Tom Poje

but it is a constant, nonetheless. to determine an E-BAR you take the contrib * (1.0I)^yrs to retirement this gives you a lump sum at retirement. you then divide by the APR to determine a monthly benefit at retirement age. if everyone has the same retirement age then whether I divide by 95.383 (8.5% UP 84) of divide by 115.387 (1983 IAF) everyone's e-bar is effected the same [you then divide this monthly benefit by monthly comp to determine the E-BAR] I will provide an example of when imputing disparity helps, but I still do some other work around the office. ok, consider PYE 12/31/2009 - hce born 1/1/49, NHCE born 1/1/63 HCE 245,000 comp and 49,000 contribution NHCE 20,000 comp and 1,100 contribution E-BAR up 84 (8.5% pre and post interest) HCE 3.783, NHCE 3.260 NOT in rate group, fails with disparity HCE 3.988, NHCE 3.910 NOT in rate group, fails E BAR 1983 IAF (8.5%) HCE 3.128, NHCE 2.695 NOT in rate group, FAILS with disparity HCE 3.332, NHCE 3.345 Now the NHCE is in the HCEs rate group.

more than an assumption, that would be the truth. In most cases, I'd go out on a limb and say the best you can do is to use 8.5% pre and 1983 IAF 7.5% for the mortality. age definition nearest if the HCEs are born in the first half of the plan year. Here is a comparison (sorry, it doesn't copy well) of 2 tables UP 84 UP 84 UP 84 1983 IAF 1983 IAF 1983 IAF age 7.50% 8.00% 8.50% 7.50% 8.00% 8.50% 101.494 98.350 95.383 124.434 114.413 115.387 65 98.975 95.987 93.164 122.216 112.234 113.516 64 96.444 93.609 90.926 119.909 109.980 111.519 63 93.897 91.211 88.667 117.508 107.650 109.511 62 91.321 88.782 86.374 115.006 105.245 107.365 61 88.704 86.309 84.035 112.400 102.766 105.117 60 86.049 83.796 81.653 109.690 100.216 102.766 59 83.363 81.248 79.233 106.880 97.597 100.310 58 80.649 78.667 76.778 103.976 94.916 97.767 57 77.922 76.071 74.303 100.988 92.178 95.133 56 75.193 73.467 71.816 97.927 89.390 92.420 55

the preamble to the final 401(k) regs states the following: 4. Safe Harbor Section 401(k) Plans Section 401(k)(12) provides a design-based safe harbor method under which a CODA is treated as satisfying the ADP test if the arrangement meets certain contribution and notice requirements. Section 1.401(k)-3 of these final regulations, which sets forth the requirements for these arrangements, generally follows the rules set forth in Notice 98-52 and Notice 2000-3. Thus, a plan satisfies the section 401(k) safe harbor if it makes specified QMACs for all eligible NHCEs. I will be glad to volunteer my name if the participant wishes his safe harbor contributionto go to someone else, or has the line already formed?.

the APR is a constant, so if you do not impute permitted disparity it doesn't make a difference which mortality table you use. Exceptions to the rule would be someone who has worked past normal retirement or late hires (e.g. age 62) and a plan with a retirement age of 65/5. but even with these exceptions, the differences in E-Bars are generally insignificant from one mortality table to another. if you impute disparity, then usually 1983 IAF produces the best results. The APR for that table as compared to another table is the largest value, so as a general rule I think most people use that table without even considering other mortality tables.

I'm not sure there is a 415 issue. lets suppose the plan is not a safe harbor, just a regular 401k - so regular that it fails ADP testing. so regular the problem was not known until 2 1/2 months after the end of the plan year. I know you folks never have that problem, but some of us do. so to avoid the tax penalty the company alloactes a QNEC, typical document QNEC to all NHCEs. the regs clearly say the QNEC can be provided as late as 12 months after the end of the plan year, and I have never heard anyone raise the issue of a 415 limit in this case- even if the QNEC went to employees who terminated during the plan year, and would have no comp 12 months after the end of the plan year. I've never seen anything written anywhere that says "you can give the QNEC, but only to those people who have enough comp in the following so there is no 415 violation". A safe harbor contribution is also a QNEC, so I don't see why the rules change in the case of a safe harbor. Maybe I understand it wrong, but I thought a QNEC was one of those 'exceptions' to the rule, because the regs throw in the rule about "must be made within 12 months after the end of the plan year".

unfortunately 2 FBI agents lost their lives when the suspects threw a "pair a bolas" at them.

