Tom Poje

yes that could happen if he failed to make the next entry date. there is that option of treating 'all hces' as being includable. It is possible you could exercise this - I don't think the IRS has considered this situation arising in a safe harbor plan where otherwise excludables are excluded from the safe harbor. not sure if that is in the 'spirit of the reg' to get a free ride on the ADP test under those circumstances.

If I understand the original question correctly: ee enters plan immediately for deferrals (in 2006) he is not eligible for the safe harbor until 7/1/2007, so he didn't get anything the first half of 2007. therefore, do I have to run a test for the first half of 2007? the answer is no, this ee is not treated as an 'otherwise excludable' employee for testing in 2007 even though he was otherwise excludable for a portion of the year. good question! in the same vein, if the plan was top heavy, but there were no other non elective contributions, you still get the free ride - even though the employee only received safe harbor for half a year.

before someone asks http://benefitslink.com/IRS/revproc2005-66.html

actually it probably means 1994 GAR at this point in time, though I am not sure if that eliminates 1983 GAM 50/50 or not.

no, you can't just say that a safe harbor contribution will be made. 1. The document must specify the plan is safe harbor and what type of safe harbor will be made. before plan year begin 2. A notice must be provided 30 days before plan year begins. you can not do things after the fact. in fact, it all has to be done before the plan year even begins. nice try.

I do not know of any hard and fast rule. I believe the IRS has expressed an opinion at the ASPPA conferences that it should be in place, in fact, I think they said even before plan year begins. (I assume you mean prior vs current year testing). Since a plan can not provide a 'maybe we will go safe harbor SHNEC' without having the plan already be subject to current year testing, there would seem to be some justification for this position.

ah, you knew it was there all along. that was what I was thinking of but couldn't remember. thanks Andy!

they only address you with one? hey loser poj-master (or poj-meister) pojeman (along with a pokeman look alike poster) to name a few. I guess I am suppose to be 'Director of Compliance' because of all the work I do with nondiscrimination.

neat. had someone (jusy a few weeks ago) in the office here who was working on a spreadsheet for combo DB and DC and I told him 'he had to duplicate the numbers in the regs' to prove his spreadsheet worked - that is how he figured out what mortality was being used (sort of trial and error - there were enough mortality tables built into the spreadsheet he simply tried different ones at 8.5% and lo and behold it worked) I suppose if 8.5% hadn't of been used it would have been more difficult.

or an easier way to remember the deferral issue: you submit your W-2 to the government. if the total deferrals on ALL W-2 >14000 in 2005 you have overdefrred

you could have 2 years, but not for 401(k) deferrals. that would also mean you could not have a 2 year wait in a safe harbor 401k

ah, if that is the correct definition then I agree. the only other time I have seen that word was in a context that implied it meant something similar to archaic. of course, my curiosity would be why you want to know where the calculations came from in the first place, or was it more from a standpoint of just wanting to know where the heck the numbers came from.

don't you love it when the IRS uses a table that is not on the list? I actually have thought about that. I think that table might have been allowed under a rev proc. or some similar bulletin. I think the same applies to the 1994 GAR table, but maybe I have dreamed all that. if someone knows for sure, I'd like a clarification. I think the APRs at the extreme ends (UP84 = 95.xx or 98.xx - I dont recall off the top of my head) and 1983 IAF at 115.xx. since the blended table APR falls between the two extremes it makes sense it would be permissible. while you may call this process 'arcane', I actually don't find it so. I have to work on an ASPPA talk on Cross Testing for July and was using the DB/DC example, so I really needed to know what table was apparently being used. plus goin over the example you cited is just reinforcement of the material. keeps me on my toes.

Is there something in 11 that is so great as to load right away? good grief, we only loaded 10 a few weeks ago. got burned once putting on an update within the first few weeks and will never do that again.

I believe the preamble to the final regs was something like 'this "clarifies" if you are eligible to defer then you are counted in the ACP test. thus, if you put an allocation restriction on the discretionary match, this will result in some HCEs receiving at a higher rate of match than any NHCE included in testing, therefore safe harbor will fail. my guess is that it was always intended this way. since the IRS used the term clarify I think they realize things were not real clear, and therefore probably little that they can do about how things were run in the past.

