWeddell. The allocation formula meets the safe-harbor requirements of Reg 1.401(a)(4)-2(B)(2) as long as every eligible participant receives an allocation based upon IRC 415©(3) compensation. Once you start disregarding certain amounts of compensation (i.e.-overtime, fringe benefits, bonuses, commissions) you must prove that the exclusion satisfies 401(a)(4) and your plan loses its "safe harbor" status under the previously mentioned Treas.Reg. This is important to analyze this because for an employer who wishes to have their document submitted for GUST, you may need to submit a Schedule Q since you probably won't receive automatic reliance on the definition of comp.

Generally speaking, it depends on whether or not your master plan document "imputes" service and/or compensation between participating employers. Under Treas Reg 1.410(B)-7©(4)(ii)©, there is a discussion of how plans are treated for coverage when a plan is maintained by more than one unrelated employer (Multiple employer plan). If the document states that service and/or comp is aggregated (imputed) amongst partic.employers, you would count comp together in determining HCE status. If compensation is imputed, you would use it in determining HCE employee status and performance of all nondiscrimination testing for the year. If service is also imputed, you would use this in determining eligibility for coverage purposes. Please keep in mind though, that ownership is not to be imputed, unless by reason of stock attribution under IRC 318 or 1563. Therefore, if you have someone who was a 5% owner but made less than $85,000 in 2000, they would not be an HCE for 2001, even though you are imputing compensation amongst participating employers.

Generally, in order to take a tax deduction for the elective deferral, the deferral and any other contribution made to the plan on their behalf, must be deposited by the due date for filing their individual federal tax return, including extensions. Each self-employed individual takes a personal deduction on their respective IRS Form 1040, from the K-1 to Form 1065, in the amount of ALL contributions made to a qualified retirement plan on their behalf, including deferrals. Because of this, the timing of when these contributions must be deposited, is on an individual self-employed person basis. The deferral deposits for the common-law employees is based must follow suit with the prescribed DOL "15-day funding rule". Someone can correct me if I am wrong, but the "15-day funding rule" does not apply in the case of any self-employed individual, but only to common-law employees, since contributions to the self employed persons are individually deductible.

Tom, To what Reg section are you referring?? What do you mean by a "plan's whose contributions consist SOLELY of safe harbor contributions is not deemed top heavy."??

For all plan years beginning after 12/31/01, matching contributions MAY be used to satisfy top heavy minimums, as outlined in Sec. 613 of EGTRRA. However, these contributions do not apply towards the gateway requirements, since they are not used in determining the EBAR's for the eligible participants.

The answer at the ASPA conference was a little "wishy washy" since there seemed to be a difference of opinion with respect to whether the funding of the MP after the assets were merged, constituted a funding deficiency to the MP for the last plan year. Normally, I would freeze benefits prospectively so there wouldn't be any more problems with minimum funding amounts and merge the assets once the final funding amount has been made.

You may not have a problem here, but it depends on what the document stipulates as to who the employer is. If the employer is the control group but each member sponsors its own plan, as long as you are passing coverage and are able to demonstrate that there is no discrimination under 401(a)(4) for any benefit right or feature (no BRor F is more favorable in ANY plan to the HCE group on average) each plan can stand on its own. Also, if each plan passes coverage, the ADP/ACP testing is also performed with respect to each plan individually. However, if an employee leaves one member to go to work for the other, I agree with "earthy" that you do not have a separation from service and the in-service rules for 401k deferrals would apply. The loans I don't have a problem with, since all "like" plans of the employer are aggregated for ALL limit purposes, including IRC 72(p). Since they are all 401k plans, the aggregation applies. I would just make sure that the loan policy and trust agreement (you may want to set up a master trust for the plan but track each plan's benefits separately) to each document is the same with reference to recognition of all benefits of the employer. Although I do not agree with this plan design, it may be doable, but a lot of testing needs to be performed, along with some special language to the plans' documents.

Tom, I've only come across this in a MPPP twice and each time they were turned down. Simply put, unless the employer is submitting an application to the Secretary of the Treasury within 2 1/2 months following the end of the plan year AND meets the definition of a "business hardship" under IRC 412(d)(2), they are probably not going to be granted a waiver for the plan year. Also, I am not exactly sure, but I believe that DC plans must also amortize the waived funding deficiency over 5 years??? but I am NOT exactly sure that is accurate. Does the plan have a last day requirement? If so, they have not yet accrued their benefit for the plan year until the last day of it, so you may be able to amend the formula to "0". However, doing so may be looked upon as a reduction or elimination of benefits and require full vesting.

I have two dentists who maintain sole-proprietorships within the same office and share the same office employees but split their costs (salaries and benefits) amongst them equally, as if they were "partners." I would like to say that they are affiliated with each other, seeing that they split all office expenses, rent, employees, etc. but because they are taxed as soleprops, is there anything that I am missing that would join these two practices together? In my gut I feel that they both provide services with one another and are acting as a partnership but I would like to have something to go by before I speak to them about it. Also, they have three NHCE's who "split time" for each DMD. In the aggregate they have over 1000 hrs but individually they have a little over 700. This is where I am coming up with the problem, because it sounds a lot like a law practice where each lawyer establishes its own soleprop and "share" the services of one admin asst who works less than 1000 between them. Any insight would be very much appreciated or just point in the right direction for an answer. thanks