Arrest report A school teacher was arrested today at John F. Kennedy International Airport by T.S.A agents as he attempted to board a flight while in possession of a ruler, a protractor, a compass, a slide-rule and a calculator. At a morning press conference, Attorney General Eric Holder said he believes the man is a member of the notorious Al-Gebra movement. He did not identify the man, who has been charged by the FBI with carrying weapons of math instruction. 'Al-Gebra is a problem for us', the Attorney General said. 'They derive solutions by means and extremes, and sometimes go off on tangents in search of absolute values.' They use secret code names like 'X' and 'Y' and refer to themselves as 'unknowns', but we have determined that they belong to a common denominator of the axis of medieval with coordinates in every country. As the Greek philanderer Isosceles used to say, 'There are 3 sides to every triangle'. When asked to comment on the arrest, President Obama said, 'If God had wanted us to have better weapons of math instruction, he would have given us more fingers and toes..' White House aides told reporters they could not recall a more intelligent or profound statement by the President. It is believed that the Nobel Prize for Physics will follow---

correct, though maybe I confused you. suppose ther are a total of 55% of the company shares in the ESOP. suppose Mr A currently owns 5% of the nontainted shares in the ESOP. suppose he is currently a 21% owner shares outside the plan. my understanding he is a 26% owner. dang, I didn't even think about it, but because of family attribution, he owns his daughters shares as well. I see this plan as a 'fun' one to process, if eating liver, being put on a rack, etc are all your cup of tea. especially if forfeitures are involved. tell the software to handle that type of mess. lets see, all share forfeitures from untainted shares , the initial tainted shares cant be forfeited to the 2 owners and the daughter, the new tainted shares can be received by the daughter if they are from her dad... the original conditions started out something like a 65% owner and a 35% owner, each 'donated' a different amount to the plan. they now own 43% outside the plan, though I am not sure exactly how much individually at the moment. maybe I will get lucky and they wont take a 1042 election this time around.

possibly correct under VCP? see comments on Accidently Defaulted Loans from the following web site: http://www.prudential.com/media/managed/EP...-0606-final.pdf

so lets see if I have all this correct, as it gets rather convoluted. Mr A more than 25% owner Daughter of A Mr B more than 25% owner "tainted" stock was put in the ESOP from both A and B with 1042 election additional stock "Untainted" as well so all employees receive untainted, but the 2 owners and daughter can never receive tainted even though the 10 years are now up and the owners no longer own 25%, becauseat the time of the sale they were all 25% owners. now they sell their remianing shares to the ESOP. (including the stock A and B own in the plan they are still not 25% owners at the time of the sale.) so I have "new tainted from A", and "new tainted from B" is the following correct - neither A or B can receive the new tainted shares for 10 years, but after that they can because they are not currently 25% owners. (ignore the fact that A will be something like 83 in 10 years, and it probably wont matter in A's case.) the daughter, because of the special lineal descendant rule can receive up to 5% of "new tainted A" during the 10 year period, but no shares of "new tainted B".

that much I understand, but the person is now no longer a 25% shareholder, so the question is : is 'perpetual' based on ownership when shares were put into the plan, or at the current time.

An individual was a 25% owner at the time he sold shares to the ESOP and took a 1042 election. it is now 10 years later, and the individual is no longer a 25% owner. is the person eligible to receive shares (the loan is now paid off), or does the nonallocaton period last forever because they were a 25% owner at the time of the sell.

