Tom Poje

while I did not attend, a good source indicated the following from Los Angeles conference, regarding stopping a safe harbor rather than terminating the plan: This came up again at LABC yesterday, and the IRS has not changed their position even with the heavy lobbying of Craig Hoffman. So, you are correct in your assessment – it doesn’t make sense, but the rules are the rules.

rev proc 2005-66 page 12. 5.05(3) I of course base this with the belief that switching from current to prior (or vice versa) is purely discretionary. no one is required to make the switch.

in othe words, since this is a 'discretionary' change, it would have to be in place by 12/31/2008. you can't retroactively amend for a discretionary change.

if you asked me where it is said, the closest I can come at the moment is (3)(ii) under Uniform normal retirement age the last sentence says "For example, a uniform normal retirement age could be based on the earlier of the fifth anniversary of commencement of participation and the completetion of five years of vesting service."

Hello and welcome and good luck. as to your question, maybe, maybe not. the match could be 50% up to 6% deferred of total comp, but for testing purposes, comp might have been (comp - deferrals) or comp from date of entry. but very observant to notice that some people are at 3.5% (or whatever)

I'd normally say yes, but the IRS has said that 65/5 is 'uniform', so you end up with (1) the employee's testing age is the employee's normal ret age.

if ee is now age 67, then his APR is based on age 67 and you simply don't prohect forward any more years of work. I am assuming you are not referring to someone who is hired at age 64 and retirement is age 65 / 5. in that case his APR is based on age 69 and you project forward 2 more years. Jim has a good grasp on it and I imagine you can rely on his calculation if you need an example.

you must follow the terms of the document, so you can't simply give the individual an 'extra' contribution via that route. if plan failed testing, you could bump someone up via an -11(g) corrective amendment. of course, if your document is old enough and hasn't been amend to include gateway language, then you would have to do that anyway. you can't simply give the gateway unless your document says so.

my understanding, which could certainly be incorrect would be 'yes' based on the following: Preamble: Second, the final regulations define any other plan of the employer for this purpose to mean any plan or arrangement that is described in section 219(g)(5)(D), which includes a section 457(b) governmental plan and a section 403(b) plan, as well as a qualified plan. §1.401(k)-1(a)(2) (2) Rules applicable to cash or deferred arrangements generally--(i) Definition of cash or deferred arrangement. Except as provided in paragraphs (a)(2)(ii) and (iii) of this section, a cash or deferred arrangement is an arrangement under which an eligible employee may make a cash or deferred election with respect to contributions to, or accruals or other benefits under, a plan that is intended to satisfy the requirements of section 401(a) (including a contract that is intended to satisfy the requirements of section 403(a)). §1.401(k)-2(a)(3)(ii) (ii) ADR of HCEs eligible under more than one arrangement--(A) General rule. Pursuant to section 401(k)(3)(A), the ADR of an HCE who is an eligible employee in more than one cash or deferred arrangement of the same employer is calculated by treating all contributions with respect to such HCE under any such arrangement as being made under the cash or deferred arrangement being tested. Thus, the ADR for such an HCE is calculated by accumulating all contributions under any cash or deferred arrangement however you could not 'shift' such amounts to the ACP test. §1.401(m)-2(a)6(ii) (ii) Elective contributions taken into account under the ACP test. Elective contributions may be taken into account for the ACP test only if the cash or deferred arrangement under which the elective contributions are made is required to satisfy the ADP test in §1.401(k)-2(a)(1) and, then only to the extent that the cash or deferred arrangement would satisfy that test, including such elective contributions in the ADP for the plan year or applicable year. Thus, for example, elective deferrals made pursuant to a salary reduction agreement under an annuity described in section 403(b) are not permitted to be taken into account in an ACP test.

I'm not sure the expression 'how to correct it' sums up the situation. based on your question, you have followed the terms of the document, excluding bonuses in determining the contribution. so far so good. you have also run the comp test, though it failed, you still ran it, so again so far so good. now, because the comp test failed you must test (nondiscrimination) the contribution on the basis of a definition of compensation that satisfies 414(s). so for instance, the HCE received 5% of compensation and the NHCE (when using total compensation) only received 4% of compensation. It is possible that if you impute disparity that will be enough to pass testing. or its possible to test on an accrual basis and hopefully the gateway minimum will have already been satisfied.

not sure what you mean when you say someone is over age 50... 1.401(a)(4)-12 definitions: testing age (4) if beyond testing age otherwise described then testing age is employee's current age.

try page 11 of the following. its from the DOL, so I'd say pretty reliable. its their guidebook to autoenrolls (I had posted this a few days ago under the 401k board, so if some of you have already printed this it is nothing new) The new publication is available at http://www.dol.gov/ebsa/pdf/automaticenrollment401kplans.pdf.

as Jim indicated, ees who terminated and did not receive a match because of the last day provision would NOT be included in the ACP test (unless your plan also allowed after tax contributions) that would eliminate a lot of zeroes from the test. on the other hand, such people would be includable and not benefiting for coverage purposes if they worked over 500 hours.

because 1.414(v)-1(d)(3)(ii) says catch up from prior year would be included in the account balances taht are used to determine avg ben percentage if allocation from prior years are taken into account. but mostly,because Mike says so.

