Mr Bagwell

I'm a little confused, but trying to think through this with you.... Plan is Top Heavy, Plan excludes HCE from getting the SH: if the plan was not SH, then all Non-Key would be required to get the TH provided a Key employee received/deferred (we will say the Key deferred above 3% for ease) a contribution. But because the plan is SH, the exemption kicks in and no TH is required. I'm with you here. You now throw into the mix a mid-year suspension and Non-Key HCE employees and the quote above. Seems to me that the removal of the SH contribution is going to require some sort of contribution to the Non-Keys (including Non-Key HCE) to satisfy the Top Heavy requirement. (Like Tom said above) Giving the Non-Key HCE a contribution doesn't "kick in the top heavy", they were required a contribution because they are Non-Key. The other side of the argument is that all the employees are owed a TH contribution because the SH was removed mid-year. Current year contributions don't turn on the TH. Last year's TH calculation turns on the TH analysis. Hope that helps.

I wouldn't do what I'm doing without this community. It's Invaluable!

I have the same problem Belgarath. I'm using Internet explorer. I need to remember the open in new window trick.

Interesting ESOP. The waiver once.....hmmm.... maybe that's the winning ticket. Thanks

BG, The hours condition gets blown up by the normal retirement age waiver to conditions. So it wouldn't matter if they worked 200 hours a year, according to plan doc, they would get the PS. I'm thinking a whole plan change would be necessary to get where they might want to go. Thanks for the help!

CHC, That's a possibility.

Point taken Larry. I didn't really like the term retirees either, but that is how they are described by the employer. I know they didn't really terminate, they just work on their own schedule now. I was hoping there was a little potential wiggle room with the 1099 employees. I really doubt these employees are being told what to do. They are probably just using the firm as a resource to do cases they want to do and the timeline they want to do work. I agree with your assessment of the "they are either independent contractors or they are not". Just looking for options.... If I was able to come up with a scenario to accurately exclude these employees like BG recommended via new comp, I'm all ears. I bet the plan would pass testing even with these excluded from the profit sharing. But what kind of language would I suggest to exclude Normal Retirement Age waivered employees? I wouldn't suggest removing the exclusion altogether. Thanks

Good thought. Sorry, should have said they are using 2 tier integrated. Not that it makes a difference, but they have been doing integrated for decades... Thanks BG

I need some ideas... Have a lawyer practice 401k plan that is starting to have retirees. I think the ownership group would like to NOT give the safe harbor and profit sharing to the retirees. It sounds like the retirees will be doing some work, just not a lot of work and will be paid via the Employer in normal fashion. I suggested maybe considering the retirees as 1099 employees. But, ER is not sure. I am just starting the brain storm stage. Any ideas? Can the plan exclude the retirees the plan year after "retiring"? I hate to use the word termination, because they are not terminated, they just work way less now. I don't think the plan could exclude by name... could be wrong. I don't see where a class would work, but maybe.... Thanks

Is this a Top Heavy plan? If it is, the plan will be giving 3% Top-Heavy to Immediate entry employees. And probably won't be an issue, but you have to run an ADP test on those not getting the safe harbor because of immediate entry.

A participant takes a hardship distribution on 1/3/2018. Suspension period goes through 7/3/2018. If participant then takes another hardship 5/3/2018, does the suspension period go through 11/3/2018? The plan has a match provision. Does a new hardship distribution require a new 6 month suspension?

CEW, You could tell this dentist to get lost and find another provider. And when he does, the new provider would guide him to proper procedures which the dentist would probably comply. Very maddening! I would go with blunt and to the point. Like a root canal!

That is brutal and hilarious at the same time!!

