Brian Gallagher

Were there no deferrals for anyone? Or just those few people who were missed? If there were other deferrals, then there is a benchmark on which the QNEC would be based.

I know that the maximum Safe Harbor match is 6% (enhanced match). And I know the plan can have an additional, discretionary, match as well. Is the maximum on that 4% before the ACP test has to be performed? Two more questions: Is it at 4% or more than 4% when the test has to be applied? If and when the ACP test is done, which match gets tested? (say for example a 5% discr. match) Is it all 11%, or just the add'l 5% I ask this becasue a client of mine currently has a match of 10% but the participation is very poor, and the ADP/ACP fails each year. I was thinking of suggesting a SH match of 6% and a discretionary of 4% to ease the plan's testing woes. Will we have to do the ACP test? Does anyone see a problem with that scenario? Any thoughts, as always, are appreciated.

I would make sure that those letters you are sending him are going certified to make sure he is getting them.

You can use the "extra" adp in the acp if you want. They get tested as would employee contributions (after-tax). However, this cannot be done if a plan is using the prior year method for this test and had used current year for the previous test--that would be double counting.

Do you actually have to perform a top heavy test each year? For example, before we do a Profit Sharing calaculation for a client, we need to know if the plan is top heavy or not. My client said, "Oh no, we're not top heavy." I asked if she did one, she said she hasn't done one "in a while." What are the consequences of not documenting a TH test each year. The plan is obviously not top heavy--one key ee, bal $150,000, non-keys, $2.1MM, but there is nothing actually showing the calculations. (We did get something in writing staitng the plan isn't TH)

Don't you have to? I thought different contribution types were tested seperately. In this case, Safe Harbor non-elective (which I'm sure is being used as the top heavy minimum) and Profit Sharing would be tested seperately.

The plan may make an additional, discretionary match. above and beyond the enhanced match and stipp pass the ADP. However, if the discretionary match is greater than 4% of comp, ACP will not be satisfied by virtue of safe harbor. I may not got all the technical pieces right. I would see Q 27:92 in the Pension Answer Book (2003 ed).

Janet, There are three thresholds for applying money as a catchup. If and when the participant: 1) Hits the 402(g) limit 2) Hit the plan's deferral limit 3) An HCE has contriuted the maximum allowed to satisy ADP

Enhanced match can go up to 100% of deferrals not exceeding 6% of compensation. The 4% level has to do with a discretionary match.

I don't see any problem as long as you can track the earnings on each money source correctly. I just think it's a really inefficient way to keep trak of accounts.

That is an interesting arrangment. You may want to sepreate it to a third account because safe harbor contributions may subject to different withdrawal restrictions (eg hardship).

We set up the amortization schedule to start 45 days after the check date.

How would the person get a higher rate? If the match is capped at $10k, the rate is still 5%.

You wouldn't happen to have a citation, would you? I'd like to have some backup in case he calls back before my ERISA atty's have a go at him. While we are on the subject: When we do excesses before Mar 15, we send a letter saying that the money is taxable in 2003 (comptroller agrees). We also state that in 2005, the participant will receive a 2004 1099-R. (comptroller doesn't like that one bit) He says that no one can submit a "complete tax return per the IRS" without that 1099-R and that the people will have to pay the 10% premature penalty this year, and wait until next year (when they get the 1099) and file an amended return to get the money back. AND, get this, that my company (by law, because we did not furnish the tax documents timely) has to pay for that amended return! any thoughts?

I just had a comptroller yelling at me becasue my company processed an excess (adp) check on march 9. he said that unless the check was sent certified mail, the irs adds seven days to the check date as the date received. thus, he says, some participants rec'd their checks march 16 (7 days after mar 9). has anyone ever heard of this? i always thought it was the "mailbox" rule, that is, the check date is the guiding factor.

these people were terminated, but were then re-hired. no transfer was involved. however, the distributions were done after they were rehired.

I have a plan that has three locations, with lots of turnover. We (the record-keeper) did a force-out of an account that was less than $5000. When the person received the check, he questioned it. It turns out that he was re-employed with another location. Fortunately, he did not cash the check, and we just reinsted the account. UNfortunately, there were several other people in the same situation who cashed their checks. What are the ramifications to the plan/participants if the money is not returnded to the plan? What if someone spent the money and refuses to pay it back? I guessing it's an operational defect, but I don't know what the plan would have to do to correct it (besides having the participants pay back the proceeds).

For Pension Answer Book 2003: "If the plan year coincides with the calendar year, then a distribution on or before March 15 of the current year is taxable to the participant in the prior year." Q27:33 In a further example of a plan year end of Oct 31, the excess should be removed by Jan 15. It seems like the 15th is the magic # for the 1/2 part of 2 1/2 months.

Besides good o'l Sal Tripodi, all the copies of my Pension Answer Book have been well-worn. I really like the Q&A format. If I need more detailed information, I check Sal.

In this case, the answer is $10,000.

I thought Nabrin was talking about himself in the other thread and in this thread it is a "new guy".

oooops. That's what I get for not reading the entire message. but i believe i'm right in that he won't max out percentage-wise, but he will dollar-wise.

How 'bout adding a Safe Harbor Match? I doubt the participation level is so low becasue of the no match. With the SH match, the plan is deemed to satisfy ADP/ACP. Any Top Heavy issues w/ this plan?

If this person is going to be an HCE, he won't hit 20%. An HCE @ $90,000 can only put in 14.45% to hit $13,000. Plus he may be limited in the ADP test (if it's failing).

Who says you can't go back and redo a test and disaggregate? A report that was run with the 4% doesn't have to be the ultimate end product. Who's to say later that the plan could be disaggregated?