Tom Poje

so how would you handle the following: (and I'll keep it simple) HCE defers 100 each month all year gets 50 each month for 6 months, then company stops the match. adp refund is 300. so, is there related match and how much? it was a 50% match. you cant really average things over the whole year, because deferrals change, etc. people might have stopped deferring because match was stopped, people terminate during the first half of the year. Thus, I would say it does make a difference if matching on a payroll basis. so it really matters if it is first in first out.

Plan fails ADP test. a discretionary match was provided weekly, but was stopped mid year. so, any guesses on the calculation of related match. Is it first deferrals in and therefore first deferrals out, so there is related match, or is it averaged over the whole year (ugh) or last deferrals in are refunded and therefore no related match.

The whiz kid who produces the 5500 user manual has the following on her 5500 website. It does not address the 3 year cyscle you are talking about however... no numbers are ever reported anymore. the only thing you check is whether plan passes ratio or avg ben test. this does not mean you are not running the test, it simply means you are not reporting the results. good grief, if plan fails, are you going to correct the problem or are you going to hope the plan never gets audited? or another way of looking at it, if plan failed, it is impossible to file the 5500 and say the plan failed, so this whole thing (at least to me) seems rather stupid to even report. of course the plan passes, otherwise it would be disqualified. I don't see too much different than with the ADP test. There is no check box that says plan passes or fails ADP test. so merely reporting the results of coverage, well, I don't see that as life or death. (as long as I have something in my records to prove the plan passes under whatever method I use. I assume that still applies to the 3 year cycle. ................................................................................ ..................... Reporting Coverage on Line 9 of Schedule R (instead of Schedule T) The most notable change in the 2005 package is the complete elimination of Schedule T. This revision, which had been rumored to be coming during the past year, is coupled with a change to Schedule R to report how the plan satisfies the coverage rules under IRC Section 410(b). Line 9 of the 2005 Schedule R instructs the preparer to “check the box for the test this plan used to satisfy the coverage requirements” followed by separate boxes for the ratio percentage test and the average benefit test. But which plans complete the 2005 Schedule R? Remarkably, the rule for which plans complete Schedule R has not been revised. That is, Schedule R is not completed for a plan that is not a defined benefit plan or otherwise subject to the minimum funding standards of Code Section 412 or ERISA Section 302 if there were no distributions from the plan during the year. Those plans will not report any coverage information at all under the new format! For plans that are required to complete Schedule R - whether defined benefit or defined contribution - line 9 must be completed unless the plan satisfies coverage under the exceptions that appeared on the 2004 Schedule T at line 3. This means that plans that are designed to automatically satisfy coverage rules - no HCEs benefit; only collectively-bargained employees benefit under the plan; all nonexcludable NHCEs are covered; or plans falling under the “acquisition or disposition” rule in Code Section 410(b)(6)© - do not complete line 9 even when Schedule R is completed for other reasons. What is unclear is how you complete line 9 if a plan has disaggregated parts and not all of the parts satisfy coverage on the same basis. For example, suppose your 401(k) feature is available to all employees so meets one of the exceptions for completing line 9, but the matching feature has a last day, 1000 hour requirement. Do you complete line 9 or not? It is arguable that both disaggregated parts in this example satisfy the ratio percentage test so that checking that box would be an accurate reflection of the plan’s coverage results for 2005. I’ll clarify how the IRS expects the information to be reported in different situations as I learn more.

if on Relius the following might work: Exclude Predecessor Service: Relates to the Business Entity Date (Empoyer/Company Data). If checked, Relius will not compute any prior years of service, service for vesting or participation before the Business Entity Date

Depeneding on how bad the test fails, it would probably be easier to amend plan (if necessary) provide a QNEC to NHCEs only for the current year. you might be able to get by on less than 3%. the only disadvantage is that the HCEs wont get, but that would be for this year only. then amend to safe harbor.

Comp definition need only be reasonable – not required to satisfy nondiscrimination requirement - see 1.401(k)-3©(6)(iv) and example 3 that follows

I don't know. does a parachute beat a paradox? if not, is it worth bluffing?

well, its possible that could be a partial termination and those people would become 100% vested. there are no hard and fast rules that I know of, if those people represent 20% of the entire employees then they around the % the IRS uses for determining such things.

if the ee has truly waived out from the plan, he would not be eligible for the safe harbor. he would be treated as includable and not benefiting for coverage (once he has met the plan's eligibility requirement and would have come in had he not waived out. he would show up as a 0 for nondiscrim for nonelective testing

"What happens in Vegas, stays in Vegas" I hope not. I hope to be able to impart some worthwile knowledge people will able to use somewhere else. and as for anything else, well, I still have to answer to the Big Guy upstairs, so I guess that won't stay in Vegas either.

