Blinky the 3-eyed Fish

Andy, without a contribution and a need to permissively aggregate the plans, then I say you are fine to have BRF discrepancies because the plans are effectively separate. I know of no "special" need to aggregate plans for any sort of nondiscrimination if you don't have to for coverage.

Mol, you understand correctly. As to your last question, I believe you can just add back one component and run the compensation ratio test on that. You just need a compensation definition that is reasonable and that would fit the criterion in my book.

It's not disqualified just because they didn't amend for GUST yet. I certainly hope you didn't tell the client that or that the plan is terminating because of that. See Rev. Proc. 2003-44 for means to correct non-amenders. It's a matter of paying a fee and preparing a submission to the IRS.

Quinn, I am not sure what you mean by your post as there is no such thing as a non-safe harbor 414(s) definition. The definition of compensation either meets 414(s) or it does not. In this case, because the definition of comp excludes bonuses/overtime, it does not meet the definition of 414(s) UNLESS it can pass the compensation ratio test. It does not, so it doesn't meet 414(s). MWeddell, has the right answer. You don't need an amendment (document language notwithstanding) to just use a compensation that meets 414(s) definition in the ADP/ACP testing.

Just send the DOL the information they request. If it's the audit report, well then find someone to do it quickly.

This works except if the doc's investment strategies violate the prudent standard criterion. SMB, you say that the doc has a totally separate business with a business partner. What is the ownership split, because it might not be a controlled group? If that is the case and it's also not an ASG, well then your idea works fine as long as in-service withdrawal opportunities pass BRF testing.

Thanks for pointing that out, but even you don't know if it can be done. This is moot though, so I shall now move on with my life.

You are right on both counts, but it's moot for this situation because of the other problems. Although, often times a partnership will have the individuals separately incorporated or they will be separate entities, which of course often is a controlled group/affiliated service group and negates the EZ.

I don't make the leap that that cite provides such a "general principal", especially in lieu of the well known "60-day rule".

I know it's not a return within 60 days, it's AFTER 60 days. I took a quick read of that promulgation and it's about repayment of advanced commissions. Why is that similar? How do you think that will waive the 60 day requirement in any way? I am cornfused by that cite's relativity to this matter.

I smell noncompliance coming. The whole "Individual 401(k)" product is designed to fit in a little teeny box. In that box is the fact that those offering this product will file the 5500-EZ for the client. Also, in that box is the use of a standardized prototype document. In that box is one brokerage account. Your situation is outside of that box and most of the providers of this service will have no idea what to do. You need to consult an real TPA, not some guy with a box. If I were the IRS, I would audit a large sampling of "Individual 401(k)'s" in about 5 years.

But mbozek, this wasn't a mistake but a voluntary distribution. I am not aware of leniency in the 60-day rule for any situation remotely similar to this. MGB, basically whatever the source of the money paid back, whether that be after-tax or pre-tax, is the how the money should be treated. I recall a discussion on this a few months back.

Yes, and to avoid 401(a)(17) proration the compensation period should be defined as the calendar year or other 12-month period. I consider it an issue in principal, but you are probably correct that in this case you are okay. I just thought I would throw it out there.

Veba, it's the vested percentage the IRS deems to be protected, not the vested balance. That leaves the HCE at at least 20% vested no matter what, so it IS a cutback issue. Also, to provide DOL equivalent hours would most certainly provide additional hours to many many employees. The owner wants to limit vesting to the HCE, but I bet she doesn't want to give away vesting years to others. Good solution PP.

If you didn't keep track of hours, then you must use DOL equivalents, which will put you in excess of 500 hours, so that doesn't work. Pax's solution works if there is no predecessor plan, but I guess it doesn't work for the client. As for the owner not being vested, that shouldn't matter since he will eventually become 100% vested by service or when the plan terminates. Another solution is if the plan is effective 4/1/2004, but watch out that the amendment may be considered discriminatory under 1.401(a)(4)-5.

