Tom Poje

you have to consider vesting on a 12 month basis regardless of whether you have a short plan year or not. see Labor Reg §2530.203-2©. no proration. they even give an example, hours end up overlapping. took me forever to find this one years ago.

In such cases, I would want election forms from the non-keys indicating a 0% deferral election. arguably someone could say they weren't aware that a match was available.

well, I haven't had time to look at the latest technical correction bill (for the most part all anyone mentioned is the elimination of min distribution for 2009.) however an article by Ascensus http://www.ascensus.com/news/news.aspx?ID=806 has the following: It’s Official! Legislation With 2009 RMD Waiver, PPA Corrections, Is Enacted President Bush signed into law the Worker, Retiree, and Employer Recovery Act of 2008 on December 23, 2008. This legislation waives 2009 required minimum distributions (RMDs), makes various technical corrections to the Pension Protection Act of 2006 (PPA), and addresses various defined benefit pension plan issues. All the provisions have varying effective dates. Some of the key provisions included in the legislation are as follows. Waives 2009 RMDs for IRA holders, retirement plan participants, and beneficiaries. RMDs for tax year 2008, including first year RMDs due by April 1, 2009, still must be distributed. IRS officials have responded to an Ascensus inquiry about RMD reporting, stating that RMD statements to IRA holders and RMD reporting on Form 5498 to the IRS will not be required for 2009. (See the article “IRS Says No 2009 RMD Statements Pending Enactment of H.R. 7327” at this Ascensus Latest News website.) Provides for rollovers to Roth IRAs of settlements received in certain commercial airline bankruptcy situations. Removes income and tax-filing status restrictions inadvertently created by the Pension Protection Act of 2006 for designated Roth account (Roth 401(k)/403(b) account) rollovers to Roth IRAs. Requires retirement plans to offer direct rollovers to inherited IRAs for nonspouse beneficiaries, beginning with 2010 plan years. Removes “gap period” income from calculations of IRC Sec. 402(g) excess deferrals. Makes various changes to eligible automatic contribution arrangements (EACAs) in retirement plans, including eliminating the requirement that EACAs include qualified default investment alternatives, and extending EACAs to SIMPLE IRA plans and salary reduction SEP plans. Revises rules for retirement plan reports of account balances and vesting, to align with certain PPA requirements for benefit statements. Revises the definition of one-participant plan for blackout notices, to align with DOL regulations. Revises the definition one-participant plan under rules associated with diversification of employer securities, to align with ERISA. Clarifies other PPA provisions for defined benefit/defined contribution deduction limits, and for defined benefit/401(k) plans (which will be allowed beginning 2010 plan years).

Sieve: I failed to answer your question, "How does Relius handle" Its by the Vulcan mind meld. you put your hands on the side of the minitor and think about how you would like to perform the test. its either that, or in plan specs on the top heavy screen, the field that says "include contributions with trade date on or before" [the default is 1/7 for calendar year plans to allow for deferrals to show up, but you can always change the date] I have no clue how that works with trade dates and stuff like that]

just so you know, for the Annual Conferences, the Q and As work as follows: questions are submitted to IRS agents a few weeks beforehand, so they have a chance to look at them. of course, there is no guarantee they will, but my experience has been they look at at least some of them. Then a few weeks before the conference, representatives from ASPPA meet with the agents to go over the questions. (I know, because I have sat in on such sessions the last few years - but not the year we are talking about) then there is the conference and many of the questions are discussed. I remember this one being done so (its one of those questions you don't forget), and there was no change of opinion by the IRS personal involved, which they have done from time to time. of course, like everything else in life, maybe they would be of a different opinion now. but I vaguely recall the topic being discussed in greater detail (e.g. "but the regs say...")

This is a top secret file I discovered on the following website: www.irs.gov/pub/irs-tege/401k_mistakes.pdf Shhhhhhhhhhhhhhhhhhhhhhhh. don't tell anyone. Though you do have a reading assignment (page 22 hint, hint, hint) and report back the answer to the question you posed.

