Tom Poje

ah, if one looks hard enough... ERISA Outline Book 9.124 (2005 edition) Chapter 9 Section IX 4.a.2. oh wait, I penciled that in myself...just kidding, it is really in there. Belgareth: I could have had a couple of classes in plan 1 HCE 1 at 15% HCE 2 at 9% 2 NHCEs at 5% so it cost me an extra 2% on one of the NHCEs to avoid the second plan and give the HCE an extra 6%

Andy - I think the difference is that you are not 'restructuring', but rather using the rules of permissive aggregation when you have more than one plan. You wouldn't be able to do that in a single plan. still, that seems like a more expensive time consuming way to avoid providing the gateway, but it sounds like it would be possible. of course, I could always be wrong in setting up something like this.

50 points to the wise individual. you are correct, the regs only talk about a SHMAC. like you, I wondered about this since it really isn't in the regs, so I asked this at the ASPPA Q and A this was Question #12 at the 2005 ASPPA conference The IRS response was "We believe the same provisions applicable to matching contributions would apply to non-elective contributions. For example, this would include the 30 day notice under 1.401(k)-3(e)(4)" IRS responses at such meetings always carry the caveat that they might not represent an official position of the IRS. I think the idea of requiring current year testing is because you have no numbers from the prior year - you had a free ride and there was no test.

in your example, the plans pass ratio% at 100%, so coverage passes. therefore you would not have to aggregate for nondiscrim testing. thus each plan would only need to satisfy gateway on its own. figuring a worse case scenario (an NHCE with comp at 90,000 getting 3% in the one plan) an additional 2% to that person would be 1,800. Though you said don't count the extra cost of a second plan, I don't see how you can not consider that. most likely the amount would probably closer to half of that. If you can run, process, file ,etc plan for that much then I suppose it could be worth it. Same concept applies to safe harbor - if you don't aggregate for coverage, then you would not aggreagte for ADP testing. each plan stands on its own. therefore there is no requirement that each plan be a safe harbor.

actually, I am one of the few people who can physically put his foot in his mouth. so I guess the comment is accurate.

ah, then you are pretty much stuck with integrated, possibly a points plan but such people wont have a lot of service so that probably wont help.

well, if the population is small, using top paid group election might 'eliminate' the young HCEs. people forget about that possibility. your other choice is to put the people into classes and simply give the young HCEs less. since this was listed as safe harbor you could exclude hces from safe harbor or you might have to do component plan testing (test the HCE youngsters on an allocation basis and the HCE oldsters on an accrual basis - and vice versa with the NHCEs) not sure of a software that actually does that - I can sort of fake out Relius by using divisions.

now there is an excellent comment. somewhere on this Benefits Link you can subscribe to a daily newsletter. then everyday you get an email listing 10 or so short topics. many moons ago, one of those was the regs. and those are the ones I grab right away. the nice thing is you get the preamble as well, and usually they are in 'english' and explain a little better the regs. now, all that being said, where you find those after the fact, well, you are talking to chief of idiots at that point. the follwoing website will list the different regs you can print scroll down and find 1.401k and there will be the different sections. I am sure there are better resources, but this is the one that popped up on a google search. http://www.access.gpo.gov/nara/cfr/waisidx...26cfr1e_05.html

If big chested women work at Hooters where do one legged women work scroll down

of course one must follwo the terms of the document. hopefully most if not all would have been amended to state there is no 70.5 until a non 5% owner terminates. you did not indicate if this ee has indeed terminated

this is all explained fairly well in 1.401(k)-3(d)(4) [Final Plan Year] of the final regs. granted your plan terminated before the final regs go into effect, but absence other guidelines I would use them. I would strongly recomend having a copy of the final 401k regs close by, especially the whole of 1.401k-3 which deals entirely with safe harbor plans. general rules are: plan provides 30 days notice of suspension of benefits [thus contributions stop at the end of the 30 days notice] plan amended to provide ADP testing for the entire year using current year method and then there is a some stuff regarding the suspension notice itself.

