Tom Poje

a few years ago when I was on the IRS Q and A panel, I personally submitted this very question, basically could the notice say "at least 3%". As I recall the initial reaction from the agents was something to the effect, what type of goofy question is that...it's quite clear in the regs...huh, how about that, it does say 'at least', so they agreed that it would be possible. again, I'd be concerned if my notice said "The plan will provide a 3% SHNEC..." as opposed to saying "The plan will provide at least 3%..."

the thrills, the chills, the spills.... this is probably the most important stuff regarding form 8955-SSA from Announcement 2011-21 (because I can't type, its 2011-21 not -11) The Internal Revenue Service (IRS), in coordination with the Social Security Administration, has developed Form 8955-SSA, a stand-alone form to be filed with the IRS, as the successor to the Schedule SSA (Form 5500). For plan years beginning on or after January 1, 2009, the Form 8955-SSA should be used to comply with the reporting requirements of § 6057(a). Form 8955-SSA for the 2009 plan year is expected to be available for filing by plan administrators shortly. Form 8955-SSA for the 2010 plan year is being developed and is expected to be available for filing later this year. Plan administrators are permitted to report information that would otherwise be required to be reported on the 2010 Form 8955-SSA using a 2009 Form 8955-SSA. The IRS has also developed a voluntary electronic filing system for filing Form 8955-SSA for the 2009 plan year and subsequent plan years. This system is ready to accept filings of Form 8955-SSA when the form becomes available for filing. In general, as with Schedule SSA (Form 5500), if a Form 8955-SSA must be filed for a plan year, it must be filed by the last day of the seventh month following the last day of that plan year (plus extensions). Thus, for example, for plans on a calendar year, any 2011 Form 8955-SSA that is required to be filed under § 6057(a) must be filed with the IRS by July 31, 2012. However, in order to provide plan administrators with additional time to complete and file the new Form 8955-SSA, this announcement provides that the due date for filing the Form 8955-SSA for the 2009 and the 2010 plan years is the later of (1) the due date that generally applies for filing the Form 8955-SSA for the 2010 plan year, and (2) August 1, 2011. For example, in the case of a 2009 plan year or a short 2010 plan year, the Form 8955-SSA is not required to be filed before August 1, 2011.

depends on how the document is worded. some actually say "at least 3% safe harbor" will be provided

this boils down to what test you are talking about. could the person defer? YES (doesn't matter whether he does or not) therefore, for coverage he is considered benefit, and is always included in the avergae benefits percentage test. always. again, doesn't matter whether he deferred or not. for 'rate group' testing [nondiscrimination classification test] - the only time you can exclude anyone who has been a participant is if they terminate and work less than 500 hours and did not receive a nonelective contribution.(And this is optional exclusion, you can always include them.) so, the person will show up on one test and maybe not the other.

back in 04 (2004, not 1904, I'm old but not that old) the IRS issued a memorandum on using short term employees for such purposes

if person has an entry date, then it makes no sense for plan status to be ineligible (well, stopping short of someone becoming ineligible for some other reason) I would expect plan status to say Inactive, the reason is Employment status. changing those should be sufficient This is pretty common on takeover cases, the system sets former terminated people to ineligible.

my comments were not meant to be untolerable or unkind - if you took it that way I apologize. you asked for 'war stories'. and that's what pointed out, I've seen resumes (I'm thinking of a former employee) who claimed an awful lot of stuff. If I was to go solely by his resume, he could take the test and pass without even studying, but I know better. so my comments were only meant to mean if your are honest about the background I wouldn't imagine you having problems with the test. the test isn't easy, but if you have a good background and you put some study time in, you will get by.

at the 2007 ASPPA conference (blame me again, I submitted this one) Q19) Safe Harbor 401(k): A notice is issued indicating a safe harbor contribution will be made for the upcoming year, but the plan was never amended to contain safe harbor language. Now that it is after plan year end, it is too late to amend to correct the problem. Is the plan on the hook for the contribution, and must also run all appropriate tests? A: Notwithstanding the notice provided, the plan terms do not provide for the safe harbor plan. Therefore, you should follow the plan terms and run the ADP test as needed. (Whether there is a Title I issue due to the notice is in the purview of the DOL.) so not having safe harbor language simply means you have issued a bad notice. you haven't violated the terms of the document in any way shape or form. thats the opposite of having the plan language and not issuing a notice. then you have an operational defect. the only exception I know of is if you had issued a 'maybe' notice. then you have 30 days before the end of the plan year (1.401(k)-3(f)) and why would the regs be specific in this case but still let you amend anytime if your notice wasn't a maybe notice.

