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You would have to put in the contribution. Since the deadline was missed you will need to run your ADP/ACP tests. If you pass then you are good to go. If you fail then you would have to correct accordingly. A couple of things to be aware of: 1. The contribution will be deductible for the employer in 2004. 2. If the plan fails the ADP test then you can use the prescribed "one-to-one method under appendix B of the EPCRS

You would only count compensation as the plan document defines it. For an S-corp you will probably use W-2 wages. You cannot use the dividend income.

You have HCEs two different ways: compensation and ownership. The top paid group election applies only to the compensation test. In your case you would use the top 20% of the employees (over $90,000). You would then have to use the ownership test. The daughter is an HCE under the ownership test.

Correct me if I am wrong but I believe the IRS addressed this at the 2002 ASPA Q&A session with the conclusion that you do not have to give the gateway minimum to disaggregated portions of the plan. I think you will also find helpful guidance under 410(b) concerning disaggregation of the plans. I am too lazy to provide any other cites. However, as Blinky pointed out, the reg referenced by Andy is pretty clear to me. I think you will find that most leading experts in the country will agree with this position.

Yes, I did mean "and".

Safe harbor contributions for 2002 were due by 12/31/03 according to Notice 98-52. I think the plan is stuck giving the 3% SHNEC. Participants were given a notice at the beginning of the year telling them this may/will happen. Participants based their decisions on this information the client provided. The client will have to fund the SHNEC and loses the safe harbor status for 2002.

I understand your logic but is there truly a definition in the IRC that defines an owner of a business using attribution? I realize it for HCEs and keys but for an actual owner?

I would do something like "Owners" and then "Owners by Attribution". Your testing will not change. The daughter will still be tested as an HCE.

That is correct.

I am not sure yet. I believe it happened in early 2003. I would like to know the treatment if it has happened in 2002 also.

I don't believe the instruction to the 5307 give this information because there is no due date that I am aware of.

A plan has been a controlled group for the past few years. All companies of the controlled group adopted the same plan. Last year due to ownership changes one company is no longer part of the controlled group. When testing this plan, would it be tested as part of the controlled group or we it be treated as a multiple employer plan?

I would say yes, this does lock them into the five year period. There are not specific regs on this subject other than the regs concerning switching from prior to current year. Since these are the only regs I would rely on these regs as the authority for this conclusion.

Notice 98-52 specifically states "the safe harbor matching or nonelective contribution formula used under the plan (including a description of the levels of matching contributions, if any, available under the plan." You have specifically stated that the safe harbor status is 3% of compensation. You have not stated that you will use a match. You cannot issue a new notice due to the timing requirement of notice 98-52. As for my comments regarding the language in the plan doc, you must follow the terms of the plan doc.

I'd say they are stuck. I would even go a little further. Some plan documents actually spell out exactly how the safe harbor is to be met. If it says the plan sponsor will actually do a 3% SHNEC then I think you lose safe harbor status completely for 2004.

It is the way Relius does its vesting calculation. Go to the corbel website and go to the FAQ section. It will tell you how to correct this.

We are in the process of updating but we haven't completed it yet. There are a lot of new features that we are anxious to use, especially aggregating plans for ADP/ACP testing. That is a long overdue feature. We do a lot of web enhancements so we have to make sure everything is carried over after we upgrade.

Appleby, I use the Panel Publishers Online. Why isn't the Journal of Pension Benefits issues after summer 2003 posted yet? Do you know when the rest of the books will be updated for the 2004 version?

I don't have it in front of me but I believe IRS notice 98-52 says that safe harbor contributions must be deposited no later than 12 months after the end of the plan year.

You can only claim the credit for the first three years of the plan. EGTRRA sunsets in 2010 so unless the sunset provision is removed the answer to your question is 2010.

Can anyone point me to a reference comparing HRAs and HSAs?

You would distribute his vested portion.

I agree with your assessment.

IMHO, I don't think it is proper to do so since this is a controlled group. The 410(b) coverage rules do not apply to SEPs so you can't do the same things as you could with a qualified plan. I believe you have to include all related groups under a SEP arrangement.

I think you would need to amend to current year.