I should let this die but... First, Andy, yes I would say both are nonexcludable. There has been discussion of concurrent versus consecutive by rcline. Now apply that to a plan with no eligibility requirements for those employed as of the effective date and 21/1 for all else. Rcline, you say . I would say that it too is concurrent eligibility in that we are testing a plan year and in that plan year there are 2 sets of eligibility requirements that are applicable to 2 different groups, those employed on the effective date and those not. Again, because we are testing a plan year and because 2 separate eligibility requirements apply to that plan year, my thought is that it treated the same as the examples in the regs.

But I think the original post is asking what are the ramifications if they don't provide all 3 platforms to everybody, rather each division continues on using the providers they were before the merge. As Austin mentions, this is a BRF issue that needs to be tested for nondiscrimination. If it passes, then it is okay from that standpoint.

The Hi-3 compensation 415 limit does not reference 401(a)(17), so there would be no reason to pro rate it. Do you want to pro rate the NC in the first year for some reason or are you trying to get a full contribution in year 1? If the latter, why not just make the effective date of the plan 1/1/2004? See prior discussions on this board about plan effective dates that pre-exist the employer. The IRS has said it's fine.

I agree with that.

By actuarial audit cases, are you talking about the small plan audits of the late 80's or so? That pre-dates my existence in this business by a long shot, so I can't comment. However, there are these from the Gray Book that I lifted from a post of pax's. How you weigh court cases versus current IRS thinking is up to you. I know that no other funding method offers the availability to fully fund benefits in a final year. Now PBGC covered plans have that option and there's UCL for those not PBGC covered, but of course, that is separate from the funding method. QUESTION 93-10 Aggregate Funding Method -- No remaining actives A sponsor has a defined benefit plan at a location where the company closes down the operation for economic reasons, effective as of the first day of a plan year. After the closing, the plan will cover only terminated vested and retired employees and their beneficiaries. The funding method is the aggregate cost method. Assume the following with respect to the plan year: Present Value of Benefits: $20,000,000 Valuation assets: $19,000,000 Under these circumstances, is the average future working lifetime for each participant equal to 1 year and thus the normal cost and maximum deductible limit equal to $1,000,000? Would the answer be different if the closing did not occur until sometime during the plan year? RESPONSE No. It would not be acceptable to use one year as the average future working lifetime where there are no remaining actives. One acceptable approach is to use the expected retirement ages as if the employees were still active. QUESTION 99-6 Funding: Spread Gain Method for Plan with No Future Benefit Accruals Plan A uses the aggregate method (level percentage of compensation) to determine funding requirements. As of December 31, 1998, all active participants are terminated, but the plan remains in existence. (a) How is the normal cost for 1999 determined? (b) Would the answer be different if the plan was frozen, but participants continued in active service with the sponsor? RESPONSE (a) The funding method must be changed to an immediate gain method. Under any immediate gain method, the normal cost would be zero and the accrued liability would equal the present value of benefits. Any unfunded liability initially recognized should be amortized over ten years. (b) No. The response in (a) would also apply to a frozen plan covering participants who are still employed by the plan sponsor.

Pepi: Tell me more! I want to know ALL the constellations! Homer: Well, there's... Jerry, the cowboy. And that big dipper-looking thing is Alan... the cowboy. Pepi: Oh, Papa Homer, you are so learned. Homer: Heh heh heh. `Learned', son. It's pronounced `learned'. That being said, in either situation, one person at NRA or all term, you have no one that has a future working lifetime to spread the costs over. You are correct that the IRS has espoused (and I agree) that IA is not reasonable to use in either situation. Now you could assume the person at NRA will actually retire at the end of the year. That might be fine to use IA in the first year, but to continually use it and fund the unfunded amount would too be unreasonable, IMHO.

Keep in mind that it's not just an ADP failure that causes deferrals to become catch-ups, a plan imposed limit will do the same. You could just amend the plan to provide that HCE's are limited to a deferral rate of 0% and allow for catch-ups. Then all your deferrals are catch-ups and TH is not triggerred.

Congrats on the hat trick, three posts in a row! We are on the same page.

You do need to general test because your document doesn't have a safe harbor formula. But as you point out in your last sentence, the question is moot if you are going to integrate using 100% of the taxable wage base because the plan will pass on a contributions basis imputing permitted disparity.

I am not sure I follow. All I am saying is that you are testing on the lowest age and service requirements in the plan year, whether you define that as none or 1 second shouldn't matter.