I don't know. I guess the question would be one of "Why is this 12 month rules in the regs? "- in other words, under what conditions would a match ever be deposited after 12 months that wouldn't be a make-up match? I've never heard of a situation in which an employer in the year 2010 would decide to make a match for the 2008 plan year. And remember the same rule applies to a deferral- if it wasn't deposited until 12 months after the fact - and I think you would have to agree a deferral deposited that late would certainly be a make up deferral, so why would the logic be different for matches? but if treated as a non-elective contribution, then as you indicated, if it only applies to HCE you might fail the a(4) test. But since you would be after the 9 1/2 month deadline for correcting the problem, then you would have to fix using VCP, which I wouldn't think is the intent of the regulation. well, I'm sure someone wiser than me knows the answer.

for purposes of the ACP test 1.401(m)-2(a)(4)(iii)© says matching contribution is actually paid to the trust no later than the end of the 12 month period immediately followining the year that contains that date. it doesn't sound like the make up match was actually deposited within 12 months, so I think that says you don't include them in the ACP test.

thats excess contribution, not excess deferral

1099R is used to report excess deferral code P showing taxable in prior year and a 2nd 1099 to indicate earnings code 8 (taxable in current year - the actual year of distribution) if I understand the rules correctly, if there was a loss then the world stops, hell freezes over, planets collide and all other sorts of strange things happen. you end up reporting the loss as 'other income on your tax form. no 1099R for the loss and everyone gets confused as to what happens. you send the person a note signed by mom saying you can report the loss. or something like that. I looked it up once and tried to erase it from my memory but it is still partially buried there. if late excess deferral (after April 15) then only one 1099R indicating total amount of distribution and taxed in year of distribution. there is no 1099 for the excess deferral, but the person still was suppose to claim it in that year - thus the person is taxed twice, and whatever other nonsense could take place (e.g. I think 10% early withdrawal may apply in the year of distribution because it is now no longer an 'excess distribution' but a distribution. ugh, don't be late. please.

just because you have a controlled group does not mean that plans are aggregated for nondiscrim (or ADP) testing. If you do indeed have a controlled group, then you have one employer and a bunch of employees working for 2 companies. if you aggregate for coverage you aggreagte the ADP test. but if you do not aggreagte for coverage , you can't aggregate for ADP testing. so its perfectly fine if 2 seperate ADP tests awere run (as long as for coverage that the people from company B were treated as includable and not benefiting. these people would not show on the ADP test either) you did not indicate what the ownership was. its possible a controlled group might or might not exist. possibly plugging the ownership percentages in the spreadsheet will indicate if you have a controlled group. I think you have the possible brother-sister 5 or fewer owning at least x% blah blah blah controlled group to determine

