Tom Poje

lump sum on the QDRO is $$$$$$$$$$$$$$$$$$$$$$$$$$$. well, certainly more than I will see in my lifetime. since the owner is in the top 25 HCEs, is the lump sum under the QDRO restricted because the owner couldn't get a lump sum?

Since the notice must be provided 30 days before plan year begins, not 30 days before any changes to the formula I would say you couldn't do that. as Janet pointed out, if the plan allows for a discretionary match, I suppose you could make a match such as .2% match up to 5% deferred. This would give people 6% match on 5% deferred which is close to what you want.

assuming it is a DC plan, you have to use an interest rate between 7.5 and 8.5, so that implies you have a document not in conformity with the regs. (1.401(a)(4)-12 definitions (Standard interest rate) why a document would lock into an 'assumption' is beyong me. if I was to amend I wouldn't have an assumptions be hard coded. I would hold you have to follow the terms of the document - if you change the interest rate assumption then either the HCE can get a larger contribution or the nhces could end up with a smaller contribution and still pass testing. that would seem to be changing the allocation, which would be impermissible. in other words, if I failed testing at 7% but would pass at 8.5% I would think you have to increase the NHCEs contribution first. I think IMHO means In My Hartnett Opinion

there is no requirement to ever file a sched P - that is an optional form. see instructions "Schedule P MAY be completed..." that being said, why you wouldn't want to file one is beyond me.

I vote two thumbs down on using SSRA. 1. regs require you to use plans normal retirement age for testing. I haven't seen where you are permitted to use SSRA as NRA. 2. there exists the possibility of submitting a document that says testing for nondiscrim will be SSRA. make sure to get the determination letter. but then the issue arises as to whether you have to check BRF for each SSRA. If you have to do that, chances are you will fail. for the most part, using SSRA will simply take an E Bar at age 65 and multiply by 1.085 for SSRA 66 and then againg by 1.085 for SSRA 67. given the fact you must provide a minimum gateway anyway I wouldn't push things to the point of using SSRA.

It is unclear to me exactly what you are saying when you say 'replace formula from prior year...' are you saying that the ADP test uses the prior year testing method? I hadn't thought about it much, but I thought prior year method only referred to the ADP test and not to coverage. in fact there is nothing in the coverage rules I know of that says look at last year's nhce group and compare to this years HCE group. A similar situation could arise if you are treating all HCEs as meeting the statutory exclusion for purposes of the ADP test - your coverage numbers could be different.

oh, so now you want me to add in a powerpoint presentation as well. good grief.

secret - I am a spy for the DOL. boy, wait til you guys start getting the letters I am sending out.... actually, a few years ago I had printed out an article about this. even as disorganized as I am, I do have a folder labeled 'fidelity bond'. thank goodness. I tried a search on the DOL site for this today, and met with the same failure you did. however, I tried google with the company name + fidelity bond and found the website article - it was an updated version of what I had. ..........Another secret................... it appears this years song to be included in my ASPPA talk will be by Loius Armstrong.................

dol might sue http://www.dol.gov/ebsa/newsroom/pr032901.html

if plan uses otherwise excludable option, then the free ride on top heavy does not exist. My understanding is that all ees must receive top heavy - not just the otherwise excludable. match can be used to satisfy top heavy. you are correct, you would have to perform an ADP test for the otherwise excludables. you are correct, rarely would you expect to find an HCE in the group. personally I don't think the option for treating all HCEs as includable would be available as you are treating those people as otherwise excludable for purposes of the match. I think one has to be consistent.

I think I understand how you feel. every once and awhile I do some training on Relius/cross testing/ etc - (actually I think the boss gets sick of me, so she rents me out) One time I was going through data entry routine and was surprised that the office I was at never heard of using PAD in the routine. good luck, it sounds like you are at least interested enough to make a big difference where you work.

personally I would not use the three year method on small plans. it is to be used only on plan with 'insignificant changes'. with a small population, changing the status of even 1 person from nhce to hce or vice versa could have a dramatic effect. why get lazy when your dealing with a limited number of people. the changes to the 5500 does not eliminate the need for coverage testing. everything stays the same - you simply are no longer providing more detailed info to the govt. but you still have to perform the test, and have it in your records. just in case of audit. good grief. do you do the same with the ADP test? since you send nothing in, dont bother with it?

I think the preamble sums it up in plain english: D. Requriement that elective contributions be immediately forfeitable last sentence: Thus, for example, elective contributions under a qualified CODA ARE taken into account for purposes of determining whether a participant is a nonvested participant for purposes of section 411(a)(6)(D)(iii) [that is, the break in svc rules] emphasis is mine.

should be possible. I have a report somewhere that will pull prior year deferrals (for hardship purposes) also have a certificate that will pull deferrals from inception, so I guess you could subtract from the end balance and assume those are the gains (unless you had some distributions, etc. If plan was a takeover and you didnt enter prior years contribution then your report will only give you a total from date plan was run on the system. if you have lots of investment choices and people have closed out some of their choices, you would have to make sure to include accounts with 0 activity. ACCTBAL.prioryrscontramt I have never tried using the acctbal.prioryrsgainsamt, and there is also a field for forfs and distrib, so good luck!

yes, there are lots of bells and whistles. if you manage to learn a few key ones your frustration level will improve. remember, on takeovers the system has no idea who was an hce in prior year unless you tell it. so that is a must code item for your ADP tests. probably the best 'help' report would be found under takeover plans - census. in particular, ees who terminated in prior year. the census item ' termination date' is NOT necessarily someones term date. a better name would be Term Date if ee was a perticipant. you should never have to enter this field. keepa your big grubby hands offa that item, unless it is an ee who quit in a prior year.

