jaemmons

Regulation 1.410(b)-5(e)(1) "...For this purpose, the plans in the testing group are the plan being tested and all other plans of the employer that could be permissively aggregated with that plan under paragraph (d) of this section..." The permissive aggregation (paragraph (d)) describes situations when employers sponsor more than one plan. Since this is one plan, just with a short plan year, unless it is a DB using the 3 year averaging rules, wouldn't the ABT's be determined for the 7/1 thru 12/31 testing period only??

Thanks Blinky, but I mentioned the 5 year lookback for in-service distributions previously in this thread. I was only clarifying that identification of key employees does not take into account the 4 preceding plan years (i.e. - no lookback period)

Post 2001 plan years, all key employees and former key employees are determined using current plan year ownership, officer status & compensation information (this is your determination year). There is no 1 year lookback for identifying current key employees. The lookback periods come into play when determining any in-service distributions which need to be added back for any employees who had 1 hour of service in the determination year.

What does your document say regarding multiple plans and which would satisfy top heavy minimums?

As long as the "Client" formally adopts their plan, as a participating employer, they can participate. This is of course, assuming that they are employees of the "Client" and not of the Leasing org. However, this would require mandatory aggregation for top heavy and other certain IRC limit testing, as eluded to in former posts to this thread.

Only if he/she was a 5% or 1% owner(and had gross earnings of >$150,000). Key employee determination for post 2001 plan years is made based on current year information. EGTRRA '01 eliminated the 5 year look back rules (except for in-service distributions). However, if this individual is not considered a key employee for 2004, he/she is a "former" key employee for 2004 and their account balance, plus applicable distribution history, is disregarded when determining top heavy status for the 2005 plan year.

http://www.irs.gov/instructions/i1065sk1/ch02.html#d0e1064

Whose the common law employer of the employees in question? From your post, it seems as if the "CO" is, which would preclude them from being able to participate in any plan sponsored by the PEO, unless the CO was a participating employer, as they are not employees of the PEO.

The current impact of the election would necessitate the 401(a)(4) testing to demonstrate that the allocation of employer contributions (non-401(k)/(m) contributions) does not discriminate in favor of the hce's. I believe that this would take care of any nondiscrimination testing associated with the availability of the irrevocable elections. Just because it is only made available to limited classes of employees does not need to be tested separately.

Fred, I believe since you have different age/service requirements for the 401k and PS portions of the plan, RELIUS is using the lowest age/service conditions to determine your population group. As such, their IRC 414(s) compensation is based on these age and service requirements (i.e.- compensation from date of entry) which is why it is including full year compensation for average benefit percentage determination. Regulation 1.410(b)-6(3)(ii)

I believe the DOL's view is that in order for the fiduciary to avoid the sanctions which may be levied under IRC 4975 (as late 401k deposits are a prohibited transaction), they should utilize the VFC program. Unfortunately a full correction would include earnings from the date the deposit should have been made up through the corrective deposit date. Also, PTE 2002-51 was effective April 29, 2002 and there actually was an "interim" VFC program in effect on March 15, 2000.

Tom, I also came to the gap earning calc of $276.36?? I believe the answer to your question on the safe harbor match may be contained within 1.401(m)-3(d)(4).(Limitation on rate of match)

Because the deductibility of pass through dividends depends on the employer to sponsor a "statutory" ESOP (one primarily invested in employer securities, etc.), does this preclude them from aggregating for adp/acp tesing purposes as allowed under the final 401k/m regulations? In other words, if the ESOP contains a 401(k)/(m) component, can the ESOP and non-ESOP parts be aggregated for adp/acp testing, without affecting the tax deductibility of the pass through dividends?

In the definitions sections to both the 401(k) and 401(m) final regulations, they state that QNEC's and QMAC's are subject to the nonforfeitability and withdrawal restriction requirements under 1.401(k)-1© & (d). QNEC's and QMAC's cannot be withdrawn for hardship purposes, unless they were "grandfathered" prior to July 1, 1989. Safe harbor non-elective contributions are defined as QNEC's in 1.401(k)-3(b) and safe harbor matching contributions are defined as QMAC's in 1.401(k)-3©. Therefore, since the safe harbor requirements went into effect after 1989, they are not "grandfathered" and cannot be withdrawn from the plan for hardship purposes pursuant to 1.401(k)-1(d)(3)(ii).

Sorry Andy. I was referring to the three year cycle of reliance and its application with respect to cross testing under 1.401(a)(4)-8. Can employers rely on the three year cycle outlined in Rev Proc 93-42 if they have not had any significant plan changes, for cross-testing purposes?

Has anyone applied the substantiation guidelines to a cross-tested plan for 401(a)(4) and 410(b) purposes? I reviewed Rev Proc 93-42 but found no examples of how the substantiation guidelines would apply to rate group testing. Thanks

Nevermind Tom, I figure out why.

Tom, For 401(a)(4) purposes, if an employee has not met the 2 year requirement for profit sharing purposes, why are you counting them in the rate group testing?

There are some who would argue that if the participant satisfied the allocation conditions under the pre-amendment allocation formula, they would have a protected benefit. Does the plan require a last day and/or 1,000 hour requirement?

Is the MP a "Pre-ERISA" MP? The final 401(k) Regulations contain the following language to newly established safe harbor 401(k) plans 1.401(k)-3(e)(2) "...Similarly, a cash or deferred arrangement will not fail to satisfy the requirement of this paragraph (e) if it is added to an existing profit sharing, stock bonus, or pre-ERISA money purchase pension plan for the first time during that year provided that.." IMHO, I don't think you can amend and restate and existing MP plan (unless it was created before 1974) to be a safe harbor plan during the current plan year.

Under Regulation 1.415-2(d)(2)(i), compensation is technically that which is received for "personal services actually rendered in the course of employment with the employer maintaining the plan to the extent includible in gross income..." If severance is paid in a separate check, either all at once or spread out, how would it be included for plan allocation/testing purposes? IMHO, technically these payments are not for services rendered during employment, and are not part of a disability or health related compensation program. Comments?

Was this a stock or asset sale? Although a stock sale would require a mandatory crediting of past service, since there is a continuation of the acquired employer, the same may not be required in an asset sale. From my understanding, unless the plan document specifically states that predecessor service is recognized, the employees of the aquired company do not need to have past service recognized under the acquiring company's plan, unless the acquiring company is maintaining sponsorship or merging the plans together. The assumed sponsorship or merger of plan assets is viewed as a continuation of the prior employer, whereby they are not deemed to have a severance of employment.

Regulation 1.401(a)(4)-1©(4) "...Consistent with this requirement, the definition of plan subject to testing under section 401(a)(4) is the same as the definition of a plan subject to testing under section 410(b), i.e., the plan determined after applying the mandatory disaggregation rules of 1.410(b)-7(d)..." This is the only place I've seen which "plainly" states the application of the mandatory disaggregation to 401(a)(4) testing.

Also, keep in mind that you may have to "bump up" (so long as your plan document contains language to do so) those who only receive the 3% NE safe harbor but are not eligible for the profit sharing plan, in order to meet the gateway requirement of 5%.

Assuming your 10/31/2004 plan year is a full 12 month year ( and your limitation year is equal to your plan year), your limitations are those that are in effect at the beginning of the plan. Since your plan year ends before 12/31/2004, the 2003 limitations would be used. I agree with the compensation and TWB limits in the prior post, but the 415 $ limit would be $40,000, since this is the 2003 $ limit for 415 purposes.