http://www.irs.gov/retirement/sponsor/arti...=137958,00.html one of the many articles that can be found here is: in particular, see situation 2 The Fix Is In: Common Plan Mistakes - Correcting a Failure to Effect Employee Deferral Elections The Problem An employer’s failure to execute an employee’s election to defer amounts to a 401(k) plan is a relatively common error. Like its cousin – mistakenly excluding an employee from a plan – the problem can be rectified by making a qualified nonelective contribution (QNEC) to the plan on behalf of the employee, and as in the case of other operational problems, the error can be fixed through the Employee Plans Compliance Resolution System (EPCRS). The problem to address is one of a missed deferral opportunity: the employee received taxable compensation instead of being able to defer amounts on a pre-tax basis and to accumulate earnings on those deferred amounts tax free until qualified distributions are taken. Let’s look at two examples, neither of which entails “catch-up” contributions for employees age 50 or older, after-tax contributions, or “designated Roth” contributions. In both cases, the employees are nonhighly compensated employees (NHCEs). Situation 1: Amy’s elective deferral election at the start of 2006 somehow was never processed by the employer’s payroll system. As a result, Amy received taxable compensation amounts that should have been contributed to the plan during the first six months of the year. The facts in this situation include: the plan’s actual deferral percentage (ADP) for NHCEs of 5%; Amy’s election form agreeing to a deferral of 10% of pay; and her compensation of $20,000 for the six months that no deferrals were made. Situation 2: Bob elected to defer 5% of his compensation in 2006. The plan includes bonuses in the definition of compensation that is used for an employee making elective contributions. Although Bob was able to make deferrals on his base compensation, the payroll system overlooked his bonus. The facts here entail an ADP of 3%; Bob’s base compensation of $19,000; and his bonus of $2,000. The Fix As in the case of an erroneous exclusion of an employee from the plan, the remedy requires the employer to make a corrective contribution of 50% of the missed deferral (adjusted for earnings) on behalf of the affected employee. The employee is fully vested in those contributions, which are subject to the same withdrawal restrictions that apply to elective deferrals. However, unlike in the case of mistaken exclusions where the missed deferral amount is estimated based on the ADP for the employee category (e.g., NHCE), in both illustrative examples, the employees’ election deferral amount is known. Thus, the missed deferral and the corresponding corrective contribution (50% of the missed deferral) are based on the participant’s actual election instead of the ADP (i.e., 5% or 3%, respectively) of the NHCEs. Before correcting for the exclusion, however, the plan must evaluate whether, in the event that the employee had made the missed deferral, it would still pass the applicable ADP test. The ADP test should be corrected according to the plan’s terms before implementing any corrective contribution on behalf of the employee. In addition, the missed deferral amount should be reduced, if necessary, to ensure that the employee’s elective deferrals (the sum of deferrals actually made and the missed deferrals, for which a corrective contribution may be required) comply with all other applicable plan and legal limits. Assuming that the plan passes the ADP test and that no changes must be made to the missed deferral amounts on account of plan or legal limits, the fixes for Situations 1 and 2 are determined as follows: Situation 1: Amy’s missed deferral amount is $2,000 (i.e., 10% (Amy’s election percentage) multiplied by $20,000 (her compensation earned during the period in which the employer failed to implement her election)). The amount of the corrective contribution the employer must make on Amy’s behalf is $1,000 (i.e., 50% multiplied by Amy’s $2,000 missed deferral amount). Situation 2: Bob’s missed deferral amount is $100 (i.e., 5% (Bob’s election percentage) multiplied by $2,000 (his 2006 bonus from which elective contributions were not made even though he elected to make a contribution of 5% of all compensation, which included bonuses)). The corrective contribution required on behalf of Bob is $50 (i.e., 50% multiplied by his $100 missed deferral). The described correction only applies to missed deferrals. The corrective contribution also must be adjusted for earnings from the date that the elective deferrals should have been made through the date of the corrective contribution. Making Sure It Doesn’t Happen Again Employers should establish systems that can help ensure that employees are provided the opportunity to make deferrals/after-tax contributions to the plan according to the plan’s terms. They also should work to ensure that third-party plan administrators have sufficient understanding of the plan’s terms to operate the plan accordingly. This is especially important if there have been plan amendments or changes to either payroll systems or administrators. Keep in mind that despite all of your good efforts, mistakes happen. In that case, the IRS can help you correct the problem so that you retain the benefits of your qualified plan.

http://www.dol.gov/EBSA/5500MAIN.HTML you should be able to find what you want here - they have instructions for the forms going back to 1995 ah, the memories. we worked on a plan for a company known as Advanced Women and the codes were CHIK C=participant directed H=top heavy I=Permitted dosparity K=prototype

in the lower right hand corner of my screen it says 100%, I'll assume somehow you hit the zoom function (or started your New Years celebration early and didn't invite the rest of us)

yes, but not for a 401(k) plan (or a safe harbor contirbution in a 401(k) plan)

I think in the case of the 3% SHNEC you can probably get by since it really shouldn't effect someone decision to defer. on the other, 30 days ago someone might have expected a match and so decided to defer. however , since you pay monthly which is 30 days, then it sounds like someone should be able to make a 'reasonable decision' and stop deferrals if they so desire. plan must be amended by 12/31/2009

sounds like you have an enhanced match, which satisfies the ADP safe Harbor. since the match is on greater than 6%, then ACP testing needs to be done, but you are permitted to exclude 4% from testing. ok, maybe only 3.5% since you are talking auto enroll. I would have to dig into the regs deeper to see what that says.

Bill's comments are right to the point - it is unclear. remember though that the 30 days is deemed 'reasonable'. for example, if I had an office of 3 people and talked to each one seperately describing the elimination of the match, would that be termed unreasobale as far as those few employees making a decision? so I would also say it is a facts and circumstances issue as well.

the document could read the safe harbor is "at least 3% of compensation", in which case the safe harbor could be more than 3%. however, remember, a safe harbor is still a form of QNEC, and therefore you would not be able to impute disparity on any such animal. it is probably better to provide any additional amount in the form of a profit sharing contribution.