Tom Poje

in addition, if you (or the investment house) were providing quarterly statements, was there a note indicating that current year's contribution (plus associated earnings) was subject to last day provison? and who calculates that amount of earnings? I can think of one situation where such a method might not be deemed valid. lets say the boss makes 100,000/month and the contribution is 6%. now after 8 months he is maxed out at (or close enough) at $48,000. he longer receives any more because he bumps into the 415 limit, yet he has his full amount invested for another 4 months, unlike any NHCE. arguably a failure of BRF - no one else has that advantage.

ugh. you make me dig through my stacks and piles notes and folders. get buried under a mess. papers everywhere on floor. you no longer good friend. the $100 is also discussed in Amendment to Prohibited Transaction Exemption 2002-51: The Internal Revenue Service (the Service) submitted a comment requesting a modification to the current requirement in PTE 2002-51 which provides that an applicant must notify interested persons in writing of the transactions for which relief is being sought pursuant to the VFC Program and this exemption.\6\ The Service requested that the notice requirement not apply in those situations where: (a) The excise tax due under section 4975 of the Code for a failure to timely transmit participant contributions and loan repayments is less than or equal to $100.00; (b) the excise tax that otherwise would be owed and payable to the United States Treasury is contributed to the plan; and © the contribution is allocated to the accounts of the plan's participants and beneficiaries in a manner consistent with the plan's provisions concerning the allocation of plan earnings. Lastly, the Service noted that, under the circumstances outlined above, employers that meet the applicable conditions of the class exemption would not be required to file a Return of Excise Taxes Related to Employee Benefit Plans (IRS Form 5330) with the IRS. After considering the issue, the Department has determined to modify the final exemption as requested by the Service. The Department notes that, for the purpose of determining whether the excise tax due under section 4975 of the Code for failing to timely transmit participant contributions and loan repayments is less than or equal to $100, and determining the amount to be contributed to the plan, an applicant may calculate the excise tax that would otherwise be imposed by section 4975 of the Code based upon the Lost Earnings amount computed using the Online Calculator. and also found under "FAQs about the 2006 VFCP update" Why did the Department amend the class exemption? Based on growing public use of the VFCP and the related exemption, we expanded the VFCP to include new transactions and amended the class exemption to add two of these transactions, the illiquid asset and settlor fees transactions. In addition, the IRS recommended that we eliminate the notice requirement in some delinquent employee contribution situations if the amount of the excise tax is less than or equal to $100 and certain requirements were met. We adopted this recommendation. but... Participant contributions to the plan were delinquent, but the dollar amount needed to correct is very small. Do I have to participate in the VFCP? No one is required to file an application under the VFCP to correct a violation. Participation is voluntary. Of course, you must take appropriate actions to correct the violation even if you don’t submit an application. However, if you don’t file an application with us, you can’t get the relief available under the Program. In addition, if we discover the violation during an investigation, and the correction was not complete, a civil penalty may be assessed on any additional amount required to fully correct the violation. Remember, too, that you aren’t eligible for the IRS excise tax relief unless you receive a no action letter. See the FAQs on the class exemption for more information. .................. so, as I understand things, let say the amount is $75. I can go through the trouble of VFPC, skip paying the excise and put it in the plan or I can simply send the excise tax to the IRS and not worry about VFPC, but possibly run the risk of trouble in the future (but that is sort of the way things work when you self correct under EPCRS)

Austin, its not realyy 'informal' my notes say something like: If excise tax amount is less than $100 then: Pay to plan participants rather than IRS, may use online calculator to determine amount of lost earnings. No notice to participants No 5330 to IRS – but send a copy to DOL apparently just for the heck of it Its buried somewhere in the class exemption, or something like that, but I would have to dig out my notes to find out exactly where. I think its in the Fibber and McGee closet, so you don't want that to be opened.

if your plan document has fail-safe language then you can provide the contribution. If not, you will have to do so via corrective amendment

now lassy, I taught it twas the background aye was pickin on

careful BG - she could probably sweet talk you into doing it for her. .......................... and I should have indicated on my census reports I use the field 'internet address' in census - not for its intended purposes, but rather, I enter something like "Paid Out in 2008" (since they remove code "Z" a few years ago, I wanted something on the census report to indicate that).