probably in most cases it makes no difference, but I will attempt to explain. in some cases you have to answer top heavy first (e.g. a document that says the integrated formula is: step 1 3% to all step 2: if there is enough bucks, allocate 3% integrated etc.... top heavy first basically says, before doing anything at all, give all eligible ees the 3% top heavy. (or I suppose 5% if it is a combo db/dc plan) top heavy skim says run the allocation. then check and see if all ees have received the minimum. if not, 'skim' it from others. then redo the allocation ignoring the people you gave the top heavy to. so in the case of an integrated plan, an ee with comp above the integration level might have received 2.8% comp plus 2.8% above the TWB. the system will skim off some of his contribution to bring up another ee to 3%. thus the ee might end up with 2.7% plus 2.7% above the wage base. if you had run top heavy first the ee would be at 3% of comp plus 2.1% above the TWB (or whatever) . thus you will get different contribution results. now that match can be used to satisfy top heavy I have no idea what the system would do if you run top heavy first. if plan is age weighted I would never run top heavy first. I am not even sure if that would be a legitimate option.

my guess is this is the first time plan has been run on the system, so in plan specs you need to tell the system that the plan is indeed top heavy. (set prior year history to 60%. also, most of the time you probably want top heavy skim. if plan is 401(k) you might want to set minimums are guaranteed to YES (if a key ee is deferring)

fortunately, at least from grief at this end, I only need to 'run the val on the system' - I dont need to contact the company involved directly. the document is specific in that the contribution can not exceed the max deductible under 404(a). any contribution which are not deductible shall be returned to the employer. the typical language. but this of course is for a loan repayment which has to be made. it is just not all deductible. so I guess the question is what is done. it sounds like the allocation or release of shares is whatever is deductible. but then what? the loan is reduced by the amount that was paid, shares are released but not allocated to anyone?

I am not worried about the interest, I know that is not a problem. the issue is that 300,000 is paid on the principal, but the 25% of comp deductibility is only 150,000. so does that simply create a large nondeductible contribution (along with penalties) or is it a situation that because the loan requires the payment (mandatory, so employer has to make the contribution) there is a way out in a leveraged ESOP.

now what? using nice rounded numbers, required loan payments = $750,000 300,000 is principal, 450,000 is interest. 25% of eligible comp = 150,000 plan prohibits making a contribution greater than the deductibility. so, do the loan payments release shares that are simply held in 'limbo'? and then this is carriedforward, along with penalty for nondeductibility? yes, this looks like some 'poor planning' on someone's part because the future will have the same problem.

Blinky provided a very good example - taking it one step further, in his example the ee ended up an accrual of 219.87 or 219.87 / 20,000 = 1.099 EBAR the good rule of thumb for the 'meaningful' benefit is that it needs to be at least .5. (You have to have that to pass minimum Participation as well) .............. if all you have is a profit sharing plan, you can amend the plan to be a safe harbor anytime during the year as long as people can defer for at least 3 months. I don't know if I would say you are 'reverting back' to a calendar year in 2006, but rather the first year of the 401k feature was simply less than a year. watch out, if the 3% safe harbor only covers 3 months of comp then you would fail the gateway minimum. ........... there is no problem naming an individual by name for purposes of class. the govt has said you can do that. some argue that creates a CODA, but it appears you are still able to do this. You could have accomplished the same thing by setting up individual plans for people, so I think the there is a valid argument for saying you haven't created an artificial CODA. If, however that ee receives zippo, and the plan fails the ratio % test for coverage you can't pass using the nondiscrim classification test

"7.5% gateway is met, so plans are cross-tested for non-discrimination." maybe, maybe not. or at least that would be my understanding. you have to convert the DB rate to an equivalent dc allocation rate. you do get the advantage of taking the average of the NHCEs (1.401(a)(4)-9((b)(2)(v)(D)(3)

your comments correspond to how I thought things should work, but the boss was disagreeing on this one. Was actually working on a DC/DB proposal, and yes the DB would be cash balance. much less the fun of testing the animals for nondiscrimination, I also wanted to be covered for the odd cases of top-heavy that might arise. Thanks!

personally, I think the answer is as clear as mud. Appendix A (.06) of the EPCRS says you can go ahead and make the minimum distributions under either VCP or SCP. The question would be the issue of the possible tax penalty. The ERISA Outline Book says yes you can self correct the minimum distribution and go ahead and make it, but you still have the tax issue. I'm not 100% sure because if SCP is to set the plan in a position as if the error hadn't occurred then why would the penalty still apply. since most of the articles I have read says the IRS usually ends up waiving the penalty then why go through the process. Of course, that doesn't make it right to 'skip a step' either. In other words, I don't know for sure, except to say that it is certainly possible to correct at least one end of it under SCP (not just VCP)

just to make sure, though, the IRS comment came informally, it does not necessarily reflect actual guidelines.,But one has to work from something, and I would agree with them, if your document says its safe harbor, then failing to issue a notice is a failure to follow the terms of the document -it shouldn't kick the plan out of safe harbor status. I know at one time the ERISA Outline Book said you still had to make the safe harbor and do testing as well. I take the IRS comments to mean, no, you make the safe harbor (despite the fact notice was not timely given) and there is no testing.