I'll go out on a limb and assume when you say you have 10 years consulting experience its a good honest statement. I've seen many a resume making a claim which in terms of practical experience meant little. Some people work in a position and push papers and punch buttons and still know little. Knew someone who had the QPA designation and to meet the requirements of remaining certified did the absolute minimum (you could attend the ASPPA conference and sleep through sessions, or for that matter not even sit in on them) enough of the war stories! When I took the CPC exams, I managed it with the head full of knowledge, extremely limited study time (the boss actually expects me to turn out work - imagine that) and sitting in on the cram sessions they used to have at the ASPPA Conference. I'm assuming the modules are the same as the cram sessions. Those one day cram sessions, which were about a month before the test probably got me over the hump. But I'm sure anyone who claims to be quirky and nerdy can manage to pass. go for it.

you can't change to a safe harbor if its an existing 401k except at the start of the year. As long as the period of safe harbor is at least 3 months you could add to a profit sharing only plan during the year, or at least that is how i understand things.

ok, I didn't realize from the discussion that anything had been taxed. Its hard to run ADP tests, and other stuff on my desk and keep up on these threads sometimes.

that all sounds fine, though I am a bit shaky on the 'zero amount taxable' was it that the 1099R was issued indicating an amount of disribution but nothing was taxed or the 1099 said a distribution was made and nothing is taxable (as if the distribution was after tax or Roth money)

I'd agree, I think you are stuck at that point. But I don't think its any different than having failsafe language. you are stuck in the fact you can never get to the avg ben pct, even though you migt have passed doing so.

yeh, blame me, if they get somewhat long winded they might be mine if its a discrimination type question. by ineligble I had meant 'ineligible for the contribution' e.g. due to hours or whatever, but I guess it came off a little different, though I guess the answer would be the same.

that would be my understanding. the forf amount was deducted in a previous year so its not held against you.

ignore the fact the plan is a new comp. lets suppose its a 2 person plan, the NHCE quits after working 500 hours and doesn't receive a contribution. so you fail coverage. how would you fix? you have to give him a contribution (or else say, sorry owner, you can't get a contribution this year?) so you put in a corrective contribution to the NHCE to fix the problem. Just in case the person is 0% vested, make sure there is some vesting attached to the contribution as well, the IRS has never specified how much. Certainly a 100% vested contribution should satisfy the IRS. hmmm. how come 'the IRS' spells 'theirs'? your situation is no different. I posed the question to the IRS slightly differently last year A company sponsors a discretionary profit sharing plan that has tiered allocations and utilizes cross testing to show nondiscrimination in amounts. Owners are allocated a contribution equal to their 415 limit. All other participants are allocated a contribution equal to 5% of compensation, which satisfies the gateway minimum. The Plan fails nondiscrimination testing. The plan could have passed by providing a 6% contribution to all eligible participants, instead of a 5% contribution. Is the plan sponsor obligated to correct the failed testing by contributing more to the current participants, or is it permissible to put in a corrective amendment and permit entry and provide a 5% contribution to an individual who was previously ineligible (assuming that would permit the plan to pass nondiscrimination testing)? Either proposed correction is possible, but both probably require an amendment to the plan that satisfies Treas. Reg. § 1.401(a)(4)-11(g), in both form and timeliness. In form, such an amendment generally either confers additional benefits to existing participants or existing benefits to additional participants. In either case, the amendment must be both “definitely determinable” and nondiscriminatory.

under Code Section 410(b)(3)(A) they are excluded from coverage under Code Sectiopn 401(a)(4)[nondiscrimination] "there shall be excluded from consideration those employees described in section 410(b)(3)(A).."

DMcGovern Q25 from the 2004 ASPPA Conference was as follows. (of course such comments reflect the opinion of the IRS individual and not necessarily the Treasury position) Suppose you have a 401(k) plan that fails ADP/ACP testing where the correction will be made by making distributions to the HCEs. Suppose you find this out after an HCE has already taken a complete termination distribution from the plan and it was directly rolled into an IRA or another plan. What is the plan’s responsibility? A: The plan must notify the participant. See 1.401(k)-1(f)(4)(i). [this goes back to 2004, so refers to the old regs, but the paragraph is exactly the same as the one in question in the new regs] Does it need to contact the other plan or IRA? A: No. Is it enough to notify the participant? A: Yes. Do 1099's need to be re-done with regard to the rollover? A: Yes. See the instructions to the 2004 1099R form. ........................ I have always thought that when the paragraph says "In the event of a complete termination of the plan..." it means everything that is mentioned after this point only refers to a complete termination of the plan. Certainly that would agree with the IRS position from the 2004 conference.[but the english language is what it is, and arguably you might have a point0 the other part of the paragraph says "a distribution of excess contributions must be in addition to any other distributions made during the year ", which certainly seems to hold to the ASPPA Q and A as well.

why would the $ be forfeited for a failed ACP test? if the match is related to deferrals that are returned to a failed ADP, then yes those matches are forfeited (otherwise the individual received match at a higher rate than the NHCEs). and if a plan fails both ADP and ACP its possible to run the ACP test first, fix that and then fix the ADP test 1.401(m)-2(b)(2)(v) clearly states that excess aggregate contributions are 'distributed to the extent they are vested. even if the person is partially vested, its possible to distribute the entire amount see example 7 of 1.401(m)-2(b)(5)

My understanding of that rule 1.401(k)-2(b)(2)(v). it only applies "in the event of a complete termination of the plan"

this was an old discussion on the issue, but I believe still valid http://benefitslink.com/boards/lofiversion...php/t10571.html

are you thinking of 1.401(k)-2(a)(6)(iv)(D) but that pertains to disproportionate QNECs

for the sake of the argument, lets suppose you have an integrated plan, last day rule in addition to the profit sharing there is a 3% SHNEC. the plan alocates 7% profit sharing plus 5.7% in excess of 100% of the TWB. There is 1 HCE and 10 NHCEs, 3 of who quit so do not receive the profit sharing. Looking just at the active NHCES and the profit sharing piece, they receive 7% (none are above the wage base) If I test on an allocation basis and impute disparity, their E-Bar would be 7% plus5.7% = 12.7% The HCE, because of the way imputing disparity works also will have an E-Bar of 12.7% (Try it, it works) so ignoring the 3 NHCEs who received 3% only that means 7 of 10 NHCEs have the same e-bar as the HCE. You pass ratio % test on an allocation basis. so as long as your group of NHCEs who receive safe harbor only is less than 30% of the HCEs and assuming you are integrated at the max, you are guaranteed to pass - even better if you have HCEs who didn't receive the safe harbor. (If you have more than 30% who failed the last day rule you probably have a partial termination)

gateway is only required for NHCEs (unless you have a document that says otherwise), so Is the only way to satisfy the gateway to give all ee's in Group B a 5% PS instead of 3% would be Is the only way to satisfy the gateway to give all NHCEs in Group B a 5% PS instead of 3%

ok, so they get the 3% SHNEC, which means thet have received a non-elective, so now they have to receive the gateway (if its coming to that) this actually sounds not like component plans (though I guess the concept is the same) but rather somewhat of whats found under 1.401(a)(4)-2(b)(3) when the plan has 2 'formulas' because its top-heavy. But I've never heard that referred to as component testing. or put another way, like broadly available testing how many people received at least 3% (which should be 100%) and then how many people received at least whatever since its a designed based safe harbor, then there really is only a second group