Tom Poje

we had one rejected - unfortunately client didn't file before 12/31/2009. had another rejected, not sure when that one was filed. Both for TPAs. the first is real interesting. (or maybe distressing) TPA called DOL and explained that the business no longer exists and the owner (age 65, computer illiterate, secretary did all that type of work) doesn't have the computer to log in. response: they can use the library or even stop in at the TPAs office. if computer illiterate, they can also call the DOL for help about getting registered for the siganture. counter response: owner moved to Florida, TPA business is in Michigan DOL response: guess they can't stop in. but not going to budge on the issue. has to be via computer. gee whiz, I did service supprot for awhile and remember how difficult it was at times to walk someone through computer stuff over the phone. and also being on the other end asking for help. hard enough when you know something about the computer and have used one. this could be interesting when the DOl has to deal with someone who has little or knowledge about computers. ......... if the company no longer exists, and there are no assets left in the plan or business, but no final 5500 is filed who pays the penalties?

since its the first year he's eligible for the match, he might not be 100% vested. in that case its entirely possible that some of the match would be forfeited, depending on how you handle things.

I'm more concerned about that 10% excise tax if they don't process the stuff by the 15th. lets see 10% of 6.75.....do you round up or down?

$6.75 corrective distribution and 1.35 in related match forfeiture (not including gains) (and I'm too honest to fudge the comp figures just to make it pass) my all time record low a few years ago was $3.00 for an ADP failure - and that was to be split between 2 people.

I'm not really sure how to interpret the wording of the reg cite. since the last words of the final sentence say ".....to the extent that a corrective distribution would otherwise have been required. that word 'otherwise' almost seems to me to say don't worry about it, but I've been wrong on plenty of stuff before. plus it also said the corrective distributuion was 'deemed' to have been made. same thing again, 'deemed' to me means treat things as if they had been done when in reality they weren't. (and this only appears to apply in situations in which all assets were paid within 12 months of termination)

see 1.401(k)-2(b)(2)(v) in regards to terminating plans last sentence ...if entrie balnce is distributed prior to distribution of excess contribution...the distribution is deemed to have been a corrective distribution...

geez, only under duress and such short notice but with everything that is piled on my desk and how I feel at the moment it will have to do. This job it seems to be so harried. Why has my bushy hair turned gray? I don't remember growing older Work all day! My account used to be a beauty. When did it shrink to be so small? I work for little pay And that’s not all! Sunrise, sunset Sunrise, sunset Swiftly flow the days A-D-P failures and loan defaults I’ve never even seen a raise Sunrise, sunset Sunrise, sunset Swiftly fly the years One plan is following another Laden with too much work and tears What words of wisdom can I give them? How can I help to ease their way? Now they must learn about their failures Day by day The I-R-S they want an audit And I know who they’ll blame – it’s me Is there an excise fee in store for me? Sunrise, sunset Sunrise, sunset Swiftly fly the years One plan is following another Laden with too much work and tears

so in addition to "Fiddling" my time trying to complete ADP tests before the deadline, and complete document restatements you want me to write songs as well?

actually, you could use any amount in the shift. they could have shifted .5 and ended up with HCE 5.5 2.5 NHC 3.5 1.25 which would also pass. Note in the first example 2% was shifted from the NHCE and 0% from the HCE. the amounts can be different as long as you pass ADP before and after.

