Tom Poje

I'd vote no on #2 - you are not adding a 401(m) feature, you already had one before. I am a bit conused on the remainder of the discussion. it sounds like you are doing prior year testing. in that case last years QMAC to the NHCEs could still be used in the ACP test, because when you ran last years test you should have compared 'last years HCE' it to the 'prior years' ACP numbers for the NHCEs.

nothing has changed. you can not impose any conditions on a safe harbor contribution. (other than applying vesting to the discretionary match)

1.401(a)(4)-11(g)(2) next to last sentence says you can use corrective amendment to satisfy current availability failure of BRF. then of course the rest of that section describes what constitutes a corrective amendment - in particular see 1.401(a)(4)-11(g)(3)(vi) Conditions for corrective amendment available for BRF sorry Tinman, I haven't the 'heart' to give a straight yes or no answer to your question.

well, the regs say you can have a safe harbor plan and provide the safe harbor to only those who are statutory includable (you give up top heavy free in that situation) it sounds like you want to take it one step further: 1. safe harbor match to statutory includable and 2a. safe harbor match to otheriwse excludable who are over age 18 2b. some type of match to remaining otherwise excludable possibly keeping track of things might be fun, but I can't see why you couldn't do that. hopefully you wont end up with an HCE in the otherwise excludable group, because of course you still have testing in that case. would have to be individual designed document I'm sure. I don't believe you can do a 'greater of' match formula without possibly running into problems with the 'rate of match' issue - different people receiving at a different rate.

Bird- so on Relius you put people into 2 divisions - the Cruel and the not so cruel. I mean accrual and allocation the accrual group consists of the 2 HCEs and the youngest 5 NHCEs the allocation group consists of owners kid (HCE) and the remaining 2NHCEs. now, when you test the accrual group, you fill in # of nonbenefitting HCEs=1, NHCEs=2 and tell the system to include only the accrual division. this will treat the kid and the 2 NHCEs as big fat zeroes now test the allocation group, but plug in 5 for the nonbenefitting NHCES and 2 for the nonbenefitting HCEs. test on an allocation basis and only that division. by the way, if test still fails, you could swith one of the NHCE to a different division. I always run a 'fake' avg ben % test just to make sure I have the correct number of HCEs an NHCEs in total.

Code section 406(g)(4)(H) says the term 'top -heavy plan' shall not include a plan which consists solely of (i).....meeting requirements of a safe harbor plan (ok Tom paraphrased this bit) since you did not meet these requirements, I'd say your plan must provide top-heavy in this case.

correct. not the 1/3 rule.

but a plan must always use 415 comp for top heavy and to satisfy the gateway minimum, 415 would again be used, though this couldbe from date of participation.

Lady MacDuff: or else simply go into census and change eligibility from No to "Yes, override" after eligibility has been run.

so lets take your example one step further. suppose the ee in question was deferring at a rate of 10% and he quits 12/29/07. his final paycheck is dated 1/4/08 showing the 10% deferral. now, since he has 'comp' in 2008 do you show him on the ADP test in 2008 though he actually performed no service in 2008 (especially if it would make a difference if passing the ADP test?) now to add to the fun, suppose plan has immediate eligibility, and an ee is hired 12/29/07 to replace him. do you count him on the 2007 ADP test as a 0 because he worked in 2007? you want to be consistent don't you? (ignoring of course the fact you could test otherwise excludables separately so it probably wouldn't matter) ha. don't open the can of worms - put in a policy that no one can quit within the last week of the year. I think the same IRS personal at the ASPPA conference added the famous line "if we audited the plan and looked at the facts and circumstances, we would know if the person should have received a contribution"

if my memory serves me correctly the answer to this question changes for plan years begining 1/1/08 because one will be taxed in the year of distribution. but as for your answer, see 1.401(k)-2(b)(2)(vi) tax treatment of corrective distributions. if made within 2 1/2 months of plan year end, then they are treated as deferrals being 'the first elective contributions for the plan year'. in other words, First in first out. thus they would be taxed in the year the plan year begins rather than ends. stupid rule, than heavens it will soon disappear. (OK, maybe I am in a minority feeling that way. ha)

yes but... if you had set up the plan to have a 1 year wait and entry dates of 1/1 and 7/1 then anyone hired after 7/1/06 wouldn't have been in the plan anyway. in other words, while possibly 'discriminatory', testing 'otherwise excludable' ees separately would probably pass testing.

