Tom Poje

look at 1.401(k)-6 Definitions Qualified Nonelective Contributions (QNECs) is clearly defined "...without regard to whether the contributions are ACTUALLY TAKEN INTO ACCOUNT under the ADP test...or ACP test...." emphasis mine. you should be able to impose whatever conditions on the QNEC. remember it is only a non elective that also meets other conditions - being 100% vested, being able to be used in the ADP or ACP test, being able to count toward top heavy, having distribution restrictions..

for those who are searching for the cite: t-6 of 1.416-1 What is a required aggregation group (for top heavy) ... each other plan of the employer which, during this period, enables any plan in which a key person participates to meet the requirements of 401(a)(4) or 410 is part of the required aggregation group. the example that follows cleary indicate if you have to aggregate to pass coverage, then you have to include the plan in the top heavy test. now, if I understand the thread, it was indicated, the plans can't pass coverage without being aggregated. but once you aggregate for coverage, you must aggregate for the ADP test. and then you are also stuck providing the top heavy to the group you didn't want to. ..... I'm assuming when it was said the plans didn't pass coverage, that meant the ratio % test. I suppose it might be possible to pass using the avg ben test and avoid aggregation, but no data was provided on that.

as noted throughout this discussion, there is no clear cut answer at this time. similar to ASPPA, the American Bar Association runs a Qand A session each year with the IRS. At their May 2008 Meeting a similar type question was raised. Rather than trying to understand the exact nature of the question, which may be a bit confusing to some, I would focus on the IRS response, which is basically "we are working on how maximum entry dates should be handled". so someday maybe we will all know exactly how to handle otherwise excludables! at past ASPPA conferences I believe the IRS officials have indicated if how you have handled things is reasonable, then they would not retroactively make you change things once they release a decision on how 'otherwise excludables' and entry dates, etc should be handled. (I tripped across their website a few years ago, so I do check on their latest Q and A's Question #14 from the American Bar Association Section of Taxation May Meeting 2008 (May 8-10,2008) (I tripped across their website a few years ago, so I do check on their latest Q and A's) 14. § 401(k) – ADP Testing An employer maintains a 401(k) plan. The 401(k) plan provides that an employee is immediately eligible to make elective contributions and is eligible for safe harbor matching contributions upon completing one year of eligibility service. The plan may be disaggregated into two parts: one covering employees who have completed less than one year of eligibility service and one covering employees who have completed one year of eligibility service. See 26 C.F.R. § 1.401(k)-1(b)(4)(vi), Ex. 2. There are employees who in one plan year are in both parts of the plan. For example, an employee hired on March 4, 2006 would be in the first part (covering employees who have not completed a year of eligibility service) from January 1, 2007 through March 3, 2007 and in the second part (covering employees who have completed a year of eligibility service) from March 4, 2007 through December 31, 2007. What portion of the employee’s compensation and contributions needs to be counted in performing the ADP test on the portion of the plan for employees who have not completed a year of eligibility service? Proposed Response: The employee’s compensation and contributions from January 1, 2007 through March 3, 2007 would be counted in performing the ADP test for the 2007 plan year for the part of the plan covering employees who have not completed one year of eligibility service. See 26 C.F.R. § 1.401(k)-6 (providing in the definition of compensation, “The period used to determine an employee’s compensation for a plan year must be either the plan year or the calendar year ending in the plan year. . . . A plan may, however, limit the period taken into account under either method to that portion of the plan year or calendar year in which the employee was an eligible employee . . . .”). See also 26 C.F.R. § 1.401(k)-2(a)(3)(ii)(B) (providing the plan needs to count only the portion of the employee’s compensation earned prior to the employee completing one year of eligibility service). IRS Response: The Service representative indicated that, in his personal opinion, the proposed response seemed reasonableThe Service representative cautioned that the answer ignores the issue of maximum entry date and whether they can be taken into account. The Service representative noted that the IRS is working on how the maximum entry date is taken into account for the disaggregation rules under § 401(k), § 410(a) and § 410(b) of the Code as with any comments by IRS officials, the responses reflect unofficial views of the IRS representatives and not necessarily official policy.

the ASPPA course book for dc-1 describes mistake in fact as "The IRS has not defined a mistake in fact. In Private Letter Ruling 9144041, the IRS suggested that only mathematical or typographical errors geneally will fall into this category. Merely because a contribution by the employer is not currently deductible does not make the contribution a mistake in fact." (page 1-10 of the 2008 edition) Doesn't sound like you fall into this category(?) remember, even EPCRS states corrections should leave $ in the plan as much as possible. you indicated $ was deposited in 2007 - was that for the 2007 plan year as well?

