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Not true. An indivual 401k is the same exact thing as the regular 401k.

Agreed. Just make sure the plan doc reads this way.

My original post says that all costs had been paid for.

I have a client who wishes to purchase the real estate out of his retirement plan. Is there a prohibited transaction exemption for this?

I have been trying to find some guidance on this and I finally found 1.125-2, Q/A-7(b)(7). It says premiums can be refunded to premium payers.

I misinterpreted then. I thought the original poster meant in addition to the 3% SHNEC.

No. Your formula fits into the safe harbor requirements.

You will have to read your plan doc to see if it uses the top paid group election.

I believe the problem with a retroactive amendment is that you have to submit the amendment via the VCP. That can costs more and be more time consuming.

I would agree with you that a refund is more logical. Unfortunately we are in an illogical business with an illogical IRS.

I tried to find some research to support your positions. After reviewing the the EPCRS procedures I do agree that refunding may be a possible solution. There is no actual guidance that I could find (let me know if I missed it). The ERISA Outline Book suggests that the correction should be a forfeit of the deferrals but this was before Rev Proc 2003-44 was issued. It seems that this is a similar situation to having an ineligible employee deferring before his entry date. I think in both situations either method would can be used.

Neither. From the 1999 ASPA Meeting: "42. A 401k plan allows participants to defer between 1% and 15% of their compensation. An employee elects 15% but, due to a payroll processing error, 17% of his compensation is deferred. The actual deferral is less than $10,000 and the error is not found until the subsequent plan year. There is no 415 violation. What, if anything, should the plan administrator do? IRS: Refunding from the plan is NOT an acceptable APRSC solution, although it might work under VCR. The money should probably be forfeited and used in whatever way other forfeitures are used, with the employee being made whole outside the plan. However, we strongly argue that the "mistake of fact" argument does not apply to these contributions!"

I think it would be fine as long as your document bases match on a plan year and allows a true up at the end of the year. If the doc states the match is on a payroll by payroll basis then you may be limited. Some docs are written with two different match formulas, one with a written formula and then a discretionary match on top of that. This may be an option you might want to consider.

I believe the Web Retriever is incapable of doing multiple pay periods. For example, if you needed a client to upload comp for each half of the year, Web Retriever would not be able to do this. Tom, let me know if I am mistaken.

What happens to forfeitures left over after a cafeteria plan has terminated and all expenses are paid?

Hmmm...I tried to attach the file but I get an error saying that I cannot upload this type of file. Anyone know a way around this?

I am assuming this is for daily plans. This can be quite a headache. Relius can't just export YTD deferrals, salary, etc. You would have to write a crystal report that did this for you and export the report to an Excel file. I will see if I have one and post it if I can find it.

I have to say that is the first time I have heard that one. I don't see why it would be a problem. It would be no different than an employer getting a bank loan to make the contribution to the plan.

Mike, why wouldn't the results be the same? 3% SHNEC of half year's comp plus the top heavy minimum difference is still 3% of a full year's comp. I missed the sole safe harbor piece. I would agree. You are exempt from providing top heavy minimums and it would only have to be on half year's comp.

I am assuming your plan doc says your definition of comp excludes comp before participation. In your case you would have 3% SHNEC on the comp from 7/1 to 12/31. The top heavy minimum would be calculated using the full year's compensation. The result would be the same but your vesting will be different.

Due to an ownership change in late 2002 a company is no longer a member of a controlled group. I believe that the rules are that this company can still be considered part of the controlled group for 2002 and 2003. If this is correct who actually gets to decide if they are included? If I am incorrect is this plan considered a multiple employer plan?

Besides the SSA, what other methods are available to find missing participants?

In my opinion you should have deferrals deposited sometime in January. I do not think it is prudent to wait until the due date of the tax return. I base my conclusions on the following sources: Department of Labor Pension and Welfare Benefits Administration 29 CFR Part 2510 Regulation Relating to Definition of "Plan Assets"--Participant Contributions; Final Rule DEPARTMENT OF LABOR Pension and Welfare Benefits Administration 29 CFR Part 2510 RIN 1210-AA53 The preamble is reproduced below c. Partnerships Two comments were received relating to when contributions by partners to section 401(k) plans become plan assets. The letters represent that, under 26 CFR 1.401(k)-1(a)(6)(ii), a partner's compensation is deemed currently available on the last day of the taxable year, and an individual partner must make an election by the last day of the year. They ask when the monies, which otherwise would be paid to a partner, but for the partner's election, become plan assets, inasmuch as partners do not receive wages. In the view of the Department, the monies which are to go to a section 401(k) plan by virtue of a partner's election become plan assets at the earliest date they can reasonably be segregated from the partnership's general assets after those monies would otherwise have been distributed to the partner, but no later than 15 business days after the month in which those monies would, but for the election, have been distributed to the partner. From the Pension Actuaries and Consultants Conference in Washington, D.C., on October 9, 1997: ASPA: If a sole proprietor or partner is deemed to earn income only on 12/31, what is the implication of elective deferrals made by the partner during the year prior to 12/31? Is a sole proprietor or partner deemed to earn all their income in one day for all purposes? IRS: Their income is actually earned throughout the year, regardless of the fact that it is DEEMED to be earned at year end. Thus, contributions can be made during the year, but this is done at the peril that the amount deferred as a percentage of pay is unknown until the year end and could result in problems.

Nevermind. I found out that this type of policy is not available through a cafeteria plan.

An employee has life insurance through a cafeteria plan way over $50,000. This employee has also taken a policy out on their child. Is the PS-58 costs calculated on the age of the employee or the dependent?