jaemmons

Yes you are correct. You don't need to demonstrate this compliance to the IRS unless you submitting a plan document or plan termination for a DL. Even if you are submitting for only "form" opinion, the IRS review agent may still request a Demo 9 for the year of review.

I now see your point. My confusion comes from the 401k regulations containing a definition of "eligible employee" which does not include employees who sign timely irrevocable waivers to participate. As such, I have treated them as excludable for purposes of coverage under 401k, 401m and any other employer contribution. After rereading over and over again the regulations under 401a4, I am going to have to concede that my opinion is an incorrect interpretation. Therefore, would you agree that although they can be excluded for purposes of coverage for deferrals and match, that they are treated as non-excludable and not benefiting for purposes of nonmatch related employer contributions? Thanks for the clarification. I guess if enough of my industry peers hammer it home, it makes sense.

MGB, I see your point. Thanks

The pay out to the hce. I guess in order to maintain accurate records of the acp test, it should be rerun, so as to reflect the proper matching contributions.

I don't agree austin. Matching contributions associated with adp refunded amounts must be forfeited from the corresponding hce account. The acp test must then be rerun. If not corrected in this fashion, one or more hce's may be receiving a matching rate greater than any nhce which would cause the plan to fail the nondiscrimination of any BRF (i.e.- match rate) in the plan, as no nhce will be receiving this higher matching rate. No distributions to any hce's are to be done, as they are not entitled to those matching dollars.

Well, it looks like I forgot that EGTRRA change. Mental note has been made. thanks

Only amounts distributed on account of hardship, which are attributable to elective deferrals and any pre-89 earnings thereon, are not eligible for roll over after December 31, 1999. Therefore, it seems that any additional amounts (e.g. - match, profit sharing, and earnings thereon) are eligible rollover amounts and as such are subject to automatic 20% withholding. This is a reference from IRS Notice 99-5 V. HARDSHIP DESCRIBED IN SECTION 401(k)(2)(B)(i)(IV) For distributions after December 31, 1999, the following rules apply to hardship distributions described in section 401(k)(2)(B)(i)(IV): A. The portion of a distribution from a qualified plan that is ineligible for rollover treatment because it is "a hardship distribution described in section 401(k)(2)(B)(i)(IV)" is the amount described in section 1.401(k)-1(d)(2)(ii)...

Item 4 seems to indicate involuntary retention for active duty. I don't see any mention of voluntary duty being mentioned. Am I missing something?

MGB, I understand that reemployment is a contingency for those serving military duty to receive benefits and service credit during their leave. However, I thought that the five year limitation applied to both voluntary and involuntary service (which is cumulative), but if the individual's service is extended past the five year limit, USERRA rights would only apply if the extension of duty were due to one of the eight reasons listed under Section 4312© of Title 38 U.S. Code, Chapter 43. The exceptions appear to be involuntary, either due to orders received to stay in active duty or due to the service position requiring more than 5 years of initial military service. Therefore, if someone is called up from reserves for a three year active duty period (assuming they are honorably discharged) and then reenlists, on a voluntary basis, for another 4 years would not be eligible for USERRA rights, as their cumulative service, taking into account that the renlisting is not one of the eight exceptions mentioned above, is greater than 5 years. Thoughts?

Any employee who goes on a qualified leave for military service is to be credited with the same hours and pay rate (generally based upon the rate of hours worked and paid over the previous 12 months prior to leaving for military duty) during the leave (not to extend past 5 years), as if they were still employed by the employer. As such, the would accrue benefits (e.g.-employer contributions, forfeiture allocations, etc.) during their leave and continue to vest. Since they continue to accrue benefits, I would reflect them as active employees, since they cannot be terminated pursuant to USERRA, and include them in the testing during their military leave. Proceduraly, I would make a note to the file for every participant who has gone a qualified military leave of absence, the duration of the leave, and comp/hours credited during the leave, since company payroll records will not match the comp and hours being credited to them during this period. You should contact your payroll vendor, if applicable, to see how they are reflecting these employees for other employers.

Andy, I see what you are saying. I know that from a technical standpoint the application of 1.410(B)-4 seems limited, if the plan passes coverage using the ratio percentage test, but I still remain conservative and view any direct/indirect classification by specific name (e.g.-all employees with red hair are excluded) as an unreasonable exclusion which is not based upon objective business criteria. Although the IRS may view this exclusion as nondiscriminatory, by application of the Code and Regulations, I still think that an employee has a basis to complain to the DOL about discrimination regarding benefits. I guess I am just a little too conservative for this discussion.

How if they are considered not to be an eligible employee? By definition in most plan documents an "eligible employee" means any employee of the employer. If a timely irrevocable waiver is signed, then it seems to me that they would not be an "employee". Thus, they would not be counted for any plan purpose.