I suppose you could modify the ADP report, taking adpnhcavgpct * adpnhcqty / (adphhcqty - # of ees term 0 comp) or in census check 'exclude from ADP test' or 'exclude from ACP test'. sorry, I'm not sure what the field name is in crystal. the census report I use will actually indicate 3 'extra' items on an ee: term prior year but has comp this year has 0 comp but is listed as active [which sre the people you are referring to - if you know these, then you could import back into Relius exclude from test] is 70 1/2

you indicated you fail coverage, so you only need to provide a QNEC to enough NHCEs to pass coverage. the QNEC = the average of the NHCEs. now, if you were to include these 'added' NHCEs in the test, since they received the avg of the NHCEs, then the ADP test should end up at the same average, so it really shouldn't matter. e.g. if the avg for 10 NHCEs was 4% and I add 1 NHCE at 4%, the avg will still be 4%.

oh yeh. this really happened here... someone sent us a death certificate for proof of funeral expenses. someone here looked up the date of death, etc and found it was someone else. if you are going to 'white out' a name and put another one in, don't make it so obvious. still, to what extent do you take it upon yourself to verify the so called proof.

and remember, the HR person doesn't 'run' the plan - there is someone out there (like us) who actually handles the compliance end of things. Taking what you have pointed out so far, the HR person should be in contact with that person as well- (hopefully their response/solution would be along similar lines to what advice has been given here) good luck on the resolution.

see 1.410(b)-7(d)(5) 2 or more plans may NOT be aggregated andtreated as a single plan unless they have the same plan year. When you have a controlled group, all employees are treated as being employed by one employer. If plans have the same plan year, you are allowed to permissively aggregate the plans for testing purposes. (Thus, for example, if each plan has a 401(k) feature, everyone could defer, so you would expect the 401(k) feature to be at 100% for coverage.) There is no requirement to aggregate the plans, but if you don't, then you end up with employees being includable and not benefiting. If the plans are not the same plan year, you have no choice - then all employees from one plan would be treated as includable and not benefitting for the other plan. the one exception to the rule would be the average benefits percentage test, which is aggregated even if plan years are different. see 1.410(b)-5(d)(%)(ii)

Rev Proc2008-50 6.02(4)(e) notes that in a DC plan a corrective contribution or distribution should be adjusted for earnings (including losses) from date of failure 6.02(5)(a) notes that the Online Calculator can be used (but only if the probable difference ...is insignificant...or admin cost..If it is not feasible to make a reasonable estimate...etc.) while somewhat old, this was an answer provided years ago - the general thought being the correction is somewhat similar to a 402(g) failure http://benefitslink.com/modperl/qa.cgi?db=...ects&id=107

'limits' are based on plan year begining(e.g for comp, see 1.401(a)(17)-1(a)(3) - they even give an example to make things clear). the one exception is the 415 limit which is based on plan year end. see 1.415(d)-1(a)(3). even the 415 limit has an odd reuqirement, in that you can't reach that limit until the actual calendar year starts. (1.415(d)-1(b)(2)(iii) (or at least that is how I would read it) so for a profit sharing plan year 7/1/08 - 6/30/09 you could not 'prefund' someone at 49,000 until 1/1/09

let say I had the following: Company A 1 year wait 5 HCE 10 NHCE plus 15 NHCE less than 1 year, so usually ignored) Company B 2 month wait 2 HCE 8 NHCE (who would meet 1 year wait) plus 12 NHCE meeting 2 month wait if you test otherwise excludable separately you would have 2 tests 7 HCE 19 NHCEs and the otherwise excludable group consisting of 27 NHCEs since the otherwise excludable group is only NHCEs that passes. so now you test the group with 1 year. you are allowed to test separately, and would have plan A NHCE ratio 10/(10 + 8NHCE) HCE ratio 5 / (5 +2 HCEs) and an ADP test including only plan A with 1 year of service plan B NHCE ratio 8/ (8 +10) NHCEs) HCE ratio 2 / (2 + 5 HCE) and an ADP test only with plan B and 1 year of service. remember, there were no HCEs in the otherwise excludable group, so that portion passes or you could permissively aggregate the plans, all ees with more than 1 year svc are benfiting, and then you have 1 ADP test including all people with more than 1 year of service. or you could also ignore otherwise excludables and test everybody with 2 months. lots of possibilities.

ok, so you had an acquistion in 2007, which means you get the transition rules which covers you through 2008. so for 2009 you have to treat all employees as if there is one employer. and you use the least stringent eligiblity requirements (but since you can test otherwise excludables separately it is probably easier to do that, and the net effect would be as if both plans have a 1 year wait - unless you manage to have some HCEs who have less than a year of service) now, after that, your results will depend on whether you are going to permissively aggregate the plans (in which case all employees show up on the ADP test, and everyone pretty much benefits for coverage) or test separately (which could cause a coverage since all employees from one company are treated as includable and not benefiting, but then they don't show up on the ADP test when you test the other plan) In other words, if you do not aggregate, you would have Plan A - Only ees of A benefit for coverage, B includable not benefiting, and the ADP test is only ees from A. and you would have Plan B - Only ees of B benefit for coverage, A includable not benefiting, and the ADP test is only ees from B. again, I am assuming you test otherwise excludable separately and therefore the different eligibility requirements does not come into play.