"Borrowing" or "Shifting" is possible. I think I have permission to copy from the Coverage and Nondiscrimiantion Answer Book since I wrote the question for this one anyway, and it is easier than typing it all up. I'm sure tha ERISA Outline Book has something similar in its description. The example used was actually from the old 401(k) regs. Q 12:78 What is shifting, and how can it be used in 401(k) testing? Shifting is the common term used to describe the process of moving elective deferrals between the ADP test and the ACP test to improve the test results. The process takes place on paper; that is, if a plan uses the shifting concept to improve test results, no money will actually move from one account to another. Thus, for example, if a plan has an HCE ADP of 4 percent and an NHCE ADP of 3 percent, the plan passes the ADP test using the alternative limitation rule by 1 percent (3%+2%=5%). The 1 percent passing margin may be shifted over to the ACP test and, if the ACP test was failing by .5 percent, the plan would now be deemed to pass. Example 12-21 Just Pickles Inc. sponsors a 401(k) plan. The plan document provides that elective contributions made to NHCEs may be used to meet the requirements of Code Section 401(m) to the extent needed under that section. The ADP for HCEs is 10 percent; the ACP is also 10 percent. The ADP and ACP for NHCEs are 10 percent and 6 percent, respectively. ADP ACP HCEs 10% 10% NHCEs 10% 6% The plan passes the ADP test, but fails the ACP test. The plan uses elective contributions to move 2 percentage points from the NHCE's ADP to the NHCE's ACP. After the adjustment, the testing results are as follows: ADP ACP HCEs 10% 10% NHCEs 8% 8% The plan now passes both tests using the basic limitation (8%×1.25 = 10%). Example 12-22. The facts are the same as in Example 12-23. The ADP results for both the HCEs and NHCEs could be shifted to the ACP test. The results would be as follows: ADP ACP HCEs N/A 20% NHCEs N/A 16% The ACP satisfies the basic limitation, because 16 times 1.25 equals 20. In order to shift, or perhaps more correctly, to use elective contributions in the ACP test, the plan must satisfy the ADP test both before and after the shift has been made. [Treas. Reg. § 1.401(m)-2(a)(6)(ii)] What is unclear is whether shifting can be performed if corrections have been made to pass the ADP test in the first place. The IRS has indicated that shifting should be possible after corrections are made to pass a failed ADP test. You would not be able to shift any deferrals that are treated as catch-up contributions since they are not included in the test. (Q and As #15 and #16, 2009 ASPPA Annual Conference) The example provided is as follows: ADP% ACP% HCE 7% 2.00% NHCE 4% 0.75% 1% is refunded to the HCEs, reducing the percentage to 6% (a passing percentage for the ADP test). After shifting .75% from both HCE and NHCE, the percentages are as follows (and the ACP test is passed): HCE 5.25% 2.75% NHCE 3.25% 1.50% While shifting takes place on ‘paper’, it must actually be possible to complete such a shift. Example 22a A 401(k) plan has a last day requirement to receive a match. The match formula is 100% up to the first 3% deferred, with a last day rule requirement. The testing results are as follows: ADP% ACP% HCE 5% 3% NHCE1 10% n/a (employee terminated) NHCE2 0% 0% In this scenario, it would not be possible to shift any of NHCE1’s deferrals to the ACP test since it was not possible for this participant to receive a matching contribution due to the last day provision, See Reg. §1.401(m)-2(a)(6) (Q and A #18 2009 ASPPA Annual Conference) ............ (usually you have enough other NHCEs that you could shift other amounts.) ................... multiple use refers to the old days - you could not use the '2' twice - once in the ADP test and once in the ACP test for example, if you used the '2' limit for the ADP test, you had to use the 1.25 multiplier in the ACP test.

the preamble to the final regs says: One commentator asked for clarification of the interaction between these timing rules and the rule under the regulations that treats a self-employed individual’s earned income as being currently available on the last day of the individual’s taxable year and whether this last day rule precludes a partner from making elective contributions during the year through a reduction in the partner’s draw. The restriction on the timing of contributions is not intended to prevent a partner from deferring amounts that are paid to the partner throughout the year on account of services performed by the partner during the year, and the final regulations have been modified to clarify this point. However, self-employed individuals who take advantage of this opportunity to defer amounts during the year must make sure that the amount contributed during the year will not exceed the limits (such as the limits of section 415) that will apply to the individual, based on the individual’s actual earned income for the relevant period. therefore, it sounds like you have a 415 limit violation and should correct under those guidelines. the answer as to whether to include the HCEs in testing as 0% is left up to debate. at prior conferences, the IRS officials have said to exclude them entirely, but there is nothing written in stone on the issue.

if they hadn't of made Sunset provisions permament a few years ago, I was going to pen a song Sunrise, Sunset so don't get me started....

on the other hand, getting the $ in the form of a distribution sounds like a good deal for the HCE. now if I was an HCE....ha......................ha....ha ha ..ha oh never mind. that will never happen

getting old and my 'sight' is going bad. should have said 1.401(m)-2(b)(2)(v) ooops, I used the old regs. But certain powers that be are kind enough to correct me. I think the difference is that the person was still entitled to the match, therefore you distribute rather than forf. as oppossed to an incorrect allocation - the person shouldn't have gotten it, so you forfeit it. a similar rule applies if you don't match catch ups, then match related to deferrals that are treated as catch up are forfeited.

tjhe failure of the ACP test results in excess aggregate contributions, and the regs say 1.401(m)-1(e)(3)(i) are distributed ...to the appropriate HCE there are 2 exceptions I can think of 1.401(m)-1(e)(3)(vii) if its not a failed test, but rather a related match to excess contributions, then it is forfeited (though you can run the ACP test first and if it fails you can distribute those $ first) the other exception is if the HCE is partially vested then you can only distribute the vested portion and forfeit the remainder. and even that rule is flexible - you can distribute the whole amount as long as you track the vested balance correctly.

