Tom Poje

Austin: what you point out is not so much a problem with the stance on forfeitures, but rather a problem with the top heavy rules in general. why should an owner be penalized for deferring? He sets up a deferral only plan so his employees can defer. but because he defers and there is little or no participation, he has to put in 3% for everyone because he deferred his own money. In fact doubly screwed if no one defers because now he gets a refund and still has to put in a top heavy. or else, that is just poor plan design. The same Corbel constantly has warned about having the possibilities of forfeitures ruining the top-heavy free status of a safe harbor plan. if there was a risk of having a minimal amount of forfeitures why not just amend and vest to 100%. that would be better planning. I'd agree with the idea that if I had a minimal amount of forfeitures I'd find some plan expenses (even next year) to eliminate the nonsense.

just so everyone knows the LRM is called Cash or deferred arrangement (CODA) of Required Modifications Information package found at http://www.irs.gov/pub/irs-tege/coda_lrm1011.pdf 3 times (not just once, but count 'em, 3 times) they tell you... p. 14 [Note to reviewer: The blank space in the preceding paragraph should refer to the Plan's forfeiture provisions applicable to employer contributions other than Elective Deferrals and Qualified Nonelective Contributions. In the alternative, a sponsor may provide for specific forfeiture language applicable only to Matching Contributions. Note that forfeitures cannot be used as Qualified Nonelective Contributions, Qualified Matching Contributions or Elective Deferrals.] p. 23 [Note to reviewer: Forfeitures cannot be used as Qualified Nonelective Contributions, Qualified Matching Contributions or Elective Deferrals. For Plan Years beginning after 2005, matching formulas, other than those above, such as flat-dollar or ones that target matches at lower paid Non-highly Compensated Employees, must satisfy additional requirements specified in Regulations § 1.401(m)-2(a)(5).] p.36 (b) ACP Test Safe Harbor Matching Contributions will be vested as indicated in the adoption agreement, but, in any event, such contributions shall be fully vested at normal retirement age, upon the complete or partial termination of the Plan, or upon the complete discontinuance of employer contributions. Forfeitures of nonvested ACP Test Safe Harbor Matching Contributions will be used to reduce the Employer's contribution of such ACP Test Safe Harbor Matching Contributions. [Note to Reviewer: Other language specifying the use of such forfeitures may also be acceptable. However, forfeitures may not be used as ADP Test Safe Harbor Contributions, and if used as anything other than ACP Test Safe Harbor Contributions, the Plan will not be exempt from Code § 416.] ............... remember the original Safe harbor documents. they original put the safe harbor language in, and thought everything was driven by the notice, but the IRS put a stop to that, and I think most people followed the IRS desires until revised language came out. now, does that mean you can follow Corbel's argument that since you have a document you can use forfeitures til the IRS puts a deadline on things? probably. of course I suppose that could raise an issue of 'ethics'....or put another way, irregardless if I did it in the past, could I do it at the moment knowing what I know? ........... as a side issue, the original Safe Harbor notice language almost implied these weren't QNECs or QMACs, but the new 401k regs definitely said they were. IRS Notice 98-52 VIII Interaction with other rules and testing methods D. Qualified Matching Contributions and Qualified Nonelective Contributions To the extent they are needed to satisfy the safe harbor contribution requirement of section V.B, safe harbor matching and nonelective contributions may not be used as qualified matching contributions and qualified nonelective contributions, respectively, under any plan for any plan year. For example, if a plan satisfies the safe harbor contribution requirement using a safe harbor nonelective contribution by allocating a 7-percent safe harbor nonelective contribution to all eligible employees, contributions in an amount equal to the first 3 percent of each employee's compensation may not be used as a qualified nonelective contribution under the ACP test. However, safe harbor nonelective contributions in an amount equal to the remaining 4 percent of each employee's compensation may be used to satisfy the ACP test (subject to the requirements of section 1.401(m)-1(b)(5)). The new 401k regs made it clear that for safe harbor “the employer is required to make a QNEC…at least 3%...” 1.401(k)-3(b)(1)

I remember many moons ago having a Corbel document with fail safe language that mentioned a plan could satisfy either ratio percentage or avg ben pct test, must have gotten past the reviewers, but eventually they had to modify that language, so this would not be the first instance in which approved document language had to be modified at a later date. Austin - I think the position is no, you can't use forfeitures as a SHNEC, because a SHNEC is used in the ADP test. (Or at least, the IRS would prefer you don't do things that way.)- at least going forward, but what that date (or if enforcable) will be is hard to say.