Sieve - I'm no longer sure about that. or maybe I am just rambling because I think it makes more sense to include such contributions. I have a new plan, 1/1/07 - 12/31/07. first contribution for the 2007 plan year is made in 2008. now I have 2 plan years to consider. is the plan top heavy for 2008? what I learned many moons ago was that the cite you pointed out refers to this, so yes, I consider that contribution. however, maybe the cite you point out actually is in reference to the 2007 plan year. no one has an ending balance from the prior year, so you are treating this contribution for that year as well.

(or more useless pieces of fact stored away by Tom) A few years ago someone asked a similar question at the Annual ASPPA Conference, that is, are you allowed to include a discretionary profit sharing contribution in the top heavy determination. I think most people were surprised when the IRS said, you could do that (especially since the regs would seem to indicate otherwise) Of course, such responses from the IRS personal might not reflect the actual stance of the IRS. the exact question from the 2002 Conference is as follows: Is a discretionary profit sharing contribution for the prior plan year that is deposited after the end of the prior plan year included in the top heavy determination for the current plan year? Let's say we have a calendar year plan, effective several years ago. We are determining the plan's top heavy percentage for the 2002 plan year. The determination date is therefore 12/31/01. The employer makes a contribution in February, 2002, which is allocated and deducted as of 12/31/01. There is a question as to whether this contribution is included in the top heavy determination for the 2002 plan year. The question relates to Q&A T-24 of the 416 regulations, which says that if a plan is not subject to 412, then the account balances are not “adjusted” to reflect a contribution made after the determination date. Argument: The key phrase here is “account balance.” The participants' account balances, as of (say) 12/31/01, include the profit sharing contribution that is allocated and deducted for the 12/31/01 plan year end. So the guidance regarding “adjustments” does not apply to the receivable profit sharing contribution; it is already part of the participants' account balances. The following is the author's analysis: The question as to what contributions are considered due on the determination date is determined under §1.416-1, Q&A T-24, which says that it “is generally the amount of any contributions actually made after the valuation date but on or before the determination date.” It then goes on to say that any amounts due under §412 are considered due, even if not made by the determination date. One could take the position that this is an exclusive statement; in other words, if a contribution is NOT due under 412 and is made after the determination date, it is not considered “due.” However, the answer to the question (T-24), “How is the present value of an accrued benefit determined in a defined contribution plan” is answered, “the sum of (a) the account balance as of the most recent valuation date occurring within a 12-month period ending on the determination date, and (b) an adjustment for contributions…” The term “the account balance” includes contributions credited to the account of a participant, it does NOT mean only the contributions actually made that have been credited. For example, if a 100 percent vested participant terminated after the determination date but before the contribution was actually made, the distribution would include that contribution, even though it had not yet been made to the plan. This is because the account balance, as of the last day of the plan year, includes the contribution. So, when the regulation addresses adjusting the account balance for contributions made after the determination date, we must start with the account balance, and then apply the adjustments. Since the account balance includes the receivable profit sharing contribution, the adjustment does not refer to the receivable. The reference to §412 in §1.416-1 is with regard to a waived funding deficiency that is not considered part of the participants' “account balance,” as the term is defined. Q&A T-24 refers to a DC plan with a waived funding deficiency that is being amortized. Such a plan must maintain an “adjusted account balance” (reflecting the amount of the contribution that has not been deposited) which must be maintained until the actual account balance increases to the point where it equals the “adjusted account balance.” It is to this (unadjusted) account balance that the (waived) contribution must be added, since the amortized contribution only becomes a part of the actual account balance as it is paid to the plan. The requirement therefore has the effect of determining top heavy status as though the contribution required under 412 had actually been made. In other words, the “account balance” would not include the waived minimum funding contribution, so an adjustment is required. IRS Response: We accept this analysis. Again, a note of caution. It should be remembered that IRS responses at such conferences do not necessarily represent an official position of the Treasury Department or the Internal Revenue Service.

