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I am assuming the profit sharing contribution is discretionary. Since it was not made by the due date of the tax return, it cannot be funded for the year they intended it for. The company should amend its tax return.

It is used for any plan that is a member of a controlled group regardless of what type of plan document you are using.

What you have just described could be considered a CODA.

You only get a free ride if you consist only of safe harbor contributions. Since an additional profit sharing above the SHNEC is outside the SH contribution area, you are required to provide the top heavy minimum.

If the safe harbor match is the only contribution then you are exempt from top heavy.

As you stated, this would not be a true safe harbor match and the plan would still be subject to the ADP/ACP tests. I am assuming that the plan doc has a discretionary match provision. Why not incorporate this as your discretionary match?

Since the first contribution for a new plan that is effective 1/1/03 isn't deposited until 2004, should 1G be checked on the first 5500?

I have a client that has a cafeteria plan document that has not been updated since 1988. Are there any requirements to have cafeteria plan documents updated similar to qualified plans for GUST, etc.?

If I remember correctly, this onlyapplies to DB plans. I believe for a DC plan that is subject to the joint & survivor rules you only include a statement that the plan will provide the annuity by purchasing an annuity contract from an insurance company with the participant’s vested account balance. Someone correct me if I am wrong.

That is correct. That someone you are referring to doesn't know what he/she is talking about.

You will include all >5% owners. You will also include the top 4-5 (depending on how you round) wage earners.

You should review your loan policy/plan document to be sure but I think you should offset the loan and not include this on the sch I.

That depends on if you have offset the loan or not. In my experience most firms will offset the loan at the time the distribution is taken.

Yes, I agree. Problems are not going to be in the first year this new company is formed. The participants probably won't enter the plan because 95% of them will never work 1000 hours so that is why I want to add the one year wait just for the new company. All other companies would maintain immediate entry. Hopefully that made a little more sense.

Yes, that is right for the first year. However, for the second year they will no longer be statutory excludable which is where my problem arises. If I allow them immediate entry and they completely exclude this company from the plan, this will affect coverage/nondiscrim for that second year. I am thinking if the company is not excluded and this company has the one year wait imposed onto it then none of the participants will ever enter the plan, hence I will not have any problems in any plan year after the first plan year.

No, this will not be a merger. It will actually be a brand new company. If I allowed immediate entry then yes I could treat them as otherwise excludables for the first plan year. However, for any year after that I am going to have problems. If I add the one year wait, 1000 hours then they will never enter the plan.

Yes, and I am taking that into consideration. For years after the initial year they would be in the plan and would work more than 500 hours but less than 1000 which would cause the problem.

I have a client that is a controlled group of companies. A new company will soon be added to the controlled group. Currently all companies are covered by one plan document with immediate entry. The plan is also cross-tested. They are wanting to exclude the new company from the plan. However, it looks like they may have a hard time passing 401(a)(4) non-discrim if they do so. I am thinking of suggesting they implement a year of service for plan entry just for the new company. Due to the expected turnover in this new company this would eliminate any testing issues. I would appreciate any other comments or suggestions on plan design for this situation.

Your description sounds correct.

You got it.

It would not be appropriate to return to the client. Your document will tell you how to allocate this contribution. If it is a basic non-integrated formula then that amount needs to be reallocated in this manner.

I would require him to send you a signed letter stating that his compensation is high enough to use the compensation limit of $200,000, or something like that.

The one-to-one correction method has nothing to do with how the catchup is treated. Your should have recharacterized the excess as a catchup back when you originally ran the test. Whatever is leftover after the recharacterization is the amount that should have been refunded. Using the one-to-one correction method you would refund this amount and then have to contribut a QNEC in the amount of the actual refunds.

I don't think you will find anything in the regs that states exactly what you are looking for. I feel like the cite Lame Duck gave should be enough. They will understand what "net" means (I would think so anyway).

I had a similar situation recently and we concluded the same position that Lame Duck gives. If your ultimate goal is to not include the negative amounts you would have to amend the document to exclude those companies from the plan.