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Yes, that is correct.

Had the EE been employed when the plan was implemented, he would have entered on 7-1-2005. Would you agree that this EE should get a contribution for that short period of time?

A plan is put into place in October, 2005 with an effective date of 1-1-2005. An employee terminated in August, 2005 and would have entered the plan had they still been employed. A SHNEC is being made for 2005. Should this terminated employee be entitled to the contribution?

I think the software/report is written incorrectly. Normally when top heavy minimums come into play, you can treat those receiving top heavy minimums only as not benefitting and if you pass coverage then you don't have to run the 401(a)(4) nondiscrim test. In your case they are benefitting even without the top heavy minimum. Since the NHCEs (I am assuming this is the case) are the only ones receiving an additional contribution as a result of the top heavy minimum, you should pass 401(a)(4) easily. Now if you have some HCEs receiving the TH minimum my answer would change.

I agree. I have seen many plan docs that have failed to leave out this provision so the plan doc would require you work 1000 hours for the short plan year.

Not really anymore. You can now carve out the HCEs to put with the nonexcludable group so you basically would always pass ADP.

That is right, starting for plan years that begin in 2006.

Your discretionary match cannot have allocation requirements under the final regs.

Yes, that is correct.

I get the impression that this is a controlled group of companies so you are going to have to have an audit no matter what.

Yes, that is correct.

The permissive disaggregated portion, otherwise excludable, would not be safe harbor but the rest of the plan would be.

We had a client install a new 401(k) plan for 2005. The employees elected to defer. The payroll company calculated the deferrals and actually took the deferrals from the checking account to deposit into the plan. However, the deferrals were never actually withheld from the participants. How should this be handled and/or corrected? My initial thought is this is payroll issue and the company is going to have to amend the W-2s. Any other thoughts?

Since they had less than 500 hours, they are excludable from coverage.

That is my understanding as well.

There is nothing inherently wrong with it but you need to make sure the plan document's allocation formula is defined in this manner.

Good point on the distributions. I had not thought of that. The loan issue is handled by the software so I am not concerned with that. The ADP test may become an administrative burden getting the election form from the participant.

I agree with you. You can't allocate it before they accrue it.

Is anyone planning on charging more in fees to plans that add the Roth 401(k) provisions? I am looking at this and I don't think it will actually cost me more to administer or recordkeep the plan due to the software handling it. Something I may be missing? Any ideas or comments are appreciated.

Unless I am missing something I don't believe anyone mentioned returning money to the employer.

Corbel also offers 1-2 seminars across the country year-round.

Good point. I was thinking from a balance forward perspective. You would need to reallocate the earnings to everyone if in a daily or SDA environment.

Notice 98-52 and 2000-3. If you have a plan doc provider, they should have something for you.

Your plan doc should address this. Usually it will say this person would enter on the date of their rehire.

Yes, that is the way I would handle it.