Mike Preston

I think we are arguing semantics as I'm pretty sure we all agree. But the logic I was referring to is that the tests under 401(a)(4) all boil down to whether each rate group satisfies 410(b). [see 1,401(a)(4)-3©(1)]. 1.410(b)-2(b)(5) is the citation that allows an employer that has no NHCE's to satisfy 410(b). Hence, it doesn't matter whether the document formula satisfies one of the safe-harbors of 1.401(a)(4)-3(b) or not.

As long as you know the IRS position and are willing to advise your client to ignore it, then at least you are making a conscious choice.

The previous answer is buying into a false premise. The OP is asking whether this particular formula can be "gotten away with" because it is an owner only plan. The previous answer gives a technically correct answer that the formula satisfies one of the safe-harbor formulas because of demographics. What should be said, however, is that in the case of an owner-only plan there is no requirement to satisfy any of the tests under 401(a)(4) so the fact that it technically conforms to one of the safe harbors is irrelevant. Stated another way, even if the formula and demographics did not satisfy any of the 401(a)(4) safe harbors, the plan would still not fail to satisfy 401(a)(4) because 401(a)(4) just simply does not apply.

I just use UltraVNC. Zero cost and does the same things, I think.

Yes, but the IRS has refused to acquiesce. If you are going to wait until Monday you should at least know that, on audit, the IRS will start down the path of saying it was late. How far they will go is unclear.

Thanks. When the OP says that he has a startup plan is he talking about a plan year that has already ended or a plan year that has yet to end? If this is a 2011 year, there are no longer any choices to be made, because the document must have specified, by 12/31/2011 whether the plan was using prior year testing. But, getting back to the original question, I don't think it is doable, after reviewing the regs briefly. I also found an IRS site: http://www.irs.gov/irm/part4/irm_04-072-003.html that lays it out fairly well. Search for "Use of QNECs and QMACs in Prior Year Testing" and you will find the rule that only QMAC's contributed before the end of the year in question can be used in borrowing. Hard to satisfy that rule if the matching contributions are "deemed" to be 3%.

Can you lay out the math that gets you to 1.7%? I think the terms of the plan control. So if the match is qualified, the prior year deemed 3% should be treated as qualified. Unless there is a reg provision that specifically says something to the contrary. I don't have time to scour the 401(k) regs on this issue, so you should.

I'm still not sure that your use of the term "profit sharing plan" is correct. It sounds more like a bonus plan where people receive certain amounts and those amounts are taxable income. Am I correct? The citation you are looking for is regulation section 1.401(k)-1(a)(3)(v) - Certain one-time elections not treated as cash or deferred elections. It is too long to quote here, but you should have no difficulty looking it up.

"Gotta love it when fact patterns change." I think all credentialing organizations should add a course to the current lineup called: "Whack-a-Mole - how to recognize when you are playing it with your client and how to handle it."

"lump sums can NOT be distributed" "The PA still does NOT request" "MAP-21 rates apply for funding and AFTAP in 2012 unless the plan sponsor (not the PA) elects otherwise." Maybe, the IRS hasn't issued its "transitional" guidance yet so it may very well be that the plan sponsor must elect to apply MAP-21 rates for 2012 in order to use them. Time will tell. I thought we were going to have said guidance issued before this weekend. I was wrong. Shouldn't be long, though. The substance of my original response remains unchanged.

Unless it is a one time election that applies to all future amounts, it renders the amounts deferred as 401(k) deferrals and therefore subject to the 401(k) limit for that year.

What CADMT said in fewer words: follow the terms of the QDRO. Period. It is not your job to tell the participant or the alternate payee that the way they drafted the QDRO is no longer necessarily consistent with their intent. I, for one, think that it is an entirely appropriate division in the circumstance you describe.

Just make sure that your eligibility computation period doesn't auto-flip to the plan year or else you will find yourself in EPCRS territory with a very unhappy client.

First of all, drop the word "waiver". There is no such thing. The IRS insists that the language of the document in question "agrees to forgo benefits not funded". Whether the PBGC is involved or not doesn't matter to the IRS. Many, many threads exist on the advisability or non-advisability of filing for an LOD. I always suggest it. Penny wise and pound foolish clients frequently decline the option.

No, it is normal.

Only possible in a termination context. I've never seen what you describe in the first paragraph. The IRS will take that position if the owner attempts to forgo benefits and a reversion is then created.

What is a non-ERISA plan with a 401(k)? Sounds nonsensical to me.

Bob has is right. Theoretically, anyway, the combination of those low interest rates along with the old UP84 mortality table results in a present value that is close to the currently available annuity pricing in the marketplace. YMMV

You are starting to make me regret teaching you about fonts. :-) I think you left out a couple of "not"s, so you may want to edit for clarification. At issue is whether the AAA's position paper regarding the requirement that the actuary wait for specific authority to issue an AFTAP makes sense in all cases. Certainly, if the law requires the actuary to wait then waiting is not a violation of actuarial standards. And if waiting has the consequences you describe, they naturally follow. So, yes, still under 60%.

Probably not. There would have to be "at least" some shared ownership. You'd want to ensure the "billing service" company doesn't not provide management services under 414(m) and does not fall under some type of "shared employee" arragement. What this is basically saying is that anyone can actually start a 'billing service' company and pick up the Doctor Group as their first client. You just have to ensure that there is a bona-fide employer-employee relationship between the billing service company and those employees (and they are not merely a smoke screen to hide the fact they are employees of the Doctor Group). Good Luck! Perfect answer.

This is such a basic question that I must be missing something. Besides, the fact that you used a percentage of 25% for the third HCE makes me think this might be a made up scenario. Why wouldn't you just design the plan to exclude this HCE?

Does 89-87 address this issue specifically?

If there is no growth and no change in tax rates then all you are doing is prepaying the eventual tax. Dumb. The Roth advantage is that qualifying growth is not taxed. If you remove growth from the equation you scuttle the reason for the Roth. Ben Spater wrote an article on this issue when Roth's were first introduced. What it said and what your post said are in agreement: those who contribute the maximum available to them as Roth contributions essentially are making a contribution larger than otherwise available. It is not intuitive, but it is correct.

While the other answers are no doubt correct, there may be limited circumstances where some, or all, of the amounts deposited may be withdrawn. The plan sponsor needs to ask someone familiar with the rules. For example, if this was the first year of the plan and the plan had a provision conditioning the first year's contribution on it being deductible and the Schedule C income was zero before consideration of the contribution then in that circumstance the monies most likely could be withdrawn. There are other circumstances that may lead to partial withdrawal which are based on the very difficult determination as to whether any of the contributions constitute mistake-in-fact contributions. A pension lawyer is your best bet.

Maybe this argues for a regimen of always reporting (even when not required - but it would be based on the information available at the time) and then reporting the payout in the following year. More work, for sure.