Tom Poje

so, WDIK, were you able to find any of the hidden books over the weekend. curious minds want to know. If my memory serves me correctly it took me a while to find the last couple, I still remember what the last one was - that is how much it sticks in my mind. someday maybe I will even give you the answers. ha. me? as Janet said, it really isn't that easy, but that is what I liked about this puzzle!

the study guide for ASPPA course (Volume 2) has the following examples on pages 59-61. ok, I am paraphrasing a little Herman defers 1800 / month. he enters plan on 7/1. thus from 7/1 - 12/31/2005 he has deferred 10800 from 1/1/06 - 6/30/06 he has deferred 10800. a total of 21600 for the plan year, but no violation of 402(g) because that is a calendar limit. plan fails ADP test ending 6/30/06. Herman has excess contribution of $1500. Becasue, as of 6/30/06 Herman has not used any catch up limit for 2006, the plan treats the 1500 as catch up for 2006. no refund. nada. zippo. zilch. The plan must treat Herman as having 3500 available left for additional catch up for calendar 2006. so far for 2006 he has deferred 10800. If Herman defers 9200 more in 2006, then an additional 3500 will be treated as catch up for 2006. note: this would mean for the plan year 7/1/06 - 6/30/07 he has already used up 3500 - this amount would be disregarded in tha ADP test. what the example doesn't say is that it was dicovered Herman lied about his age - he was only in his 40's. now everything is really botched up, and one regrets ever getting involved in the pension industry.

I am sorry to see this topic to take on an air other than 'neutrality' (or at least it seems to me) from numerous parties involved. That should not be the point of posting. but things happen like that in the heat of the argument. I admit to losing it this Sunday when an indiviudal knocked at the door and (in my opinion) tried to twist and turn things that were in the Bible and kept changing words that weren't there, would try and change things from what I was pointing out, etc - but that is another story. anyway my original comment regarding cross-testing was simply meant to imply if you got to the point of cross testing you don't have a choice of picking and choosing who gets - the minimum allocation gateway would go to all ees who received top heavy. however as pointed out, there is more than one gateway (unfortunately the IRS used the term 'gateway' in more than one place) - broadly available is also a possibility. and broadly available does not require passing the avg ben % test. though now that you pass broadly available you go on to cross testing and fail avg ben % test and at that point you would have to give at least some of the NHCEs an increase. and that could only be done, if I understand things correctly, through a corrective amendment. This is an interesting plan. Assume plan fails avg ben % test as indicated. Plan could pass on allocation basis by bringing enough 3% to 8% to pass. plan could pass on accrual basis by providing 5% to all top heavy (assuming that is sufficient to pass avg ben% as well, or of course possible the ratio % for each HCE. wonder which would cost more, or which one the employer would want. and I am sure there are other possibilities.

the instructions for 2005 says "Use Schedule SSA to report revisions to pension information..." (what other revisions are possible? I guess maybe a name change) "...you do not need to report changes in the value of the employees accounts, since that is likely to change. However you MAY report these changes if you like." I would take that to mean simply a change in balance, but not include one that has gone to zero, especially with the qualifier that the account is likely to change. Note: the old instructions said "You MAY Use Schedule SSA to report revisions to pension info...." and "You are encouraged to report changes....other than account balance changes..." so this is a change (even if so slight). But the word MAY has been dropped.

we have always include A's and D's. I guess it depends on how you read things. In other words, we follwo the 5500 preparers manual. Did someone who receive a payout separate from service? Yes is a D required to be reported on SSA? Yes. Line 7i states, "If any participant(s) separated from service with a deferred vested benefit, enter the number of separated participants required to be reported on a Schedule SSA (Form 5500)." The only ones who we wouldn't include would be those who separated woth a deferred benefit and are not required to be reported - either they were paid out in the year of termination, or they were paid out in the following year and they were never reported previously.