Adku, You have the 1099R figured out. Now to the basis part..... IMO: the important factor of 401k Roth to Roth IRA rollover is the opening and funding of the Roth IRA and the five year clock. IF the Roth IRA has been opened and funded in (pick a year) 2016. The five year clock starts in 2016. You don't get a new clock for the 401k Roth funds after the previous opening and funding. Doesn't matter if the funds have been in a Roth 401k for a few months or few years. 2016 is the magic clock start date. The basis from the 401k is of little use for the Roth IRA, if anything at all. The clock starts when the first dollars go into the Roth IRA. In this case, 2016. When new dollars are added to the Roth IRA, basis would be tracked. But the basis of the rollover would be the whole rollover amount. It seems counter intuitive that the 401k is tracking everything for proper taxation and then the Roth IRA seems to say "who cares". If the Roth account is opened and funded with these rollover dollars, the clock is starting over with the current year and the whole rollover amount is the basis. Of course the basis is important for the 401k. You would need to know when the clock started and when the participant turns 59 1/2. But that really only pertains to the 401k. When I used to visit with participants that were very Roth minded, I told them to open and fund a Roth IRA asap, provided they could. Sometimes the compensation levels prevented this. This way the Roth clock starts and they have the ability to roll the 401k Roth to Roth IRA without having the clock start over. Plus, if you roll the 401k Roth out of the plan previous to 70 1/2, no RMD's on the Roth IRA.....

Run like Forrest Gump!!

What is the definition of compensation in the plan document? If the document says w-2 plus deferrals: you are taking box 1 and adding box 12 DD amounts (deferrals). However, the SBJPA of 1996 defined deferrals as any amount contributed under a section 125 plan. Most medical plans and flex benefits are section 125. You would need to add them to box 1 too. So assuming that the plan does not exclude any compensation, I'm with BG5150, use the YTD payroll report.

The thrill of dual eligibility.... the agony of brain cramps!

A cross tested plan could be a cold shoulder to some participants. The cross tested plan allows for disparity in the allocation the profit sharing. The disparity could be 0.00 to an HCE. There is a wide variety of outcomes in a CT plan. If the client is so nervous about the allocation, give the HCE $100 and be done with it. The testing is going to be the same process if the HCE gets 0 or 100.

Here is what I found in regards to losses..... (4) Principles regarding corrective allocations and corrective distributions. The following principles apply where an appropriate correction method includes the use of corrective allocations or corrective distributions: (a) Corrective allocations under a defined contribution plan should be based upon the terms of the plan and other applicable information at the time of the failure (including the compensation that would have been used under the plan for the period with respect to which a corrective allocation is being made) and should be adjusted for Earnings and forfeitures that would have been allocated to the participant's account if the failure had not occurred. However, a corrective allocation is not required to be adjusted for losses. Accordingly, corrective allocations must include gains and may be adjusted for losses. For additional information, see Appendix B section 3, Earnings Adjustment Methods And Examples. Emphasis mine. This is page 29

Isn't the magic whether or not a KEY gets or makes a contribution, king? Non- safe harbor, I'd say yes, king.

Haha, I thought the same thing!

The participant does not have to wait until 12/31/2018 to be credited with the fifth year of service. A year of vesting service is defined (in your example) of 1000 hours. Once the participant reaches the 1000 hours, they have a year of vesting service. The practical side of this is when do you receive the census information to know that the participant has worked 1000 hours? Sometimes you get it once a year at testing time. Sometimes you receive via payroll updates. So I will have some plans were vesting is getting updated during the year. Some plans will get updated at the end of the year. No big deal really. So from your example, you would need to know at the time of distribution whether the participant has worked 1000 hours to know to update the vesting or not.

It's most likely a valid way to make a change. I'd guess the scenario of passing the information to employer/payroll to make the change is where the hang up is. I know of a major player in the 401k market that sends a deferral change report to the employer for handling. The employer has to go in and get the report and pass on. If the employer doesn't get the report I can see where the deferral doesn't get changed....

Plan is safe harbor non elective with a 100% of 2% non safe harbor match. A rehired employee was not giving the opportunity to defer for 2017. I know that the fix for the deferral piece is 50% of the 3% plus the 3% safe harbor. My dilemma is the match piece. If my brain is working correctly, I understand the regs to be... 2% match. The employee's missed deferral was 3% (because of safe harbor non elective) so the match is 100% of 2%. Can I get a confirmation or denial? Thanks

Mr Bird, I have had those same thoughts in regards to the 3(21) and 3(38). I would say they have their place, but the concept of the protection is generally a scare tactic to try to win some plans. I liken it to a Seinfeld episode where Puddy is selling Jerry a new car and Jerry asks about undercoating. Puddy responds by saying "we don't even know what that is".