first, any corrective amendment has to be done within 9 1/2 months. second, you are correct, if cross-testing you have to give the gateway before proceding any further. after that, my understanding is the corrective amendment can go to one or more, your choice of employees, as long as it has substance and doesn't violate some other rule. you cant get 150% contribution to an individual, nor can you give a $$$$ to a 0% vested employee unless you vest that contribution., etc, etc. thus, (again my understanding) you could give a corrective amendment to just group 2 NHCEs. I thought the regs in -11g were fairly clear (unlike much of the other regs) but then that still doesn't mean I understand them 100%

I grabbed this one a number of years ago, figured it summed things up pretty well. the Corbel comment is as follows: Safe Harbor Plans: Allocation Conditions and Matching Catch-ups. The final regulations retain the rule of the proposed regulations against allocation conditions with respect to any matching contributions the employer uses to satisfy the ACP test safe harbor. Therefore, the plan will not be able to apply a “last day” or “1,000 hours of service” condition to an “additional” match not used to satisfy the ADP test safe harbor. With regard to catch-up contributions, the IRS solicited comments regarding circumstances under which elective deferrals by an NHCE to a safe harbor plan would be treated as catch-up contributions but would be less than the amount required to be matched by the safe harbor plan (e.g., less than 5% of safe harbor compensation). The final regulations do not include any special rules for the treatment of catch-up contributions in a safe harbor plan. Therefore, a plan making safe harbor matching contributions may not exclude catch-up contributions in applying the match.

to clear the confusion, a plan MUST MUST MUST MUST be operated according to the terms of the document. if you don't have safe harbor language you are not safe harbor. thus, as a general rule, the language MUST be in place before the plan year begins. the only exception is the 3% SHNEC, in that case, you can issue a maybe notice 30 days before the year begins, and then amend the plan 30 datys before plan year ends if the plan will be safe harbor. the safe harbor MUST be for 12 months, the only exception is for a new plan, a new plan feature (e.g. adding a 401k to an existing plan) or a short plan year.

for a cost, before BenefitsLink I had used this, but its been too many years for me to comment now. back then they had many good people involved: (Pension Information eXchange http://pixpc.com/ also TAG, same type of deal as above, there is a fee. I know even less about them. don't even know what there website is or what the acronym stands for. Technical something or other of course there is ASPPA. they provide a number of webcasts, education materials, etc. http://www.asppa.org/about/about_who.htm and NIPA (its similar to ASPPA) http://www.nipa.org/ which I know nothing about but for the cost, BenfitsLink. (Its free, but I guess you get what you pay for) Many years ago the Grand Poobah Dave Baker asked me to help out, so that is my connection - for better or worse.

my notes, ha, not mine, but a print out I have from Groom Law Group (from 2002) sums it up as follows: If the plan does not provide for matching contributions on catch-up contributions, any matching contributions made with respect to amounts recharacterized as catch-up contributions must be forfeited. by the way, a safe harbor plan is required to match catch-up, but the way things operate, I can't imagine you not wanting to match catch-up, the way the regs operate.

the cite I referred to in the regs comes from Treas. Reg. §1.414(v)-1(d) Treatment of excess contributions 1.414(v)-1(d)(2) has the header Contributions not taken into account in application of the ADP test (i) basically, this says that you don't count deferrals that exceeded a statutory or plan limit in the ADP test if they are treated as a catch up (ii) says that excess contributions are subtracted from the participants deferrals [i read this to say that those deferrals treated as catch ups are indeed [i]excess contributions[/i]] (iii) has the header excess contributions treated as catch-up contributions. (this describes how to handle them, which includes the forfetures of related match) I am not sure if it was a typo on your part, but you referred to treating them as Excess Deferrals, which is a different animal. If it wasn't a typo, I don't see how they can be treated as an excess deferral.

that is my understanding.

Automatic Enrollment DOL, IRS Issue Guide for Small Employer Automatic Enrollment The Department of Labor and Internal Revenue Service announced Jan. 15 a new publication to help small employers understand automatic enrollment for tax code Section 401(k) plans. The publication describes an automatic enrollment Section 401(k) plan, how to set up the plan, management of the plan, fiduciary responsibilities, and a checklist to ensure compliance with the law, the department said. The publication is part of the agency's ongoing campaign to educate employers, particularly small businesses, and help workers and their families save for a financially secure retirement, the department said. The new publication is available at http://www.dol.gov/ebsa/pdf/automaticenrollment401kplans.pdf.

I think you are getting confused on which sign you are talking about. you are thinking of the sign with Matt Millen and the arrow does indeed point 'south'...er down, which is the direction he took the Lions. ok, so I'm from Michigan. I refer to them as the Ions because they get the "L" knocked out of them every game.

For the sake of the argument, pretend there was no such thing as a catch-up. You determined how much deferral had to be treated as excess contribution. If any match was related to that deferral, it would indeed be forfeited (though you could always run the ACP test first and have excess aggregate contributions, so maybe you would get a distribution before forfeitures) the last sentence in the catch up regulation pertaining to this situation says: such elective deferrals are stll considered to be excess contributions under section 401(k)(8), and, accordingly, matching contributions with respect to such elective deferrals are permitted to be forfeited under the rules of section 411(a)(3)(G). [Treas. Reg. §1.414(v)-1(d)(2)(iii)] one problem is some people read 'are permitted' to mean "I can forfeit them if I want to, but I don't have to" rather than "Normally you are not allowed to forfeit someone's match, but in this situation you are"

good point, check your document. I know the new Corbel documents contain such language, (otherwise you would have to use the plan's normal retirement age) even if you use SSRA as testing another issue is to whether you would also have to do a BRF on age 65, 66 and 67 which would most likely fail.