Amy: if this helps, the IRS has to have a way of checking things. so they simply add up all the W-2s in a given calendar year to see if the limit has been exceeded. This is why the corrections for excess deferrals are due April 15. You file your taxes, the govt adds up the W-2, etc.

as Kevin C noted, the language you quoted is no longer applicable. in fact, someone sent me something they received from the IRS. they were trying to terminate a plan, and their request for a determination letter resulted in the following response: The plan document provided contains methods of correction for eliminating 415 excess limitations. The methods may not be used for limitation years beginning after July 1,2007. Please remove the methods for the limitation years beginning after July 1, 2007. (This same language for 415 failures is now in EPCRS, so it is more a matter of correct documentation) You should have a 415 amendment which says such language is no longer applicable. If your document says something to the effect "The limitation year is the 12 month period ending on the last day of the plan year" I believe all the new Corbel documents contain that language for the initial plan year, so you wouldn't pro rate the comp limit. (But of course your document might contain other language)

the same to all, here's wishing God grant all a wonderful new year

thanks Kevin, knew there must be something somewhere that wouldn't permit a catch up. dave- it is conceivably possible to defer during the year, but when the sched C income is calculated you end up with nothing. the preamble to the final 401k regs envisions this: (p12-13 on my copy) One commentator asked for clarification of the interaction between these timing rules and the rule under the regulations that treats a self-employed individual’s earned income as being currently available on the last day of the individual’s taxable year and whether this last day rule precludes a partner from making elective contributions during the year through a reduction in the partner’s draw. The restriction on the timing of contributions is not intended to prevent a partner from deferring amounts that are paid to the partner throughout the year on account of services performed by the partner during the year, and the final regulations have been modified to clarify this point. However, self-employed individuals who take advantage of this opportunity to defer amounts during the year must make sure that the amount contributed during the year will not exceed the limits (such as the limits of section 415) that will apply to the individual, based on the individual’s actual earned income for the relevant period.

Thinking out loud, if the amount is less than $5000 and the person is over age 50 then there is no 415 violation because it can be treated as a catch-up? That would seem strange, but ...

lets ignore the fact the plan is safe harbor. lets pretend it is a 3% money purchase. your suggest would be that you amend the plan to 0% to get out of it. that is clearly a no-no. or suppose the plan was a 2% DB. you are suggesting going beyond just freezing the plan, but eliminating something someone has accrued. remember, in a safe harbor plan, there are no accrual requirements. so these folks have already accrued the safe harbor. it is to late to retroactively amend the plan back to 1/1/08.

gee whiz, no wonder I never married. I give all my good secrets away. Pepperoni and Cheese Bread 1 1/4 cups warm (105-115° F.) water 2 packets or teaspoons dry yeast 1 teaspoon sugar 1 teaspoon salt 1 teaspoon butter or margarine - softened 3 1/4 cups bread flour 27 thin slices provolone 10 ounces pepperoni - chopped 1 egg - beaten [well, ok, I never bothered to brush the loaves with eggs. another trick is to brush the loaves with butter after taking them out of the oven] Measure the warm water into a warm bowl. Sprinkle the yeast on the water and stir until dissolved. Add the sugar, salt, and butter and three cups of flour and beat until smooth (with the flat beater, if you have a KitchenAid or equivalent). Then add the remaining flour a cup at a time (with the dough hook if you have it) to make a soft dough. Knead it until it's smooth and elastic, about 8-10 minutes, with the hook or on a lightly floured surface. Place in a buttered bowl and turn to butter the top. Cover it and let it rise until doubled in size, about 1 hour. Punch the dough down and divide it into three pieces. [i divided the dough into 6 pieces] Roll each out to a 12 in. x 8 in. rectangle. Place 6 pieces (12 if you want) slices of provolone on each rectangle and then scatter 1/3 of the pepperoni on the cheese on it. Roll the rectangle up from the long side (jelly roll-like) and seal the seam. Repeat for each rectangle. Place the rolls on greased baking sheets (you can fit 2 on one sheet). Cover and let rise until doubled, about another hour. Slash the tops in three or four places and brush the loaves with the beaten eggs. Bake at 400ºF for 25-30 minutes or until done. Cool slightly and serve warm. Refrigerate any leftovers and reheat (around 20 minutes at 300ºF works well) to serve. hey, I think these are real good.

