jaemmons

If a client amends their plan to remove the safe-harbor language for a prospective plan year, when can they switch to "prior" year testing? Since the plan must default to current year testing while a safe harbor 401(k), does this automatically "lock" them in for the five-year period, whereby they would need to submit for an approval letter to utilize prior year testing? Any thoughts????

I forgot where I read that in order to satisfy the safe harbor allocation under the permitted disparity regulations, that the plan must use full plan year compensation and cannot limit comp paid while a participant.?. Does anyone recall where this is clarified? Thanks Never mind. Regulation 1.401(l)-1©(28) makes reference to compensation defined in Regulation 1.401(a)(4)-12 which does allow for inclusion of only comp paid while a participant.

Plan was effective in 2003 (effective date of deferrals was also in 2003). However, no deferrals or matching contribs were made, nor were any other benefits accrued in the 2003 plan year. Can the employer use the deemed 3% for both adp/acp testing in 2004, as there weren't any contributions made in 2003 or do they have to amend the plan to use current testing?

From my understanding, the employee or appropriate officer of the branch of military they are to serve should have provided advanced notice, either written or oral, to their employer, in order to be afforded the reemployment rights under USERRA. If they had, upon return from military leave which has lasted more than 30 but less than 180 days, the employee must reapply (how they do this I am not exactly certain) for the position within 14 days after completion of their military service. When they make this formal application, I would think that they should submit discharge paperwork which would support compliance with the 14 day deadline.

That's assuming the deceased spouse was over age 70 1/2 at the time of death. If the spouse was not age 70.5 or older, the surviving spouse would take the spousal rollover into account for determining the RMD which needs to be taken by the end of 12/31/2004. The deceased spouse's rollover is not taken into account for the RMD which needs to be taken by 12/31/2003, as the balance used to determine the surviving spouse's RMD is based on the value in the surviving spouse's IRA account on 12/31/2002. Confusing huh?

If you want to use a good online service for proposals, I would recommend using PensionOnline. They are at www.pensiononline.com

The regulations are pretty clear as to what contributions are required Unless the plan is not in the first plan year or subject to minimum funding requirements, receivables are not included on the determination date. 1.416-1 Q&A T-24 Q. How is the present value of an accrued benefit determined in a defined contribution plan? A. The present value of accrued benefits as of the determination date for any individual is the sum of (a) the account balance as of the most recent valuation date occurring within a 12-month period ending on the determination date, and (b) an adjustment for contributions due as of the determination date. In the case of a plan not subject to the minimum funding requirements of section 412, the adjustment in (b) is generally the amount of any contributions actually made after the valuation date but on or before the determination date. However, in the first plan year of the plan, the adjustment in (b) should also reflect the amount of any contributions made after the determination date that are allocated as of a date in that first plan year. In the case of a plan that is subject to the minimum funding requirements, the account balance in (a) should include contributions that would be allocated as of a date not later than the determination date, even though those amounts are not yet required to be contributed. Thus, the account balance will include contributions waived in prior years as reflected in the adjusted account balance and contributions not paid that resulted in a funding deficiency. The adjusted account balance is described in Rev. Rul. 78-223, 1978-1 C.B. 125. Also, the adjustment in (b) should reflect the amount of any contribution actually made (or due to be made) after the valuation date but before the expiration of the extended payment period in section 412©(10).

IMO, the plan administrator should preclude the employee from exercising the options during the suspension period, if the amount to be exercised is at least the amount of the hardship withdrawal. Because they are using the safe harbor hardship rules, it would be difficult to argue that they met the "immediate and heavy financial need" if they turn around within the suspension period and exercise their nonqualified options at an amount equal to or greater than the hardship withdrawal. I would look at the $'s involved and go from there.

What is the relationship of the partnership to Company A? You may need to see if there is an affiliated service group: The partnership the FSA, Company A the "A-org" and Company B as the "B-org" (since the wife of Dr.X is indirectly an owner and HCE of the FSA).

Sounds to me like an indirect CODA which would subject the contributions to ADP and 401(a)(30) limit testing. I had a similar issue with a medical group (why is it always the doctors who cause these problems? ) and set up the groups in a similar way. The only thing I did differently was make the elections irrevocable and had their corporate counsel incorporate the elected profit sharing contribution as part of their overall compensation package within their employment agreements. This way it would meet the exception as a CODA under Regulation 1.401(k)-3(v).

Good point Tom (about the inclusion amounts for adp testing)! The plan does allow for it, so I am okay there. Thanks for the reply!

