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Do the rules of converting a regular 401(k) to a safe harbor 401(k) regarding when you can convert apply to SARSEPs?

I have a participant that converted from full time to part time. They no longer work 1000 hours in a given plan year. The plan is top heavy. The participant only works when needed and did not work on the last day of the plan year. Would you consider this participant eligible for the top heavy minimum or not? I believe the participant is eligible but I would like to hear some other opinions.

We should get ASPA to lobby for my proposed top heavy rules instead of repealing them. My proposed regs say that when a plan becomes top heavy, the Employer will automatically have to sponsor a coed naked pizza party as soon as administratively feasible but no later than the fifteenth business day of the following month.

That is correct. There is no where else to put it. You will need to know the amount of unrealized and realized gains/losses for the SAR.

That would be nice if all docs did that. Anyway, to summarize this thread and make sure I understand everything: If a plan passes 410(B) coverage testing with TH mins included as benefitting, the administrator will then have to cross-test the plan under 401(a)4. The TH mins would have to get the gateway and a corrective amendment would have to be added as Tom noted. If a plan fails 410(B) coverage testing with TH mins included as benefitting (assuming their is no fail-safe language that does not let you treat TH mins as benefitting) you would bring participants, including your TH mins, up the regular ER contribution level until you pass. Set me straight if I have erred in my logic.

I agree with your assessment. Does the Corbel doc allow you to test TH mins as benefitting? I am curious if their doc even allows you the opportunity to do the 401(a)4 general test.

But would your bring your TH min participants up to the regular ER contribution amount?

What if the doc has the fail safe requirements that says they get a contribution? Would you still need the corrective amendment? The doc just says bring in participants and give them the ER contribution but does not state whether you give them the TH or the regular ER contribution?

Here is another scenario added onto the previous that I have never come across. What would you give the top heavy minimum participants if you did fail 401(a)4? My guess is the full ER contribution. Another scenario: Plan fails 410(B) with TH mins included. When you bring in additional participants, would they get the TH minimum or the full contribution?

Okay, it is a Friday so my mind is fried. I see my error in thinking. For some reason I am thinking the fail-safe language got rid of 401(a)4 when intstead it gets rid of the ABT part of 410(B). Tom, set me straight here if I am still going towards the dark side.

So if I pass coverage testing treating THMs as benefitting then that is the end of 410(B). However, this does trigger the requirement of now passing 401(a)4.

Yes, but you would have to disaggregate those participants and test them.

I have a plan would not pass 410(B) testing under the safe harbor (not benefitting) due to a top heavy minimum. I know you can then see if it passes 401(a)4. It looks like the prototype doc they are on does not allow this but rather states that you keep giving EEs with the most hours a contribution until they do pass. Is this typical of most prototypes?

Are you saying I write sloppily or Notice 98-52 is?

If the division consists of only HCEs then I think you can. However, you cannot if this person is moving to NHCE status or there are any other NHCEs in your group. Notice 98-52 says that employees that are eligible for the 401(k) deferral arrangement must get the safe harbor contribution. You are also at the mercy of your prototype.

I am about to upgrade to 8.0. Are there any problems I should be aware of that any of you have seen after the upgrade?

If you reset their password or something you could go through the VRU/internet and do it that way maybe.

Yes, that is correct. I was assuming that they were both corporations. Sorry for the confusion.

If the FSO was a service organization then it would be a B-org ASG. Since that is not the case, it is not an ASG. There is another point I should mention. Since one corporation owns more than 50% of the other, the two will be treated as one for 415 purposes only.

I agree with you that it is not a controlled group. You must have at least 80% owndership. The 50% test only applies to a brother-sister relationship but you still have to have 80% common ownership. It is not an affiliated service group. In order for it be an A-org or B-org type ASG, the FSO must be a service organization. A restaurant would not be considered a service organization.

If any of the firms you work for has a naked pizza party, please let me know so I can send in my resume.

Nevermind, found it.

I am having trouble locating this one. What year?

This a profit sharing only so there is no ADP. This is a standardized doc so you cannot exclude groups. My initial thought is the participant is in the plan as well.

Where can I find that guidance?