Tom Poje

it doesn't surprise there is confusion. It is argued about all the time. my research came up with the following: at least this is what I included in The Coverage and Nondiscrimination Answer Book, 2008 Supplement, based on everything that I have been able to find. Q 12:72 ... What happens if this date falls on the weekend? It is unclear. According to one recent IRS source, unlike the due dates for other forms, the two and one-half month period is not extended to the following Monday for excess contributions if the period ends on the weekend. For example, March 15, 2008 falls on a Saturday. For a calendar year plan, to avoid the 10% excise tax the excess contributions must be postmarked by that date. See Page 9 of IRS publication Retirement News for Employers (volume 4, Winter 2008) found at http://www.irs.gov/pub/irs-tege/rne_win08.pdf The confusion arises because of Section 7503 of the Internal Revenue Code, Time for performance of acts where last day falls on Saturday, Sunday, or legal holiday provides: When the last day prescribed under authority of the internal revenue laws for performing any act falls on Saturday, Sunday, or a legal holiday, the performance of such act shall be considered timely if it is performed on the next succeeding day which is not a Saturday, Sunday, or a legal holiday. For purposes of this section, the last day for the performance of any act shall be determined by including any authorized extension of time; the term “legal holiday” means a legal holiday in the District of Columbia; and in the case of any return, statement, or other document required to be filed, or any other act required under authority of the internal revenue laws to be performed, at any office of the Secretary or at any other office of the United States or any agency thereof, located outside the District of Columbia but within an internal revenue district, the term “legal holiday” also means a Statewide legal holiday in the State where such office is located. However, in Revenue Ruling 83-116, the IRS concluded that this section does not apply if it is not in connection with the determination, collection or refund of taxes. Thus, since the refund of excess contributions is not an IRS filing, there is no extension.

the otherwise excludable has been discussed over and over and there are still no 100% clear guidelines. the Code simply says a body must enter the first day of the plan year or 6 months after meeting the requirements. This imples a plan could have, for all practicallity 183 entry dates - e.g. 1/1, 7/1,7/2,7/3.....12/31. so lets say you have someone hired 3/1/07. one year later is 3/1/08. 6 months after that is 9/1/08. arguable, under the terms of the Code, if this person quit anytime between 3/1/08 and 9/1/08 the plan could have excluded him, and therefore he could be treated as otherwise excludable. (Thus Relius will otherwise exclude people under an 18 month rule) some IRS agents agree with this position, others say if the plan specifies entry dates, you have to consider the entry dates as well. They keep promising we will get guidance someday. years ago I read somewhere that the person who wrote that particular section of the Code had intended it should have read 'the first day of the plan year or 6 months after the first day of the plan year (or something to that effect) but it didn't come off that way. probably because what is exactly 6 months after 1/1....6/30? 7/2? other???

without digging deeper (my desk is covered with too much stuff at the moment) I believe (but certainly could be wrong) you are permitted to aggregate the plans, but you would lose the safe harbor. It sounds like you said the 3rd plan has only NHCEs and is a safe habor as well, which is utterly confusing anyway.

you can not have a 2 year wait for the safe harbor. you are getting a free ride on the ADP test, and that includes deferrals, which at max can have a 1 year wait. the only out the that is permitted would be if you had immediate eligibility, and then you can exclude otherwise excludbales. (because you could have tested them separately if you didn't have a safe harbor.) you can always have a 2 year wait for other profit sharing, but then remember you now have ees receiving different levels of nonelectives

1.401(k)-2(b)(2)(iv)(B) indicates a plan may use 'any reasonable method for computing income...' I think most people follow 1.401(k)-2(b)(2)(iv)© which gives a formula, but really makes no sense if deferrals were not deposited throughout the year (interesting, though. you simply want to refund 3,000. since most accounts lost money, I'd think using the formula would result in less of a distribution)

no. regs are clear you need to pass both before and after shifting (the term the regs use is 'elective contributions taken into account under the ACP test) see 1.401(m)-2(a)(6)(ii) however, if you are failing the ACP test you could distribute the excess aggregate contributions first, then distribute the excess contribute from the ADP test and avoid forfeitures. there is no requirement you perform the ADP test first and forfeit related match

