401_noob

haha.. that should be deductibility!

Hola Amigos! I was wondering if anyone could point me to some guidance regarding the calculations of the deduction limit prescribed by IRC §404(a)(3) for an Employer that terminated their Plan mid-year, specifically if you use comp for the entire year, or just the portion of the year that the Plan was active. I am inclined to say that it is for the entire year because I know that the deduction for DC plans is 25% of the aggregate comp of the eligible participants and that comp for deduction purposes is all comp paid or accrued to the participants during the Employer's taxable year. I was hoping that someone would know where this scenario is described in the EOB or some other text. Thanks in advance!!

well I guess that would explain why I can't find this in the EOB. Thanks for the clarification!!

The way it was explained in the webinar and displayed on the attachment I provided, it seems like an "and".

I listened to a Relius webinar yesterday ("401(k) Beyond the Basics 14: Participant Loans: The Fine Print") and the presenter said that any new loans following a loan that has been deemed distributed is a deemed distribution unless the old loan is repaid and the Plan receive adequate additional collateral from the participant or loan payments are via mandatory payroll deduction. This was news to me. I had never heard the part about paying off the old loan before. I am familiar with Treasury Regulation 1.72(p), Q & A 19, but i didn't see anything that mentioned paying off the old defaulted loan. Has anyone heard this before? 401(k) BB 14 Loan Fine Print.docx

SH Match has to be allocated on the Catch-up contributions. See page 5/8 of the below link on the bottom left side of the page. http://www.aon.com/attachments/human-capital-consulting/2013_article_ADP-ACP_Safe-Harbor_Schwallie.pdf

Awesome, thanks for your input everyone!!

it looks like my Plan Document has the same verbiage as BG5150's so could it be possible to allocate the nonuniform match?

So if the Plan's AA says that the additional match is discretionary would this kind of match be permitted?

Would it be permissible for a SH Basic Match Plan to allocate a discretionary match in a nonuniform manner where the owners get a lesser benefit than all the other participants? For example could the owners get a match equal to 40% of the 1st 100% where the other participants get a match equal to 70% of the 1st 100%? I looked in the EOB and the EOB seems to suggest that it is possible, but it would be subject to BRF nondiscrimination testing. Thanks in advance!!

good point. This is what the EOB says regarding that: When an amount is distributed from a plan in a rollover transaction, that amount is still treated as a distribution in determining whether the distributing plan has satisfied its minimum distribution requirements. See §1.401(a)(9)-7, Q&A-1, of the 2002 and 2001 Regulations and §1.401(a)(9)-1, Q&A G-1, of the 1987 Regulations. However, if the amount rolled over includes all or a portion of the minimum distribution from the distributing plan, the recipient plan will have received an invalid rollover amount. IRC §402©(4)(B) precludes the rollover of amounts that are required to be distributed under the minimum distribution rules.

+1 for what ETA said. This is what the EOB says regarding this: All amounts distributed during year are ineligible for rollover until minimum distribution is satisfied. Any distributions in a year in which the participant is required to receive a minimum distribution (i.e., a distribution calendar year) are treated first as satisfying the required minimum distribution for that year. See Treas. Reg. §1.402 ©-2, Q&A-7. This is true for distributions made in the first distribution calendar year, even though such distributions are not required to be paid until the RBD. Treas. Reg. §1.408-8, Q&A-4, provides that the same rule applies to distributions made from IRAs within a distribution calendar year.

On slide 99 of ASPPA's Advance Top Heavy Testing and Plan Design Techniques presented by Bill Grossman, it says that there is no known correction of rescinding or returning the key employees deferrals so that a Top Heavy allocation will not be required. The presentation can be found here. Slide 99 in on page 50. http://benefitslink.com/boards/index.php?app=core&module=attach&section=attach&attach_id=1148

Does Q&A 5 from the DOL's Field Assistance Bulletin 2008-04 help: Q5: Who must be bonded?Every person who “handles funds or other property” of an employee benefit plan within the meaning of 29 C.F.R. § 2580.412-6 (i.e., a plan official) is required to be bonded unless covered under one of the exemptions in section 412 for certain banks, insurance companies, and registered brokers and dealers, or by one of the regulatory exemptions granted by the Department in its regulations. [see Exemptions From The Bonding Requirements, Q12 through Q15, Funds Or Other Property, Q17, and Handling Funds Or Other Property, Q18 through Q21.] Plan officials will usually include the plan administrator and those officers and employees of the plan or plan sponsor who handle plan funds by virtue of their duties relating to the receipt, safekeeping and disbursement of funds. Plan officials may also include other persons, such as service providers, whose duties and functions involve access to plan funds or decision-making authority that can give rise to a risk of loss through fraud or dishonesty. Where a plan administrator, service provider, or other plan official is an entity, such as a corporation or association, ERISA’s bonding requirements apply to the natural persons who perform “handling” functions on behalf of the entity. See 29 C.F.R. § 2550.412-1©, § 2580.412-3 and § 2580.412-6.

