Tom Poje

BG5150 Let's suppose you had 2 separate plans (e.g. controlled group) and you were going to NOT test them together You still have one avg ben pct test combining all plans, just in case either plan fails ratio % and you need to rely on the avg ben test. so you look at Plan 1, run your testing on whatever method you choose. you do the same for Plan 2. Component Testing is really no different. in this case, you have 1 plan, but you split it into 2 as if you had 2 separate plans,, with the advantage you assign each participant to one or the other. ............. Cloudy - interestingly enough when I first posted I didn't include the reg cite, which for me is a no-no. so I went back and added it. I try very hard to remember to include such items, even if it means looking it up again and again....

another way of looking at it, if it helps. let's suppose you were going to split the plan into 2 (component plan testing) and test one part on an accrual basis and the remainder of the folks on an allocation basis. there is still only one average ben pct test including everyone [1.401(a)(4)-9(c)(4), despite the fact for rate group testing some are tested one way and other are tested another way.

the Accudraft document (from 10 or so years ago, doubt it has changed) had the following (emphasis mine) Reemployment of an Employee Before a Break In Service and Before Eligibility Requirements Are Satisfied. For any Plan Year in which the eligibility requirements under Section 2.1 are based on Years of Service, if an Employee Terminates Employment with the Employer prior to satisfying the eligibility requirements in Section 2.1 and the Employee is subsequently reemployed by the Employer before incurring a Break in Service, then (1) the Employee's pre-termination Year(s) of Service (and Hours of Service during any computation period) will be counted in determining the satisfaction of such eligibility requirements, and for all other purposes, as applicable, and (2) the Eligibility Computation Period, Vesting Computation Period, and/or benefit accrual computation period, as applicable, will remain unchanged a different document has (sorry I saved this years ago but didn't put down which provider - since it indicates section 3.5 which is break in service rules it was probably a corbel or variation of corbel document) (c) Rehired Eligible Employee who had not satisfied eligibility. If any Eligible Employee who had not satisfied the Plan's eligibility requirements is rehired after severance from employment, then such Eligible Employee shall become a Participant in the Plan in accordance with the eligibility requirements set forth in the Adoption Agreement and the Plan. However, in applying any shift in an eligibility computation period, the Eligible Employee is not treated as a new hire unless prior service is disregarded in accordance with Section 3.5(d) below. (3.5d is the break in service rules)

at least in my system of belief someday once did the same for me. have a blessed Easter to all.

the most recent LRM issued by the IRS had the following. while this was referring more so to an allocation by group method, I don't see why the same logic wouldn't apply. The employer will specify in written instructions to the plan administrator or trustee, by no later than the due date of the employer’s tax return for the year to which the employer’s contribution relates, the portion of such contribution to be allocated to each participant allocation group. The employer contributions allocated to each participant allocation group will be allocated among the employees in that group in the ratio that each employee’s compensation, as defined in section _____ of the plan, bears to the total compensation of all employees in the group. In the event that an eligible employee is included in more than one participant allocation group, the participant’s share of the employer contribution allocated to each such group will be based on the participant’s compensation for the part of the year the participant was in the group.

you are the one that confused me because you said you could exclude bonus effective the next pay date. but maybe I read that wrong. the regs have always said you could reduce or eliminate, you had to give 30 days notice and you took the plan out of safe harbor. but lets look at the issue going forward. I eliminate bonus effective 1/1/2019. if I amended today then 7 months for the smm would be 11/1 or thereabouts. the safe harbor notice is issued 12/1, it references the smm so no problem with the comp definition. suppose instead I don't amend until 7/1/18 effective 1/1/19. smm will be issued 2/1/18 on 12/1 I give my safe harbor notice. it references the SPD which says total comp is used because the new smm isn't available yet. well, that is plainly incorrect, and therein lies my problem. the participant can not make an informed decision at that poit in time.

the irs says you can reference the comp in the SPD so no argument there. however if you start excluding comp I think that since that reduces the contribution someone will receive, then the 30 days notice is required, and that would not be satisfied by waiting to issue an SMM. the regs are clear the 30 day rule is based on facts and circumstances. so you have normally 30 day before start of plan you issue notice. this can reference the SPD in regards to comp. so someone can make an informed decision because he has access to the current spd. he knows the rules. but now mid year you change the definition of comp. how can he make an informed decision if he isn't going to know for 7 months that comp definition was changed? that is the point the facts and circumstances kicks in, at least in my opinion. at the start of the year, the comp definition is already known in reference to the spd, but mow it is not.

