Tom Poje

In a safe harbor plan the regs (or at least the original Notice clearly gave an example in which bonuses were excluded) without looking it up, I think it was worded that this was fine as long as the participant could receive the max match. no solution was offered if you ended up in a situation in which someone couldn't, ugh. I hate to think of how you would correct. I'd have to go back and re-read things about comp. not sure why you would want to handle the people differently for what little (if any) it may save you. I'm not even sure if that would be the intent of the regs to create a situation in which that would happen. that seems inconsistent with the spirit of things. I thought the main issue of those taking the default and those not was whether to provide a notice or not. sorry can't be more helpful

A QACA is indeed a safe harbor 401(k) with the following exceptions or alternate possibilities: 1. vesting - does not have to be immediate, can be a 2 year cliff. (though with a 1 year wait for eligibility this condition is almost moot, unless someone quits shortyly after entering the plan) 2. an additional option is available for the match - 100% on the first 1% and 50% on the next 5% a handy dandy description from the DOL can be found here: http://www.dol.gov/ebsa/pdf/automaticenrollment401kplans.pdf see page 5, 2nd column

I suppose it is conceivably possible for someone to cap out - e.g. that the theoretical reserve becomes so large that one doesn't receive a contribution, but I would have to see what type of formula resulted in that scenario. I guess someone's comp could drop dramatically from prior years. and if the plan was top-heavy, you would still have to provide a top heavy.

just to make clear on a couple of points - since the answer provided seemed to deal more with nondiscrim rather than coverage. 1. there is no minimum participation test for a DC plan. 2. A QNEC is still a NEC (non elective) so for purposes of coverage may only be used in the nonelective coverage test - never in the ADP coverage test or ACP coverage test. 3. if you aggregate for coverage, then you must aggrgate for ADP testing - I can only assume that is why you are giving the folks in C a QNEC???? 4. if you are performing a(4) testing [not coverage], you have to test with and without QNECs 5. how a DC question ended up under DB is beyond me.

well, a QACA is a safe harbor 401(k) plan. under the safe harbor rules 1.401(k)-3(b)(2) --> safe harbor comp means comp as defined in 1.401(k)-6 1.401(k)-6 Compensation......whichever period is selected must be applied uniformaly to determine the compensation of every eligible employee... (the only 'sort of exception' I know of is limiting comp from date of participation.)

I thought you indicated the plan had an effective date of 1/1, which implies it does not have a short year. for purposes of deferral, one can't defer on 'past' compensation, so it is entirely possible to have deferrals start effective 7/1. and top heavy is 415 comp, so includes all comp even if bonuses, commissions etc are excluded. now the gateway minimum is also 415 comp, but that can be limited to date of entry. as for the match, if I was to add one, I would limit it to 6% deferred up to 4% comp and no allocation requirements. then i could use it as a safe harbor match.

and you have hit the nail on the head. if the interpretation of 'special effective date of 7/1' for the 401(k) implies that only comp from 7/1 is to be used then I would agree for the 401k portion, because you are limiting the comp to that period (not just from date of participation) you would therefore prorate the comp. (The IRS has also implied this in cases where you have decided to stop the safe harbor midyear as well) my comments were meant in general - that just because a plan is new does not mean that you necessarily prorate the comp. of course, if the plan turns out to be top-heavy, then the non keys still have to end up with 3% on total comp anyway - whether all or part is top heavy.

In my copy of the regs (just for kicks) I added the following under 1.401(a)(4)-4(b)(1) without regard to the average benefit percentage test of 1.410(b)-5. seriously, there is no avg ben % test under BRF testing. one of those strange rules. or at least that was what was beat into my head years ago.

lets suppose the plan had been in existence for a number of years and someone enters 7/1. you would not pro-rate the compensation limit for that individual simply because his compensation is limited to 1/2 a year. the only time you pro-rate comp (as far as I understand it) would be if the compensation period itself is less than 12 months. This can happen if an existing plan is amended creating a short plan year. However, you have an inital plan year (and if you look up 'limitation year' in the document the wording should be such that for an initial plan year you still use a 12 month period ending on the last day of the plan year) now that still doesn't answer the question as to how much comp to use for an individual - if the document says from date of participation, then that is what you use - but no pro ration of the 401(a)(17) limit.