I'm not sure I understand the reasoning. The only amounts that can ever be used in the ADP have to be 100% vested, implying they are QNECs of one type or another. (e.g. a SHNEC or a Basic Match) A safe harbor match could be discretionary match meeting the 4% comp limit guidelines, which would never be used in the ADP test. The discretionary can be subject to vesting, thus it would make sense that forfeitures could be used as a safe harbor in the ACP test. This all goes back to the issue "Can forfeitures be used to satisfy safe harbor?" and the IRS has made it clear they feel certain that since the regs say QNECs must be 100% vested when made to the plan, that forfeitures (which obviously result from contributions subject to a vesting schedule) do not meet this requirement. based on the comments on the handout for IRS Q and A #21 for this year's annual conference it's worth the price of admission (hint: some folks at ASPPA disagree with the IRS position) well, I won't be attending this year so I will miss that and have to wait to hear what other people say.

with a taxable wage base of 110,000 I arrive at the following for the covered comp limits (hopefully the spreadsheet still works) edited: note: I have a sample plan with dummy people for different ages on Relius and by plugging in the TWB for 2012 the results that show on the nondiscrim report for the covered comp are the same as my spreadsheet. hurray! looks like it still works.

the Sept CPI-U was just released, and is 226.889 so according to the code, the following should be the limits for next year: close, so close to getting an extra jump in the 415 limit to 51,000 xxxxxxxx catch deferral compen dc 415. db 415. key emp hce unround 5,752 17,255 254,780 50,956 203,824 165,607 115,120 rounded 5,500 17,000 250,000 50,000 200,000 165,000 115,000 of course, I guess Congress could always jump in and say "We are changing the rules. you will never ever see an increase because we spent all your money and are short of cash" for soc sec, which is based on the CPI-W factors I come up with an increase of 1.0359 depending on the rounding I make that a 3.6% increase

the instructions for schedule H says the following: Line 3d(2). top Check this box if the plan has elected to defer attaching the IQPA's opinion for the first of two (2) consecutive plan years, one of which is a short plan year of seven (7) months or fewer. The Form 5500 for the first of the two (2) years must be complete and accurate, with all required attachments, except for the IQPA's report, including an attachment explaining why one of the two (2) plan years is of seven (7) or fewer months duration and stating that the annual report for the immediately following plan year will include a report of an IQPA with respect to the financial statements and accompanying schedules for both of the two (2) plan years. The Form 5500 for the second year must include: (a) financial schedules and statements for both plan years; (b) a report of an IQPA with respect to the financial schedules and statements for each of the two (2) plan years (regardless of the number of participants covered at the beginning of each plan year); and © a statement identifying any material differences between the unaudited financial information submitted with the first Form 5500 and the audited financial information submitted with the second Form 5500. See 29 CFR 2520.104-50.

the CPI-U factor will be released around 8 AM or so on the 19th. so except for a caveat that Congress could always jump in and say "NO" I'd say things are pretty well locked in place. Using an value of 226.200 for Sept, I arrive at the following: catch up deferral comp dc 415 db 415 key hce unrounded 5,746 17,237 254,520 50,904 203,616 165,438 115,000 rounded 5,500 17,000 250,000 50,000 200,000 165,000 115,000 I only chose that value because it makes the HCE rounded and unrounded value the same. In other words, the HCE limit will either be 110,000 or 115,000 unless there is a dramatic change from the value of 226.545 in Aug.

for an upcoming ASPPA webcast Restating Plan Documents for PPA and Revenue Procedure 2011-49 When: Thursday, November 3 from 2:00 p.m. to 3:40 p.m. ET one of the highlights says: Attendee Takeaways: Cross-tested prototypes will no longer have a limit on the number of allocation rates, but new questions exist as to the availability of individual participant by participant rate groups.

