Mike Preston

But it doesn't not follow either.

so I have 3 people. Husband and wife making $260,000 and NHCE making $20,000. Wife gets allocation of $1. NHCE gets allocation of $20,000. How much can husband get? Isn't it $12,399? Your statement was "if it was a db/dc combo plan and you were limited to 6% deductibility in the DC it obviously wouldn't work". Had you said "it was a db/dc combo plan with two participants in the DC it obviously wouldn't work" I wouldn't have "huh"ed you.

I agree with mbozek that "It's complicated." Some of the rest of his description is rather loose. I agree to see the IRS worksheet for details.

And if you do become disabled, do you think you would enjoy fixing an overcontribution problem (think excise taxes, etc.) when you could have avoided it entirely by waiting a few months to make the contribution?

Besides the problem that Kevin pointed out, all I wanted was the clarification you provided. In *your* numeric example the person of interest is making 5k. 94% of 5k is $4,700. Assume a typical gateway of 5%. The $4,700 would need $470,000 of additional comp so that the aggregate would fall below 6%. Potentially much, much less if there is another HCE getting something less than 5%.

Huh?

It looks like you will have W-2 income in excess of the SSWB (social security wage base), which is $118,500 for 2015. Accordingly, with 1099 income of $138,000 the "reduction" to that $138,000 for the "Self employment tax adjustment" will only be $1,848 rather than the $9,193 used to determine a max contribution of $25,760 [Formula of $138,000 - $9,193 = $128,807 * .2 = $25,761]. Substituting $1,848 for $9,193 results in a max contribution of $27,230. To get the right number, have your accountant fill out a Schedule SE (Form 1040) and use that number rather than my $1,848. mike

No. The W-2 will show the amount of salary deferrals made by the employee but will not show anything else in the retirement arena (matching employer contributions, profit sharing contributions, pension accruals, etc.).

Is it just me or what? Isn't the easy answer "yes, it works" because a safe-harbor design is a design that is the sume of two formulas, each of which constitute a safe-harbor design?

What does the document say?

Well, if that was the question, I would have agreed with you!

I believe the IRS has the right to consider the filing deficient and apply late penalties until fixed.

I can see various reasons a firm might provide a report that displays the ADP/ACP testing. Most revolve around the fact that ADP/ACP testing is, relatively speaking, understandable. Also, it may be used to display required refunds or QNEC's. None of that applies to cross-testing. I'm sure others can think of other reasons.

I think you are now saying "yes" to the question posed in message #5. As am I. I completely agree that the fact that this terminated HCE may or may not be in another plan is irrelevant to the question.

There is more out there saying you can than anything else. Remember that amounts that aren't deductible are NOT subject to an excise tax if the election in 4972© [i think that's the cite] is made. So, you have a choice, go the 4972© route and then deduct the overage on the 2015 tax return, recognizing that the maximum deductible for 2015 is an independent calculation and if there is precious little difference between minimum and maximum in 2015 the deductible limit in 2015 may not allow deduction of both the carryover and the 2015 minimum (wash, rinse, repeat) or say that there is no need for 4972© because the overage is first eligible for deduction in 2015. You get to the same result, but one requires a 5330 filing (showing no excise tax due) and the other doesn't.

Tom, take a look at your post here: http://benefitslink.com/boards/index.php/topic/52976-catch-up-rechartization-after-failed-adp/#entry229644 Have you changed your mind?

IF the ADP test is failed, how is that not a plan limit that has been exceeded?

Tom, I still don't get it. In the case being discussed, the PLAN has failed a test and the appropriate correction is a refund of $6,000 (if not catch-up eligible). How is it possible that the correction is *NOT* reduced by the catch-up eligible amount?

Oh, to get to your question, yes, we ask for a hold harmless whenever we rely on or re-publish work done by the prior firm if we aren't engaged to independently determine compliance.

I can do an 80-life crosstesting analysis in less than an hour if the census and HCE determination is ripe for the plucking so I don't understand some of what you say. I'd say the standard in the industry is to provide a client with, at the least, a representation that the allocation satisfies 401(a)(4). If the client has that, why is that any different from a representation that the allocations satisfy 410(b), 415, 416, etc., or that the definition of compensation satisfies 414(s)? Some firms might present formal reports for such representations, others might not. Some firms might present formal reports for one or more, but not all. Note that the 416 regs have a specific reference to the fact that a formal report isn't necessary to establish whether a plan is top-heavy. All that is necessary is to provide, in essence, a mathematical proof. If somebody familiar with the allocation can determine that the plan satisfies 401(a)(4) by inspection, and makes such representation to the client, what else do you think needs to be provided?

This came up years ago and the IRS representative said that one concern would be an exclusive benefit violation. I would think it would need to be egregious before the IRS would press such an issue. But I suppose if the plan sponsor contributed 4 times the PVB in anticipation of fully funding benefits for a future acquisition it might run afoul of the exclusive benefit rules. Getting to your initial issue, the problem is that we don't have any 404 regs so anything you do, even if it faithfully matches the result described in a gray book question, has to be sprinkled with a bit of caution.

Did you mean to say they should *NOT*?

With "clients" like this it would not come as a surprise to me to find that there is a non-owner participant and that a 204(h) is required. I agree that if there truly is nobody else a 204(h) Notice is not required.

It is a match. Run it by an ERISA attorney. It probably needs a bit of EPCRS.

There is no shortcut. Read the thread you cited. Ignore the jokes. You need an actuary to determine the required minimum contribution. It should be funded. Or excise tax paid. Plan should be terminated formally ASAP because otherwise 2nd year of accrual will take place (if it can even be avoided at this point, depends on the document). If appropriate, change prior sentence to the plan's formula should be reduced to minimize or eliminate 2nd year accrual. Final 5500-EZ should be filed when plan terminated. Anybody who hints at ignoring the plan because "nobody knows about it" should be web-shamed. You have precious little time to do the right thing and amend the plan and issue a 204(h) Notice to save the client from an accrual. Don't waste it looking for a way to help your client commit a crime.