Could it be argued that the participant is on a bona fide leave of absence and thus the loan payments could be suspended (1.72(p)-1 Q&A 9)?

Thank you for the input Lou and Tom.

Can anyone direct me to where i could find if corrective refunds for ADP are performed on a FIFO or LIFO basis? I searched the forum and found a thread on the subject, but it referred to Treasury Regulation 1.401(k)-(1)(f)(4)(ii), but that seems to be regarding special rules for direct rollovers of Roth contributions. I've been looking in chapter 11 of the EOB, but i can't find anything. Thanks in advance!

What about a TH situation where the Plan is a Safe Harbor Plan, but per the Plan Doc the SH contribution is only allocated to NHCEs. There are three employees/participants in the Plan, all HCEs (Husband/owner, Wife, and another participant). For what it's worth, the other participant is an officer, but doesn't make more than the compensation amount to be considered an officer for Key Employee Officer. Since they are all HCEs, there is not an allocation of SH contributions. Is this deemed to pass TH? I failed to mention that the Keys deferred to the Plan. Thanks!

Treasury Regulation 1.72(p)-1 Q&A 19 has some additional requirements for issuing additional loans following a default.

Say an ER failed to allocate a matching and profit sharing contribution to an EE. Would the corrective allocation be subject to earnings? I think that it would be as Section 6.02(4) in EPCRS says that correcive allocations are adjusted for earnings. Another argument i have to support this is that the whole purpose of a correction is to put the EE in a position to where they would be had the error not occured. Thanks!

No, it has the blank space where the limit will be written for the elective deferrals that will be considered for the discretionary match, but there isn't a limit written in the blank space. Thanks!

Does the plan limit the amount of deferrals that will be considered for the additional match to 6% of compensation? No, while the Discretionary Additional Matching condition is selected in the Plan Doc, it does not limit the amount of deferrals that will be considered for the additional match to 6%. Does this discretionary match have any allocation conditions? Or more accurately, is there any way that an HCE could end up with a higher match than any NHCE if both deferred the same percent of pay? No, only the Plan's Profit Sharing contribution has allocation requirements. Does the document spell out whether or not the plan will test the match using current or prior year testing, or does it say "safe harbor - no testing"? The Plan says Safe Harbor Plan/ACP test only using current year testing. So, i suppose that would mean that the additional match is not eligible for the ACP Safe Harbor? Thanks!

Yes, but just to be sure we're both on the same page, let me rephrase it. The Plan Sponsor has a Safe Harbor Basic Match Plan and timely distributed the Safe Harbor Notice for the Plan Year ending 2014. After year end, they have some extra money and want to allocate an additional discretionary match of 100% of the first 4%. There was no notice that there would be an additional discretionary match when the 2014 Safe Harbor notice was distributed, but the SH notice did say that additional employer contributions may be made and to refer to the SPD. The SPD says that the ER may make additional contributions and that they would be subject to the vesting schedule. Will the additional discretionary match be a Safe Harbor ACP match since it doesn't exceed 4% of comp? There are no allocation requirements on the additional discretionary match. If you have any questions on any specifics that i didn't mention, please let me know. Thanks!

I have a question regarding this topic. If a Plan Sponsor, at year end, gives a discretionary match that will fall in the ACP Safe Harbor requirement, but the ACP Safe Harbor contribution was not disclosed on the Safe Harbor notice for the Plan Year in question, can the discretionary match still be exempt from ACP testing? The Plan provided a SH Notice prior to the Plan Year that said the SHBM will be made, but it included language that in addition to the Safe Harbor contribution, the Plan Sponsor may make additional contributions to the Plan and it referred the participant to the Plan’s SPD with a disclaimer that the additional contributions may be allocated in a different manner and subject to a vesting schedule. Any thoughts on if the additional discretionary match will need to be tested? Thanks!

I think you are referring to IRC 401(k)(4)(A) and Treasury Regulation 1.401(k)-1(e)(6).