some facts, as Mike has tried to point, but without a real example being put forward, it is hard to tell. Plan formula = 8% plus 5.7% integration (for example I will use 90,000 as TWB) plan has 1 HCE at 200,000 10 NHCE. 6 received through formula, 4 received top heavy 3% 410b coverage - all benefit, so plan passes coverage. basic formula is safe harbor so the question is does plan have to test for nondiscrim since some people received different rate? The regs clearly state if plan can satisfy 410(b) by treating top heavy folks as '0', then plan is still treated as being safeharbor formula and no 401(a)(4) testing needed. (In other words, you are not penalized by providing a top heavy) so HCE = 22270 contribution (8% of 2000,000 and 5.7% * (200000 - 90000) 6 NHCE at 8% 4 top heavy folks treated as 0. then ratio test for his is benefiting is 6 / 10 = 60% plan fails ratio, need to test avg ben test. Nondiscrim classification test if you impute disparity (and test on an allocation basis) then HCE E Bar = 13.7 (22270 + 5.7%*90000)/200,000 6 NHCE E Bar = 13.7 (8% + 5.7%) of course! NHCE = HCE Ebars in all plans that use max TWB and integration %. so you have 6 of 10 NHCEs in the rate group.(60%) this is certainly enough to pass any safeharbor. thus, if you pass avg ben % and it passes you are ok. cites from the gray book and other sources (which point to the preamble of the regs) have indicated simply running the avg ben % test on an accrual basis is not considered cross testing. without knowing ages and stuff I am not willing to make a broad statement that the plan 'most likely' passes avg ben %.

While cleaning out some stuff at home I found the following buried deep in stuff that I must have been given years ago. Good luck! There are 36 books of the Bible hidden in the following: (shhhh. don't tell people where they are yet. maybe just say how many you have found) While motoring in Palestine my friend O. Dusty Baker and I met Chief Moth Mujud, gesticulating wildly. His fez, raiment and features were odd. I never saw so dismal a chief. On market days he pumps alms from everyone, a most common practice. A glance shows that he acts queerly. Excuse me speaking so, but he was showing a crowd how they used to revel at Ionian bouts, when the brew seems bad. A fakir was sitting on a humble horse, whose appearance was quite interesting – he was wearing as comic a hat as they make. He pointed up eternally toward a rudely carved J on a high cliff. My companions excitedly cried, “See that J, Oh, now I know we are near the ancient Ai. Was this Ai a holy place?” From answer given elsewhere, I’ll say not. We asked the age of the big stone J. “O eleven centuries at least,” he said. I knew that in such a jam escort was necessary. Besides, our car was stuck in a rut here. So leaving the sedan, I elbowed nearer the fakir. A toothless hag gained access to his side, and paused to rest herself. She asked, “Do you have a treasure?” To which I retorted: “Not I. Moth, you know – tell us. Chief Moth Mojud expressed a desire to show us, however, warning someone may try to steal or annex O Dusty Baker’s goods along the way. Now I am at the work of tracing the missing cargo of tobacco that belonged to him. That’s my job. To the chief’s expression of sorrow over the tobacco loss I answered, “well, you did warn us.” My brother might be able to help us. He is a lawyer; however, he is a bit of a tramp, rover, BS from Harvard. His name is Eugene. Sister is working with him as well. They asked, “Well, where is that rover, prodigal at?” I answered that it used to be incorrect to use ‘at’ that way (never use a preposition at the end of the sentence) but everyone does it anyway. By the way, the flu kept Eugene at home this year. It really is too bad, I, a homebody, am the one roaming the Orient looking for treasure, while he - a tramp - at home in bed.

based on what was said: more than 30% of the people received top heavy (or terminated with more than 500 hours and received no contribution)- otherwise I don't see how you can say you fail 410(b). that sounds like an awful high %. if that is true then lets take a look at an individual making 110,000 (using 90,000 as my integration level) they would receive 8800 + 1140 or 9940, which is 9.94% of pay. 1/3 of that is 3.31%. that means if (and I stress 'if') you were to go the cross tested route you would be 'required' to increase the contribution of all top heavy people to satisfy the gateway.

well that all depends. is it possible? of course. if you were brand new to pensions I would say no. since it says you have 500 posts on benefits link, you are either asking a lot of questions, or responding on some of them and that would indicate to me you have a good grasp of pensions. the tests aren't easy, but they are certainly fair, I don't think there are any questions that are intended to trick you. if you have a good knowledge and you have at least looked at some of the questions from the study guide and you feel comfortable then I would say go for it. on the other hand, I have worked with people who have never passed, the forever '6' but not '7' and they simply claim they are not good test takers. I think that might have a little to do with it, but I also know they were weaker in the field than what they thought they were and their studying was insufficient to cover for that.

and so if you were to run a 414(s) compensation test would the amount be de minimis? granted there is no standard definition, but a common guideline of 'less than 3%' would not be a problem. or, if you were to actually test the plan using actual comp, would the plan fail - especially if you impute disparity or something similar?

