Blinky the 3-eyed Fish

Okay, for my third post in a row I have another issue. Does the TH contribution have to go to these union employees in the plan? My only find so far is this from 1.416-1 (see underlined passage), which would indicate that the TH minimum is not required. However, none of my VS documents are worded to exclude union employees from receiving the TH minimum if in that plan. Darn union employees in with non-union! Q-3. Must a collectively-bargained plan be aggregated with other plans of the employer to determine whether some or all of the employer's plans are top-heavy? A-3. A collectively-bargained plan that includes a key employee of an employer must be included in the required aggregation group for that employer. See Question and Answer T-6 for rules concerning required aggregation. A collectively-bargained plan that does not include a key employee may be included in a permissive aggregation group. See Question and Answer T-7 for rules concerning permissive aggregation. However, the special rules in section 416 (b), ©, or (d) applicable to top-heavy plans do not apply with respect to any employee included in a unit of employees covered by an agreement which the Secretary of Labor finds to be a collective-bargaining agreement between employee representatives and one or more employers if there is evidence that retirement benefits were the subject of good faith bargaining between such employee representatives and such employer or employers. In determining whether there is a collective-bargaining agreement between employee representatives and one or more employers, the additional condition of section 7701(a)(46) must be satisfied after March 31, 1984.

I found my answer that all is well Notice 98-52 IX.B B. Aggregation and Disaggregation Rules 1. Plans The rules that apply for purposes of aggregating and disaggregating CODAs and plans under sections 401(k) and 401(m) also apply for purposes of sections 401(k)(12) and 401(m)(11), respectively. See sections 1.401(k)-1(b)(3) and 1.401(m)-1(b)(3). Accordingly, all CODAs included in a plan are treated as a single CODA that must satisfy the safe harbor contribution requirement of section V.B and the notice requirement of section V.C. Moreover, two plans (within the meaning of section 1.410(b)-7(b)) that are treated as a single plan pursuant to the permissive aggregation rules of section 1.410(b)-7(d) are treated as a single plan for purposes of the safe harbor methods. Conversely, a plan (within the meaning of section 414(l)) that includes a CODA covering both collectively bargained employees and noncollectively bargained employees is treated as two separate plans for purposes of section 401(k), and the ADP test safe harbor need not be satisfied with respect to both plans in order for one of the plans to take advantage of the ADP test safe harbor. Similarly, if, pursuant to section 410(b)(4)(B), an employer applies section 410(b) separately to the portion of a plan (within the meaning of section 414(l)) that benefits only employees who satisfy age and service conditions under the plan that are lower than the greatest minimum age and service conditions permitted under section 410(a), the plan is treated as two separate plans for purposes of section 401(k), and the ADP test safe harbor need not be satisfied with respect to both plans in order for one of the plans to take advantage of the ADP test safe harbor.

A takeover safe harbor 401(k) plan allows union employees to defer and receive matching contributions, but they are ineligible for any nonelective sources, including the safe harbor nonelective contribution. I can't find anything that says this is permissible. Notice 98-52 and the ERISA Outline Book simply mention that all employees eligible to defer (except otherwise excludable employees) must receive the safe harbor nonelective. Confirm or deny my findings please.

Mike, as with SC, I am not sure exactly of your opinion here, so here is another example of a DC plan. Do you agree with the calc and if not why? 2003 net earned income (prior to any pension contribution) = 200,000 W-2 wages of benefiting staff employees = 300,000 Pension contribution for staff employees = 30,000 Pension contribution for sole proprietor = 32,466 Calculation of compensation 200,000 - 30,000 = 170,000 1/2 of SE taxes = (170,000 * .9235 * .0145) + (87,000 *.062) = 7,670 Net = 170,000 - 7,670 - 32,466 = 129,864 The pension contribution for the staff employees works like any other expense that reduces the NEI and SE taxes. The total deduction though of 62,466 is what would be compared to the deduction limit of (300,000 * 129,864) * .25 = 107,466

I was just going to ignore Holland's remarks.

Mike, Jim Holland stated at the LA Benefits Conference that people eligible to defer but didn't (and didn't benefit in any other way) would not have their compensation count. It was quite a shock to most of the crowd, some of the panel and to me. I always take those comments with a grain of salt though.

For personal political reasons I cannot comment on an industry that feeds off the slaughter of my brethren. BTW, Kirk, if you read this, I think the last paragraph is better than anything I could come up with and should certainly be a nominee.

