Tom Poje

unless you had a document that said you must test on an accrual basis I don't see why that would be possible. you can always test on an allocation basis exactly how is the formula written in the document written? If everyone is in different groups, and you give everyone a 5% alloaction and test on an alloaction basis, then you end up passing.

as I recall, the basis for the IRS comment was as follows: A SHNEC can be used to satisfy everything under the sun, becuase the regs say so (e.g. it can be used in nondiscrimination testing) A QNEC is slighlty different because the regs clearly says you have to do a(4) testing with and without the QNEC, and I believe that is the basis for the IRS statement that you can't use the QNEC to satisfy the gateway.(on the other hand the gateway rules were written after the QNEC rules, so its hard to say.) my own misguided logic would say the following- I run a test with the QNEC -did the ee receive a nonelective, yes, therefore it should count toward the date way I run a test without the QNEC - lets suppose the ee received a 3% nonelective. can I use the QNEC to satisfy gateway? no, because I am not using the QNEC under these testing conditions. Therefore he would need more to satisfy the gateway. carrying my misguided logic further, if the ee received no other nonelective, it would seem you have an argument he doesn't deserve the gateway when looking at the testing that excludes QNECs. of course, all that is an opinion which may be incorrect. You also have a document that says you can count the QNEC toward testing which implies IRS approval (or an item they missed when reviewing) In addition, remember that views expressed at the ASPPA conference do not necessarily reflect an actual Treasury position.

you sound correct on all points for purposes of ADP/ACP - but not for nondiscrimination if the plan was cross tested this assumes the person is an HCE regardless of whether a top paid group election was made or not

when one says 'average benefits test', just what does that mean? do you mean average benefits percentage test? its unfortunate the two terms are similar but they are different. now, to pass coverage, most of the time you pass the ratio percentage test. if that fails, you try to pass using the average benefits test, one part of that is the average benefits percentage test. you are permitted to run that test on an accrual basis without having to provide the gateway. the IRS has made that clear. (You are of course at that point only testing coverage, not nondiscrimination, and the gateway is for nondiscrim.) and it turns out for nondiscrim if you passed avg ben % test for coverage then you pass it for nondiscrim as well. so the gateway should only be based on whatever comp you are using for your nondicrimination classification test. so the question would be , just what comp are you using for that portion? Plus the regs say you can use comp from date of entry for purposes of the gateway. I think I would agree with J Simmons, that you need to use comp from date of entry as of 4/1. or for me, I would probably calculate the e-bar as sum of the two parts. I have one e-bar (comp and contrib) for the portion from date of entry of 4/1, and another for the portion from date of entry from 7/1. I don't see anything in the regs that says I can't do that, but who knows when you get into something like what you describe.

possible hints 5 was a remake of a Charleton Heston movie 8 was one of a series of movies involving a particular fictional character, lets say 1930's - 1940's 9 was a remake of an old TV show.

that sounds like an enhanced match, which is fine for ADP safe harbor, but you have to ACP test amounts received above 6% of comp

use at your own risk, since I wrote this to satisfy my own specific requirements. this summary of accounts prints by ACCT id, so should print each account seperately rather than combining all deferrals together. I had been coding Roth as an additional deferral account and using 'descritption' to distinguish between Roth and Regular deferrals, thus I needed to generate the info in this format. It prints the account name (e.g. Deferral or Roth Deferral) (I do not track investments separately, so if you are looking for something in that respect, then this report will probably not accomplish what you want, because you probably want totals only by 'specific source' and not each account.) (This does not show shares either, if that is your fancy) I also track suspense accounts using the user defined fields, so you might have to edit the report at the base of the report.

well, safe harbor contributions can be made to another plan other than the one containing the deferrals (1.401(k)-3(d)(2)©, so certainly there is at least one situation in which this is possible. I believe it is also sometimes done with 403(b) arrangements (deferrals in the 403(b), and match made elsewhere) so I guess it is possible with matching contributions. I can't speak from any definitive experience.

that sounds correct to me

just Roth, or do you mean as a separate item on a report (e.g. summary of accounts, so it will print one line listing begin bal, etc in deferral and another line printing beg bal, etc roth deferrals) that one I have.