the table can be found here and in a gazillion other places I am sure. http://www.lawrenceassociates.com/Files/Splitnot01-10.pdf

question 32 at the 2005 ASPPA fall conference

as things currently stand, you are correct if you are eligible to defer you must get top heavy if the plan is top heavy. (This might require a gateway minimum if the plan needs to be cross tested you are also correct, for coverage (and nondiscrim) the nonelective portion of the plan could be tested using otherwise excludable option.

well, possibly as a guideline, 1.401(k)-3(c )(ii) says last day of immediately following plan quarter. that is for safe harbor match, not sure if such requirement is written in stone for regular match

page 2 of the 2005 instructions for form 5500 "Changes to Note for 2005" clearly answers this question - not just once but actually twice. there are only 11 short bullet points I would answer the question, but this is for anyone else as well - you should have a copy of these instructions on hand. http://www.irs.gov/pub/irs-pdf/i5500.pdf

sorry Andy, I will probably bored there just as well not into gambling, and I am offended by immodest dress. as for Elvis, well that picture made it into a powerpoint presentation a few years ago (in fact the only reason I still have a picture is after a hardware crash I still had the presenation on disk. doubt anyone else wants to see that one.

hopefully that is what your document says for 414s comp. I vaguelly recall some of the old Corbel documents specifically defined testing. now they say something like 'any definition of compensation that satisfies 414s may be used' hey Andy, looks like I get to give a nondiscrim talk at the ASPPA confernece in July in Vegas this year. is that a step back from the big one in Washington?

definitions are found in 1.401(A)(4)-12 plan year comp (1) .....[use] one of the periods described in paragraphs 2 - 4... (4) period of plan participation from this most people I know would hold you are allowed to use comp from date of entry even though top heavy is based on full year. in other words, testing comp is different than allocation comp. of course if your document is specific on its definition of 414(s) comp you are stuck. also watch out for gateway minimum on such folks.

see 1.401(m)-2(a)(4)(iii) to be used in the ACP test must be made within 12 months. otherwise, despite you would 'match' deferrals you would now have to treat the match as a nonelective - as the only nonelective and run an a(4) test. (which, since after 9 1/2 months woule be too late to correct with a corrective amendment if you failed - you would have to go through CAP or whatever. If my wee brain still functions, I believe it also becomes a 415 allocation for that year, not the plan year made.

I like the logic. so here is what the 'administrator' is trying to say plan has maximum 1 year wait/age 21. otherwise excludable option not available for terminee who has performed service for 3 years. plan has immediately eligibility. therefore otherwise excludable option is available, even for a terminee with 66 years of service like mr. cline. what would Mr. Spock say.... I think the difference is that otherwise excludable deals with eligibility to enter the plan. the 500 hours rule deals with eligibiility for an allocation. big difference.

I would hold that 11.335 (2005 edition ERISA Outline Book) is even clearer. "An otherwise excludable employee is an eligible employee who would not have been an eligible employee if the one year of service and/or age 21 age requirement were imposed" don't see anything in their about terminees < 500 hours. I would further add the main argument regarding otherwise excludables is whether the plans entry dates apply (e.g. monthly or whatever) and at the Q and As the IRS has said ok to use the maximum allowed by law (first day of plan year or 6 months after meeting requirements). once in under maximum exclusion, you are in.

keep in mind, if you are after the end of the plan year, it is a little late to amend, especially if a profit sharing plan. you would end up reducing everyone elses contribution by the amount you are giving to the disabled person. there are anti-cutback laws to keep in mind.

c'mon, you can't fool me. only 22 years? how much of a setback are you using in the value? when addressing otherwise excludables the 401k regs refers to 1.410(b)-6(b)(3) and 7©(3) 6(b)(3) which refer to code section 410(a)(1). I dont see anything there that refers to 'terminees with less than 500 hours'. in fact, section 1.410(b)-6(b)(3) says you can't use 410(a)(1)(B) which is a 2-year wait for deferrals for otherwise excludables, so I am not sure how they get around the rule.

at the ASPPA conference in Washington, the IRS said you would follow same the rules outlined in the regs for the termination of a SHMAC - e.g. give 30 days notice, test, etc. of course that was a Q and A, andsuch opinions might not represent actual IRS stance. this was Q and A #12.

well, the IRS has already said you could name people as classes in a cross tested plan, so that in itself is generally not a problem. If the ink on the amendment you found hasn't quite yet dried, then that is a problem...er be careful not to smudge the ink. suppose instead the company had set up 3 plans one for owner A one for owner B and one for all other ees. now, would that be considered a CODA if owner B received nothing? I have seen arguments either way on this issue regarding a possible CODA, the advice I have heard simply said make sure the amounts allocated to the different classes is done be a board of resolutions. in other words, for better or worse, it looks like it is possible to accomplish what you have in a single plan