the concept of 'rate of match' is found in the Code (not the regs)- 401(k)(12)(B)(ii) when I say that the SHNEC has nothing to do with the ACP test I mean that the SHNEC is not used in the ACP test at all (unlike the safe harbor match (provided it doesn't exceed certain limits) which may be used in the ACP test.) conceivably you could have a plan that passes ADP safe harbor and not ACP safe harbor, but you could never have a plan that passes ACP safe harbor and not ADP safe harbor. you could have a plan that provides a SHNEC only. there is no ACP test to pass as there is no match, so there is no ACP safe harbor to worry about. my apologies if that statement was confusing.

good luck. I have actually run it that way on Relius. It is almost like you want an initial 'dummy' run that shows you total number of NHCEs and HCEs, and then when you run component plans the number of total NHCE and HCEs is the same, even though you only see the names of fewer people on the report. The avg ben % test is the tricky part, but they have added a toggle on that to indicate 'avg ben % test passes' (assuming that it does. or if you get lucky, you wont need it and can pass ratio % test for each component plan.

if the plan is providing the 3% shnec then the ADP is satisfied. but the shnec has nothing to do with the ACP test at all. If there is no match, then there is nothing to worry about because there is no ACP to worry about it. if the plan stated it would provide a match and then switches (reduces or eliminates) then the regs say the ADP test must be satisfied. interesting, it says nothing about satisfying the acp test! but I think that goes with the concept that normally even the safe harbor match (disgregarding a discretionary match) is tested under ADP and it 'may' be tested under ACP if you want (excluding up to 4% of the match as desired) you have also botched the top heavy free, though I wouldnt expect that to be a problem unless the shnec was being provided on a date of participation basis. (my initial response assumed the match was discretionary and I would still hold hold that changing /reducing would fail the issue of the 'rate of match' being different - almost like aggregating 2 plans with different match formulas)

component plan testing is simply an option, so it doesn't have to be in the document. Treas. Reg. §1.401(a)(4)-9©(1) describes it as Plan Restructuring basic rules are as folows: 1. plan passes 410(b) before restructuring 2. split plan into 2 (or more) component plans a. each individual must be in one and only one plan (though technically they show up in the other plan as a big fat zippo, zero nada, nothing, number of eyes blinky has if he lost 3 of them. b. each component plan satisfies 410(b) c. each component plan passes 401(a)(4) - usually you test the young HCE and old NHCEs on an allocation basis and the old HCEs and young NHCEs on an accrual basis. an ee 'not' in a component plan still shows up in that plan as a big fat zippo, nada, zero, nothing d. if the plan as a whole passes avg ben % test, then the component plan passes avg ben % test. hope that includes the basics. if using Relius, you can put people into into divisions and then test the divisions (but fill in the # of HCEs and NHCEs not benefiting in the little grid or whatever you call that data entry screen)

A safe harbor plan never has to say how much of a discretionary match will be made - simply that there exists the possibility of such a match. so the question would be, do you pass safe harbor ACP if the discretionary match is reduced during the year. I would say no, thus you will have to pass the ACP test. My reason being that you have created a scenario in which the match was at one rate at one point during the year, and at another rate at a different period. (Thus, the HCE could abuse it by having a discretionary match at 66% up to 6% deferred - and the HCE socks it away early. then the formula is amended to did-del-lee squat and the NHCEs are left out in the cold.)

you must have done a good search, because you can not return deferrals once made. you did not rpovide enough other info to determine what else the plan could do. for example what is the avg ben % test when done on an allocation basis? will that pass? once the kid is in assuming he is the youngest and received the SHNEC then I think you are left to test on a component basis - that is, the son and the older NHCEs tested on an alloaction basis, and the older HCEs tested with the younger NHCEs on an accrual basis. if all you are doing is providing the 3% shnec to the nhces, then I guss the assumption is that the HCEs are capped at 9%?