In light of the DOLs 'missing person guidance' I personally would not be wild about forfeiting such balances (though it still is in the regs that it is possible) conflict between DOL and IRS - who wins? I am assuming you are talking about a 'small' balance. Has your document adopted the provision to rollover the amounts to an IRA if you get a 'no response' from the individual? I believe there are places willing to set up IRA for such people.

you might try this one: http://benefitslink.com/links/20071025-056981.html

this is where I pulled the info (I don't have an excel sheet myself) http://www.homepokergames.com/kenoodds.php of course, if it makes things easier, you could simply send me the $ instead. I am more than willing to turn around and send you 90% of it back, which is a better deal than most of the places.

of course a google search will find your answer explained in many different ways. here is one: Wherever you choose to play the payout schedule overall is geared to provide around a 70% return for live Keno and around 85-90% for Online and Video Keno. This doesn't sem like a big difference but think of it in the inverse terms - the casino's profit. A game that gives you a 95% return means the casino is keeping 5% but a game that is giving you a 70% return then the casino is keeping 30% - 6 times as much! You can download my Keno Odds spreadsheet by right-clicking KenoOdds.xls and selecting "Save target as" to figure out what the casino edge is in your keno game. The equation for calculating the probability (p) of hitting (n) numbers out of the (x) numbers you picked when (y) numbers were drawn out of (z). (i.e. - "What is the probability of hitting 4 out of the 5 numbers I picked when 20 numbers were drawn out of 80"). n = 4 x = 5 y = 20 z = 80 p(x,n) = (combin(x,n) * combin(z-x,y-x+n)) / combin(z,y) It is important not to look at the payout schedules but to actually see how much profit the casino is keep from the money you wager. That's what the following does. I took 2 payout schedules and calculated the casino edge on all the bets and showed it in red. At first glance the 2nd payout schedule looks better because the high-end payouts are much higher but payouts are smaller on the lower end. But the payouts on the small end occur much more frequently and that's where the value of the ticket is most of the time. The 1st payout schedule shows a casino edge of about 7% while the 2nd schedule shows an edge anywhere 21-66%! You will lose your money anywhere from 3-9 times as fast playing the 2nd schedule if you choose to play the game with the big payoffs. There are too many factors involved even amongst the video versions - so your payouts can range anywhere from 72% to 92.5% depending on where you play.

1.415(a)-1(d) refers to a 'default' rule on how to handle someone exceeding the 415 limit. just what the heck is the default (besides "whatever Mike Preston wants it to be") 1.415(a)-1(d)(3) Incorporation by reference--(i) In general. A plan is permitted to incorporate by reference the limitations of section 415, and will not fail to meet the definitely determinable benefit requirement or the definite predetermined allocation formula requirement, whichever applies to the plan, merely because it incorporates the limits of section 415 by reference. (ii) Section 415 can be applied in more than one manner, but a statutory or regulatory default rule exists. Where a provision of section 415 is permitted to be applied in more than one manner but is to be applied in a specified manner in the absence of contrary plan provisions (in other words, a default rule exists), if a plan incorporates the limitations of section 415 by reference with respect to that provision of section 415 and does not specifically vary from the default rule, then the default rule applies. With respect to a provision of section 415 for which a default rule exists, if the limitations of section 415 are to be applied in a manner other than using the default rule, the plan must specify the manner in which the limitation is to be applied in addition to generally incorporating the limitations of section 415 by reference. For example, if a plan generally incorporates the limitations of section 415 by reference and does not restrict the accrued benefits to which the amendments to section 415(b)(2)(E) made by the Uruguay Round Agreements Act of 1994, Public Law 103-465 (108 Stat. 4809) (GATT), apply (as permitted by Q&A-12 of Rev. Rul. 98-1 (1998-1 CB 249) (see §601.601(d)(2) of this chapter), which reflects the amendments to section 767 of GATT made by section 1449 of the Small Business Job Protection Act of 1996, Public Law 104-188 (110 Stat. 1755)), then the amendments to section 415(b)(2)(E) made by GATT apply to all benefits under the plan. (iii) Section 415 can be applied in more than one manner with no statutory or regulatory default. If a limitation of section 415 may be applied in more than one manner, and if there is no governing principle pursuant to which that limitation is applied in the absence of contrary plan provisions, then the plan must specify the manner in which the limitation is to be applied in addition to generally incorporating the limitations of section 415 by reference. For example, if an employer maintains two profit-sharing plans, and if any participant participates in more than one such plan, then both plans must specify (in a consistent manner) under which of the employer’s two profit-sharing plans annual additions must be reduced if aggregate annual additions would otherwise exceed the limitations of section 415©).

