Sully

If the MP plan was in fact terminated then I doubt any of the money in the PS plan is subject to the J&S rules. Check the plan document to see about the distribution provisions for rollover accounts. If the MP plan was merged into the PS plan then I agree with the previous post.

Make sure you run the top heavy test. You may be required to give a top heavy minimum contribution to all of the eligible non-key employees.

I do not think you can change the plan provisions during the plan year and still be considered a safe harbor plan. See 1.401(k)-3(e)(1).

I've been through Rev. Proc. 2003-44 and it's not much use now since the plan is under examination. My real concern is whether or not the IRS would try to disqualify the plan since the 401(a)(9) distributions for 2003 were not made until 1/26/04. Any thoughts?

I have a client that did not make the required 401(a)(9) distributions for the 2003 calendar year. The missed distribution amounts were $2,000 to NHCE’s and $6,600 to HCE’s (> 5% owner). The distributions ended up being made on January 26, 2004. To my knowledge, none of the participants reported the late distributions and paid the associated penalty tax. Also, no VCP filing was done. The plan has received notice from the IRS that the 2004 plan year (calendar year) will be audited. I am sure the IRS will have questions about the distributions that were made in January and I am at wit’s end trying to figure what can be done, if anything. Anybody have any suggestions on what we can be done at this point or do we just wait and see what the IRS says and go from there? Thanks for any thoughts.

An Employer improperly excluded several eligible employees from their 401(k) Plan for part of the year. The employer self corrects and contributes QNEC's for these employees. Should these QNEC's be included in the ADP/ACP testing? If so, do you include the whole QNEC or just the part that was for the missed contribution, and not the 'missed earnings'? Thanks for any input.

What if this same highly compensated employee terminates employment before 7/1/07? Since he would be considered 'otherwise excludable' wouldn't you have to run the ADP test for 2007?

I have a client with a non-top heavy 3% safe harbor 401(k) plan. The plan is run on a calendar year. Eligibility is one year of service and age 21 with dual entry. The employer wants to change the plan to allow immediate eligibility and participation on the 401(k) portion of the plan. There is an employee that was just hired and he will make more than $100,000 in calendar year 2006, therefore he will be an HCE for 2007. He will be the only HCE in this situation; all the other new 401(k) entrants will be NHCE’s. He will enter the profit sharing and safe harbor portions of the plan on 7/1/07. The question I have is this: Do you have to run an ADP test for the first half of 2007 for the otherwise excludable employees? Or, since this employee will enter the safe harbor portion of the plan on 7/1/07 he will become an includable employee who is receiving the safe harbor contribution (for the latter half of the year) and therefore would not have to be tested with the other excludable employees for the year? Thank you for any input.

Based on the above posts, can someone please confirm the following: A calendar year C-corp employer with a calendar year plan would have until 3/15/06 (plus extensions) to adopt the automatic rollover amendment. Thank you in advance.

No W-2 issued (self-employed). It all showed up on his 1040.

His CPA told him he could make a $3,000 catch-up contribution for 2004. He contributed that $3,000 in 2005. His CPA also told him he could make a $3,000 catch-up contribution for 2005. He contributed that $3,000 in 2005 also. Last time I checked you could not make a catch-up contribution to a straight profit sharing plan. Also, the above amounts were above and beyond the 25% of pay 404 limit. The plan document says the following: 'In the event that a contribution made by the Employer under this Plan is conditioned on deductibility and is not deductible under Section 404 of the Code, the contribution, to the extent of the amount disallowed, must be returned to the Employer within one year after the deduction is disallowed.'

A self employed dentist shut down his practice in July '05 and is in the process of terminating his profit sharing plan. There are no other participants in the plan besides him. He has already funded the plan for 2005 and he will exceed the 404 deduction limit by $6,000. Since he will not have any future income he has no way of using up the excess contribution. Do you think this excess contribution could be returned to the employer based on a 'mistake of fact'? Thanks in advance for any responses.