with all that knowledge, I am sure something will turn up quickly. God bless your endeavors!

the IRS has never really answered the question whether you could make a safe harbor less stringent in its requirements during the year. based on their responses to such questions, I would say they are not wild about permitting this, its like opening Pandora's Box. supposedly the only permissible changes were adding a Roth feature and (if I remember correctly) adding funeral costs for hardships. so at this time I wouldn't recomend it. that does not mean they won't allow it in the future, but at teh moment....

the IRS has made clear in one way shape or form the following: 1. you must follow the terms of the document. 2. the document (not the notice) is the driving device 3. there is nothing to stop you from providing both a safe harbor match and a safe harbor nonelective, but again it is specified in the document. 4. so, if its not in the document, you can't do it. thus, you would need an amendment. 5. if you give out a notice the plan is safe harbor, but the document isn't amended, then you are not following the terms of the document if you provide a safe harbor. 6. there is a timing issue involved in all this. amending the plan to provide a safe harbor match at this date, and then providing a notice might fail the guidelines for being considered a reasonable amount of time to make an informed decision as to whether to defer. (I have not read your other question - at this point in time, based on limited facts provided, you would have to amend to switch from SHNEC to SHMAC. If its for a plan year begining 1/1/09, the IRS could (and I stress the term 'could') deem it not providing someone a reasonable amount of time to make an informed decision (because a SHNEC you get regardless of whether you defer - there is no timely decision, but a SHMAC makes a difference if you defer) but, the IRS could deem it to be made timely - its hard to say.

Shot in the Dark: I have a word file on my system dated 3/18/05 so I must have tripped across something a few years ago and was absolutely fascinated by it. That doesn't explain how I found it in the first place, but the date puts it at NCAA tourney time, so I must have been looking up something, I will guess something todo with the rules of basketball. I had forgotten about it and inadvertatly noticed it today. It still fascinates me. JanetM: What free time? (see note above) In the last couple of weeks I have made at least 5 different types of cookies, and 4 different types of bread to give away to the folks at work. hmmmmmmmm. this year I found a recipe in which you roll the bread dough around provolone cheese and pepperoni.