Under the attribution rules of 318(a)(4) stock in a company shall be considered owned by a person if they have an option to acquire it. Has anyone attempted to make an otherwise NHCE an HCE, by having the employer give them options to acquire stock? Obviously, there appears to be a lot of smell test issues here, but I was just curious to what degree anyone has used this.

I agree with Tom with the logic that the receiving the gateway minimum is just necessary to get to the cross-testing. Once you are there, the test is run under those rules, i.e. with and without the QNEC. I liken the QNEC to a key needed to get into a building, but once you're in, the key serves no purpose other than to jingle around in your pocket annoying those trying to work while you stroll the halls in your everlasting attempt to seek out victims of your tirades. (I had to edit your to you're so y'all don't think I is ignurent)

Mike, I got from pjm that the only 2 participants were the parents, so that there was no one available to waive benefits

I guess the lesson is to tread carefully if trying to use the 1563(e)(5) exception.

Uh, wrong on many levels Samsam. Was the cite by Andy not good enough? Let me try and explain the rules of who needs to receive the gateway. Follow these rules and your path will be straight. Deviate from them and watch how mad your client gets if he finds out what could have been done. Q: Who must receive the gateway in a cross-tested plan? A: Each NHCE that benefits under the nonelective portion of the plan, EXCEPT those participants that do not meet the statutory age and service requirement AND that component of the plan is not cross-tested. The nonelective portion of the plan is from any source, i.e. profit sharing, safe harbor nonelective, top heavy minimums and QNECs. Of course your document must allow for this. I have seen some language that does not have the availability to not give the statutory excludables the gateway.

The attribution rules under 1563 apply for consideration of who is an owner. Attribution between a child and the parent does not take place if the child is over 21 and the parent owns 50% or less. But the determination of substantial owner goes back 5 years, so if the child is under 26 at the time in question, then the plan is not PBGC covered, otherwise it is. Pretty silly huh? And the kicker is that the parents cannot waive benefits, so be sure that plan is sufficient if you ever want to terminate it.

I am not sure if this is a question, an answer or both. He is an HCE based on the information provided. Now if there is the top paid election or calendar year election, it could be a different story.

One example is Sal's comment at the end of page 1.34 of the 2003 edition of the ERISA Outline Book.

Take a step back and think of the reason for 401(a)(4) testing. It is designed to show that the plan is not favoring highly compensated employees versus nonhighly compensated employees. This is clearly not the case here, where you are capping only HCE's. Ah, foiled by Andy's quick keystrokes again! And he even provided meaningful cites, while I provided only concepts.

How is the correction going to made? Provide more details my fellow gladiator. Oh wait, you aren't a gladiator, but a type of noodle spelled differently.

It's a safe harbor based on the information provided. I too want to know why you think a change to the formula is needed. Why is it not meeting the client's objectives?

Lame Duck, are you referring to the fact that if they have a minor child then 100% of the ownership from each parent's company is attributed to the child and you have yourselves a controlled group? If so, this is a highly debatable subject. (I forgot the verb in the last sentence.)

Without looking anything up, I state that it is the guideline of the IRS when making corrections to put the participant back to a position if the mistake had not happened. Thus, the shorted contributions would be considered for the appropriate source and not be QNEC's.

I found a moment, so I looked more in depth at what you are saying Andy. Tell me what you think. To be a nondesign-based safe harbor, you have to comply with 1.401(a)(4)-3(b)(4)(i)(3). That section basically says that the plan must satisfy 1.401(a)(4)-3(b)(4)(i)(2), which describe the safe harbor flat benefit requirements, except that the minimum years of service can be less than 25. Thus, while I think the Levinrad example fulfills this requirement, I don't think the same is true with the unit benefit formula you mentioned on February 3rd. One thing to add is that you could simply meet the flat benefit requirement by changing the formula and getting the same result. Oh, wait, you mention that in your post. Uh, nevermind.

You don't say if it's a calendar year plan, so I will assume that. The answer is yes, and for a calendar year plan, that would have been done long ago.

Andy, if I ever meet you, my handshake (finshake) will be that of a dead fish.

Andy, have you applied for determination letters that these designs meet the nondesigned-based safe harbor?

I think the ERISA Outline Book sucks! Every day when I look up information and am able to find exactly what I need in moments, even on the most obscure of topics, I think it sucks that I don't have the ability to write it nor am I receiving the mass royalties. :angry: