Tom Poje

Sungard's latest EFast2 (Part 23) bulletin is similar, though worded for plans who have short years in 2009 What filing options are available for a one-participant plan that has a filing deadline that occurs before the IRS releases the Form 5500-EZ (e.g., short 2009 plan years)? A one-participant plan with a filing deadline that occurs before the release of the Form 5500-EZ has three options: File a Form 5500-SF; Use a 2008 version of the Form 5500-EZ (including the correct dates on the form) and file it directly with the IRS at its Ogden, UT Service Center. The IRS verbally informed ASPPA that a one-participant plan may use the 2008 form until it releases the 2009 version. However, as of the date of this technical update, the IRS has not formally confirmed this option. Although the IRS has not formalized this option, it is unlikely the IRS would reject such a filing. Wait to file until the IRS releases the 2009 version of the form.

Grew up in Michigan, listening to the Detroit Tiger ballgames with my dad. I don't think my dad ever missed a game. ah the memories as an 'ignorant' little kid, wondering how the heck Ernie knew, when a fan caught a foul ball, that the person was from some obscure little town. 'complaining' because the color man in the booth was leaving peanut shells all over the scorecard a strikeout was often "He stood there like the house by the side of the road and watched that one go by" when the Tigers were behind, it was "Here comes Vince Desmond, the old run maker" and his "back, back, back, its looooooonnnngggg gone" for a homer. an excellent broadcaster, but more importantly, a good honest man!

I save everything I can get my hands on, this was Q and A 12, 2003 for the ABA or you can find their Q and As for prior years at the following website. (I print off a copy of the latest one every year) http://www.abanet.org/jceb/qanda.html 12. §401(a)(9) – Required Minimum Distributions Treas. Reg. 1.401(a)(9)-2, A-2(a) provides that except in the case of a 5%-owner, the “required beginning date” is April 1 of the calendar year following the later of the calendar year in which the employee attains age 70-1/2 or the calendar year in which the employee retires from employment with the employer maintaining the plan. Assume that the employee is age 73, is not a 5%-ower, and “retires” on December 31, 2003, as the term “retires” (and related term “retirement”) is commonly used by the employer and under the terms of the employer’s qualified§401(k) plan. However, in fact what this means is that December 31, 2003, is the employee’s last day at work, and the last day for which he is paid or entitled to payment. January 1, 2004 is the first day he is not employed by his employer. When is the employee’s required beginning date? Proposed Response: For the purpose of Treas. Reg. 1.401(a)(9)-2, A-2(a) “the calendar year in which the employee retires from employment with the employer maintaining the plan” is 2004, not 2003, and therefore his required beginning date is April 1, 2005. Moreover, the employee’s first distribution calendar year (Treas. Reg. 1.401(a)(9)-5, A-1(b)) is calendar year 2004. IRS response: The IRS disagrees with the proposed answer. When an employee retires is a facts and circumstances determination, but generally an individual’s last day of work is when the employee retires. Other facts, such as the employee returning to work on a sporadic basis after the official date of retirement, could change the answer. But under the facts presented in this question, the last day of service, December 31, is the date of retirement.

as i recall from the DOL Q and A, the only paper forms they will take are amended 2008 at this point in time. I think (without looking it up) they stopped accepting those after 10/15/2010. It would be nice if you could use the 5500-SF on those as well, but they clearly indicated that was not possible.

fascinating. so if it is deemed a problem, arguably it is a significant problem since it involves all employees. But SCP is only available for significant problems if there is a determination letter. Since no one knows about, no determination letter must have been made, because other the proper notices would have been followed.

the 5% gateway must be provided to all participants who have received a nonelective contribution. the maximum eligible wait for deferrals is one year, therefore the maximum wait for a safe harbor is one year since the safe harbor is a non elective, then these folks must also receive the gateway while you can split your testing group into 2 parts - otherwise excludables and statutory includables, no such possibity exists of splitting into groups based on those with 2 years or less and those 2 years or more.

I have no problem with your argument, its simply that in the context as presented by IRS officials at both ASPPA and ABA (unless I am really missing something) the officials have never said you must both make the contribution and ADP test as well. so who am I to argue with them, TAG and Corbel. Now, without going back and rereading the questions as originally posed to see if it was specified in the context what the timing of the contribution would be (before or after 12 months deadline) it could be that the IRS officials (as well as TAG and Corbel) were considering a time frame of less than 12 months when answering the question.

I think its unclear at best what happens after 12 months. we know if the full contribution is not made before 12 months, then the regs specifically say you must test (even though a safe harbor was made through part of the year). I can understand that since a full 12 months of contributions was not made. but in the case where it is late, a full 12 months was eventually made, and being late is a faiure to follow the terms of the document, as oppossed to amending a plan mid year to change from being a safe harbor - so there is a bit of a distinction.

that would be my understanding as well, the quote is almost word for word from the preamble to the 401k regs A PLAN that uses the safe harbor method MUST specify whether the safe harbor contribution will be the SHNEC or the SHMAC and is NOT permitted to provide that ADP testing will be used if the requirements for the safe harbor are not satisfied. The safe harbors are intended to provide ees with a minimum threshold in benefits in exchange for easier compliance for the plan sponsor. It would be inconsistent with this approach to providing benefits to allow an employer to deliver smaller benefits to NHCEs and revert to testing In a similar veain, from the Q and A American Bar Association (ABA) Committee on Employee Benefits Q and A May 9, 2003 Company A adopts a safe harbor 401(k) Plan. IRS insists that each year that the safe harbor election is used, the employer must amend the plan to provide that the safe harbor contribution will be employed for that year. Is this correct? Proposed Response: If the plan contains a default provision, annual amendment to employ the safe harbor is not necessary. The acceptable default provision provides that in any year where the required advance notice that the safe harbor fails to be given, the Plan is subject to the standard ADP test. The employer can file a copy of the safe harbor notice with the form 5500. This procedure cuts down unnecessary paperwork and is consistent with the statute providing for the safe harbor. IRS Response: The IRS disagrees with the proposed answer. Notice 98-52 requires a notice to participants before the beginning of the year indicating the plan may be amended during the year to provide for a safe harbor nonelective contribution, and Notice 2000-3 provides for some flexibility by providing a supplemental notice to participants and amending the plan to provide for the nonelective contribution by December 1 of the plan year. There is NO DEFAULT OPTION under existing IRS guidance. (Emphasis mine) ............ now all that being said 1.401(k)-3(h)(1) does indicate that the "safe harbor must be deposited within 12 months to be taken into account for the plan year" but there are no additional comments that say otherwise you must using the ADP /ACP. but maybe all that means is that it starts the clock running for when you calculate earnings on the late contribution.

or assuming you you have a small plan and 'normal' assets, then file the 5500-SF and skip the silly schedules.

dang. I was going to vote for Curly Neal. oh well.

my understanding of the 'old' regs is that the rule read as follows "HCEs are defined as those eligible employees who are more highly compensated than two-thirds of all eligible employees." the emphasis being on 'are more'. if you have 5 HCEs and 11 NHCEs would that satisfy that description? I don't see how that could be considered 'more'

oh he's way above and beyond me. probably more interesting as well. next thing you know he'll want the Elvis costume as well. plus, he doesn't post nasty movie puzzles and other stuff as well!

this might be a starting point http://benefitslink.com/articles/expenses001213.html especially see item 3 in the paragraph beginning Although the DOL... The DOL would be probably be a good contact as to what would be considered a reasonable expense that could be passed on

This is similar to 'how late can a plan switch testing method (current vs prior) The answer provided by the IRS at the ASPPA conference 2009 #13 was as follows: This is a discretionary amendment as defined in Rev. Proc. 2007-44, which generally must be adopted by the last day of the plan year to which it applies. However, it is possible an earlier deadline might apply to avoid violating the anti-cutback rules of IRC §411(d)(6). See also, Treas. Reg. §1.401(k)-1(e)(7), which makes the testing method a plan document requirement. based on that, I would hold you have until 12/31/2010 for a plan year ending 12/31/2010. (otherwise the caveat they added about anti cutback makes little sense.. for instance, suppose this was a cross tested plan, and one of the groups was HCEs. then any change to that group could result in a cut back if it changed who was an hce.

if your document permits them

at least its now out there with ft williams

in the unrealistic and bizzarre Poje world you could probably set up a DER using (using the key ees soc sec number) top heavy test distrib history and enter a 'positive' distribution value for 'in-service distribution' for a year 12/31/2005 (assuming you are doing 12/31/2009 val) since its a positive distribution which of course makes no sense the system will then treat it as a 'negative' and then reduce the top heavy balance rather than increasing the top heavy balance the reason for using 12/31/2005 is so that the system will ignore this value the following year since it will be more than 5 years.

also, how do you have "Compute past years service" I strongly recomend it be set to 'not computed' after the first year. the only time you probably want the system to calculate past years is the first year on the system. once someone has a value greater than 0, it will no longer calculate on that person. but if it finds someone with 0 - well, unless some other flag is tripped it will calculate past years on the person and figure they should have had 1 in the prior year.

correct, that is an item that could be amended going forward

there is at least one IRS official who holds that you would have to use full year comp, but this was only an informal comment made at one of the ASPPA Conferences. Until (or unless) the IRS comes out with something more specific, the current belief is if there are no other contributions (forfeitures or non electives besides the safe harbor) the plan is simply not top heavy. so whatever software is being used, there should be some way of either indicating the plan is not top heavy for the year, or that the minimum is 0% or some other work around.

interesting. using ft william as well. 1 plan has already been accepted that has '&' in the company name. have 2 others out there, not completed, but the edit check produces no warning message about the use of '&' so maybe its where you are using the symbol.

the very 'title' (if you will), of the particular reg cite is "Certain one-time elections not treated as a cash or deferred election". in fact that has to be the reason they are irrevocable - if you coukld switch, then you have in essence created a CODA. you are correct, if by chance enough people elected out, you could have a problem. but again, these people do not appear on the ADP or ACP test. another similar example would be someone who is not eleigible for a match because of a last day rule or hours requirement. they don't show in the ACP test either. (This is different than someone who chooses to defer 0, and met hours/last day requirement - and the match is therefore 0.

first, the document must allow someone to irrevocably waive out. in the regs one time elections are found under 1.401(k)-1(a)(3)(v) though actually it doesn't even mean someone is making an election out of the plan, but could refer to someone making an election to contribute a set amount to the plan. Example 5 uses 5% to a money purchase - and that will be the only amount, even if the emploer adds another plan! but regardless. to be on the ADP test you have to be 'eligible'. if someone elects out they are not on the ADP test. same rules for the ACP test. (If you had a controlled group and you don't aggregate plans, you don't put the members of the controlled group on the test with 0 either, so nothing special there) once the person completes the eligibility requirements, they are included and not benefitting for 401(k) coverage and 401(m) coverage and a(4) coverage. they would also show on any a(4) nondiscrim test, which is different than ADP or ACP rules. why would someone elect out? about the only reason I can think of is because they want to put into an IRA, and if you are benefitting in a plan your IRA limit is reduced. Another possible reason is they don't want free money given to them by an employer.

don't know. we use a different software for the 5500s - while we haven't filed many yet, so I don't have other examples, as I said , there was certainly no problem with the '&' symbol. there is always the chance the problem is at the software end - I'd be more curious if others are having the same problem you are.