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No, but they should be included in the loan policy.

With EGTRRA I can't understand why someone would want voluntary contributions. In my opinion, putting money in pre-tax is a better investment strategy since the amount that you would have paid in taxes is growing (hopefully) along with your contribution. Also, the processing for you, the TPA, could be greatly increased depending on how you structure the plan. If it is widely used it also possible that you might have some ACP problems.

I practice exactly what actuarysmith said. However, I think it would be possible to state that the plan allows a participant to defer 100% of comp and have a documented interpretation/administrative procedure that states this means 100% of comp after payroll taxes, cafeteria, etc.

Yes, my statement was meant for the profit sharing piece, not the SEP.

I don't see a problem with that except that you will have to state this in the plan document. If you are using a prototype then you would have problems. You would probably have to use a custom document.

HCEs do not necessarily have to give the money back for failing ADP/ACP. The company could give do a few things such as a QNEC contribution in order to get the test to pass. Your other questions: 1. HCEs are not used for top heavy. You use key employees v. non-key 2. All assets in the plan including distributions in the lookback year. 3. It is all assets no matter if they are currently vested or not. 4. If a plan is top heavy then every non-key has to receive a 3% contribution. Matching contributions can satisfy this for post-2001 plan years. However, if anonkey ee is getting a 2% match, the company will have to provide an additional 1% contribution to bring him up to the 3% requirement. It uses the vesting schedule of at least a 6 yr graded.

However, it may not be subject to withholding (not sure) and there is a definition of compensation that excludes that comp under the 3401 definition.

415 usually includes all income that is subject to income tax. This could include the fair value of a company car, certain reimbursed expenses, a home that is not paid for by the employee, etc.

Why not amend to use current year testing? Also, was the 401(k) not available in 2001? If that is the case, then you could use the first year election of 3% for the NHCEs.

Is that good enough or do they need to do VFC as well?

I have a client that paid expenses out of the plan to pay for expenses for financial accounting information pursuant to SFAS No. 106. It is my understanding that this is a fee that is not allowed to be deducted from a Plan. What would be the correct way to make the correction to the plan?

As long as the plan provides 100% vesting, you can have a 2 year eligibility requirement with the entry dates you are using. This is relevant to all contributions other than pre-tax deferrals.

However, some states do offer bankruptcy protection to IRAs.

I think it gives you some leeway but it sounds like you are leaning a little towards cross-testing a little. If you are including this then that would make the Plan an individually designed plan requiring an IRS determination letter.

Why does he want to get rid of the provision? It doesn't effect him either way.

I think in most cases reimbursement of CDSCs would be treated as a contribution to the Plan. However, I do believe there are certain rare cases which could fall under the Rev Rul 2002-45. That is the point I am trying to make.

However, you could view it differently. It is a sales charge and not a direct loss on the account. I really think it could be viewed either way. I think a better approach would be to let the CDSCs be deducted up to a certain percentage. Some of these investment vehicles charge an excess amount that I believe would violate a breach of fiduciary duty. I think the plan administrator would definitely have an argument of paying 70% of a 15% CDSC which would not have to be treated as a restorative payment.

I wish the IRS/DOL would just make an official ruling one way or the other.

You could also try to get the insurance company to bill the company directly in the amount of the CDSC instead of having the company directly reimburse the participants.

Hehe, Okay. I think we are both in agreement, we are just saying it in different ways. And yes, I take back any implication regarding active participants. I hope we did not confuse the starter of this thread too much.

Mike, I personally cannot find any reference or material that would require a terminated participant that has not accrued a benefit at that time to receive a contribution for a plan merger of an MPP and PSP. Please give me a reference. Thanks.

Do you also think these participants should be 100% vested?

If they are currently employed, yes. If they terminated before a freeze or termination, no. I do think I understand what you are getting at now. However, I do not think that a merger would qualify as a freeze or termination so this would not apply.

Not that I am aware of. I went back to review some of the applicable rulings on mergers and I cannot find anything that says this. Since everyone has to only work one hour of service, that is currently employed, the only question is the participants that are terminated without 501 hours of service. I can't see why they would be entitled to the contribution if they never accrued the right to it. Then again, IRS does not use logic.

You can amend the Plan to a zero contribution but anyone that has already accrued the 501 hours for the year still have to receive the required conribution. You will also have to issue an ERISA 204(h) notice on a timely basis.