Mike Preston

I don't © what the problem is.

Yes, that is correct. I just want to make sure that my 401k administrator is advising me correctly. They are stating that the discretionary profit sharing must be given to all eligible particpants, wheter they are deferring contributions or not, according to IRS regualtion and not my adoption agreement elections. So, they are stating that if an eligible participant declines to participate in deferring money for retirement, they will still need to enroll in the plan to receive the discretionary profit sharing. Does this sound correct? It looks like you are getting more than an ear full on this so I'll try to be brief. I just want to deal with a couple of your phrases, in case it helps clarify things a bit. First, you say that something must be done "according to IRS regulation and NOT MY ADOPTION AGREEMENT ELECTIONS" (emphasis mine). If I was asked whether that statement was correct or not, without any further explanation, I would say that it is a false statement. The reason is that you must satisfy both. If you don't, then it is a BAD THING. You absolutely must insist that the contributions you make satisfy IRS regulations and are not in conflict with your adoption agreement elections. Second, you say that if an employee is not contributing their own money to the 401(k) plan, then "they will still need to enroll in the plan to receive the discretionary profit sharing." The language that you used makes it seem like you think the employee has to do something, like fill out a form, or agree to open an account to receive a profit sharing contribution. That is definitely an incorrect view of things. It is better said that the plan administrator (that would be you) must establish an account on behalf of those who are eligible to receive a contribution. You enroll them. They don't need to do anything. You do it for them. If your 401(k) administrator is saying that the employee has to "enroll" by filling out some sort of form before they can get a profit sharing contribution, they are wrong. My guess is that you meant to say that "they must have an account established for them even though they did not contribute to the 401(k) portion of the plan". If you did intend to say that, then all is right with the world. Good luck.

No, I wasn't. But it is more than just "penalties". If the money is withdrawn before the guidelines allow, not only does one have to pay the penalties, but the earnings are subject to tax. Of course, it is possible to just lump the tax in with the penalties and call all of it the cost of withdrawing the money early. Sounds like you've got all the bases covered. There are two issues here: 1) is the payroll system withholding the right amount of income tax? 2) are the amounts being invested in your Roth 401(k) account both: a) being taxed currently; and, b) eligible for the earnings exclusion? #1 is something that you can adjust if you don't like. What is withheld doesn't have any impact on the tax you must pay to the IRS (although if it is too low, you can be subject to penalties in certain circumstances). All it does is modify the amount you must come up with when you file your taxes. If you do a projection of the amount you will actually owe and you contrast that against what is being withheld, you can then modify your withholding if you don't like the result. #2 looks right to me, simply because in your original post, you did NOT put an asterisk next to the amount shown as your Roth 401(k) contribution. The asterisk indicates that the amount is being withheld from your paycheck AND excluded from your taxable earnings. Since the asterisk wasn't there, it looks like your payroll provider has done things properly.

Oh, my. First, and foremost, "but as long as it is tax-free, it is not a problem" seems to imply that you want the monies you deposit to escape current taxation. That isn't the way Roth 401(k) contributions work. You ARE taxed on them now, just as if you had put them into your bank account. It is the appreciation (earnings) in the Roth 401(k) account that are tax-free. And that only happens in certain circumstances. If you pull the money out of the Roth 401(k) too soon, even the earnings are taxed.

What is the plan's eligibility?

I vote strongly for it being a reasonable classification. That, and $4.95 might get you a frappucino. I believe the regs have an example indicating that one of the acceptable criteria for determination of a reasonable group is hire date. It would seem to me that in the case of a soft freeze the effect is to demark on the basis of hire date. QED.

What was it? 99% before the edit?

It won't. I'm just making it up.

Annual.

mjb, if the only different is semantics, then all is well. It is when there is a legal difference when things start to go sideways. But I'm convinced that you have stated the correct calculation. It is the OP who is having trouble with this, not you.

Reed, Reed, Reed. No, wait. I misspelled that. What Tom sent.

I dislike the way you described something. Correct me if I'm wrong, but aren't you saying that you are CHOOSING to correct under the 1 for 1 method and because of that choice you are precluded from disaggregating otherwise excludables when testing the ADP/ACP? If so, then stating that you are precluded from disaggregating is not a fair description unless you make it clear that said preclusion is solely because of the choice you have made. With that said, I don't see any reason why what you do for the ADP/ACP test should have any impact on how you test 410(b) for the non-ADP/non-ACP portions of the plans. They are separate and distinct tests under 410(b) and whatever you do for the ADP/ACP test never has any impact on what you do for the non-ADP/non-ACP tests. Also, with respect to the ABT, you perform that test with respect to the tested population. In the case you posit, you will actually have three of them, should you need them. One would be with respect to those who are excludable. One would be with respect to those who are not excludable. And one would be with respect to the combination. The development of this is rather complex and I don't have time to get into it. I have posted rather long messages in the past which identify the sections of the regulations that make this result clear. Maybe somebody else has one of them bookmarked so it can be referenced. Bottom line: define the group from the plan you want to test under 410(b) (without permissive disaggregation; with permissive disaggregation - those who are excludable; without permissive disaggregation - those who are not excludable) and that group defines who you include in the ABT on a controlled group wide basis. In almost all, but not 100% of cases, testing the otherwise excludables passes because they are typically NHCE's.