as for what comp to use, I'd hold the fact the plan ceased accruals to be the 'termination' date. the new 415 regs says. hopefully I have the cites correct, though I am still working on my 'copy' of these. 1.415(j)-1(d)(3) Deemed change of limitation year. If a defined contribution plan is terminated effective as of a date other than the last day of the plan’s limitation year, the plan is treated for purposes of this section as if the plan was amended to change its limitation year. Thus, the rules of this paragraph (d) apply to the terminating plan’s final limitation year. 1.415(j)-1(d)(2) Application to short limitation period. Where there is a change of limitation year, the limitations of section 415 are to be separately applied to a limitation period which begins with the first day of the current limitation year and which ends on the day before the first day of the first limitation year for which the change is effective. In the case of a defined contribution plan, the dollar limitation with respect to this limitation period is determined by multiplying the applicable dollar limitation for the calendar year in which the limitation period ends by a fraction, the numerator of which is the number of months (including any fractional parts of a month) in the limitation period, and the denominator of which is 12. In the case of a defined benefit plan, no adjustment is made to the section 415(b) limitations to reflect a short limitation period. as close as I can come for an example: 1.415(j)-1(g)Example 2. In 2008, an employer with a qualified defined contribution plan using the calendar year as the limitation year elects to change the limitation year to a period beginning July 1 and ending June 30. Because of this change, the plan must satisfy the limitations of section 415© for the limitation period beginning January 1, 2008, and ending June 30, 2008. In applying the limitations of section 415© to this limitation period, the amount of compensation taken into account may only include compensation for this period. Furthermore, the dollar limitation for this period is the otherwise applicable dollar limitation for calendar year 2008, multiplied by 6/12.

1.401(k)-2(b)(2)(iv)(E)(v) contains a clue (possibly) "...in the event of a complete termination of the plan...correction distribution must be made ASAP... If the entire account balance of the HCE is distributed prior to when the plan makes a distribution of excess contributions...the distribution is DEEMED to have been a corrective distribution..." emphasis mine. Since it is 'deemed' to have been made, that sounds like you are done, but it is sort of vague.

the instructions for line 4i schedules (it is in italics as it is a note rather than actual instructions) says 'costs' "may be omitted when reporting investments of an individual account plan that a participant or beneficiary DIRECTED with respect to assets al;located to his or her account (including a negative election authorized under the terms of the plan) emphasis is mine. these instructions, if you don't have them are readily available - a simple google search should find the instruction for form 5500

regarding otherwise excludables: (trying to keep it real simple, and completely ignoring entry dates) the code says you can exclude people who worked less than 1 year and age 21 you indicated your plan lets people in as young as age 18. so you were being more generous than you had to - anyone age 18 - 21 could have been excluded. so they are referred to as 'otherwise excludable' now quite often, these people because they are so young don't defer - thus they would be a 0 on the ADP test, making it harder to pass testing. Because the govt wants the opportunity provided to as many people as possible to defer, they will not 'punish' by forcing you to include these people in the major testing just because you were more generous by letting them into the plan. hope that helps.

time out. if everyone has the same retirement age of 62, then the retirement age is uniform, it is simply not the usual 65 you commonly see. so testing age would be 62.

this is a gray area depending on exactly which IRS official you might be talking to. certainly the regs provide that you can test 'otherwise excludables' separately. now, exactly how that works and who that includes has been an open debate the last few years. 1. does the document have to specify the use of 'otherwise excludables'. there seems to be some leanings in recent years that despite the fact this is a testing 'assumption', it might be best if it is described in the document. 2. do plan entry dates make a difference? some IRS officials voice an opinion yes, other say no. The code / regs simply say refer to max age/servcie. (age 21/1 yr of service) and then the code says one must enter the first day of plan year or 6 months after meeting the requirements. this ends up with 3 schools of thought. you indicated the plan had monthly entry dates. so, for a calander year plan, employee A is age 23 and hired 2/3/06. works 1000 hrs so 1 yr ends on 2/3/07. one school of thought says monthly entry dates apply, so if ee is still working on 3/1/07 he is in the big test. another school of thought says 'use 1/1 and 7/1 entry dates as max exclusion'. thus is ee is still working on 7/1/07 he is includable in the big test. the final school of thought says you could have written the document to say use the absolute max entry date possible. (e.g.1st day of plan year or 6 months after meeting age 21/1 yr of service) thus this ee would be in the big test if still working on 8/3/07. (Personally, until IRS says one way or another my leanings are in the last camp since I could have written my document that way - thus the people who are in the plan would have been excluded if I had written the document that way - hence the term 'otherwise excludable'. since there is no requirement to use the 'otherwise excludable' assumption, there is certainly nothing wrong with including everyone, even if it makes a plan fail testing.