I took the trouble (like a fool at home, no time at work) to try this (But then again I guess that is no different than studying and reading up in the field I work in, always hope it makes me better) anyway using Mortality Table is 1983 GAM 50/50 Blended (The old GATT table) Interest rate is 8.5% APR = 106.662 I get the following in that example: Age 39 (26 yrs to retire) 3% contribution Age 44 (21 yrs to retire) 6% contribution for simplicity, assume both make $10,000 (though it doesn't matter what comps you use) Age 39 = $300 contribution Age 44 = $600 contribution Age 39 E Bar = [300 * (1.085 ^ 26) / 106.662 * 12] / 10000 = 2.81 age 44 = [600 * (1.085 ^ 19) / 106.662 * 12] / 10000 = 3.74 maybe my rounding is off a little, but this seems to work.

nothing to be humble about - that is the rule, plan has to be tested for ACP. ADP gets free ride. no fair cheating and shifting deferrals to help testing either.

without looking at that example, I had the same problem (issue?) with another of their examples - for converting the 1% DB benefit into an equivalent allocation rate. it appears they use Mortality Table is 1983 GAM 50/50 Blended (The old GATT table) Interest rate is 8.5% APR = 106.662 that is a wild stab in the dark. (I have grown to detest examples that don't disclose such things) tried very hard to put those things in the Coverage/Nondiscrimination Answer Book when I use an example.

Peg got fired. She 'woodn't' hop right on it when the boss asked her to serve the customers.

Q and A #19 at the fall 2005 ASPPA Conference Group A is covered by both PS and DB plan group B is deferral only 401k. what is 25% deductibility limit? Answer- it is limited to 25% of comp of group A. see 404(a)(7)(A)(i) of course, Q and As carry a caveat that they do not necessarily represent the official position of the IRS. but this one even cites the Code so I would say it is even more reliable. good gfrief, this Q and A sounds exactly like what you asked. are you just checking up on us?

I dont think so, I vaguelly recall many years ago the owners match was used in the ADP test, but I dont remember for sure.

gateway applies to nonelective contributions a match is not a nonelective contribution a DB accrual is a nonelective contribution. so, if he received a nonelective he has to get the gateway. if match only, then no gateway. if I understand your question correctly

I'm leary of making an answer without being clear on the terminolgy being used. you indicated 1 HCE, 3 NHCE (2 termed < 500 hours) plan is cross tested, coverage is a problem. there are 3 coverage tests - all eligible to defer so 401 k passes all got safe harbor match, so 401m passes. nonelective - you can exclude term w < 500 hours, so I would expect that to pass coverage as well. If it is not, something is coded incorrectly. (e.g. on the status screen, the employee has something in 'reason not eligible'. if so, then I need further info to determine how things are coded and how to prevent this in the future. by the way, that is not an 'uncommon' mistake so dont feel bad if that is what it is. now, avg ben % test - you have to include all contributions from all employees. since 2 NHCE received no PS, I could see this test failing. but that is not coverage, that is part of the nondiscrim. however, assuming the lone remaining NHCE has an EBAR >= to the HCE, I would expect that the plan to pass ratio % test since the other 2 NHCEs would not be included in the test. on the other hand, if you only provided a gateway minimum, then the EBAR might be less and you would fail. (or dreaded 'bug in the software'. I have not run much at 10, but am pretty confident that Relius 9 is calculating correctly.

I'd still say something is left out of the argument. Person quits late December, final paycheck is first week of January (that is simply a side effect of processing, we do not get paid every day) Its argued the person performed no services in new year, therefore shouldn't have deferred (and also had no eligible comp) Fine. now you have created a new problem. the person performed services at the end of the year, but you are ignoring that last week he worked. Why are you allowed to do that? ERISA Outline Book is not 100% clear [ they start talking about severence pay and stuff], though 2005 edition says (11.47) there is a good argument that the payment should be eligble for deferrals. [also see 11.62) it also adds, if you use the 403b proposed regs, deferrals made out of final paycheck would be acceptable because such an employee is treated as an active employee for the payperiod. not sure if the 2006 edition has anything new. My interpretation of all that would be something like Plan year runs from 1/1 - 12/31 the corresponding compensation runs from 12/28 - 12/XX or whatever.

if each plan can stand on its own as far as coverage goes, then it is my understanding you could have 2 plans with 2 different safe harbor formulas.