it took me awhile to find it in writing, but once I found it I haven't forgotten it.according to 1.401(k)-1(b)(4)(iii)(B) last sentence: Similarly, an employer may not aggregate a plan (within the meaning of 1.410(b)-7(b)) using the ADP safe harbor provisions of section 401(k)(12) and another plan that is using the ADP test of section 401(k)(3). thus, for better or worse, it appears you could never reach the point of aggregating dis-similar plans. At one time I had thought you could aggregate and not rely on safe harbor, but that would not appear to be the case.

you have 4 formulas so I'd say you have 4 BRF tests, one for each formula. certainly someone in group 1 wouldn't do any better if he was in group 2, but the same could be said for someone in group 4 - they wouldn't do any better if they were in group 2 either. in other words, when looking at group 2, I think you would treat anyone from group 1, 2 and 4 as 'benefitting'.

well, of course, maybe. but at least I'll give it try on how to import all that ugly nasty data into the schedule D. you have to have a file 2pagetwo.3x8 [note, its 3x8 because its a 2008 import. last year it was 3x7] since you can't attach a file like that on benefits link I renamed it 2pagetwo.xls so you have to rename it back. doesn't really matter where you store the file as long as you remember where you stored it. you have to have a file that contains all that useless schedule D info. I have included a file named schedule D. All you need do is simply edit the names and amounts in the file. Extremely important is the far far far column AK. you have to have the 3x8 (with the tilde) for every fund you want to import. finally, I included a powerpoint walk through with screen prints (as best as I can do)

my logic says since the plans are not permissively aggregated, and you don't include the one group of employees in the ACP test then you wouldn't include them in BRF, though I don't know of any particular cite that actually says.

you would only receive 1 1099 indicating the year the distribution was actually made. as for the year in which the excess deferrals were actually made - that is up to the individual to report. the participant files their tax form with their W-2, and in your case, the W-2 clearly shows 24,000 in deferrals. hence, the IRS should know that there are excess deferrals, and whether or not the person actually claimed them. note that you only are double taxed on the deferrals not the gains. you are only taxed on them once, in the year of actual distribution. you are correct, this would be correct under EPCRS.

something appears to be missing in your description on how the testing was performed. 1.401(a)(4)-9(a) is clear that if you permissively aggregate plans and treat them as a single plan under 1.410(b)-7(d) (coverage) then you MUST also treat them as a single plan for purposes of section 401(a)(4) [nondiscrim] so it would certainly be incorrect to say "once a plan passes coverage ALL discrimination testing is done on the plan basis not the controlled group basis." if you permissively aggregated the plans for purposes of coverage.