the way I understand things would be as follows: whatever method you use for coverage you must use for nondiscrim you have 3 basic coverage tests in a 401k plan 401k corresponding nondiscrim test ADP 401m corresponding nondiscrim test ACP nonelective: correponding nondiscrim test: test on allocation basis or cross test each of these 'tests' are independent of the other tests. thus, you could split your 401k coverage into 2 tests - statutory includables and otherwise excludables, and thus you would run your ADP test in a similar fashion. now you proceed to your ACP test. again you could split the test, but you dont have to now you proceed to the nonelective test. again whatever you do for coverage you do for nondiscrim. but as far as I can make things out from the regs, there is no requirement that each of the separate tests have to be done in the same fashion as the other test. ............ catch ups are not included in nondiscrim testing, but corrective distributions are included. catch ups are not including in determining how much a top heavy minimum would be required for a given year but corrective distributions would be. catch ups are not included when determining if a person exceeded the 415 limit, but corrective distributions are.

or, put another way, anyone eligible to defer (with the exception of 'otherwise excludables') must be eligible for the safe harbor as well.

precisely my point. some documents are very specific in regards to testing (I think it might have something to do with 'definitely determinable' fears.) I had one document that was hard wired at 7.5% for interest rate assumption for nondiscrim testing. (It was quite a shock and surprise to me to actually trip across something like that in a document) I think there is some concern amongst others that your the document is also supposed to specify what your ADP 'assumptions' are (e.g. if you are going to use 'otherwise excludables'). (Due to rumors that certain IRS agents 'require' it????) so I lean towards the cautionary 'does the document specify something' in regards to whatever testing you may be doing.

yes, the least you can do is recycle. get with it!

Its a lot easier for me to write pension songs. perhaps if you go to plan specs / miscellaneous/excluded divisions that should give a list of the all the divisions, and you can probably actually print that sub folder. that would be my initial guess, for by now you know how lazy I am and will try to find any work around.

at the 2004 ASPPA conference the following was posed: "If a plan document provides that the admin committee may limit HCE deferrals in order to prevent ADP testing violations, and the administrator takes that action through resolution and not by plan amendment, is this considered to be an "employer-provided limit" so that contributions in excess of this imposed limit are eligibile to be treated as catch-up contributions? Answer: YES (of course such answers always carry the caveat that they might not represent the actual IRS position, but personally along similar lines of reasoning I believe what you want to write into the document should be possible. of course, you won't know what that limit is until sometime during the year, but even the regs give examples of changing an employer limit during the year and how to calculate the amount of catch up involved in such a change. the question would be: does your limit apply going forward once the % is determined, or is it averaged over the whole year.

someone asked me this and I don't deal with IRAs, but anyway: "I have an IRA that consists of an auction rate bond that I cannot sell. The bond does not pay enough interest to to meet the min distribution I am required to withdraw. What should I do?" I guess, in other words, if you have all assets tied up in non liquid assets, how do you pay a min. distribution.

Its like pension knowledge I'm easily blown away by the competetion. What is really sad, I am working on adding Jamaica Farewell to my "CD" Pension Songs in American History which will give me the following 1 Old MacDonald (had a plan) 2 Sittin' in a four-oh-one - kay Otis Redding 3 Hello D-B Louis Armstrong 4 What a Wonderful World Louis Armstrong 5 What a Wonderful World Sam Cooke 6 Cats in the Cradle Harry Chapin 7 A D-B Dbeatles 8 Yesterday Dbeatles 9 Return to Sender Elvis 10 Wise Men Know Elvis 11 Are You a Poor One Tonight Elvis 12 Jamaica Farewell Various Artists

you described the definition of comp for allocation purposes. does the document have a separarte definition of 414(s) comp?

I suppose one solution might be to temporarily trick the system. e.g. set up a dummy QNEC account, run the additional match there, print the ADP/ACP test and then reverse all the tricks.