CTipper

Maybe I've missed the boat here, but I thought S Corps could sponsor ESOPs. I've reread 409(p) several times today and each time I do I understand it a bit less. Let's assume a one owner S Corp. This S Corp has 9 other employees. The S Corp wants to start a leveraged ESOP. And, the owner's compensation represents 35% of total eligible payroll. (9 employees at $45,000 each plus him at $225,000) Is the owner excluded from the Plan? Or, should the owner be excluded from the plan? Is there a contribution rate that would allow him to be in a plan? Thanks Christopher

Becky Sorry, you're right. I completely misread what had been posted. My apologies. Christopher

How was this resolved?

Becky I never thought about this before. You can't have a class allocation or age weighted plan in an ESOP? It was not something I'd ever paid attention to until I came across this while looking for something else. Thanks Christopher

So, am I correct in understanding that what you're saying is that the upside of not being covered by ERISA is that we get to do what we want with plan design. The downside is that we don't have one set of rules to go by. Is that right? From what I'm hearing, federal law -- or the lack thereof -- allows the plan design they want. The question is whether or not state law allows it. Is that correct? Christopher

Does this answer apply to both types of 457B plans? Your statement about facts and circumstances makes it seem like it's only for non profits. Thanks Christopher

By that I presume you mean age, race, sex, etc. Is that correct? I'm being asked if a government entity can have a 457b plan for just one employee. Of course this one employee will be a highly compensated employee their second year of employment. The entity also has an old 401(k) plan that has benefits that would be considered less than the requested 457b plan. Everything I've been able to find, plus your comment, seems to suggest that this is indeed the case. Is it? Thanks Christopher

You know and I now that you can't have a SIMPLE and a 401k plan at the same time. The IRS' web site even has a nifty little FAQ that helps make that clear to non-pension professionals. The client has a controlled group. Yes, we've asked them every year about family members owning other businesses. Yes, every year they've told us "no." Turns out they've got a controlled group. The company I knew about is my client. They sponsor a 401k plan. The company I didn't know about has a SIMPLE. Only 1 NHCE contributed to the SIMPLE this calendar year. Do you just disallow the deduction to the SIMPLE and go forward? I've looked, but I can't seem to find anything that gives me a hint as to how to fix this thing. Thanks Christopher

okay guys Despite my best efforts, I guess I'm going to have to breakdown 409A and 83 myself. I'm just having a hard time reconciling where I read on the IRS website and their audit guidelines how you have to have an SRF, but Kirk is saying we don't I'm not trying to offend or annoy. I am trying to comprehend and this is taking a bit. thanks Christopher

Thanks everybody for helping. The employer will want to impose the minimum level of SRF on the employee elected deferral portion. On the employer funded portion they may want it to be higher than the 5 year example. We haven't gotten that far. I have not yet had a chance to read the site that "E" shared. And, yes, I know I need some (ok, a LOT) of help. However, after I posted this I chatted with one of my regular referral sources and found out that he does quite a bit of this stuff. He said that their view on it was that by simply having the assets at risk -- that they are the general assets of the employer and that this is not a "funded" arrangement -- constitutes an SRF. You guy's are disagreeing?

Well, to be honest with you, that was my question. Before I had started looking in this particular scenario, I had heard that a good "safe harbor", if I may use that phrase in a NQDC setting, is to have a 5 year graded vesting schedule on each contribution. Each contribution takes 5 years to vest. Does that sound reasonable? Is there a shorter time span that would satisfy the risk of forfeiture clause? Or does it need to be longer? Thanks

How are you defining this in your documents? Can it be something as simple as 0% vested while employed and then they become 100% vested upon separation of service? thanks

I finally have an opportunity where I might be able to do a NQDC design for a prospective client. The prospect has many employees and essentially no one, other than the HCEs, is deferring. They like the idea of restricting eligibility in the 401k plan to only NHCEs and opening up a NQDC for the HCEs. I found the audit guidelines on the IRS website and it points to a section in 401(k) that states that eligibility can't be limited to participants who elect not to participate in the 401k. If I read this literally this doesn't apply to my situation. These participants are not being allowed to opt out of the 401k plan. If they're an HCE, they're excluded from the 401k plan. Am I reading this right? Thanks

Interesting thought. I was operating under the assumption that the numbers we put on page 2 would be similar to the numbers that we put on the Schedule F for a small cafeteria plan. If someone is eligible to participant in any of the benefits they are eligible even if they haven't met the eligibility for, say, MFSA yet. Also, the instructions for question 7 say "covered by a plan." Where are we instructed to answer question 7 individually for each component plan?

I am looking for some help in finding a sample document for a wrap-around plan document that will allow you to file 1 Form 5500 for the Cafeteria Plan and its component welfare benefit plans. How detailed do they have to be? Does the Plan Sponsor have to list each and every welfare benefit by name? Or, can you simply refer to "all benefits offered by the Employer?" I am presuming that the contents of the wrap-around document are relatively brief and can be incorporated into the Cafeteria Plan document itself.