CTipper

No Automatic enrollment is allowed now. What we're waiting for is the 90 day free look. The way I've read the regs (which doesn't mean much) is that the ability to take money out using a 90 day free look starts January 1, 2008. It doesn't start April 1, 2008. Have I misread the reg and it specifically states that the 90 day free look (I know they don't call it that) applies only to deferrals made to plan years that started after December 31, 2007? So, since automatic enrollment is allowed now. And if you can start to take your money out on January 1st if it's not been in there 90 days, that means it's October 2nd or 3rd. No? Christopher

but that's the rub 90 days from October 2nd or 3rd is January 2008. I'm hearing people suggest to the clients that they start the second week of October. So, it does mean that we may have to start thinking about this earlier. So, it looks like you agree with my interpretation that a chane in the default investment option is an active change. thanks. Christopher

the way I'm reading this, MSN and Tom are not agreeing with each other Tom is saying first deferral amount from the first pay period only MSN is saying that it's all deferrals until an affirmative election is made so? which is it? MSN, are you saying that if you affirmately (?) elect a deferral amount the amounts deferred prior to that can still be withdrawn? Finally, anybody have any ideas if changing the investment election counts as an affirmative election? Christopher

2 questions about this, please Question #1 When does the 90 days start? I was first told that it started the day the money was deposited in the trust. Now I'm being told it's the day it's taken out of the paycheck. Question #2 What do you have to do to loose your 90 day free look? Part A Let's say an employee has one withdrawal at whatever the plan states is the default amount. Then 1 week later for the next payroll that employee changes the amount coming out of his paycheck to a different amount. Does the employee still have access to the 90 day free look? Part B Let's say this employee hasn't made any changes to their deferral amount but has logged on to the asset holder and has changed the investment option to something other than the default. Can this employee still benefit from the 90 day free look? Thanks Christopher

Why would this be a fiduciary nightmare? It's an unmitigated pain in the administrative rear and you can never charge enough to make it attractive from a revenue point of view, but fiduciary? I'm not getting it. You've got a finite amount of investment options. Those aren't your responsibility. Someone else is being paid to make sure that the appropriate ones are picked. You've got quarterly valuations. You've got more than 3 investment options and you let them change investments quarterly. What you've got is a communication situation with your client. How often after receiving contribution amounts are you going to give the buys to the broker? How often, and when, are participants going to be allowed to rebalance their accounts? What's your promised turn around time for distributions and does the client understand that they won't be done until the prior valuation is complete? The biggest problem we've found is with brokers who don't understand their role in the equation. They don't buy or sell the dollar amounts you tell them to. They add investment options and don't tell you. They combine investment options and don't tell you. Etc. All things that make it a logistical nightmare, but nothing that's a fiduciary issue. Christopher

PMC The only thing I can think of that will definitely let you get a full year's compensation in for non-elective contribution purposes would be to start a second plan that was effective 01/01/07. Then you merge the 2 plans into one for 2008. I know it may not seem very elegant but it will allow you to get that part of the job done. And, I think you can definitely add a discretionary match subject to ACP testing now even though it wasn't available when you first drafted the plan. Christopher

Dulan, Are you applying to be the administrator of his estate or of his 401(k) Plan? Was the second wife named as the beneficiary? or Was the last beneficiary designation form signed when he was married to his second wife and "spouse" was listed as the beneficiary? And, unfortunately, the divorce decree doesn't take precedence over the beneficiary designation. Who has the last known beneficiary designation form and what exactly does it say for primary beneficiary? Christopher

Everything I've read says "can not." And, it's calendar year based, not plan year. So, if you're thinking of doing a 9/1 to 8/31 plan year, you can't because you've still got a Simple contribution made during the current calendar year. I don't think it matters whether it's Simple IRA or Simple 401k. Christopher

if crossing 100 participants and the ensuing audit isn't an issue, why are you excluding anyone? the HCE's don't have to be exluded by plan design to pass non discrimination testing. They just have to be defer zero and you don't have a testing issue. you only have to exclude the HCEs if you're going to exclude NHCEs. This is because of coverage not discrimination. heck, since 401(a)(26) went away 10 years ago for DC plans, you could set up a plan for each participant, but that's a different story. Christopher

