401_noob

Unlike the annual additions limit, the annual compensation limit for an off-calendar plan year is based on the limit that applies for the calendar year in which the plan year begins.

My understanding is that participation is not a protected benefit, so participants can be amended out of the Plan if the Plan's eligibility or entry dates were to be changed to the statutory requirements and they have not satisfied the statutory requirements. Usually when a plan is amended like this it will address if anyone is grandfathered in or if it will apply to individuals hired after the effective date. Now there may be language in the Plan's underlying document that may prohibit this, so I would start there. I know in your situation you are asking about employees that are about to enter the Plan and my reply was regarding employees that had already entered the Plan and were participating. FWIW, I don't see a problem with this. I'm curious to see what others have to say.

Couldn't he exclude those prior years of service if the Plan Sponsor did not have a Plan or a predecessor Plan at the time the rehired employee was performing the service the first time and the current Plan, as written on his VS document, excludes years of service before a Plan was maintained?

Is imputed disparity the same as permitted disparity? If so, I thought that permitted disparity was a design based SH, so why would it be subject to general testing?

FWIW, I agree with Tom and this ASPPA presentation confirms that the SH contribution doesn't have to be provided to the HCEs in order to be exempt (slide 83 on page 42). https://www.asppa.org/Portals/2/06-11-14 Presentation.pdf

But how is someone going to be Key but not HCE? Never mind, an officer can be hired in the current year with no look back comp in the previous year to make them HCE, so i answered my own question.

Well first I should say that I am only a newbie, an aspiring QKA, so I wouldn't put much credibility on my thoughts or interpretations. I am a bit biased though because I read the Relius technical update before reading the IRS notice, so my interpretation is influenced by the Relius materials. I only included it to facilitate further discussion on the topic. I would assume, and you know what they say about assumption in Under Siege II, that the crew at Relius would have vetted their interpretation with their ERISA counsel/staff attorneys before broadcasting it for end users. Maybe someone on Benefits Link went to the Orlando Advanced Pension Conference in Feb 2016 and heard the presentation by Craig Hoffman on this topic and can chime in with the notes from the presentation.

it may be worthwhile seeing if the Plan uses the one-year marriage rule and also seeing if the participant and the spouse were married for more than a year.

Tom is referring to the Adoption Agreement/Plan Document. It will specify who gets the Top Heavy minimum allocation if the Plan is Top Heavy. The Law requires that it be allocated to non-Key participants, but the Plan can say that it is allocated to all participants including the Key participants.

I think that it would ultimately depend on how you are related to the owner and if their ownership is attributed to the other three employees. It is possible to be HCE, but not Key in which case a Top Heavy Minimum allocation will have to be made to the non-Key employee(s).

I was under the impression that it was required that union employees be tested separately if the Plan covered both union and non-union employees. Is that not the case or is there an exception in this situation? Thanks in advance!

FWIW, I was reading/googling PW info yesterday and came across this website that said that the PW fringe benefit can be used to offset other ER contributions to the Plan (profit-sharing, match, SH)... http://www.consultrms.com/services/prevailing-wage.html It is the third paragraph from the bottom. I can't attest to the validity of this information as I was trying to learn information on this topic myself. I'm interested to see what the rest of BenefitsLink has to say.

I have notes from a Sungard/Relius presentation titled "ADP/ACP Testing Techniques 2012" that says to fix 415 failures first because that pulls them out of 402(g) and ADP. Hope that this helps.

If a Top Heavy Plan has only deferrals, safe harbor matching contributions, and prevailing wage contributions, does it lose it's free pass? I know that it gets a pass if only deferrals and the safe-harbor contributions are made, but does the prevailing wage contributions blow that up or is there another exception for those contributions? Now, what happens if the eligibility for prevailing wage is immediate and the other contributions are 21 & 1 YOS? Usually that would blow it up too, but again I don't know if there is an exception for prevailing wage contributions. Thanks in advance!!

As Belgarath asked, what is the Plan's default beneficiary hierarchy? You can likely find it in the SPD, at least it is on our SPDs. The mother may be a default beneficiary too.

Here is what the FIS/Relius Technical Update says: Link here: http://www.relius.net/news/TechnicalUpdateDetails.aspx?T=P&1=1&ID=1087 Prohibited mid-year changes and special rules The Notice provides that a few mid-year changes are not permitted: · A change from a traditional safe harbor to a QACA, or vice versa; however the addition of an automatic enrollment feature to a traditional safe harbor plan is permitted; · A change lengthening the vesting schedule for QACA safe harbor contributions; or · A change reducing the number or otherwise narrowing group of employees eligible to receive safe harbor contributions. However, this does not limit the ability of the employer to amend a plan mid-year to change eligibility requirements for employees who have not yet become eligible to receive safe harbor contributions.

I have a unique hardship request to prevent eviction. Apparently the lease contract states that the tenant has a limited amount of time to notify the property owner of issues that need repair and if that amount of time expires the tenant is responsible for repairing the dwelling. Now the owner of the property is trying to evict the tenant/participant for neglecting to notify the owner of needed repairs, so the owner is saying pay to have the repairs done or get out. Has anyone ever seen anything like this before? Is this a valid hardship request? On the surface it is to prevent eviction, but it is also to repair a property that doesn't belong to the participant. Any thoughts? Thanks in advance!

Slide 76 on page 38 of the ASPPA Top Heavy presentation confirms Tom and ETA's statement. https://www.asppa.org/Portals/2/06-11-14 Presentation.pdf

i guess he could petition his congressman/woman to amend IRC §§401(k)(12)(E) or 401(k)(2), but yes, he is stuck until he reaches a distributable event.

but what if everything was paid out within 12 months but the HCE's account, a portion of which was ADP excesses, was rolled to an IRA?

Well the ASPPA books say that the obligation to repay is not waived because the loan is deemed distributed. Because the deemed distribution treatment under IRC §72(p) is solely a tax rule, and is not treated as an actual distribution for other purposes, the deemed distribution does not affect the participant's continued obligation to repay the loan. The loan obligation is not extinguished until the loan is repaid, either by the participant through a resumption of loan payments, or by offset against the participant's accrued benefit, pursuant to the plan's security interest. In fact, there is still a fiduciary requirement to enforce the loan, because ERISA requires the governing documents of the plan be followed (e.g., the written loan provisions or loan policy that is part of the plan), and to protect the benefits of the plan participant.

The loan should have been offset and the unpaid balance would be taxable to the participant (your late brother) or his estate. The tax liability might be reported on the participant's final income tax return or the estate's income tax return. I don't know why the loan would have to be repaid since it should have already been offset.

When studying for my DC-1 exam there was a paragraph or two about bankruptcy protection afforded qualified Plans and the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005. The text said that BAPCPA currently protects up to $1,242,475 in an Individual Retirement Account (IRA). The text also says that the limit on protection does not apply to funds rolled into an IRA from a qualified Plan. Don't know if this is the bankruptcy and creditor protection you were looking for. Hope it helps!

This was helpful, thanks for sharing this information with me!

Is there an example that you can provide of the threshold or additional rate exceeding the maximum threshold or rate allowed under the permitted disparity rules...? Just trying to understand where 2A would be appropriate for other allocation methods other than the obvious cross-tested. I looked in the 5500 preparer's manual hoping to find an example, but no luck. Thanks in advance