Jim Chad

Under the no good deed goes unpunished, here is what we have. Employer has about 150 employees with about 130 eligible. Now eligibility is one year and 1,000 hours and age 21. When they started the Plan 2years ago, they allowed anyone with 6 months and age 21. This made eligible a department where most people work about 5 hours a week. None of them defer. If we make that department ineligible it would get us under 100 eligible employees. I think this would mean no audit requirement for 5500. Am I correct? Am I missing anything?

It is not pretty. But I think it is OK. All of the tax effects will turn out correct at the end. But an audit would be ugly because the paper trail is all wrong. Instead of a 1099 the results will be on his w-2.HIs company contribution for the match will not be the separate deposit that would be clear. I would tell the employer that he should go back and correct everything. But if he doesn't want to pay my hourly fee to fox this, I would not loose any sleep. What do you all think?

Thank you, everyone. Happy Easter!

I'm just not sure. The non standardized prototype says match is fixed at 100% on deferrals up to 1% of comp. Calendar year plan and comp is annual for the match calculation. There are no hours or last day allocation requirements. They are having growing pains and would like to stop the match. I told them they can stop paying match every pay and make annual payment. But their question to me is can they stop the match midyear? I think no. What do you all think.

Corbel's SIMPLE document seems to say that the 25% test must still be satisfied? AM I reading this right?

Is there any option for self correction here like in EPCRS? If not, get we get ASPPA and NIPA to talk to EBSA about such a program?

Good points, Lou If that had been done, I would know where we are. They split up 17 months ago. The Plan was not split up. Does the young doctor have any options at this point?

Company A had a 401(k) Plan. New doctor was hired. New doctor and older doctor formed new companies. I am not sure if this is the way to say it. But I think both companies became employees of Company A. And both companies became Participating employers in the 401(k) Plan sponsored by company A. Things went bad and new doctor left. Older doctor removed new doctors company from being a Participating employer. New doctor was partially vested when he left. Do his years with his company after separation count toward vesting in older doctor's Plan?

I can see why no one wanted to answer this. Here are my thoughts. FWIW The right thing to do is get the PS 58 amounts, issue 1099's and amend tax returns. Yes, I know what you are thinking. Amending 15 years of returns would be bad, maybe even impossible. But it is RIGHT. What do people think of just amending 2009, 2008 and put all of the rest on the 2007? I don't know what I think of this idea. I would want to think about it for a couple of days before giving my opinion on it. But maybe this is the best that is possible. If you put it on the past tax returns, the amount claimed as income would be a "cost basis' when you surrender the policy. I think the amount of the cost basis should be paid from the Plan to the Participant because I see problems with IRA's and cost basis. That is my 2 cents worth, well maybe one cent. What do others think?

First check to see if the 50 cent match is in the document. Many times it is only the limit of counting deferrals up to 3% that is in the document and the rest is discretionary. If it is discretionary, all you need is a board or managers resolution to change the match to zero cents. If it is fixed at 50 cents, amending to discretionary will accomplish what you want.

Document says match is discretionary and annual counting deferrals up to 3% of comp. They were depositing monthly 100 cent on the dollar counting deferrals up to 3% of comp. In prior years, every year I would always do a true up at year end to comply with the doc. In June of 2010, they stopped depositing the match because of cash flow problems. I'm looking at doing the true up now and I have a question. Do I bring everyone up to the highest HCE which is 1.77% or Do I bring everyone up to the 3% received by one NHCE that left employment in March of 2010? The doc does not have last day, 1,000 hours or any other allocation conditions.

You have it correct. You have to do the circular calculation for self employment, starting with the information on the K-1.

I think if the match is vested, the match is distributed and taxed. I am at home and can't look this up right now. Can anyone confirm or correct me?

Austin I agree it feels "funny". ("funny" meaning commission). But I got used to that feeling with several 401(k) platforms paying our firm a very small (5 hundredths of 1%). It is so common that apparently the courts, in their infinite wisdom, think it is all right. Anyone else have any thoughts?

FWIW I am doing it, also. One pleasant surprise is the bnak and brokerage houses we use for these have all gotten good at giving us a list of assets that is fewer pages than it was the first year.

It sounds to me like a much smaller problem to leave now. Closing all of the accounts at once is one advantage and doing it when there is no divorce going on is another. I would explain this to the employer and let him decide. After that, it really is a "SEP" (Someone Else's Problem). FWIW if I were the employer I would move the assets now, even if the Morgan Stanly Rep was my best friend.

Austin, Much of what you say is true. Part of it, i can not say yes to , because I am not sure I follow. (It has been a long day.) You are right in that one great way to use component testing to help a cross tested Plan is to test the group of employees with a young HCE by using allocation rates. This way the young HCE's high EBAR does not matter. Does this help?

Are the fees at the new investment company lower because of the large amount of money which includes this guys account?

FWIW I think this is nondiscriminatory.

Here is another thought. Pay periods vary. We have all seen weekly, biweekly, semi-monthly and monthly payroll periods. Could sh be paid annually, this week?

Does anyone see a problem with this idea? If Nov. 2008 an older employee is hired, he will come into the plan on 1-1-10. Now new comp plan doesn't work so well and we cannot amend for 2010 to add permitted disparity. If every one is in their "own group", can I give an allocation approximating permitted disparity. Then do my testing on an allocation basis and imputing permitted disparity?

Payment was made January 2009. I think I have to have to 1099's. I think the gain is taxable in 2010, Code 8. How do I code the refunded Roth so it is not taxed again?

I have seen people look at a "benefit statement" Then decide on some interest rate that sounds reasonable to them and go to a math tables book to get the present value factor. Multiply it on a calculator and there it is. It takes about 5 minutes. I know enough about DB plans that I would have no confidence in this. What can I tell them, in layman's term, about what they are missing?

I think you are correct FWIW

I will start the discussion by throwing my SWAG out there. I think no problem or testing required. But it really is a SWAG. I have nothing to base it on.