Brian Gallagher

if the PA wants to give the HCE's more money that the NHCE's then he may want to consider a new comparability profit sharing contribution. the drawback is that (almost) everyone will get money, not just those deferring.

...and don't forget that the basic plan document must specifically allow for those deferrals to be recharacterized...if the doc doesn't mention it one way or the other, it's not allowed.

the 5% owner and the dollar limitation are two mutually exclusive criteria for the determination of an HCE. it is one OR the other. so just because someone is in one category, doesn't mean that he or she is not precluded from being considered in the other.

the money was not originally taxed going in, but when it gets replaced it is taxed when it comes out of the paycheck. ex: put in $2000.00 to 401k (pre-tax) take $1000.00 loan (not taxed) loan is 5.75% interest. assume its for 1 quarterly pmt--total will be $1014.38 partic has $1014.38 taken from paycheck for loan payment (taxed once) acct is now $2014.38 partic takes total distrib. entire 2014.38 is taxed again

not to get off the suject maverick, but i don't see that loan provision going away either. just because the govn't loves them. the money get double taxed! (after-tax payments and taxed when it comes out at retirement) sorry for the digression, folks.

as for the loan: if the loan itself would be a hardship, the participant does not have to take that either. as for the esop: got me.

What kind of match or profit sharing (if any) are available? instituting or upping a match might be a good idea. accelerating vesting is another potential idea. offer loans. maybe safe harbor contribs so you really don't have to worry about participation--ADP/ACP/Top Heavy would be satisfied. also, an extreme measure might be to find a new provider. my company has a good prototype product [shamless plug!!]

My thoughts: since this is obviously not a bone fide mistake of fact, the money needs to stay in the trust, so I don't really see a way for the participant to get that money back. maybe the company can loan him the money and he can pay them back. To me it would be the same thing, except that the loan payment was invested all at once, rather than in intervals.

On the prototype I work with, there is no $ or % for the discretionary match, only the regular match. I would certainly ask UPI. (Also, check the basic plan document; there may be something there.) ...bg

How 'bout this: pull the money (+/- earnings) from the new plan and recharacterize the money as ordinary income for the correct year, ie. re-issue 1099's (one H and one 8/P). Also, I'm thinking that the company will be on the hook for the 10% penalty tax for not timely removing the excesses.

I'm not familiar w/ that particular document, but is there a provision in the adoption agreement for anything like a discretionary match? If it doesn't, it sounds like the plan would have to be amended, because the AA is changing. Plus there's always the SPD/SMM's to consider.

Catch-ups can be made after the ee hits one of three limits: 402g, plan's deferral limit or adp test. In this case, the ee has not hit any of those limits. It's the ee's choice wheter or not to make elective deferrals and get the maximum amount of PS. Since he/she could have made deferrals and did not hit any of the limits, I would think that a catch-up contrib is not applicable.

I would say yes, all of the deferrals would be eligible for hardship withdrawal. My reasoning: if this participant is an HCE and the plan is using the current year method of ADP testing, he/she will not know until the end of the year exactly how much regular elective defferal and how much catch-up there will be. The HCE may be relegated to a dollar amount much less than $11,000 of regular deferral due to the ADP test. Contributions above the ADP limit will be considered catchup (up to $1,000). If the HCE took a hardship during the year, he or she would not know if the deferral hit the ADP limit, and after year end it would be too late--the money has already left the trust.

Where in the code does it allow for rollover of 401K money due to disability? Does it explicitly allow for it, or is it under the part where it says that "any distribution from a qualified plan are eligible for rollover except..."? We are having a minor disagreement here at work. Thanks for the help!

Where in the updated code can I see where owner-employees are now allowed to take loans under EGTRRA?