Tom Poje

interesting. so Mr Big owns 85% Son #1 owns 15% daughter #1 owns 0% Mr Big is a male chauvinist so son #1 would actually fall into two categories

this is an updated version of what has been passed around for years. However there are now 72 songs to identify by the pictures. in all fairness, a list of Christmas songs is included, though not every song on the list will be used, just to confuse you. And, in all fairness to others, please do not provide answers in this thread. I suppose you can always start a new thread and label it quite plainly ANSWERS so you don't spoil the torture for anyone else. hey, I just looked at this today, created it to a word document. I am completely baffled at the moment looking at some of the stuff, so good luck!

If I understand you correctly, it sounds like plan was amended to include safe harbor language. does it also 'for the plan year 2005'. my understanding that is how it would work. in other words, something like Amendment #1 for the 2005 plan year a 3% shnec will be made. If there is no such reference then it sounds like the plan was amended permanently to use the SHNEC until an amendment is made taking it out of safe harbor. in other words, you cant really use a wait and see since the language is in there I could certainly be wrong, I would check with the document provider.

per a request, here is the hardship report. (requires you to check 'zero activity' accounts, just in case you have sources and one (or more) sources has been elimnated, zapped or whatever. also the safe harbor allocation report. This report works if account number for the safe harbor is greater than 799 and all other nonelective accounts are less than 800. One would have to modify the report to work for other conditions. it is hoped these work.I tinkered with the safe harbor report the other day. It should print by division and give totals by division, and the % of SHNEC. should also indicate if someone is at 415 limit, but then that is what I fooled with the other day and I might have broken it.

once someone has accrued a benefit you can not take it away. thus, if the requirements to receive an allocation are 1000 hours, then surely by this date someone has accrued. thus to change the definition of comp would be a cutback on someone who has deferred. If your plan has a last day provision you probably can amend as far as I can tell, but, for example if retirees are eligible regardless of hours or last day then you wouldn't be able to amend.

now for the nest question: our office still has not 'gotten with the times' and moved to Relius 10.x we are still on brand 9.x. The wonderful DLavigne was having problems having the report work. I suspect it is a conversion issue, but I wouldn't have a clue on how to upgrade the reports to that version. Patti - all comments tongue and cheek! You already told me there was an unseen smile. still, seeing them in person (or on the board) is too cool! .......................... this is really good news about the Crystal reports, at least I can throw them on the board from time to time. not that anyone really uses them. ha! .........................

well the one cite I used in the Coverage and Nondiscrimination Answer Book is Q3 from the 2001 ABA Joint Committee on Employee Benefits. This might be listed as ABA (American Bar Association). I know you can find the Q and As on their website. I am sure there have been other sources that have said the same thing, this is simply the one can easily reference.

ok, here is a test for a real live crystal report allocation report, will show def match profit sharing, and % of pay for profit sharing. sorts by division I have been using this for cross tested plans. just made some recent modifications which I hope havent screwed anything up. who knows, sometimes when you tweek something for one thing you break it in another area. used Freezip to compress the file if that makes a difference.

thnaks for the advice. I will have to try that.

I should add the following: I am more than willing to share reports, but they are a use at your own risk. while I don't think there are any major problems, one never knows. where possible, double check totals and stuff with another report. reports I have with 415 limits have been hard coded from days of old, and I have not gone back and updated them. I keep promising myself to do that, but time never seems to be there. probably all reports require the plan name to be entered in Alphanumeric fields 11 and 12 - otherwise report prints no data. by plan name I mean a name without the company name attached. remember, these are free reports, however currently I am owed at least one big smile, that is accruing interest at an inordinate rate. don't get behind on payment requests!