one other thought comes to mind. all that has been said was that plan is top heavy so need contribution to cover 5 years. you would first have to 'make' the contribution for 2001 and then rerun your top heavy test. without knowing numbers I suppose it is possible one contribution might kick the plan out of being top heavy in one of the later years. plus you have to be careful running the numbers. thats about the time the rules changed (1 year instead of 5 years, who is key, etc)

you are correct in cases in which an ee is safe harbor eligible (all participants) vs profit sharing (which could be restricted to hours /last day provision. hopefully you would be able to pass on an allocation basis otherwise you might have to provide the gateway minimum. I would expect the only time you could fail would be if more than 30% of the NHCEs failed hours/last day.

you still have to follow terms of the document. the plan may call for a discretionary match, but if HCEs are not excluded then you still have to give them the match as well. in addition, if by flat dollar amount you mean that each particiapnt gets the same amount, then again, the document has to be specific. most allocate based on deferral.

as a side issue (unrelated to this discussion, but worthy of note), section 6.07 (assuming your print job is the same as mine it would be page 30) Defaulted Loans can be fixed under VCP. finally, something in writing!

for better or worse, that sounds correct, or at least how I understand things. and top heavy is based on total comp and not from entry date it is possible top heavy only goes to non key employees depending on how the document is written or I suppose if you are talking about the 2006 year then you simply dont make the discretionary profit sharing and just have safe harbor contributions

correct, if everyone gets safe harbor (and there are no other contributions) plan gets free pass. (I wanted to argue you had 2 plans - one safe harbor and one for otherwise excludables and run top heavy the same, but it doesn't look like it works that way. if the plan has language that says otherwise excludables dont get safe harbor, then I don't think you can correct by giving them since you have 'no valid reason' for taking such action. any top heavy can be subject to vesting. if document says match counts toward top heavy - or at least I don't know why a safe harbor match can't count toward top heavy - it is still a match - then assuming most people received the basic match they would already have satisfied top heavy.

you make some good observations. now, without looking it up, I think if a plan splits the participants into otherwise excludable then there is no free ride on top heavy - if the plan is top heavy you have to give to all - though safe harbor contributions can be applied to top heavy ( depending on document language)

there is no such thing as 25% 415 limit. 415 limit is now 100% of comp or the indexed dollar limit. there is a deduction limit that is 25%, but deferrals aren't counted so that can't be it either.

The daily treasury rates can be found here (last column): http://www.ustreas.gov/offices/domestic-fi...rate/yield.html click on 'historical data' and look at '2006' if you sum up all the rates for April and take the average, you arrive at 5.06 which is the rate just released. The same holds true for March. you can't go back much further than that because they didn't exist for awhile. so, while 2 months is not a lot to go on, based on the above date it appears you can get a good idea what the rates will be ahead of time

plans can be disqualified for accepting deferrals above the limit. In this case it sounds like neither plan is in that position - it is the individual who has violated the limit - and my understanding is that the individual could request from either plan. Thus if $ were already rolled into an IRA it would probably be wise to request from the other plan. all that being said, it is my understanding excess deferrals can not be removed after April 15th. the exception would be if the plan would be disqualified, then it is permitted under the self correction program. however, as I said, it doesn't sound like either plan has a valid reason for making the distribution - at least if you are talking about after the April 15th deadline! of course, we all know the individual is over age 50, so the excess deferral actuall are catch up contributions - correct?

it sounds like something is missing - if you 'just barely failed' and now are at $50,000 to fix? if HCE was at max comp amount, then using comp less deferrals might pass testing (again, if it barely failed then it might pass) look at Appendix B of EPCRS Section 2 .01 ADP Failure 1.(a) correction is QNEC via Appendix A .03 (b) one to one correction - return $ amount plus gains, contribute similar contribution (either to those ees from year in question or (if I remember correctly) the employees in the current year. now, can you argue the failure is insignificant and therefore eligible for complete correction under SCP? or is it safer to go through VCP. without more facts....

can I correct it under EPCRS? dang, I only make an attempt from time to time to find a puzzle just to give someone a break from the madness we call pensions. I don't always double check to see if the stuff is correct. well, ok, in WDIK's case I post the puzzle just to drive the poor individual crazy. but if you had fun.....then it was worth it

hints (for WDIK since he can't stand me posting these puzzles) 2. Action/Adventure 3. Sci-Fi 6. Action/Adventure 9. Drama 10. Comedy 12.Action/Fantasy

check the definition of 'eligible employee' 1.401(k)-6 "an employee directly or indirectly eligible to make a cash or deferred election under the plan..." if they are excluded from the plan, then they would not come into the ADP test at all.

see also 1.401(k)-3(h)(2) basically says 'you can use SHNECs in nondiscrim' ERISAnut makes a very good point about possibility of terms getting mis-used