Mike Preston

I'm not sure I understand what the options are that you are choosing between. I believe, without looking it up, that the benefits are aggregated and then you divide by the appropriate denominator. I don't think you aggregate the fractions. Then again, my Gust deadline is tomorrow so I'm pretty much useless at the moment, as my head is into the plans on my desk. If my memory is serving me, I would convert the DC to benefits and then add the benefits from the DB and then finally divide by service. What this does is elongate the divisor with respect to the benefits accrued in the plan with less service. I can't see how it is done any other way, especially once you consider imputation of social security.

It is a simple amended return.

g8r, do you have any citation on the inability to use the 9/30/03 extended RAP as the basis for the EPCRS one-year rule?

Never heard of it. Doubt very seriously it can be done.

Uh, this discussion wasn't discussing government auditors. But I agree with the quote, anyway. ;-)

What does the plan say?

Surely it wasn't a full dollar.

cease, my pleasure. Fundek has it right, per the regs. However, for years before 1/1/2004, the regs aren't yet madatory, so one could, if one wanted, and if the plan supported it, define catch-ups to be those amounts in excess of periodic limits. I don't think I've seen any plans that are precise enough in their EGTRRA amendments to allow for this, but it is theoretically possible. So, as clarified by Fundek, the issue of being comfortable is not a payroll by payroll determination. It is a year by year determination. Has the client done its calculations correctly? Unless you see the complete data, I don't think you can be comfortable with it.

I am sorely tempted to ask: "What number would you like it to be?". But I usually don't. Especially in the case of a partnership or sole proprietorship where one must differentiate the deduction for purposes of income tax reporting. Your method is as good as any other, because there is no such thing as a good method unless the plan uses a method where there are no bases and the costs are determined on an individual basis. One could argue that the selection of a method that includes bases when the client will want or need a breakdown by individual is inherently inconsistent. But I wouldn't go quite that far. Close, though.

I would say the rules indicate those people are NHCE's. However, the IRS may be more lenient. Consider adopting a plan and submitting, along with a Schedule Q. Since the fee waiver is still in effect, that won't cost anything. Indicate in the cover letter what you want to do and see if the IRS will go along with it. Plenty of time.

Andy, you nailed my intent. Sorry if it wasn't clear. Merlin, compensation used in testing is independent of compensation used in the plan. How you come up with your benefits in each plan is almost irrelevant. Once you have them, though, you test against any 414(s) definition of compensation you want to use. What the db plan does doesn't really matter because 414(s) won't allow you to eliminate the increased dollar limits.

You say tomAto, I say tomahto..... Restructured, reclassified, do over, mulligan, whatever. You just can't do things like that in the corporate environment. There is a paper trail that makes doing so almost impossible. In a partnership or sole proprietorship environment, however, checks can be, and frequently are, cut directly from the bank accounts of individuals. When that happens, whether the monies are deferrals or employer contributions is subject to reclassification.

1) Yes. (i) Current Account Balances (iii) Only those years where the participant benefitted within the meaning of 410(b). Even if no contribution was made, forfeitures might still have been allocated. Yes, the aggregated DB/DC plan must be tested on a single basis, either rates or accruals.

Well, Earl. How close did it come?

See Section 12 of that very document.

Different folks have different opinions. Check out: http://benefitslink.com/perl/qa.cgi?db=qa_..._employer&id=31 and http://benefitslink.com/modperl/qa.cgi?db=...employer&id=229

Then I don't see how it can be restructured. The client is not gonna be happy.

The client is certainly allowed to keep their own records. And if their document provides that a participant can only defer x% normally, but may exceed x% by the catch-up limits available, then the client can certainly keep track. But my question is whether you can rely on the client to determine that such a plan limit has been exceeded. That is, are you comfortable with the client making this determination without giving you the facts to determine whether they are right? If so, fine. If not, then you should get detail. Keep in mind that you started this with the phrase that the participant did not exceed any plan imposed limitation. You have to reconcile your statement with the client's to understand what is going on.

Late amenders are subject to a specific schedule (the VCP schedule) divided by 2 if the submission is within 1 year of when it should have been done.

Yes, TH is based on the entire year.

In that circumstance, I agree that 80-155 probably doesn't apply. What type of plan sponsor? Sole Prop? Corp? LLC taxed as a partnership? Other?

The client will need to give you a reason that the $1,000 was considered a catch-up. It can only be a catch-up for specific reasons, not because the client wants it to be. In any event, IF it is a catch-up then you do not treat it as a deferral subject to ADP testing. IF it is a catch-up then it counts against your 2003 catch-up limit for the calendar year and the remaining catch-up availability is $1,000.

I have the feeling that this client deposited their own $40,000 early in the year and even though the funds were deposited into the pooled account, wants to have THAT $40,000 (or, $28,000 if the deferral is to be netted against it) as being attributable to him/her while the contribution for "others" was delayed until a later time period. That is the classic scenario where 80-155 applies and it applies to tell the client that treating the owner's contributions in a pooled account differently from others is a disqualifying event. But, back to the problem, I would vote for what the TPA said in the absence of an attorney directing the "correction". This client sounds like a disaster waiting to happen, if you ask me (which I know you didn't). How come the client is contributing $40k in the first place? If it is a 401(k) plan to do so is like putting a sign on one's forehead saying: "Where's my sign?"

The date of deposit is not the relevant date. The compensation from which the deferral was taken is the factor that determines which year (calendar or plan) that the deferral is associated with. It is therefore relevant when WOULD the deferral have been paid as compensation had the deferral not been made. When you originally posted that the contributions were "made" during the periods you defined, I thought that was because the deferrals were deposited on the payroll dates. If that wasn't the case, please correct your information and repost the entire scenario.

Boned, basted and barbequed?