Jim Chad

You are on the right track. Most of the problems come from trying to exclude leased employees. They are normally included. Derrin Watson's book "Who's the Employer?" has a great section on this. And so does the ERISA Outline bu Sal Tripodi.

I changed the force out level from $5,000 to $1,000. Are there any problems in changing it back to $5,000?

I am starting to restate my Plans for EGTRRA and there are many things I am considering recommending my clients change in their documents. In the past, if they wanted to allow hardship withdrawals, I always recommended the safe harbor. Does anyone prefer the the other provision for Hardship withdrawal, and if so, what are your reasons? Thank you in advance, to anyone who puts in time discussing this.

I may be getting too picky. But is the gateway the hoops to get into the general test or is it the hoops to be able to run the general test on an accrual basis for a DC Plan?

I see that I did not address your main question. Which is can you raise the minimum deferral from 1% to 3%? I can't remember where, but I thought I read that any minimum over 10$ or 1% could be a problem. Does anyone else remember anything like this?

I can't think of any obstacles in laws or regulations. But a practical problem may be FICA and Medicare taxes. Is the employer an exempt organization, like a church? We usually recommend 90% as a maximum because it is easier to work with than 92.35%

no problem. Unusual, but no problem. Where can I apply?

Kim: you are correct. I was trying to say that it will save time by getting you closer than a wild guess. But you are right. It will not be exactly right. I just thought of something. Is there a way to tell Relius about earnings subject to FICA from another employer? I can't look right now because I don't have access to Relius now. Applyby : You are also correct. You would not treat him as a common law employee in the final, real calculation. By the way for those people who have never seen this before. One way a person can have w-2 wages and self employment income from the same employer is to be an employee for part of the year and a partner for part of the year.

I think Relius can help you, though. If you put the owner in as a separate employee who is eligible for the Plan and put in w-2 comp. And leave him in with the preliminary profit. Calculate everything and then delete the extra employee. Now you are starting the calculation knowing how much income to add to the wages for the owner.

2 issues here Yes you have to test benefits, rights and features. If only the owner and spouse have an investment available to them, it will not pass. As far as valuation and transfer, you might want to look to see if the document allows the trustee to have an extra valuation done at any time. I would be very surprised if this is not there.

I don't think there is a good way to handle this. Maybe the best idea would be to call support for a workaround.

Yes, you can do both Section 404 says that the deferral is deductible separate from the employer contribution.

Is this a benefit, right or feature which needs to be tested for coverage or nondiscrimination?

What software are you using?

I can't imagine a reason to exclude commissions from taxable wages unless they are deferred into a 401(k) or something like that. Can you tell us more about what you are thinking?

NO, I do not think they would both have to offer the same match. I think they just have to pass coverage. Think of this as if it were one company with 2 locations or 2 divisions. Depending on the mix of HCEs and NHCEs, it might pass coverage. And then, of course, you would have to do the ACP test. I think the ACP test would include only the participants in the division receiving a match.

I do it the same way as ELK h says above. Even if the rest of the 5500 is on an accrual basis, I still report corrections on a cash basis: in other words in the year they are paid out. This is the only way I can see to have the gains be reported correctly.

Am I right in thinking that the W-2 income is from another business that is not under common entity rules? If this were the case, your reason for taking it into account is just for FICA and Self employement taxes. If it is a common employer, that is a different problem. Is the w-2 from a common employer?

Good points, guys. Yes, there is one HCE. I called an IRS auditor, and here is what I was told off the record. Note: I am paraphrasing from memory. If I am doing an audit, I would not be too concerned about getting all the data from the parent company. The parent company is the one with the power and can look out for them self. It is the employees at the little companies we are supposed to look out for. The conversation went on for a while, but that is my summary of it.

If they are both defined contribution plans, such as in your example the limits for 404 and 415 are applied to the combination (or totals) of both Plans. If you take all of the rest of the limits one at a time, they are easy. 402(g) Limit of 15,500 plus catch up is per person and all Plans combined. 417 limits the amount of compensation used in calculating benefits and testing...this is on a per Plan basis and you do not need to cut it in half because you have two plans. Oh. Top heavy would also be combined. What I mean is that in calculating whether the plan is top heavy, you would use all balances in both Plans Plus distributions from both Plans. Then, if the Plan is Top Heavy, you would need to meet the TH minimum once. The Plan documents should be coordinated and tell you which Plan needs to provide the TH minimum.

I have been trying to think of an example that would be more clear of what I was thinking. Sometimes, shares of a mutual fund are distributed to one terminated employee as an IRA rollover. This may be done to save him having to pay the front load on those shares if he had to buy them again. The 401(k) Plan would treat this as if the shares were sold, gains realized, and cash paid out. Or maybe another example would be when a traditional IRA is converted to ROTH. The accounting shows the gains to be realized. I know the gains aren't realized. But I think the accounting is done as if they are.

My question for everyone is: When is the process of terminating a Plan beyond stopping? If no one has been paid out, can't you start allowing deferrals, etc.? Would anything need to be done with the final Determination letter or could you just put it on a shelf and ignore it?

Lori: I would think the gains were "realized" at the moment of transfer. And I would put them in realized gains. FWIW

I am looking at taking over the 401(k) Plan for a company with 6 employees. This company is owned by a company listed on one of the stock exchanges. The big company also owns at least one other company with 4 employees and no 401(k) Plan. I am trying to picture how I am going to do coverage testing. I think I am going to have a hard time getting all of the census data for the large company and all of the little ones. Does anyone know of any shortcuts I can take? (I think the previous TPA saw the Basic Match Safe Harbor and thought no testing was necessary.)

These are two seperate questions. The answer to the first is:Yes, all qualification requirements must be met every year. The second question about testing and disqualification is a little tougher to answer. I can't understand what "automatic disqualification" means. There are some things that if the IRS finds on an audit they would start talking about disqualifying the plan. But hopefully a cure could be worked out to prevent disqualification. Can you clarify your question?