EBIA used to have a very nice explanation of this in their Cafeteria Plan binder. (I think they've been bought by someone and I can't remember the new name right now.) From the cafeteria side of this problem, the employee must have some form of "cash back." If there's no opportunity to prevent constructive receipt, there's no cafeteria plan. Just for giggles let's assume that the employer spending credit is $300 per month and the employee elects to run $200 of that through medical reimbursement in the cafeteria plan. Okay, that part's clean. But now the employee has chosen to NOT prevent constructive receipt of $100. For purposes of this discussion, let's not worry about any cafeteria plan provisions reducing the amount of cash back based on how they choose to use or not use it. Further, let's assume that this employee has checked off on his enrollment form that he wants the $100 to go to his 401k plan account. The employer then adds $100 per month to his W2 wages and defers $100 in salary deferrals. Yes, the employer is then actually paying $107.65 for a $100 benefit (FICA, etc.), and the employee is paying $107.65 for a $100 contribution to his 401k. $7.65 to FICA, etc., and $100 to his 401k plan. The existing 401k plan covers this already. Right? The 401k plan handles W2 compensation and deferrals. What document are you waiting for? QDROphile, why are you saying you can't do this in a 401k plan? Final cafeteria regs from 2000 or 2001 specifically mention and allow employer spending credits to go to a 401k plan. In fact, they're written in such a way that they're only allowed to go to a 401k plan. 403(b), 457, Sar SEP and Simple IRA are exluded. I've never been asked, but I've always assumed that Simple 401ks were included. The messy part about this is operational -- not plan documents or testing. The employer needs to remember to add the unusued employer spending credits to compensation. The employer and employee need to understand that FICA is still involved. And, finally, most of the cafeteria plans I've seen have a much shorter waiting time to get in than the corresponding 401(k) plan. So, until that participant has satisfied 401(k) plan eligibility -- or the 401k plan eligibility is changed to coordinate with the 125 plan -- the participant has to have some other cash back option. What's going to be interesting is how this ties in next year with the automatic enrollment and the 90 day free look. Although I've seen nothing written on this, I presume that this wouldn't really be a default automatic enrollment from the 401k plan's point of view because the participant has done something actively to get a 401k contribution. that help a bit? Christopher

If she was using public transportation, probably. But, if she's just using her own vehicle, no. She's just commuting. Yes, it's a heck of a long commute, but a commute never the less. Hope that helps a bit. Christopher

no, the 5500 and Schedule B say Multi not Multiple what lead you to believe Multiple? Christopher

Yes, this is somewhat related to another post I'm looking at a prospect with a multi employer plan. There are currently (supposedly) only 3 firms participating/sponsoring the plan. Total number of participants is just above 120. From what I'm hearing about actuarial certification costs for a multi employer plan, it seems like the actuarial costs for 3 separate single employer plans would be less than the cost for 1. Not to mention that if each employer split off to their own plan they'd be way below the audit limit and would save those costs. Is this possible? What obvious pitfall am I missing? Thanks Christopher

I would like to think I have half an idea as to what needs to be done with a single employer defined benefit plan. I even think I'm almost knowledgable about multiple employer plans. Apparently I know next to nothing about Multi Employer Union Defined Benefit Plans. We normally have an actuary sign our Bs for the work we do. They won't consider this Multi Employer plan I'm looking at as a prospect. So, what makes these so difficult now and what does one need to look for? If we're comfortable with single employer plans and we can find an actuary to sign the multi employer B are we begging for trouble? Any interested actuaries out there? Thanks Christopher