I'd agree, at this point in time, there is no attachment for the SF (aside from the SB if its a DB) but as you pointed out, it is probably a good idea to fill out a schedule of delinquent payments and have it on hand so you aren't trying to re-create things at a future date.

don't know what the vendors will do without (g)Reed picking up the last of the giveaway items (nor for that matter how the rest of his office could handle it if he doesn't go and return with the goods). I ended up speaking at the NIPA conference this year so I earned my credits for the yaer I'd agree, the chance to sit and swap a few ideas and share some info is always missed. still have the links here. funny, the one year a new song or two hasn't popped into my head and I don't have to speak at ASPPA. But it has given me time to throw all the songs into one powerpoint. I'll make the people suffer at our Christmas party. gotten out of hand. 14 songs, almost 45 minutes.

don't have to speak this year, so I'm going to be a no-show. probably won't even be missed. you'll have to save your tomatoes for another occasion (or use them on someone else).

Sam Cooke, in his song "What a Wonderful World" explained that to me a few years ago. (If so desired, the 'mid' file is attached, but you have to rename it from xls to mid and then you can sing along) Don’t know much about this DB There’s a funding de-fi-cien-cy And I know that they are on the hook I-R-S wants to take a look And I do know that the dollars are few And the contribution’s overdue What a terrible plan this DB Don’t know much about ac-tu-ar-ies No sense of humor, no per-so-nal-i-ties Let us cut it quickly to the core Everyone knows they are a bore They will tell you one and one is three Or whatever you want it to be What a strange world this ac-tu-ar-y Now I know, I’m not an “A” student [“A” for actuary of course!] I’m not trying to be For maybe by being an ac-tu-ar-y No one would understand me? Don’t know much about P-B-G-C Supposedly it’s a guar-an-tee Then the rules changed under P-P-A Even more confusion to this day So let’s eliminate them two by two For if actuaries were a few What a wonderful world it would be.

we filed the 2009 awhile ago (which includes 2009 and 2010) data with batch through ft william and that has been accepted. just filed a second batch consisting of 2010 only today. seems to take a few days to process everything.

I was going to ask "Why would anybody want to become an actuary when they grow up?"

not an expert on loans, but it might hinge on the plan's loan policy. some do not permit loans once someone terminates, so paying back a loan, even if within the 5 year window might not be possible. since you would go through VCP anyway, its going to be up to the IRS to decide if they accept whatever you propose.

under the definition of effective availabilty (1.401(a)(4)-4© it says based on all the relevant facts and circumstances the group of employees to whom a BRF is effectively available must not substantially favor HCEs. your description certainly sounds like it substantially favors the HCEs. that being said, since there is no mathematical test, I suppose you could use the facts and circumstances from the coverage rules 1.410(b)-4©(3) as a guideline. for instance only a few NHCEs bodies were needed to pass ratio %, or if the avg ben % test was well over 70% , then possibly things pass the smell test. but it still is going to be a judgement call. I think you would have to look at "Why are there not long term NHCEs if there are long term HCEs?" and that's hard to give any proof one way or the other. Once had a plan audited and the IRS agent said there is over 20% turnover. why don't you consider that a partial termination. I pointed out this was a plan in the computer industry and the agent actually was surprised the turnover wasn't even higher, and let it go at that. I don't think the fact the plan fails should be considered, because all that happens is the HCEs get a refund, so they gain either way. I would be very wary of 3 year testing when a plan fails. the rule is not there to say "I only need to correct once every three years"