ADP test - told system to print correction report asked it to calculate related match it told me "You selected correction report, but did not select a correction method" thus, it doesn't calculate the related match amount. Relius response: calculat related match is actually a subreport of the refund to HCE, so you have to select both. Something to watch out for - In the particular plan I have the system can not calculate the related match. it was a 50% match, but the match was stopped midyear. (Per payroll match rather than end of year match) so looking at the deferrals over the whole year it appears there was no related match. however, first in first out, so I have to dummy things up to show the related match. always something to watch out for. also, it does not appear it helps to selct don't print soc sec number in plan specs, as these reports print them anyway. same hold for nondiscrim reports. Relius response is that not all reports have bility to supress soc sec numbers. I was not aware of this.

well, things seem to be running smoothly. the Crystal end of things is an adventure, I haven't completely found myself around as far as modifying reports. as far as saving reports to a file(word or excel or whatever), I get a stupid extension listing the time and date as well. the nondiscrim reports are in Crystal, but you also get the gift of the old txt files saved under QTTEMP, why these reports are still generated I have no clue, but they are there nonetheless.

my limited knowledge applies to the safe harbor - the SHNEC can be stopped follwoing the guidelines for stopping the SHMAc - that is, 30 days notice is given and then the plan would be tested using current year. now as to whether you can convert to a SIMPLE I have no clue.

you can't simply 'create a 3 SHNEC'. the plan document must provide for such an animal, and the proper notice must be given. now, if you are asking the sponsor provides a 15% profit sharing each year. can he provide a 12% profit sharing and a 3% SHNEC? yes, as long as evrything is properly in place. in other words, if you currently have an existing 401k it is too late this year. if all you have is a profit sharing, then yes, you could add a safe harbor 401k feature this year.

this is a sample of the correction report for a failed ADP test. to verify testing results, I have added the numbers to show plan passes under the old rules. also added the numbers to show that after the actual refund the 'top down' method has method has been achieved. since you cant run this report out of custom, it would have to replace the existing Relius report, but if you want such a report, send me an e-mail. granted I have only tested it on a few plans, but it appears to be working fine.

after tax must be tested every year, even if plan is safe harbor. now the question would be, I can make Roth contributions (outside the plan) (no taxes on earnings) or I can make after tax contributions (taxes on earnings) hmmmmmmmmmmmmmmmmmm

based on what I have read, the answer is no sched R is needed. If the plan is DB or money purchase then you have to fill out the sched R, but you might be able to skip question 9 which deals with coverage. you skip filling it out if you would have filled in section 3 on the sched T in previous years.

the SHMAC satisfies ADP safe harbor, and ACP safe harbor as well. you are correct, a discretionary match can be made as well, as long as it is capped at 6% deferred up to 4% of comp. in other words you could have a discretionary match of 66.67% up to 6% deferred because that would cap out at 4% of comp. beginning in 2006 you can NOT have eligibility requirements on the discretionary ( hours or last day) but they can be subject to vesting. As the question has come up before, I see nothing dumb about it.

no because, for example, 2 people with the same age could have different years of service and therefore different contribution % amounts, thus you wouldnt have smoothly increasing bands. what few points plans I have looked at would pass the 1/3 rules under the gateway minimum so I doubt this would be an issue anyway. the normal testing for a points plan, at least as a first steo is testing on an allocation basis and running something similar to the avg ben % test on the ps contributions (and using 100% instead of 70%)

assuming plan has a 2/20 vesting schedule, and further assuming employee has not reached normal retirement, your statements sound correct. I suppose if plan says early retirement = 100% vested and ee hits that, or other things like that, ee could be 100% vested. but otherwise 80% sounds correct

Andy well, I am suppose to come up with some more stuff to add to the book, so maybe I can figure out a way to add this one to the book. just got the e-mail from ASPPA wanting me to give the safe harbor/cross test talk in Oct again. maybe 2 times. plus I have to modify it for the July presentation so the emphasis more on cross testing with a little on safe harbor. oh well, I wasn't going to do anything the next few months anyway.

Kim in the 2005 edition it is 11.216 ugh. making a lazy jerk like me look it up.

I would agree with WDIK. you can't simply 'assume' one can make a catch up. suppose the ee quits, then what, you reclassify how you were doing things. and what if you dont match catch ups? now suddenly you have deferrals that were treated as catch ups, but are no longer, so they need a match. about the only case I can imagine where you can have catch ups that early would be as follow Jan pay = $1000 ee defers 60% since plan limits deferrals to 50% then indeed ee would have a catch up.

original results 7.02 .21 3.33 .08 after deferral refund 5.33 .21 3.33 .08 shifting .33 (for convience, could be other amounts) from both HCE and NHCE 5.00 .54 3.00 .41 and now passes. my understanding is this would be ok. If I recall ERISA Outline Book says maybe, but it is not clear. somewhere in the back of my thick skull I recall reading the idea of the shift was to be able to use 'deferrals' not needed to pass the ADP to support the ACP test. certainly that is what has been done. I would agree that it is gray, but I take the aggressive position in this case and say it can be done. with the numbers being that close before shifting, was ant consideration made for using comp - deferral for testing purposes.