Any election or waiver to not participate within a plan is viewed as a CODA unless exceptions under the 401(k) regulations apply. One of those exception is contained within 1.401(k)-1(g)(4)(ii). From my interpretation, this section pertains to a waiver to participate or accrue a benefit under any type of plan the employer sponsors, including DB's, MPPP, and Profit sharing only plans. It does not only pertain to plans which already contain a CODA. In order for the one-time election to not be viewed as a CODA, the employee must irrevocably elect to not be eligible to make any CODA under any plan maintained by the employer for the duration of their employment. To me this means that if an employee is irrevocably waiving participation in the plan, before they ever become eligible, this applies across the board to all money types available within the plan (e.g.-deferral, match and profit sharing). Therefore, by application of this regulation, the employee's signing of a timely irrevocabel waiver would make them an ineligible employee under the plan, who is not counted in any tests for the plan. If the employee signs a revocable waiver, then I would agree with including him/her in testing as an eligible employee, as the revocation of any election or waiver would constitute a CODA.

jquazza, If the plan document is defining the comp to be used for nondiscrimination testing then it is defining the plan's 414(s) compensation. Yes, the general definition of what 414(s) comp is defined within the Code, but a plan's specific definition of this compensation is unique and is most of the time defined in the plan document. Some prototypes and even some volume submitter documents do allow the employer to define the 414(s)comp used for adp, acp and (a)(4) testing separately.

AndyH, If a plan is cross-tested, which may or may not be the case here, and each rate group cannot satisfy 410(B) using the ratio percentage test, then you must demonstrate that the groups pass the nondiscrimination classification test of Reg 1.410(B)-4 and the avg benefits test under -5. Coverage testing for each rate group is determined the same as for initial eligibility. As such the exclusion by name may or may not be allowed. I agree with you to the point that most of the time, once a plan passes the ratio percentage test that all BRF's will pass nondiscrimination testing. However, I have always taken the conservative approach that any classification, whether it be for initial eligibility or for allocation groups, must meet 1.410(B)-4. It eliminates an explanation to the IRS during a document determination letter process for an individually designed document to support the exclusion by name.

It doesn't see that any matching contributions, whether used to satisfy top heavy mins or not, would be treated as an allocation for minimum gateway purposes. See Section B to the Explanation of Provisions to the final nondiscrimination regulations issued June 29, 2001. As such, if they are not eligible for the PS, they would not receive the minimum gateway allocation.

As long as the physician employees (whom I assume are the "doctors" in question) have valid irrevocable waivers on file, they are not treated as eligible employees for all plan purposes. As such, they are excluded for all plan purposes. See Regulation 1.401(k)-1(g)(4)(ii)

Just make sure that no part of the plan must utilize 1.410(B)-4 for nondiscrimination purposes (e.g. 401(a)(4) testing for availability of any benefit right or feature and general testing for new comp). Just because the plan passes the ratio percentage test for yearly coverage, it still may need to prove the classification nondiscriminatory.

If an employee timely signs an irrevocable waiver to participate in a plan sponsored by the employer, they are not treated as an eligible employee for all plan purposes. As such, they are not counted in the adp,acp or 401(a)(4) testing. See Regulation 1.401(k)-1(g)(4)(ii)

IRC 414(q)(1)(B)(1) references compensation from the "employer" in excess of $80,000 (as indexed). Only compensation paid to an employee while they were employed for the new companies, not the predecessor employer, is used to determine HCE's. Therefore, unless the new companies paid compensation during the look back year, you need only look at ownership for determining HCE's for the current plan year.

Check your plan's definition of IRC 414(s) compensation. Some documents, as Mike Preston eluded to in another thread reply, allow for the plan to use different comp definitions for different testing purposes (e.g- adp/acp, nondiscrimination a4 testing, etc.)

Assets of this nature which are ineligible to be transferred to another qualified plan, including IRA accounts are not technically "owned" by the employee but by the plan's trust. The participant does not obtain any right to those benefits ("own")until a distribution event occurs. I agree that they should work with the employee to obtain the funds from the IRA, but the trust is the rightful "owner", regardless of the assets being earmarked in an individual account for the participant, and as such can the plan's trustee should be able to work with the IRA custodian/trustee to have those ineligible assets returned, if the employee does not cooperate.

I would first attempt to get the money back from the participant for the cash portion. Next, I would have whomever is listed as the trustee to the plan contact the IRA custodian and let them know that they had accepted an ineligible rollover and as such those amounts need to be returned to the trust. Finally, I would have the trustee contact the TPA/and or recordkeeper to have the loan restored to the participant's account, as it should not have been offset, since the participant did not incur a distributable event. Who authorized the distribution?? Obviously, there is some liability here but you need to determine where.

For adp testing purposes, you can use any definition of compensation which meets the requirements of IRC 414(s). An allowable exclusion is comp paid prior to plan participation, so as long as your document reflects an effective date for employees to make pretax deferrals as of 11/1/2002, I don't see any problem with counting compensation for that time period for adp testing purposes. You don't have a short plan year, so compensation paid during that time period is not subject to any prorated reduction in the IRC 401(a)(17) comp limit. You may use $200k.

As long as the account minimum is a guideline established outside of the plan by the financial institution, I don't see any problem with it. Aside from fiduciary concerns, if the plan and/or trust agreement states the account minimum, the plan will have to test for current availability of that right.