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I would say no because the only reason you are able to setup the SH for 2003 is because it is a new plan. Since it would not be a new 401(k) feature for the 2003 plan year you would be subject to the 30 day notice requirement.

Yes, you can still setup a SH 401(k) for 2003.

Your plan year must be at leat 3 months long in order to qualify for the safe harbor provisions. If you are wanting to set a plan up for the plan year ending 12/31/02 then you cannot do it. You can still establish a new plan or convert a PSP into a SH 401(k) plan for the 1/1/03-12/31/03.

Yes, I have all that but I was hoping someone might a "short" version already written up that I could plagiarize.

Does anyone have the definitions of compensation in layman's terms (415, 6051, & 3401(a))? I am trying to give this to some clients and everything I can find is so long and technical that I am finding it hard to communicate the definition even though I have a good understanding of the subject.

Your calculations are fine but there are a few things to consider: 1. The deferrals of $22,000 would not be deductible as an employer contribution but would be deductible as a business expense under IRC 162. 2. If this is a sole proprietorship the total contribution will change due to the calculation involving half of the social security tax. 3. You could also give the wife more since you have not reached your 404(a) deduction limit up to her 415 limit of $30,000.

That was my thinking as well. Then again I initially didn't think you would have to give the gateway to participants that only received the top heavy or SHNEC. With all the fun gateway stuff I just wanted to be sure.

I am curious about putting another factor in this discussion. Let's say you finally pass coverage on a benefits basis. Would the gateway minimum apply in this situation where an employee was not eligible for the regular allocation due to the hours requirement but was eligible for the top heavy minimum?

Would anyone feel different with this scenario. There is one plan document. In the plan document there is an different allocation formula for each controlled group employer. This got me to thinking that you could perceive this as being as more than one more plan thus requiring a 5500 for each employer. Any thoughts are appreciated.

That was my feeling and the 5500 instructions seem to indicate this also. Thanks for the assurance!

First time I have had to file a 5500 for a controlled group. I have one controlled group with every company adopting the same plan. Do I file one 5500 for the plan or a 5500 for each member of the controlled group?

That is the first time I ever heard of that. I tried finding something on it and I was unsuccessful. As far as I know, mulitple employer plans could use either prior or current year testing, as long as the regs for switching are followed of course.

Oops, sorry. I just noticed you said those three plans were available. I guess I should read more thoroughly. I agree with mbozek.

The 402(g) limit is $12,000 plus $2,000 catchup contribution for the 2003 tax year.

I assume you are using a prototype document. I would contact your document provider concerning this. My guess would be that you would have to do a new adoption agreement.

Is this like Jeopardy where we have to answer your post with a question?

Sorry, but my last reply was written before I had my first cup of coffee. I see I was on a totally different tangent. I agree with Katherine on the tracing rules. Read IRS Notice 88-74 which the IRS issued for guidance on this subject.

Yes, I realize that but the ADP is something else to factor in as well. Most of the cross-tested plans I work with are using the SHNE so it does not really matter for those. Either way, thanks again for the good tip.

So you can use the top paid group election for cross testing. That makes sense but I never really thought about that for plan design. Thanks for the tip, Tom!

What does the plan's loan policy say? Most loan provisions don't require the loan to be used for a specific purpose. However, I do realize that a lot of loan policies allow loans for hardship situations. Double check the loan policy to see which is the case here.

I disagree. I attended a CPE seminar concerning safe harbor. The example in the mateials given to us from the IRS rep. gives a situation where a 3% SHNE is being used. A 4% discretionary match is also given that is 100% vested after three years of service. The example states that the match does satisfy the matching limitations of section VI.B.3. I also posed this question to Rich Hochman at another seminar and he concurred.

If you are using a 3% SHNE, a 4% discretionary match can be used and can be subject to vesting.

I don't know the code reference but maybe you could show him the plan document where it states this requirement and then show him a copy of the plan doc's IRS opinion or determination letter saying the doc is okay.

I don't remember the IRS ever writing their code in the form of limericks...

It is my feeling that rate banding should almost never be used with small plans but rather with plans with a minimum of around 20 HCEs and minimum of around 100 employees. I can't find much support for this so I am turning to you for some guidance and/or feedback.