just when you thought you knew the rules. wow, a novel idea in 1949. Evolution of the rules of basketball 1895: The free throw line was officially placed 15 feet (4.6 m) from the basket. Before this, many gyms had the line 20 feet (6.1 m) from the basket. 1896: A field goal or basket was changed from counting as three points to two points. Free throws were changed from three points to one point. 1897: Backboards were installed in most arenas. 1901: A dribbler could not shoot the ball and could dribble it only one time, using both hands. 1909: The dribbler was finally permitted to shoot. In addition, the dribble was defined as the "continuous passage of the ball," which made the double-dribble illegal. 1911: Players were now disqualified after committing their fourth personal foul. No coaching at all was allowed during the game, even during timeouts. 1914: The bottom of the net was finally cut open so the ball could fall through. 1915: The college, YMCA, and AAU rules became the same for the first time. 1921: A player was allowed to re-enter the game once. Before that, once a player left he could not return. The backboards were moved 2 feet (610 mm) in from the wall of the court. Before that they were right on the wall and players could climb the padded wall to sink baskets. 1922: Running, or "traveling," with the ball was changed from a foul to a violation. In other words, instead of the other team getting a free throw, the team in violation simply lost the ball. 1924: The player who was fouled had to shoot his own free throws. Prior to that, there was usually one player who shot all his team's free throws. 1929: The charging foul by a dribbler was called for the first time. 1931: The "held ball" could be called when a closely guarded player withheld the ball from play for five seconds. The result was a jump ball. The ball was made smaller, with the maximum circumference reduced from 32 to 31 inches (813 to 787 mm). 1933: The ten-second center or midcourt line was introduced to cut down on stalling. That meant the team with the ball had to advance it over the center line within ten seconds of taking possession. 1934: A player could now leave and re-enter the game twice. 1935: The ball was made smaller once again. The maximum circumference was reduced to between 29 1/2 and 30 1/4 inches (749 and 768 mm). 1936: The three-second rule was introduced. No offensive player could remain in the free throw lane, with or without the ball, for more than three seconds. 1938: The center jump after every basket scored was eliminated. That led to more continuous play. 1940: The backboards were moved from 2 to 4 feet (0.6 to 1.2 m) from the end line to permit more movement under the basket. 1945: Defensive goaltending was banned. Big men could no longer swat the ball away once it started downward toward the basket. Five personal fouls now disqualified a player. An extra foul was not permitted in overtime games. Unlimited substitution of players was finally introduced. 1949: Coaches were finally allowed to speak to players during a timeout. 1954: The NBA adopts the shot clock. A team must attempt a shot within 24 seconds or lose possession. The shot clock is reset when the ball contacts the rim or when the defensive team gains control of the ball. 1957: The free throw lane was increased from 6 feet to 12 feet (1.8 to 3.7 m) wide. 1958: Offensive goaltending was banned. In other words, an offensive player could not tip a team-mate's shot into the basket while the ball was directly above the rim of the basket. 1985-1986: The NCAA adopted the 45-second shot clock. 1993-1994: The NCAA shot clock time was reduced from 45 to 35 seconds. 2001-2002: The NBA reduces the number of seconds for a team to advance the ball past half-court from 10 to 8. Illegal defense was also eliminated.

LRM#94 contains the following language Each eligible NHCE must have an allocation rate (defined above) that is not less than the lesser of 5%, or one-third of the allocation rate of the HCE with the highest allocation rate. now, if I have an employee who is eligible to defer, but quits and the plan has a last day rule for nonelective contributions, then the nondiscrimination regs cleary indicate the indivudal is not required to receive the gateway. At the minimum I would conclude to be consistent, by 'eligible' the LRM means eligible to receive the nonelective contribution.

I would imagine one method would be something like the following if (month<3,1/1/08,if(month>9,1/1/09,7/1/08) that is rather quickly and crudely written, and probably noy written quite correctly, but hopefully enough to get you started.

This was from the Winter 2008 Employee Plan News (subscription is free from the IRS) I know this issue has been raised before, here is the official word from the IRS, common Plan Language errors: Defined contribution plans still include correction methods for excess annual additions in §1.415-6(b)(6) of the 1981 regulations. However, the final regulations issued in 2007 deleted the permitted correction methods in the 1981 regulations. Plans that include a correction method in the event a participant would exceed the annual additions should be amended to delete the language effective for limitation years beginning on or after July 1, 2007. ...... Thats because you correct the problem using EPCRS

The 2009 covered comp can be found here: http://www.ifebp.org/Resources/News/Regula...009-02.htm?PF=1 though the rounded values have an error 1969-1972 values should be $105,000, and 1973 and later values at $106,800. a while back I tried tinkering with a spreadsheet to calculate the numbers and this one actually seems to work - at least it produced the same numbers as were just released. you simply input the new taxable wage base every year. now if someone can explain how I managed to throw the thing together... Hey, Merry Christmas all! God bless your holidays.

yes, I agree. if you have received any type of nonelective, you are eligibile for the gateway.