Tom Poje

vesting operates under an even stranger concept. short plans have no bearing, because you always consider a 12 month period. this means you end up double counting hours due to an overlap. see Labor Reg 2530.230-2© (of course there is nothing to stop you from also amending a plan to say "A person will receive 1 yr service for vesting if they complete 500 hours in the short year from 7/1 - 12/31" as long as an individual who worked less than 500 hours in that period is credited with a year if they completed 1000 hours in the 12 months period.) you don't prorate HCE determination either, because that is the 12 month period preceding the determination year.

my guess, being that the self correction is you put in the contribution with interest calculated from the due date.

join the club of mis-reading things. the line forms on the right and currently extends quite a distance.

1.410(b)-6 lists the people who are exludable.. in particular, (f) says terminees with less than 500 hours who do not benefit. there is nothing that says terminees that terminate with more than 500 hours who do not benefit. the 401(a)(4)rules follow the guidelines set forth in 410(b)

if they have entered the plan, then yes, they show up as a zero. in fact if it is a 401k plan, and they had less then 500 hours they would show up on the avg ben pct test as well with a zero because they could have deferred (whether they did or didn't), but they could be excluded from the rate group test.

but we're not in Oz, so when does going over the 415 limit rainbow occur? In your example, what if owner 1 was over age 50. would you then allocate more profit sharing to him because he is catch up eligible and didn't use the catch up yet with his deferrals? ........ again depending exactly how the document is worded, at at least one ASPPA Conference the IRS implied you would allocate comp to comp, then use EPCRS to correct violation of 415 limit - return of deferrals to the participant, because that is favoring the individual (that is, the participant is getting company money rather than deferrals)

A bigger thanks to you for following up and posting the IRS response. sounds like your experience was as good as mine.

my gut feeling, is that no, you can't change anything in the safe harbor once things are started. based on comments from IRS officials - for better or worse - their hands are tied. the only exceptions permitted were adding a Roth, and if I recall correctly, modifying the hardship rule. In this particular case, I think you have even more strikes against you. The safe harbor rules already speak of makung a match on a payroll basis and that they have to be in by the end of the nxt quarter. furthermore, you are talking about the hopes of amending a plan to favor an HCE who has the advantage of being able to put in all his deferrals early and getting the advantage of losses....er...gains over the whole year as oppossed to the NHCE.

only because I called the IRS help line yesterday and was redirected to another dept phone line to be helped with the 1099R form, you might try them the help line phone number for this dept was 866-455-7438 (I had called first thing in the morning (8:30), no waiting, etc.)

you learn something new every day. having this situation arise at this late date - of course a takeover case. called the IRS help line, started with one office, and redirected to another. (Despite 2 different phone calls, no waiting, very helpful people - so much for ugly rumors) (This of course involves not going through VCP) anyway, my ultimate question boiled down to how do I do this if I file 1099s electronically? so, you use the 2009 software, not the 2008 software. there is a spot to code the form 'prior year filing' another spot where you enter "2008" to indicate the proper year the system then generates a paper copy 1099R with the year 2008 (rather than 2009) in the upper right hand box of the form. the electronic file (nothing at all to do with the printed 1099) to be sent to the IRS contains the letter "P" in field 6. "P" I guess must indicate prior year. well, ok, maybe I got lucky and the particular software I used had the proper features, though I would assume all of them would since they have to be approved ahead of time. the individual needs to amend their 2008 tax form. the IRS official did mention there may be a late fee assessed, but not necessarily. If I recall the particular dept was IRS Forms and Reporting (I could be wrong about that name) the help line phone number for this dept was 866-455-7438

justbsur: you have to be careful about the match. the actual wording in the notice is as follows: Section 401(m)(3) provides that rules similar to the rules of section 401(k)(3)(E) shall apply for purposes of the ACP test. For purposes of the ACP test, the "first plan year" of any plan is the first year in which a plan, within the meaning of section 414(l), is or includes a section 401(m) plan (i.e., the first year a plan provides for employee contributions described in section 1.401(m)- 1(f)(6) or matching contributions described in section 1.401(m)- 1(f)(12), or both). This does not say "the first year the plan provided a match" , but rather "provides for a match". A subtle distinction. Thus if the plan had a match feature but never used it my understanding is you are out of luck. At least, that is what IRS officials have said at different conferences, as far as I can recall. This issue has come up from time to time, so many have read it that its the first year a plan actually makes a match.

that sounds correct

if you are real lucky (but your name doesn't sound Irish) the plans are top heavy. no profit sharing is made, but the top heavy is made. since the non keys (hopefully they are all the NHCEs) received a top heavy they have to receive the gateway minimum as well. (hopefully the document has gateway language as well) then the HCEs get 0% anyway in profit sharing, which is what you wanted

so, they say you can put people in their own groups and then say just make sure you don't operate so that in effect it becomes a CODA, with the caveat added at one of the ASPPA conferences "We will know abuse when we see it" gotta love it. (I'll give them credit for at least following the LRM!)