This is from the IRS, its simply a short 'check the boxes' survey. Parts of it actually reference the prior version of EPCRS (2006-27) rather than 2008-50 but what the heck. basically they are trying to get an idea on how often you are self correcting things. I figure it can't hurt to fill out the survey (might have been nice if they asked what other items would you like to see) ................................................ Tax Administration IRS Requests Feedback on Self-Correction Program The Internal Revenue Service's Employee Plans announced March 4 that it is conducting a short, voluntary, and anonymous survey designed to gauge the relevance and usefulness of its Self-Correction Program. Participation in the survey will assist the agency in making its programs more responsive to the needs of plan sponsors, employees, and beneficiaries of the retirement plan system, according to the announcement. The survey takes less than 5 minutes, the agency said. The survey is being conducted by Joyce Kahn, manager of EP Voluntary Compliance. The survey will be available until March 20. To take the survey, go to http://guest.cvent.com/SURVEYS/Welcome.asp...dc-0ac8081fde8d.

guess that explain why 3/14 is PI day Cosine, secant, tangent, sine, 3 point 1 4 1 5 9 I guess the true PI day would have been 3/14/159 and going further 3/14/1592 (I forget what I was doing that day)

Sieve - if I take a shot, you (being the fine goalie you are) will just kick it back and before I get a chance for a rebound, I will probably be checked into the boards. WRERA modified the code (definition of applicable plan) (5) Section 414(w)(5) of the 1986 Code is 9 amended by striking ‘‘and’’ at the end of subpara 10graph (B), by striking the period at the end of sub 11 paragraph © and inserting a comma, and by add 12 ing at the end the following: 13 ‘‘(D) a simplified employee pension the 14 terms of which provide for a salary reduction 15 arrangement described in section 408(k)(6), 16 and 17 ‘‘(E) a simple retirement account (as de 18fined in section 408(p)).’’. found that because the preamble for automatic enrollment says Section 414(w)(5), as amended by section 109(b)(5) of WRERA, defines an applicable employer plan as a trust described in section 401(a) that is exempt from tax under section 501(a), a plan described in section 403(b), a section 457(b) plan that is maintained by a governmental employer described in section 457(e)(1)(A), a simplified employee pension the terms of which provide for a salary reduction arrangement described in section 408(k)(6), or a SIMPLE described in section 408(p).

first check doc to see if match is used for top heavy.

how about the preamble which says However, these regulations do not reflect: (1) the change made by section 109(b)(3) of WRERA that eliminates the requirement to include gap period income for a distribution of an excess deferral under section 402(g); (2) the additional time to correct excess contributions under a SARSEP that includes an EACA; (3) the tax treatment of excess contributions and earnings thereon under a SARSEP; and (4) guidance on SIMPLE IRA plans that include an EACA. or under the definitions section under 1.414(w)....: (e) Definitions. Unless indicated otherwise, the following definitions apply for purposes of section 414(w) and this section. (1) Applicable employer plan. An applicable employer plan means a plan that-- (i) Is qualified under section 401(a); (ii) Satisfies the requirements of section 403(b); (iii) Is a section 457(b) eligible governmental plan described in §1.457-2(f); (iv) Is a simplified employee pension the terms of which provide for a salary reduction arrangement described in section 408(k)(6); or (v) Is a SIMPLE described in section 408(p).