'because its a new plan, means there is a short plan year' this is not necessarily true. certainly no one can defer before the 401k feature is in place, but the plan could have an effective date of 1/1 (e.g. profit sharing could be made based on the whole year) I think for testing in that scenario you would take seperate E-Bars and add them e.g. the e-bar for deferrals is (deferral for the period / comp for the period) + .... ...... since 1.410(b)-7(d)(5) says "Same plan year requirement" and "...unless they have the same plan year" I would say you can't aggregate the plans if you do indeed have a short plan year since the plan years are not the same.

This was just forwarded to me... "Like many recent college graduates, Raechel Holtgrave was planning to accept her first full-time job this year — a position with State Farm Insurance. But now that she’s been crowned Miss Hooters International, those plans will have to wait. she majored in mathematics and actuarial science" huh. what's the world of actuaries becoming? gotta love her quote “You’ll never find an easier job, and you’ll never find a job where you have this much fun,” she said. “That’s why I’m worried about my next job that I’ll be bummed it’s not as much fun.” http://www.columbiatribune.com/news/2009/j...-spreads-wings/

Rev Ruling 2009-30 adds the following to our jumbled knowledge of Automatic Enrollments. There are 2 'situations' provided Situation 2 The annual increase does not have to be the first day of the plan year. This example uses April 1 rather than the plan year begin date of January 1, because salary increases are enacted on April 1. Situation 1 I am not sure who dreamed this one up. the increase is the greater of 1% or a number of percentage points calculated as 30% of the percentage increase in the base pay. (rounded to the nearest whole percentage) In this example the plan is not intended to be a QACA or an EACA, so the increase does not have to meet the uniformity requirement (e.g. some people will increase 1% each year, but someone with a big salary increase would increase 2 or more- definitely non-uniform for 2 people who otherwise have the same number of year, etc )- so the odd annual increase is ok. C'mon - which one of you characters out there are setting up plans like this?

but if they are all owners, then they most likely would be 'key' employees, and the top-heavy could be provided to non-key only - or I would assume so, unless you are stuck with a document that requires all participants to receive top-heavy.

from your description, the 401(k) feature was added on 9/1. It is, in many ways, its own 'plan'. thus, as I understand the rules, anyone who terminated before 9/1 would not be considered at all - neither for coverage nor for the ADP test - they simply don't exist - so I wouldn't think coverage should be a problem.

Belgarath - I did try a search of the ASPPA Q and As, the question was actually asked (I think in 2007) if you had to match excess contributions, but no answer, the agent was going to look into it, and that is as far as it went. I have seen the language you described in a document, and again, it just seems strange to me you could do this, but what the heck. Its interesting, the HCE loses out on the deal, because otherwise he would receive the excess aggregate contribution due to the ACP failure, but I guess you save some on the excise tax.

this is an old response (ok, maybe a just a shade of being an ancient response) , and as is indicated in the answer the IRS may be reconsidering the opinion expressed here http://benefitslink.com/qa_columns/plan_de...archive/41.html

I realize that. my comment wasn't meant to imply the plan was or wasn't top heavy, rather it would seem inconsistent to ignore excess contribution in determining match, but you consider the excess for top heavy and non-discrimination. but of course, anything is possible, the regs are a strange animal.

interesting. I didn't think you could do that in a document in regards to the match. for example, if the HCE was the only one that deferred, even though the deferral is distributed the plan would still have to make top heavy if required. I'd have to check through some old Q and A's and see if the IRS expressed an opinion on what you are describing.

I am far from an expert in the area (as if anyone is, except maybe for Derrin Watson) however, according to the IRS notes (see page 7-72 of the attachment - IRS notes on Controlled and Affilaited Service Groups) you have 1. an organization that performs management functions 2. [maybe] the management organization's principal business is performing management functions on a regular and continuing basis common ownership is not important. so, based on that, I believe you need to test to see if the principal business is satisfied for each group. see page 7-75 and the example