doombuggy: now that is funny (and thanks for the compliment) You never know when you pick a song if enough people will appreciate it (much less even have heard it) That was ceratinly one of the first songs I did. Don't have to speak this year so won't be at the ASPPA conference this year. Kind of nice not to have the pressure on, it still frightens me a bit to get in front of a large group and try to impart some information. Here are the words (and a midi-file, had to change the extension to 'xls' so you have to rename it to 'mid') (I really do like the original, says a lot about how we rush through the world so much we forget some of the more important things in life) Thanks again for some memories. The plan arrived just the other day The company put in a four-oh-one kay They added a match and what can I say I deferred in the usual way The cash was growin’ as I put away I’d say “I’ll have a lot some day, yeah, You know I’ll have a lot some day.” And the cat’s in the cradle And the silver spoon Little boy blue and the man in the moon When will I retire well I don’t know when But I’ll have a good time then, yeah, You know I’ll have a good time then. The plan turned ten just the other day I said thanks for it all I’m doin’ okay I invested low now its high today I’m glad I deferred 10% of pay As I saved away my wife her smile never dimmed She said “I admire him, yeah You know I admire him!” And the cat’s in the cradle And the silver spoon Little boy blue and the man in the moon When will I retire well I don’t know when But I’ll have a good time then, yeah, You know I’ll have a good time then. The plan was tested just the other day It failed ADP in a big time way They put in a QNEC once and awhile A good deal for me I said with a smile The deferrals were too high for the HCEs See you later can I thank you please. And the cat’s in the cradle And the silver spoon Little boy blue and the man in the moon When will I retire well I don’t know when But I’ll have a good time then, yeah, You know I’ll have a good time then. I retire just the other day I was sick of work and the rate of pay The four-oh-one kay was such a good find The money is there and it grew over time. Well the job it was a hassle but now I’m free Recommend you defer like me Recommend you defer like me As I looked at the balance it occurred to me It had grown up just for me, yeah, It had grown up just for me And the cat’s in the cradle And the silver spoon Little boy blue and the man in the moon When will I retire well I don’t know when But I’ll have a good time then, yeah, You know I’ll have a good time then.

Thank you Detroit Tigers for taking care of business!

this spreadsheet explains how the TWB is calculated, with the historical data going back to 1994. unlike the pension limits which are directly related to the CPI-U factors, and thus can be easily calculated, the TWB is based on the national wage avg and I have no clue when they release that figure. and for 2012 you actually use the 2010 avg. based on the calculation, the TWB should actually have gone up, but since the COLA was 0 there is a special rule that says things stay the same. anyway, this otherwise useless spreadsheet is brought to you by a hopeless mathematician who is simply interested in how some of this stuff works.

shhhhhhhhhhh this is top secret. don't tell anyone else. and telling you this only cuz I know you are in my home town. After the last name column, there is a check mark column. Check the box for each participant whose information is based on incomplete records. Information with respect to a participant may be based on incomplete records where more than one employer contributes to the plan and the records at the end of the plan year are incomplete regarding the participant's service. Check the box next to a participant's name if: the amount of the participant's vested benefit is based on records which are incomplete with respect to the participant's covered service (or other relevant service) or the plan administrator is unable to determine from the records of the participant's service as to whether or not the participant is vested in any deferred retirement benefit but there is a significant likelihood that the participant is vested in such a benefit. See 26 CFR 1.6057-1(b)(3). oh, all right. this is from the instructions.

my point exactly - unless the document says entry date is first day of plan year and 6 months.

its probably ok, but I can't tell from the data provided. it was indicated there were only 2 entry dates 1/1 and 7/1 (probably first day of plan and 6 months following), with no special entry dates. it was not indicated what the effective date was. it was also indicated it was a new plan, so if it was established 10/1 the entry date for the first year would be 10/1????e.g first day of the plan year.

well, it would go against what I learned (but I'd be the first to admit I have been taught incorrectly on stuff, and its hard to unlearn things) Corbel's has an example here http://www.relius.net/News/TechnicalUpdates.aspx?ID=258 in which base comp was the definition. plan fails 414s test so has to use total comp in tits definition. (by base comp, com is comp less any bonus or commission) if I recall correctly, some document checklists even have a note if exclude bonuses is checked then plan mail fail 414s testing. I guess looking back at the original post, there are 2 possible questions posed (which I didn't really see) 1. can you exclude bonuses - I'd say yes, but you have possible comp testing issues. 2. can it be an option up to the participant - I think that is a different issues. that would seem to be no different than a participant stopping his deferrals at some point again, not all documents allow for such options.

doombuggy: I have visions of Elvis singing the following lament (I think this probably applies to any software at some point in time) Return to sender Return to sender I gotta package from the postman He pulled it out of his sack The latest updated software So bad I had to send it back And I wrote upon it Return to sender Address unknown No such number No such known We had a quarrel Support and I had spat I said I didn’t like it They said tough – whatta ya think of that? So I dropped it in the mailbox And marked it Special D {DUMP!} But bright and early next morning They mailed it right back to me Though I wrote upon it Return to sender Address unknown No such number No such known This time I’m gonna take it myself And put it right in their hands I’ll give them a piece of my mind And then maybe they’ll understand Why I wrote upon it Return to sender Address unknown No such number No such known