Under EPCRS the preferred metod is to put in a corrective amendment making the person eligible. Appendix B section 2.07(3) this avoids the question you are asking regarding W-2

the regs require a plan pass a(4) testing both with and without those QNEC used in the ADP/ACP test. see 1.401(k)-2(a)(4)(ii). you would end up aggregating the plans, conceivably you could run into minimum gateway issues (you can't count the QNEC - unlike a safe harbor it can't serve extra duty)

Sieve- you raise an interesting point that auto-enroll could start at 4% and conceivably be as high as 10%. If I remember, someone asked that question at an ASPPA conference and I think the IRS response was something to the effect that "they would know an abuse if they came across it".

excess deferrals are always taxed in the year they were made. the govt adds up all your W-2s so they know about them wether you claim them or not. whether you notice if you had tehm or not. if you don't take a distribution by April 15th, you still get taxed. however, now they are stuck in your account and you will be taxed a second time when someday down the road you take a distribution. WRERA eliminated GAP period income. probably in a year or two you will be able to adopt the emendment that retroactively puts this into effect.

arguably under 1.401(a)(4)-4(e)(3)(iii)(G) you may also have a BRF issue as well -the right to make each rate of matching contributions.... does everyone have a 'current availability'? yes, beacuse you are "not" [(forgive my typo for omitting the word 'not'] preventing anyone from deferring enough to get a match. does everyone have an 'effective availibility'? arguably no, since the economy may dictate someone's ability not to defer 4%. based on facts and circumstances, does the formula favor HCEs?

as close as you are going to come under EPCRS is 6.02 (5)© which says if total amount of overpayment is $100 or less the Sponsor is not required to seek return of overpayment. arguably, any correction should be adjusted for earnings, and since the market has dropped just a tiny little bit the last year you are probably under $100.

the term compensation can mean a lot of things. it can refer to what is the profit sharing allocation formula based on. does the document have a definition of 414 s compensation? alphabetically it is usually would be under 'f' (e.g. the same as Four-fourteen)

for testing purposes you are permitted to use a definition of compensation that satisfies 414(s). using (comp - deferrals) satisfies that definition, so unless your document specifically defines compensation for testing purposes differently there is nothing wrong with the way the test was performed. (check definition of 414(s) compensation in the document) whether the test was performed to the greatest benefit of the HCEs is a different matter. other examples: using comp from date of entry rathet than full year comp, testing otherwise excludables separately, etc...all these testing assumptions would produce different results

Remember the rule: you can only do what the document permits. if the plan contains gateway language then you can provide the gateway. if the plan does not contain the gateway language then you would need to correct the problem with a corrective amendment.

these will be published in the Federal Register tomorrow. Have only had a brief chance to look them, but I see in the preamble p.9 "...in an employee makes an affirmative election before the default contribution would have begun, then the initial period does not begin for the employee." Text of Final IRS Regs on Automatic Contribution Arrangements

Not off the top of my head can I think of a reason. If it was a new plan, I imagine the reason for not including the match is that you could add it at a later date and still get the 3% ACP look back becasue it would be a new feature.

they show up as 0's (in fact, even if they terminated with less than 500 hours, because that rule only applies to 'participants') note, this logic is different from the ADP or ACP test where such bodies don't show up.

this is one of those things I classify as falling into the category of outright "strange". under EPCRS Appendix A, failure of 415 ....even if the error did not result from the allocation of forfeitures or from reasonable error in estimating compensation...(go to last sentence...) for limitation years begining after 1/1/09...corrected in accordance with section 6.06(2) and 6.06(3) which says you distribute unrelated deferrals first (then deferrals and forfeit unrelated match) such deferrals are disregarded for 402(g), 415 and ADP test [and related match from ACP test] I believe at one of the ASPPA Conferences the IRS even indicated this could indeed happen. (That surprised me, but going back and reading the stuff, it does seem to say that) for instance, suppose I alloacte a 20% to a group in a new comp plan. becasue of deferrals, one ee eould go over the 415 limit. I follow the formula and 'over-allocate' to the individual, and then make the correction for 415 violation. Ultimately you end up with the person receiving the same amount in total, but in different sources. yeh. ,mentally it sounds somewhat flaky to me, but I haven't found anything against doing that.