Belgarath: Interesting. The language you were required to put in the adoption agreement comes from LRM 94. I'll post it again, the particular verbage is in green.

I have that section of my book paperclipped just so I wouldn't accidently look at the old regs. That section under the old regs lists the 4 reasons for hardships distributions (I believe funeral expenses have been added since then) personally I think working in the pension industry is a hardship, but I guess that is a different matter.

Maybe it was this benefits link post (I have no idea how to actually point to the post, its the best I can do) http://benefitslink.com/boards/index.php?showtopic=40880

I have no idea. I just remember reading something about the EINs awhile back and figured it made sense about the reason to obtain a seperate trust EIN. by the way, there is certainly no reason why that number doesn't change depending on the scenario. for example if assets were at INVESTMENT HOUSE 1 and you have switched to INVESTMENT HOUSE 2, you would swith the EIN that goes on the schedule R when a distribution is made. But you are asking the wrong idiot about EINs and the like... Asking me that type of question is like looking for a penny in the corner of the round room. (oh, the rest of you folks don't know the story behind that comment.)

well, you are certainly headed in the right direction. you pointed out you have a controlled group, and if you have different formulas then some type of testing must be done. you indicated there are 3 plans, and two are the same plan year, so that really complicates things because you can not aggregate plans with different plan years. (except for the avg benefits % test, if that is needed) if there are no HCEs in a plan, then that plan automatically passes testing. (but that doesn't prove the other 2 plans pass if they have an HCE - even if they alloacte a % of pay. for example, suppose Plan B is loaded up with HCEs and it alloactes a 10% of pay formula, while plan C is loaded up with NHCEs and uses a 3% of pay formula. Clearly B needs to be tested to prove nondiscriminatory.

if the plan's assets are under a seperate EIN, then in the case of lawsuits, bankruptcy etc against a company they are still protected. however, if everything is under the company EIN, my understanding is that you don't have the same safeguard in place.

again, its the excess contributions that are taxed in the year of distribution. excess deferrals are taxed in the year made, and if not distributed by April 15, are taxed a 2nd time, in the year of distribution.

from the 2007 ASPPA conference Q17) Safe Harbor 401(k): For the safe harbor nonelective contribution, does the document or notice have to specify the exact percentage or can it simply say “at least 3%,” giving the employer to contribute a larger contribution if it so desires? A: The safe harbor matching contribution formula must reflect the exact percentage. The nonelective contribution formula may be expressed as “at least 3%.”

Q & A 19 from the 2007 Conference 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.) (such response from the IRS always carry the following caveat, but at least there is a basis for following whatever procedures you take: The answers reflected in this presentation are the ASPPA representatives’ interpretation of the IRS officials’ responses, and are not direct quotes. They are intended to reflect as accurately as possible the statements made by the government representatives. This material does not represent the official position of the Internal Revenue Service, the Treasury Department, or any other government agency; nor has it been reviewed or approved by the Service or the Treasury.

the regs say you look at a group that consists of 'half the eligible NHCEs' I would hold that 10 is less than half of 21 and would fail to meet the requirements, so I would always round up

I had pulled my value from a spreadsheet someone sent me, so it could well be incorrect. I never use 8% so it doesn't effect anything I have done, but thanks for the note. Austin: the only time I have seen an interest rate other than 8.5% work is when there are a number of HCEs with different ages and in different groups (e.g. receiving different % of pay) along with some NHCEs with ages greater than some HCEs In Relius, if you go to Data Entry/Tables/Actuarial/Annuities you can generate APRs for any mortality table on the system, for any age any interest rate. (I also think on the table I had the ages reversed - they should have gone from age 65 up and not 65 down, but that is my own fault for copying and pasting stuff rather rapidly)