The IRS has gone as far as to say you could actually have each person in his/her own class, thus net effect would be, yes you could define classes to chieve the same effect as being by $ or whatever. (Note: all this was actually possible years ago, but you would have had to set up multiple plans and exclude people from the plan and then aggregate the plans for testing - so the IRS has simply made things easier on us) now, all that being said, if the result by naming classes by $ would be to provide 'short term' employees who have small comp a large % of pay vs others could very well be a problem. The IRS has made that clear. (in some ways this would be no different than using a bottom up QNEC to satisfy the ADP test)

gotta run, I am past my 415 limit. yes, I have a 1 page plan spec report I can send you. I do have an allocation report that sort of does what you want - it does not show % for deferral or match, but that could be easily modified if you know a smidgen of crystal. if you click on my name you can send me your e-mail and I can send you reports tomorrow. welcome to the Board! (Sorry, I am unable to attach crystal reports directly - system simply wont let me do it)

I don't think you need to change your ADP test. The adp test is the nondiscrim test for deferrals and you use what options work. for example, if you used otherwise excludable for the ADP test, there is no requirement that you do the same for the a(4) test. you probably noticed there are two comp fields - one for rate group and one for avg ben % test, so it sounds like you need to override twice. ah, good universal language description - at least that is how I would read it.

the reasonable classification test applies to coverage, so if plan failed ratio percent test, you could not proceed to avg ben test. the IRS has confirmed at different conferences, etc, that you can indeed put people into classes for purposes of allocation. thus, unless you are excluding a class from getting something, the reasonable classification test should not come into play. Technically an ee receiving a penny would be considered benefiting, I suspect there would be a point the IRS would say, it has to be meaningful, just like they have with the issue of usin short term employees to pass testing.

in Relius you can override testing comp - without opening up a plan I believe it is a subscreen along with computed comp. the language of bringing people in is for coverage and I don't believe that applies to nondiscrim testing. (You are correct, such language precludes the use of avg ben test, but I am pretty sure that applies to coverage only) and you are passing coverage since all NHCE received a QNEC. you cant 'self correct' nondiscrim failure, so somehow have to figure out how to get the sucker to pass. but if I understand things, you have 5 NHCEs at 3% 5 * 3 = 15 8 nhce total, so 15 / 8 = 1.875 HCEs are at 3%, so 70% * 3 = 2.1 so fail avg ben % test without the deferrals (which would have to be included. but since you fail ADP test, including deferrals makes things worse. but that is testing on allocation basis. so cross testing might work depending on ages. on the other hand, lets suppose all 8 received top heavy in 2002. then you would have 8* 3 + 5 * 3 = 39 for 2 years. 39 / 8 nhce/2 years = 2.4375 HCEs al got 3% so their avg is still 3%. 70% * 3 = 2.1 so 'passes' avg ben % test but you still have to add back deferrals (so that is a guestimate number anyway), but at least you are in the running. its a bit more complicated than that, that is a crude illustration only

probably better would be 1. owners (not by attrubution) 2.employees not described above making more than 50,000....etc 3. etc. remember, if you say owners, the kids are in. but my understanding is that you can put people into whatever groups - it creates a definitely determinable allocation group.

ugh, maybe. you said plan year was calendar, so I assume you are talking 12/31/2004. that means to fix with corrective amendment you have 9 1/2 months. too late. (Though I suppose if you are talking about one of the hurricane effected areas you could argue for more time) anyway: Coverage: you indicated all NHCEs received so coverage passes at 100% (at least for nonelective portion) assuming all could defer, so 401(k) portion passes at 100% as well. 401(m) - unknown based on data provided. as for nondiscrim, your conclusion is basically correct, but lets review what has taken place. QNEC given to all NHCEs, no HCEs. this is considered a safe harbor formula. It is ok to exclude HCEs. nonelective - if this was also provided to all ees then it would also be considered safe harbor and under the multiple plan formula rule no further testing is needed. however, as their is a last day provision (e.g. it is a top heavy) then testing is needed. now the regs say a plan must pass 401(a)(4) with QNECs a plan must also pass 401(a)(4) without QNECs 1.401(k)-2(a)(6)(ii) of new regs 1.401(k)-1(b)(5) of old regs depending on what you have handy. obviously testing with QNECs should pass. well maybe not obvious since QNEC is small. hard to say w/o knowing numbers. now w/o QNECs only 5/8 NHCEs get or 62.5% so ratio % fails, but that would be enough to pass midpoint, so if you can pass avg ben % test, I think you are ok. as for testing comp, some documents describe 414(s) comp as any definition that satisfies 414(s) can be used, in which case you could use full year comp. (comp from date of entry being allocation comp not testing comp) imputing disparity should help. plan could be tested on accrued to date basis, which is a little more complicated, but uses not just current year but would include some of the prior year contributions as well. You didn't indicate if any of the terminees had less than 500 hours. certainly when testing with QNEC you would have to include them in testing since they received a contribution. I have never seen the issue addressed before, but I guess when testing w/o QNECs you would be able to exclude those ees since you can exclude terminees with less than 500 hours. of course, I could be wrong about all the above, but that is my understanding of the rules.