Does anyone know of any restrictions (aside from the double counting ones) on shifting elective deferrals to satisfy ACP testing??? I am being told that in order to shift elective deferrals, the adp for the nhce's must be at least 2%. From my understanding, as long as the adp test passes before and after the paper shift, the plan can "shift" elective deferrals to satisfy acp testing. The only reasoning I could see for the 2% would be for the MUT which was eliminated by EGTRRA. Any comments would be appreciated.

From what you have given, I don't see a problem with what you are suggesting.

No. From my interpretation of the regulation, they can extend the loan term to the maximum period allowable (which depends on the type of loan it is), without having to include the loan as a distribution under 72(p), as long as the new installment payment isn't less than the original installment payment.

The only extension, that I am aware of, to the 12 months is for military leave under USERRA. After a leave of absence (non-military) a loan may be reamortized to the latest permissible time limit, which for non-residential loans, would be five years from the date the loan was taken. Even though the original loan was for three years, the loan can still be extended to five years following the leave of absence, without violating IRC 72(p). The ony catch is that the new loan repayment must be no less than the original loan repayment amount. See below. §1.72(p)-1 Loans treated as distributions. * * * * * A-9: (a) Leave of absence. The level amortization requirement of section 72(p)(2)© does not apply for a period, not longer than one year (or such longer period as may apply under section 414(u) and paragraph (b) of this Q&A-9), that a participant is on a bona fide leave of absence, either without pay from the employer or at a rate of pay (after applicable employment tax withholdings) that is less than the amount of the installment payments required under the terms of the loan. However, the loan (including interest that accrues during the leave of absence) must be repaid by the latest permissible term of the loan and the amount of the installments due after the leave ends must not be less than the amount required under the terms of the original loan.

Maybe.

Waiver of IRS related penalties for a late 5500 is not covered under the DFVC program. Only penalites imposed by ERISA (DOL penalties) are covered. The DOL agent was correct in their assessment, that in order for the plan administrator to get the IRS penalties waived, they need to draft a letter and attach it to the late 5500, which illustrates the "facts & circumstances" that attributed to the late filing. The IRS will review and make a decision as to whether or not the penalities will be enforced or waived. Good luck.

The option for allowing the participants to purchase the policies must be in the plan document. If it is not, then the plan administrator cannot provide the participants this option and can surrender the policies. : )

I don't know if I agree with the DOL agents explanation for his/her reasoning (discretionary profit sharing analysis), but I do feel the employer has an issue with the "late deposits". These are not discretionary er $'s and thus are given a higher standard for deposit timing, which carries a potential prohibited transaction similar to those for 401k deposits. The employer chose to meet the Davis-Bacon wage requirements by providing the employees with a qnec in the plan, instead of an increase in their paycheck. This is why these $'s and the potential prohibited use associated with not depositing these $'s by the prescribed time limits within the Act, are viewed and compared by the DOL to the deposit rules for ee contributions.

Whatever you call it, if it goes on the W-2 and the plan counts all w-2 wages then from an operational standpoint you would withhold the deferrals. However, the employee can instruct the employer not to before the check is cut.

All participants from each participating employer are added together to determine whether or not the participant count would subject the plan to an "ERISA" audit.

Just to add that late deposits of ee deferrals are considered a "nonexempt" transaction which should be reported on Schedule G to the Form 5500, as well as the Form 5330. Since the client is consistently late, I agree with the prior statement to "CYA"(Cover your assets ), from a TPA liability standpoint, by writing the client a letter to inform him of the fiduciary issue and suggested method for correction (VFCP). You may waant to let your client know that by going through the VFCP they would insulate themselves, as fiduciaries, from any DOL civil penalties or future DOL examination. I agree that ministerial TPA's need to just inform the client of the problem and may suggest a solution for correction, but it is ultimately up to the client to follow through with doing it.

The mrd amount for the year of death still uses the same life expectancies for the participant and the spouse. The deceased participant's life expectancy does not go to "0" until the year following the year of death, whereby mrd's are then based upon the life expectancy of the surviving spouse.

Plans which are safe harbored under IRC 401(k)(12) and 401(m)(11) are exempt from top heavy if the only contributions made to the plan are pursuant to these code sections, including elective deferrals. Aside from that, the basis for top heavy minimums generally starts with the highest deferral rate for key ee's. So yes, deferrals do trigger top heavy mins if any key is deferring during the top heavy plan year.

Sorry Mike, I guess I should have been a little more adamant with "must", like all clients, you can lead them to water but you cannot make them drink...