if no notice was provided, the IRS has indicated that you have a possible disqualifying event - that is, you failed to follow the terms of the document which state the plan is a safe harbor (and one of the requirements is that you provide an annual notice) the plan is still safe harbor. this is a common misconception that failure to provide a notice means plan is not safe harbor and must be testing. if you go to the following website, you will a bunch of issues addressed by the IRS: http://www.irs.gov/retirement/sponsor/arti...=137958,00.html your problem is choice #7. (if you were to number them) I consider this a valuable website to keep handy! Another Way to Spell "Relief": E-P-C-R-S A general sense of which direction you need to go and what you'll need to do in order to get your plan back into the fold of compliance using the Employee Plans Compliance Resolution System (EPCRS). Correcting a Failure to Effect Employee Deferral Elections How to fix a failure to execut an employee's election to defer amounts to a 401(k) plan. Correction for Exclusion of Employees for Elective Contributions or After-Tax Employee Contributions How to fix the exclusion of employees for elective or after-tax employee contributions. Excess Deferrals How to fix the problem of excess deferrals. Failure to Limit Contributions for a Participant How to file the problem of failure to limit contributions for a participant. Failure to Obtain Spousal Consent How to fix the problem of failure to obtain spousal consent when a distribution is made to a participant in the form other than the required Qualified Joint and Survivor Annuity. Failure to Provide a Safe Harbor 401(k) Plan Notice How to fix the problem of failure to provide a safe harbor 401(k) plan notice. Failure to Timely Adopt Interim Amendments How to fix the problem of failure to timely adopt interim amendments. Failure to Timely Start Minimum Distributions How to fix the problem of failure to timely start minimum distributions. Hardship Distributions in a 401(k) Plan How to fix the hardship distributions in a 401(k) plan that do not satisfy the plan provisions. Not Correcting ADP/ACP Mistakes Timely How to fix the problem of failure to timely test for and correct ADP or ACP mistakes in 401(k) plans. Participant Loans in 401(k) Plans How to fix problems associated with participant loans in 401(k) plans. Plan Loan Failures and Deemed Distributions How to fix the problems associated with plan loan failures and deemed distributions. Self-Correction Program (SCP) Insight into the Self-Correction Program which is a correction program for resolving operational failures without any disclosure or payment of fees to the Service. "Simple" Retirement Arrangements - SEPs, SARSEPs and SIMPLE IRA Plans How to fix the common problems found with "Simple" IRA-based plans. Top-Heavy Errors in Defined Contribution Plans How to fix top-heavy errors in defined contribution plans. Using a Plan Amendment for Correction in the Self-Correction Program When can a plan amendment be used to correct a mistake in the operation of the plan under the Self-Correction Program? Using EPCRS to Terminate an Orphan Plan How to use EPCRS to terminate an orphan plan. Vesting Errors in Defined Contribution Plans How to fix the problem of vesting errors in defined contribution plans.

the Preamble to the final 401(k) regs states that "a plan satisfies the section 401(k) safe harbor if it makes specified QMACs for all eligible NHCEs."(If plan was otherwise, the preamble also states "in lieu of QMACs the plan is permitted to provide QNECs equal to 3%..." thus, a safe harbor plan has either QMACs or QNECs that were made. without other specific guidance in regards to safe harbor plans (there are none that I am aware of) I think you would treat the contributions as such...thus it would appear you could use them either in the ADP test ot the ACP test, since that is how you would have used a 'regular' QMAC or QNEC. but of course thats my opinion or thought.

I hold for 9/14.

yes and no on the 18 month rule. the code (time of particpation) says the entry date after satisfying the reuirements is the EARLIER of the first day of the plan year or 6 months after meeting the requirements.... thus in a calendar year plan someone hired 9/1 would have completed 1 yr on service and would enter 1/1 not 3/1 which would be 18 months. someone hired 3/1 on the other could be made to wait until 9/1 of the following year which is indeed 18 months. Otherwise, yes, at this time there are no hard and fast rules whether the plan's entry dates apply. you run what you feel comfortable with and can justify. some documents are silent. I have one that defines OEs as a particpant in the plan who 1. has not satisfied the maximum age and service requirements set forth in Code 410(a)(1)(A) AND 2. has not reached such Participant's Hypothetical Entry Date.

as a general rule, when you split plans into component plans, you are testing one group on an allocations basis and another on an accrual (or cross tested ) basis. I'm not sure how you avoid the gateway once you hop into that land. in addition, see 1.401(a)(4)-9©(3)(ii) which clearly states you acn not avoid the gateway by restructuring into component plans.

well, the only other place would be 1.401(m)-1(a)(3) which deals with employee contributions. there is no distinction made between 'madatory' or other after-tax contributions, so I would assume as long as these contributions are indeed after-tax they fall into that category.

so Austin, you put in an -11g amendment that changes the hours requirement (for this year only) to no hours and no last day provision. now you pass coverage, but have to give all these people effected by the amendment the same match as everyone else received, which was nothing????

this might (I stress might) possible be addressed in 1.401(k)-1(a)(3)(v) which is the section on one-time elections

"it's in there" No hardships permitted on safe harbor contributions - see Notice 98-52 IV.H

You might also be interested in the following. its very short notice - just found out about this on Monday. DOL Webcast - Getting Ready for the 2009 Form 5500 and Electronic Filing, June 11, 2009 DOL has announced a webcast on the 2009 5500 - nothing like planning ahead - it's this Thursday. Here's the link to register: https://event.on24.com/eventRegistration/Ev...cepage=register