Austin - I have a problem with that. 1.401(k)-3(d)(3)(I) last sentence says The determination of whether a notice satisfies the timing requirement of this paragraph is based on all relevant facts and circumstances. As opposed to other changes that might be made, I'd say if I changed the definition of comp (especially if it effects a matching contribution) that you fail the concept of allowing a person to make an informed decision whether to change deferrals if you get to wait 210 days or so to issue the SMM! but then Dr. Evil might be trying to influence me.

just to be clear, the IRS website has the following requirements for safe harbor notice (I only copied up to the highlighted item. https://www.irs.gov/retirement-plans/notice-requirement-for-a-safe-harbor-401k-or-401m-plan Required content The notice must be sufficiently accurate and comprehensive to apprise an employee of his or her rights and obligations under the plan. For both a traditional safe harbor notice and a QACA safe harbor notice, the notice must contain the following information: The safe harbor matching or nonelective contribution formula used in the plan, Any other contributions under the plan, or matching contributions to another plan on account of contributions under the plan, including the potential for discretionary matching contributions, and the conditions under which the contributions are made, The plan to which safe harbor contributions will be made if different from the 401(k) plan, The type and amount of compensation that may be deferred, How to make deferral elections, including any administrative requirements that apply to the elections, The periods available under the plan for making elections, The withdrawal and vesting provisions applicable to contributions under the plan, and Information that makes it easy to obtain additional information about the plan (including an additional copy of the summary plan description (SPD)), such as telephone numbers, e-mail addresses and mailing addresses of individuals or offices from whom employees can obtain such plan information. A safe harbor notice may cross reference the plan's SPD for information regarding any other contributions under the plan (including the potential for a discretionary matching contribution) and the conditions under which such contributions are made, the plan to which the safe harbor contributions are made, if different from the 401(k) plan, and the type and amount of compensation that may be deferred. ................. so I guess you don't have to include comp in the notice, so I save my self the trouble of issuing a new notice, but now I have to issue a new SPD anyway. not sure that saves me anything in the long run!

I'd express a concern on the item that says (iii)Reduction or suspension of safe harbor contributions or changes from safe harbor plan status to non-safe harbor plan status (permitted only as described in §§ 1.401(k)-3(g) and 1.401(m)-3(h)). seems to me if I excluded bonuses (or something similar) I have reduced the safe contribution. e.g. I told the folks they would receive 3% of total comp for the whole year and now I have reduced that amount they will receive

I assume the empower imports used with Relius are similar to other software. there are a numbers of files I found to be real useful with FT William govt forms. all can be copied and pasted into excel and worked with. There is an AHIP file - this contains the schedule of assets data. the following files all have import files into FT William There is a PSD file. this is schedule D data. There is a PSA file. this is the schedule A info. this is in a fixed file format, so have to work a little bit with is in excel to get the data into a format for importing. PC2 is page 2 of sched C PC3 is page 3 of sched C Happen to have a MEP of 35 plan or so, and having the ability to copy these files into excel, summing up the totals and then with a small amount of work pasting that data into FT William import file sure saves a lot of time. (Along with being able to pull the SSA info from Relius and importing that (this year almost 200 folks for the SSA) really helps.

the ERISA Outline has the following Chapter 2 Section VIII 2 B 2 2.Who is an otherwise excludable employee? IRC §410(b)(4)(B) doesn't actually use this term, but the term is illustrative of the category of employees being disaggregated. The statutory language says: "If employees not meeting the minimum age or service requirements of subsection (a)(1) (without regard to subparagraph (B) thereof) are covered under a plan of the employer which meets the requirements of paragraph (1) separately with respect to such employees, such employees may be excluded from consideration in determining whether any plan of the employer meets the requirements of paragraph (1)." Let's parse this language in §410(b)(4)(B). The employees being disaggregated here are those who do not meet the requirements of IRC §410(a)(1) (i.e., minimum age of 21 and minimum service of one year of service). The reference to "subparagraph (B)" means that the 2-year eligibility rule cannot be used as the basis for this disaggregation rule. See 3. below.

nope, unless that 5000 is the highest amount deferred by any HCE in other words, you run your test and it fails you calculate your refund and if it belongs to an HCE that can be treated as a catch uo. lets say you provide a 2% QNEC before any refund. you now run your test and it fails. if any of those refunds belong to catch up eligible HCEs then you treat those amount as catch up. but based on your comments, it doesn't sound like that is what is taking place. the way you worded thing almost sounds like you have HCEs with more than 5000, and the refund (or catc up) is based on top down by who deferred the most

I guess if the 15th falls on a weekend you might get an extra day, I don't remember

, as Shakespeare said, in the regs it is 2(b)(5) or not 2(b)(5), that is the answer it is only a 10% penalty, but it sounds like you are late to me. in fact, I think most of the investment houses I deal with 'insist' refunds be done a week before hand because 'supposedly' they need time to process things. the regs don't say 'as long as you notify the folks by 3/15 you are ok' it says corrections must be made by 2 1/2 months, and I've never seen a write up that says Mar 16, arguing there are 31 days in March and you should be able to 'round' to the 16th. 1.401(k)-2(b)(5) of course a QNEC could also be made.