As an aside: Why bother having a SHNEC if you do not have any HCE's? I guess you could have a Key Employee in the plan but it does not look likely based on the information you provided.

I'm getting ready to submit a VCP filing and was wondering about the expected turnaround time. The filing deals with 9 employees being excluded from the 401(k) plan for part of the year. Thanks in advance.

Maximum percentage allowed on salary deferrals is 100% (ignoring the FICA issue).

Assume the following fact pattern: Single participant 401(k) Plan for 2003. Participant is over age 50. Employee’s compensation = $16,000 Employee’s 401(k) contribution = $14,000 Employer’s profit sharing contribution = $4,000 (16,000 x 25%) Total allocation for this employee = $18,000 Is this possible? The regs say you exclude the catch-up contribution for 415 purposes so it appears to be okay. Am I missing something? Thank you in advance.

A client has a calendar year 401(k) plan with a match of 25% on the first 6% of deferrals. The match is funded annually after the end of the year. They have not yet made the matching contribution for 2003. For the 2003 plan year the plan fails the ADP test so we are returning excess contributions to two of the HCE’s and will forfeit their related match. The plan document says forfeitures are to be used to reduce the employer’s match. When the match is made a portion of it will be forfeited and the forfeitures are supposed to reduce the match. But, how can it reduce the match if the full match has already been made? Since we cannot use the forfeiture to reduce the 2003 contribution could we use it to reduce the 2004 match? Any comments would be greatly appreciated.

IRS and DOL announced today that people affected by Hurricane Isabel have been given an extension of time to file Form 5500. Does anyone know if the GUST restatement deadline was extended for similarly affected people? Thanks.

Based on above post: Deferrals during plan year = $26,000 Profit Sharing for plan year = $17,000 Total annual additions = $43,000 Is that possible? I thought the maximum catch-up for 2003 was $2,000 and, therefore, the maximum annual additions could only be $42,000.

Yes, the limitation year is the plan year.

Assume a 401(k) plan with a June 30 plan year end. Participant with the following employee 401(k) contribution history: 7/1/01 – 6/30/02 $0 contributions 7/1/02 – 12/3/02 12,000 1/1/03 – 6/30/03 14,000 7/1/02 – 6/30/03 26,000 (total deferrals for the plan year) What would be the maximum profit sharing contribution for this employee for the 7/1/02 – 6/30/03 plan year? A) 16,000 (able to use the 2,000 catch-up contribution) or B) 15,000 (because he already used 1,000 of his catch up contribution in the 2002 calendar year)

I have an Employer with 3 different classes of employees: Salaried Employees Hourly Union Employees Hourly Non-Union Employees The salaried employees are all covered under the Employer's DB and 401(k) Plans. All of the hourly employees (union and non-union) are covered by a collective bargaining agreement. When testing for coverage I know we can exclude the hourly union employees. But, how about the hourly non-union employees? I think 1.410(b)-(6)(d)(2)(i) allows us to exclude them but would like confirmation. Also, I do not know if this matters or not, but this is in Virginia which is a ‘right to work’ state. Thanks.

Convenience. The Airborne pick-up box is rigt in front of my office. I checked with Airborne and they will deliver without the street address. Thanks for the responses.

I am sending several 5558's to the IRS via Ariborne Express. The instructions to the 5558 do not give a street address, they only give the city and state (Ogden, UT). Has anybody had any problems with the deilvery of the forms without the street address? Does anybody have the street address? Thank you.

I read the article that was posted and the following section confused me: QJSA Requirements Remain the Same The final rules do not affect qualified joint and survivor annuity (QJSA) requirements under sections 401(a)(11) and 417. For example, a profit-sharing plan that offered a life annuity would also be required to offer a joint and survivor annuity. Money purchase plans must continue to offer joint and survivor annuities. Can somebody enlighten me as to why it says a PSP that offered a life annuity would also be required to offer a joint and survivor annuity. I thought we were able to eliminate the different payment options. Thank you.