shame on you. never assume anything. memorize the following as your penalty. but in this case you are correct, EPCRS is pretty specific Section6.06 (2) (2) Correction of Excess Allocations. In general, an Excess Allocation, as defined in section 5.01(3)(a) of this revenue procedure, is corrected in accordance with the Reduction of Account Balance Correction Method set forth in this paragraph. Under this method, the account balance of an employee who received an Excess Allocation is reduced by the Excess Allocation (adjusted for earnings). If the Excess Allocation would have been allocated to other employees in the year of the failure had the failure not occurred, then that amount (adjusted for earnings) is reallocated to those employees in accordance with the plan's allocation formula. If the improperly allocated amount would not have been allocated to other employees absent the failure, that amount (adjusted for earnings) is placed in a separate account that is not allocated on behalf of any participant or beneficiary (an unallocated account) established for the purpose of holding Excess Allocations, adjusted for earnings, to be used to reduce employer contributions (other than elective deferrals) in the current year or succeeding year(s). While such amounts remain in the unallocated account, the employer is not permitted to make contributions to the plan other than elective deferrals. Excess Allocations that are attributable to elective deferrals or after-tax employee contributions, (along with earnings attributable thereto) must be distributed to the participant. For qualification purposes, an Excess Allocation that is corrected pursuant to this paragraph is disregarded for purposes of § 402(g), § 415, the actual deferral percentage test of § 401(k)(3), and the actual contribution percentage test of § 401(m)(2). If an Excess Allocation resulting from a violation of § 415 consists of annual additions attributable to both employer contributions and elective deferrals or after-tax employee contributions, then the correction of the Excess Allocation is completed by first distributing the unmatched employee’s after-tax contributions (adjusted for earnings) and then the unmatched employee’s elective deferrals (adjusted for earnings). If any excess remains, and is attributable to either elective deferrals or after-tax employee contributions that are matched, the excess is apportioned first to aftertax employee contributions with the associated matching employer contributions and then to elective deferrals with the associated matching employer contributions. Any matching contribution or nonelective employer contribution (adjusted for earnings) which constitutes an Excess Allocation is then forfeited and placed in an unallocated account established for the purpose of holding Excess Allocations to be used to reduce employer contributions in the current year and succeeding year(s). Such unallocated account is adjusted for earnings. While such amounts remain in the unallocated account, the employer is not permitted to make contributions (other than elective deferrals) to the plan.

ye official cheat sheet, the answers, etc I guess I sort of promised though no one is making you look at the file.

TPA Bob: this turns out to be a stupid quiz I created years ago. my brother 'found' it on his computer. he had put it in a folder years ago - 'things to eventually do' or something like that. Ha. I am working on putting together a nasty one inviolving 'invisibles'. this time of year I need insanity breaks from ADP testing.

Bill- you are correct of course, it was unclear to me what the exact situation was. the method would still work. if you really only wanted to pull one source, you could run a transaction to transfer 100% from all investments to one investment. then run the DER out of transactions to obtain your numbers, then reverse the transaction. sounds like more work than its worth. I have a participant statement that prints portrait, so I guess if I was really interested in doing something like that, I could tweak the report so it only shows end balance, and export out of report writer to excel but no time now to even think about a project like that.

10 was The Untouchables all other responses were correct. 5 was a remake of Charlton Heston movie, and they actually had 4 other movies based on the original, the Heston was only in the first 2. if that ain't enough of a hint...

since each person is in their own rate group, and you fail if you test on an accrual basis, then test on an alloaction basis. there is no gateway minimum since you are not cross testing. so lets say you give the rank and file 3% (e.g. covers top-heavy) then you could give the HCE 3% + 3% on comp > twb and test imputing disparity. you should end up with everyone having the same alloaction rate.

there is nothing to prevent you (aside from a poorly written document) from testing on an alloaction basis. of course, if you did that you already know that each person will have the same alloaction rate, so it is really only going through the motions. on the other hand, I will take a guess that each person is in their own group, so you could run an allocation as if the plan is integrated and then test imputing disparity. this would give the HCE a slightly higher % than the NHCE

that is the way I would read it. in other words you cant cheat give the HCE a db benefit, give the NHCE a dc contribution and then only impute on the DC portion (therefore only increasing the NHCE E-Bar.)

that doesn't sound like you are following the terms of the document to me if you did it that way

instead of screen viewing or printing a report writer report you can always send the report to excel and open there (e.g. print to file, and then choose excel for the format) this can be done with any crystal report. your headers might not be lined up, and you might have to re-align some of the data, but that works well if you have many items you want. for pulling just the elements you want (you get no headers) the possibly top secret method known only to spies and espionage agents of foreign countries is to go to transactions, then click on File Import/Export File Import/Export setup Category and then Employee/Plan Data (to get name and soc sec number) Account Detail (Export Only to get ending balance) then Export (Summary and the date range) shhhhhhhhhhhhhhhhhhhhhh. no fair telling. It works just like DER, but you only have a limited selection of elements