example 4 of EPCRS is The plan provides for matching contributions for each payroll period that are equal to 100% of an employee's elective deferrals that do not exceed 2% of the eligible employee’s plan compensation during the payroll period... (2) Corrective contribution for missed matching contribution: Under the terms of the plan, if Employee X had made an elective deferral of $720 or 3% of compensation for the period of exclusion ($24,000), the employee would have been entitled to a matching contribution equal to 2% of $24,000 or $480. The missed matching contribution is not reduced because no plan limit is exceeded when this amount is added to the matching contribution already contributed for the 2006 plan year. Accordingly, the required corrective employer contribution is $480. The required corrective employer contribution is adjusted for Earnings.

here is document language from a FT William document. of course, there are other documents, but I would think they would be similar. as noted above, you might be due a contribution for 2017 which could be deposited late in 2018 (for instance the regs indicate a safe harbor 401k could be as late as 12 months after the plan year) which would be option 'b' below, but for they could have done option 'd' - in this plan example NRD. most plans I know choose option 'a', pay out and then an additional final fayment if such additional allocation occurs 3. Time of Payment (Other than Death) Distributions after Termination of Employment for reasons other than death shall commence (Section 7.02): a. [ ] Immediate. As soon as administratively feasible with a final payment made consisting of any allocations occurring after such Termination of Employment b. [ ] End of Plan Year. As soon as administratively feasible after all contributions have been allocated relating to the Plan Year in which the Participant's Account balance becomes distributable c. [ ] Normal Retirement Date. d. [ X ] Other: Age 65

in the FT William document you have the following choices: 22. Allocation of Profit Sharing Contributions a. Profit Sharing Contributions are allocated to Participant Accounts at the following time(s): i. [ ] End of Plan Year ii. [ ] Semi-annually iii. [ ] Quarterly iv. [ ] Each calendar month v. [ ] Each pay period so if you checked 'v' how would you handle it - only once a year? no, I think you would follow the terms of the document. now if your document was checked 'i' and you allocate every payroll, then you aren't following the terms of the document either. so if you missed someone, you fix it

I assume most documents have the following clause Section 7.08 MISSING PAYEE If all or any portion of the distribution payable to a Participant or Beneficiary remains unpaid because the Plan Administrator has been unable to ascertain the whereabouts of the Participant or Beneficiary after making reasonable efforts to contact the Participant or Beneficiary (which may include, but not be limited to, sending a registered letter, return receipt requested, to the last known address of such Participant or Beneficiary; using the Social Security Administration letter forwarding service; and/or a commercial locating service) the Plan Administrator may use a reasonable method to remove the assets from the Plan that is consistent with ERISA and the Code. Such methods may include, but not be limited to, (a) creating an individual retirement plan designated by the Plan Administrator; or (b) if, for a period of more than five years after such distribution becomes payable or six months after all attempts to locate the Participant or Beneficiary, the Plan Administrator is still unable to ascertain the whereabouts of the Participant or Beneficiary, the amount so distributable may be treated as a forfeiture under Article 6 hereof. so, I guess after he quits and 'can't be located' go ahead and forfeit the $.

could be sung to the tune of Amazing Grace, but then, so can Casey at the Bat

I assumed she was working in the pension industry and had to get the ADP tests completed - in other words, she has hours like the rest of us this time of year.

Interesting! so I need some $. Please oh please fail the ADP test so I can get a refund! if the refund was $200 could you reduce the loan balance by $200 and issue a 1099 indicating $200 failed ADP test? In other words, if the loan was 5000, then the person took a 4800 loan and had 200 in refund. in total the same, just that they get the 1099 for the distribution. that would seem like a wild work around as well, but then I'm not even sure if you could do that, but if in the unlikely case loans were only available from deferral...

and I didn't realize whose birthday as well.

no idea Belgareth. that is all the IRS write-up indicates is 100% vesting, but we know the IRS 'frowns' upon a plan just sitting, but I doubt they can force you to shut it down completely (unless they get real tax greedy and find some reason!) as jpod indicates it sounds ..well maybe 'smells' is a batter word as the company pays to maintain a plan for the sole purpose for the owner to get a loan.

the only technical issue I can think of is (OK, that the IRS thinks of), but emphasis mine. https://www.irs.gov/retirement-plans/no-contributions-to-your-profit-sharing-401-k-plan-for-a-while-complete-discontinuance-of-contributions-and-what-you-need-to-know While plan sponsors aren’t required to make contributions to their profit sharing/401(k) plan every year, contributions must be “recurring and substantial” for a plan to be considered ongoing. Employee Plans Exam guidelines state that if the employer hasn’t made contributions in three of the past five consecutive years, the plan may have incurred a complete discontinuance of contributions. When a complete discontinuance of contributions occurs, the plan sponsor must treat the plan as a terminated plan and fully vest all participant accounts for the plan to remain qualified. Determining if there’s been a complete discontinuance of contributions is based on facts and circumstances, for example, the plan sponsor’s history of profitability, and the probability of future contributions from the sponsor. .............. so when filing the 5500 I'm not sure what gets puts down for "Was there an amendment to terminate the plan" or how long you can keep a 'terminated' plan "active"