under EPCRS an 'insignificant problem' depends on number of participants involved and number of years. I'd say you fail, so you fall under 'significant operational failure'. this is described in Section 9 of the EPCRS. I just attached the EPCRS instructions under another posted message 'failing top heavy test' or something like that. grap a copy of that and read. section 9 starts somewhere around page 35. only you can determine if you feel comfortable using EPCRS to self correct the problem.

sure I can always have comments. they might not be correct, but I can still have comments. 1.401(m)-2(a)(3) Determination of ACR ...those amounts determined under the rules of (a)(4) and (a)(5) of this sections AND the QNEC and ELECTIVE CONTRIBUTIONS (emphasis mine) taken into account under (a)(6) of this section. now (a)(6) says ....elective contributions in the plan year or the applicable year. and (a)(2)(ii) says if prior year testing is used then the ...applicable year is the plan year immediately preceding the the plan year for which the ACP is being tested. so it still looks like you may be able to 'shift', regardless of the fact there were no actual matching contributions in the prior year because you are permitted to include elective deferrals in the ACP test. let's carry the argument that a shifted deferral is not a matching contribution one step further. suppose the plan is using current year testing. would you also hold that you can't shift because 'a shifted deferral is not a matching contribution'? now someone who is elibile to defer but is not eligible for a match at all is something different - those ees are not on the ACP test so you can't shift them, which means you may need to shift larger amount for the other NHCEs. or if all but 1 NHCE failed the hours requirement (or last day) and the 1 remaining NHCE didn't defer - then you couldn't shift anything because there is nothing to shift, but other than that, I still would hold you can shift.

I'll be nasty a second time and make you look it up again. see section 6 .02(4)(b) maybe its around page 24 if it printed like my copy. note: in regards to all matters involving EPCRS: e.g determination letter if need, standard practices, etc

correction is part of EPCRS, most recent version is rev proc 2006-27 see appendix A.02 (should be around page 58) not sure how folks survive without a copy of this. it's good for insomnia as well.

I think the answer is yes, since the match was an available option never used (as opposed to a newly added feature). my understanding of the rules is that you can't shift deferrals for those ees who weren't eligible to receive a match (e.g. last day rule or hours requirement - because those people don't exist in the ACP test), but other than that the regs simply seem to say you can use deferrals not used in the ADP test as long as you pass before and after.

there are a couple of things going on worth mentioning in regards to the 'match' 1. you have a Basic safe harbor match, which satisfies ADP test and can be used to satisfy the ACP safe harbor as well. 2. if a discretionary match is provided, then, to be considered safe harbor, as you indicated, it must be limited to 4% of comp (and 6% of deferral) - this means that a 66% of deferrals up to 6% would work because no more than 6% of deferrals was matched and the maximum amount of doscretionary match equals 4% of comp. but you have to follow the terms of the document - if there is no cap on the discretionary then you may have to do some testing - on either all match or match less the 4% basic (though I think even that may have been slightly modified if it is an automatic enrollment safe harbor match - something in the back of my overly thick skull says there is something about that I dont quite recall) now, at least in regards to Corbel documents, there is cap written into the discretionary if the intent is to be safe harbor. 3. the plan could also (or instead of the discretionary) provide an additional fixed match on up to 6% deferred (there is no cap of up to 4% of comp) lets see, three points, three eyes for Blinky, so that should just about cover it.

I'd vote no. since plan was safe harbor that 'implies' it has a 'use current year' provision, even if the document doesn't say that. in fact, the rules for discontinuing a match require the document to use current year, so unless you amend to prior year I think you would have to use current year. I once asked the document lady at Corbel-land about that - how come even though I chose safe harbor the document said 'use prior year testing', andshe agreed it should really be current year. but all these comments are my own opinion based on what I understand the rules to be. part of the problem is the very nature of the beast. If you have a safe harbor, then why would you have language describing what the testing method will be. last year at the ASPPA conference the IRS personel voiced an opinion if the match was not safe harbor you could indeed use prior year testing for the ACP test (of course depending on what the document says)