well, I figure we can share answers next Friday. based on comments (my brother told me which ones he solved) the following have not been solved 1,5,6,8,9,10,12,16,17,20,21 (I can't tell you the answer because I don't know them)

that's the only one I knew. my brother indicated he solved 6 of the 21 I do not have the answer sheet so don't ask me. I figure pensions ruin my week, might as well ruin someone's weekend as well.

maybe here 1.401(k)-1(a)(6)(iii) Accordingly, a self-employed individual may not make a cash or deferred election with respect to compensation for a partnership or sole proprietorship taxable year after the last day of that year. See §1.401(k)-2(a)(4)(ii) for the rules regarding when these contributions are treated as allocated.

I don't do movies, but maybe someone out there can identify all these movie scenes with explosions in them. ok, don't post answers, just comments as to which ones you have solved. give other people a chance to be frustrated

depending on your document, yes, you can exclude people by name.

these are the examples from the regs (i) Facts. Employer N maintains Plan C, a qualified defined benefit plan under which an employee becomes a participant upon completion of one year of service and is vested in 100 percent of the employer-derived accrued benefit upon completion of five years of service. Plan C provides that a former employee's years of service prior to a break in service will be reinstated upon completion of one year of service after being rehired. Plan C has participants who have fewer than five years of service and who are accordingly zero percent vested in their employer-derived accrued benefits. On December 31, 2007, effective January 1, 2008, Plan C is amended in accordance with Code Section 411(a)(6)(D) to provide that any nonvested participant who has at least five consecutive one-year breaks in service, and whose number of consecutive one-year breaks in service exceeds his or her number of years of service before the breaks, will have his or her pre-break service disregarded in determining vesting under the plan. (ii) Conclusion. Under paragraph (a)(3) of this section, the plan amendment does not satisfy the requirements of this paragraph (a), and thus violates Code Section 411(d)(6), because the amendment places greater restrictions or conditions on the rights, as of January 1, 2008, to section 411(d)(6) protected benefits for participants with fewer than five years of service, by restricting the ability of those participants to receive further vesting protections on benefits accrued as of that date. (A) Employer O sponsors Plan D, a qualified profit sharing plan under which each employee has a nonforfeitable right to a percentage of his or her employer-derived accrued benefit based on the following schedule: 3/20 [this was before plans were required to use the 2/20 schedule or the 3 yr cliff] (B) In January 2006, Employer O acquires Company X, which maintains Plan E, a qualified profit sharing plan under which each employee who has completed five years of service has a nonforfeitable right to 100 percent of the employer-derived accrued benefit. In 2007, Plan E is merged into Plan D. On the effective date for the merger, Plan D is amended to provide that the vesting schedule for participants of Plan E is the seven-year graded vesting schedule of Plan D. In accordance with Code Section 411(a)(10)(A), the plan amendment provides that any participant of Plan E who had completed five years of service prior to the amendment is fully vested. In addition, as required under Code Section 411(a)(10)(B), the amendment provides that any participant in Plan E who has at least three years of service prior to the amendment is permitted to make an irrevocable election to have the vesting of his or her nonforfeitable right to the employer-derived accrued benefit determined under either the five-year cliff vesting schedule or the seven-year graded vesting schedule. Participant G, who has an account balance of $10,000 on the applicable amendment date, is a participant in Plan E with two years of service as of the applicable amendment date. As of the date of the merger, Participant G's nonforfeitable right to G's employer-derived accrued benefit is zero percent under both the seven-year graded vesting schedule of Plan D and the five-year cliff vesting schedule of Plan E. (ii) Conclusion. Under paragraph (a)(3) of this section, the plan amendment does not satisfy the requirements of this paragraph (a) and violates Code Section 411(d)(6), because the amendment places greater restrictions or conditions on the rights to section 411(d)(6) protected benefits with respect to G and any participant who has fewer than five years of service and who elected (or was made subject to) the new vesting schedule. A method of avoiding a section 411(d)(6) violation with respect to account balances attributable to benefits accrued as of the applicable amendment date and earnings thereon would be for Plan D to provide for the vested percentage of G and each other participant in Plan E to be no less than the greater of the vesting percentages under the two vesting schedules (for example, for G and each other participant in Plan E to be 20 percent vested upon completion of three years of service, 40 percent vested upon completion of four years of service, and fully vested upon completion of five years of service) for those account balances and earnings. [Treas. Reg. § 1.411(d)-3(a)(4) examples 3 and 4]