It depends on how the plan is worded. If the plan is worded "properly" then there is no reason why the accrued benefit can't be reduced due to the factors you mention. I would also suggest that the plan would be in a better position if it had an LOD on the language.

I'm with Bird on this one. Of course it depends on how the plan is drafted, but just about every one I've seen defines "Plan compensation" as NE from SE less 1/2 FICA less amount attributable to contribution on behalf of SP, in the case of a DC plan (it is basically the same thing for a DB plan, but the amount attributable/on behalf of the SP is an actuarial calculation that has no definitive formula - but since this IS a DC plan, the above formula holds).

The devil is very much in the details. And there is no way that you can present enough of those details here for people to give you a definitive answer, one way or the other. Almost certainly, if everything was done properly, they could have structured things as you indicate they are administering the plan. However, the fact that you were left with the impression that it was intended as a merger of equals and the fact that for every other benefit they recognize all service with both hospitals leads me to believe that there is a significant potential that what has come to be is inconsistent with what they promised at the time of the merger. Unfortunately, even if they did promise recognition of all service when computing benefits under the new plan, they could *still* potentially wiggle out if the "form" of promise wasn't legally binding under ERISA. Different courts in this country, over the years, have applied different standards to what constitutes a legally binding promise. Hence, without a complete review of the facts it would be impossible for somebody to say that there was an ERISA violation. So, what to do? I suppose it depends on whether there are any time considerations. Are you planning on retirement soon and therefore wish to push the issue quickly? If so, you would want to submit an application for benefits and once they communicate to you what they think your benefit is, you would then file a claim for additional benefits pursuant to your belief that all service should be taken into account. What happens from there depends on their response. You may be pleasantly surprised that merely following this course of action results in enough firepower being brought to bear on the issue that it is resolved in your favor. Of course, the opposite is also possible. Once your claim is denied, you then have the ability to march into court and have the court opine on whether the hospitals are adminstering the plan properly, in light of all that has been promised. Obviously, for a court action, you would need to hire an attorney. I would even suggest that you consider hiring an attorney to prepare your claim for additional benefits, to ensure that you dot all the i's and cross all the t's at that stage. If you aren't retiring immediately, you may want to find somebody who is and then have them follow the path, above. You can even get a group together to fund the attorney's expenses on behalf of one individual challenging the benefit determination, as the hospital will be bound to improve benefits for all if they are forced into improving benefits for one. With all that said, you have a potentially very complicated set of facts to unravel and it may be in your best interest to involve an attorney earlier in this process, rather than later. Good luck and let us know the final result when you find out. As I have indicated to others, if you are intending potential litigation, please be aware that these boards are public and therefore do not post anything which could potentially be used against you should it come to light during the litigation.

Unless, of course, the CB plan is administered in a manner which ties the investments to the selections, thereby creating the a26 issue.

I think the issue is that, in a sane plan sponsor's world, it goes out and actually purchases the theoretical investement/index. In such a case, it can be argued that you have separate asset pools and are subject to a26. Being subject to a26 is a non-issue, of course, if each of these separate asset pools has at least 50 bodies. Hence, the ability of a large plan, like BofA to get away with this design when a small firm would be unable to.

I think the issue is a26, isn't it? If a plan covers 100% of the population and there are two choices and no fewer than 40% elect each choice it should work. Similarly, if at least 50 people elect each option, it should work. It was my understanding that this is the way the Bank of America plan was designed. But I could be misremembering.

Yes.

This is serious stuff. The Plan Administrator of the Plan needs to engage counsel to determine the best course of action. If nothing changes, my advice to the Plan Administrator would be to try to spin off that person's interest into a separate plan and let the PC deal with it. This may require court action. You need counsel for that.

Off the top of my head I can't think of any reason why not.

I haven't the time to research this at the moment, but why can't the "form of benefit" be a "3 year installment" of roughly $26,000/3? Each annual distribution would be less than $10,000.

You need to follow the terms of the plan, or change the terms of the plan to allow what you want. Note that you can superimpose upon the plan's terms via an amendment under 1.401(a)(4)-11(g) if you want.

When performing non-discrimination testing one must select an interest rate between 7.5% and 8.5% for most of the calculations. When given that choice, it is permissible to use any rate within that range. The definition of that range is that such an interest rate is a "standard" interest rate.

Not enough information. Generally, the answer would be yes. But if you are testing based on otherwise excludables and one of these individuals in excludable (generally under age 21 and less than 1 YOS) then that individual needn't receive the gateway.