well if you think you get confused, if it wasn't for the preamble I don't think I ever would have noticed the regs to say 'no eligibility conditions on the match' because it is not quite worded that way. And I got lucky that I didn't throw out my copy of the proposed regs becasue, as I indicated, the particular comment about no conditions was left off the final regs preamble. (I think this was an inadvertant error - or maybe the IRS didn't like the fact they used the word 'clarify'. who knows.

I agree, info provided makes the answer unclear. however, I have thought about the issue before. these stupid issues of rule of parity, break in service etc. in the case of a 401k in which an ee has quit, I think the 'general' rule is immediate reentry - you cant exclude him later than that. if you operated under the 1 year of service rule, once he completes a year of service you have to retroactively let him enter. but that is impossible with deferrals, you cant defer on $ earned a year ago. in the case of a profit sharing only plan, I think the answer is less clear. part of me says, yes, plan could require 1 year of service before reentry (even if it had immediate upon rehire). thus it would seem he could be treated as otherwise excludable. the problem is, after he complete 1 year, if he is treated as having a retroactive to date of rehire, then it seems like you would have to rerun the test from a year ago and include him. but I have no basis for those comments except my own illogical way of thinking.

415 limits are individual limits. you can not combine. you can also not get more than 100% of pay. it is the lesser of 42,000 or 100% of an individual's pay

well, I read the following Regs:1.401(m)-3(d)(4) Limitation on rate of match – … an employee is taken into account for purposes of this paragraph if the employee is an eligible employee under the cash or deferred arrangement… The preamble for the propsed regs summed it up better. I have included it below. For whatever reason these comments were not included in the preamble to the final regs, but what they referenced in the regs remained the same. The original interpretation was 'if someone is eligible for the match, therefore you could have an eligibility exclusion. But now it is quite clear 'if you are eligible to defer...' "These proposed regulations would CLARIFY that, for purposes of determining whether an HCE has a higher rate of matching contributions than any NHCE, any NHCE who is an eligible employee under the safe harbor CODA must be taken into account, even if the NHCE is not eligible for a matching contribution. This means that a plan provision which limits matching contributions to employees who are employed on the last day of the plan year will not be able to satisfy the ACP safe harbor, since a NHCE who is not eligible to receive a matching contribution on account of the last day requirement will nonetheless be taken into consideration in determining whether a plan satisfies section 401(m)(11)(B)(iii)" as RCline pointed out, it becomes a moot point since for testing you are allowed to exclude the 4% match from testing

Linda - it should just be the weighted average, not the sum of the two parts. in other words, not (ADP plan 1 plus ADP plan 2)/2 but rather (Sum of all ADP % plan 1 plus sum of all ADP % plan 2)/ (# of partic plan 1 + # of partic plan 2)

while if properly designed the HCE might not receive at a higher rate, I still do not see how you get to the point of satisfying ACP safe harbor if there is an eligibility condition on the discretionary match - thus it seems to me ACP testing is needed.

Mike: Besides the scratch 'n' sniff smell test I don't know of any particular test. you did not indicate in your example if there was a block of nhces being excluded from contributions. I think that is the IRS' biggest gripe. If you are not excluding any NHCEs you have more of a leg to stand on. Along the same lines, an example that was used (as a possible no-no) in one of the talks at the ASPPA conference was to include short time HCEs (the kids) and give them nothing. I believe the example had a 5 yr old, 9 yr old and a 16 year old. The argument being that the 5 and 9 year old probably didn't do any 'legitimate work'. Ha. I almost asked about the 16 year old. must be a real special kid if they got any work out him as well.

I would agree with you mr. 'soup' - the only possible issue being whether you are allowed to include all the match made in testing/ one part of the regs says no, but then another part says, "ah, there is a special rule..." conceivably if enough NHCEs did not defer then the plan would fail ACP testing as the ACP % would be very low. If you are only allowed to test using the discretionary match, then the HCE would have a % but the NHCE would be at 0 and the whole argument ceases to exist because you would never do that.