I wrote it in crayon on the back of a napkin, is that good enough? or see 31.3405© -1 Q and A 14 MUST a plan administrator withold tax....if the amount is less than $200 A. No........ (it gets into an explanation that if multiple checks are cut, the first one or mor might fall below $200, but once you hit that amagic number in total, then you have to withhold.)

you can only exclude eligible terminees with less than 500 hours if they received no non-elective contribution (e.g. profit sharing and forfeiture) AND they were a participant. for example, if you have a controlled group and did not aggregate plans for testing you could not exclude eligible terminees with less than 500 hours from the other plan.

Sieve hits it right on the nose. this is simply a poorly administrated procedure. if you are going to deposit amounts on a payroll basis, you best put all such contributions in an 'unallocated account' and handle that after the end of the year. you only spoke of 'forfeiting' the unintitled to match. If this is a self directed account, then the person is not entitled to the gains/loss either. that is ugly enough. in the likely case the person has more than one investment, how do you propose calculating the amount of gains to be forfeited? At the 2009 ASPPA Conference Q and A #33 A plan provides for a discretionary match which is computed on an annual basis. All participants share in the match. To avoid a large contribution at the end of the year, the employer contributes (for example) a 100% match on deferrals not exceeding 4% of compensation on a payroll basis throughout the year. Is there a violation of the timing of contribution regulations if the employer computes and funds the match this way, and then deposits any possible match true-up at plan year-end? Under the final 401(m) regulations, you cannot prefund matches before they are earned. Therefore, we will assume for purposes of this question that no requirements apply in regard matching contributions. On that basis, we are concerned that the allocation violates the terms of the plan, which provides for an annual allocation. ughhhhhhhhhhhhhhhhhhhhhhhhhhh. you have prefunded a match. a clear violation based on the IRS comment

myth - a young damthel, thumbtime in dithreth another myth - you must run ADP test first. there is no requirement that the ADP test is run first. in fact 1.401(m)-2(b)(3)(v)(B) says you determine level of match after correction of excess aggregate contributions. Thus if you run the ACP test first and fix that first, you might not have any related match to forfeit - you never get to that point. IRS officials have indicated this as well as ASPPA Q and As. Q and A 18. ASPPA Conference 2004 There are two prevalent methods for performing the ACP test when deferrals must be returned due to a failed ADP test: The first method forfeits all matching contributions associated with the excess contributions under the ADP test. The ACP test is then run. Under the second method, the ADP and ACP tests are both run. Corrective distributions are made first then any matching is forfeited if necessary. Are both of these methods acceptable or is there one specific method that should be used? A: Either method is acceptable as long as it is in conformance with the plan language. We believe most plans utilize the second approach. ................................................................................ ............... I suppose a really poorly worded document might require otherwise.

I think you are right to be concerned by the definitions. if you take a strict interpretation I think you are correct that wife and kid are owners and therefore in group 1. if you are talking about the 2009 valuation, then no you couldn't do a corrective amendment because that would be taking away a benefit someone has already accrued. I suppose another possible interpretation would be would be to say if group A includes owners by attribution, then no one is in group B and that wouldn't make sense as to what the plan was designed for. Therefore, it's logical to conclude that group A is meant to be 'owners, not by attribution" or "direct owners". possibly a board of resolutions to indicate as such. would it stand up under IRS scrutiny? who knows.

I would think so. in one sense of the word a loan is not really a distribution, it is sort of like a particular investment for the individual

which is summed up well by the line from The Lord of the Rings All that is gold does not glitter, Not all those who wander are lost;

the regs require a safe harbor to be provided for anyone who is eligible to defer -no allocation conditions. My own leanings are that someone who quits before deferrals start would be ineligible for safe harbor. the whole purpose of the safe harbor is you give up running the ADP test because you have provided a special contribution. of course, that doesn't mean the IRS wouuld interpret it that way...

if you are adding a 401(k) feature, then you can addthe safe harbor feature anytime up until Oct 1. but if there is already a chance to defer, it is too late for 2010.