I've heard that California doesn't allow the emailing of information with employee social security numbers in the email. Are there other states that don't allow that? If so, does a password protected zip file allow for the transmission of that information? Thanks Christopher

not answering your question at all and probably hijacking the original question. In order to keep the allocation to HCEs under 1/3rd, am I correct in presuming that it's allowable to allocate a lower percentage to the HCEs? I know that may seem obvious, but I don't want to make that kind of assumption. We usually use the phrase "cross-tested" to give HCEs higher contribution rates than the NHCEs. And, giving a lower rate to some or all of the HCEs is not prorata. Thanks

Greetings all, I'm looking for help with a code site so that I've got something for my files. I've got a client who is a statutory employee with a life insurance company. She's also in that life insurance company's plan and has made deferrals and received an employer contribution allocation. She's also got her own plan with her own company. She's adding the W2 from the life insurance company to her Schedule C compensation. When they're not benefitting from another company's plan that kind of makes sense with what I understand about a Statutory Employee. However, when that W2 compensation is being used to provide an Employee benefit under another Employer's plan, how do we use that very same compensation twice? What am I missing?

It just got more interesting. Can the 100% C Corp owner also be the "bank" where the money is coming from?

At first I thought this was obvious, but the more I think about it the less I'm sure. A C Corp is sponsoring a new leveraged ESOP Plan with a December year end plan. Payments are on an annual basis. The loan is taken out at the end of October -- 2 months before the end of the first plan year. This makes the first payment due during the second year. How much of the interest from that first payment is allocated towards that first plan year? Thanks Christopher

Stephen Thank you for your response. It's going to take a bit of digesting. Hope you take this the right way -- is there a site I can go to for the vesting issue, please? And, just to make sure I understood your answer -- Even if a 401k plan started 01/01/2000 they can have an ESOP effective 01/01/2007 with years of service for vesting starting at 01/01/2007 so that everybody is 0% vested. Right? Christopher

So, as long as the document allows for the separate contribution this would be possible? Can we have the Non Elective Safe Harbor contribution be 100% vested and the normal one be subject to a vesting schedule?

Yes, #1 is vesting service. I know from combining DB and DC plans that if they have had a DC plan for a number of years I can't have service for vesting start from the DB plan's inception date. I was presuming that would be true with an ESOP and a 401k plan. I've done a bit of looking but can't find anything saying anything either way. For #2, I know that there are portions of the allocation that don't count towards the 415 limit, so it could SEEM like someone has a $90,000 415 limit, but that's not the same as saying the dollar limit applies individually to each plan, right? Also, as I type this, I just realized I've always read everything regarding the divident payments, etc., not counting towards the annual limit. But, I've always interpreted that to mean the flat dollar limit. (not sure why). What if those allocations than exceed the participant's compensation? Is it still okay? Christopher

I know in a KSOP you can't fund the Safe Harbor with employer stock, but if you've got a properly functioning leveraged ESOP, can you have the 3% contribution go into that Plan? Thanks Christopher

Had an interesting experience this morning Had someone tell me that their lawyer told them (yes, 2nd or 3rd hand information) 1. Even if the Employer has been sponsoring a 401(k) Plan for many years that it is okay for the Employer to establish a new qualifed ESOP with years of service starting from plan effective date; and 2. That when an Employer is sponsoring both an ESOP and a 401(k) Plan, that the 415 limit applies to each individual plan. In other words, it could be $45,000 in the ESOP and $45,000 in the 401(k). Before I'd had this meeting I would have thought the answer to both was obvious --- no. But now I'm not sure about anything anymore. Thanks Christopher

I haven't mentioned synthetic equity yet because I'm still dealing in the theoretical. So, it can be done, but just limited to 9.9% of the total contribution or less. You didn't mean 9.9% of his compensation, right? I could see how synthetic equity could be an issue when you have multiple owners, but is it really a concern if you have a 100% owner? Christopher