Tom Poje

as noted, spreadsheet could be in error. I threw the calculation 'for others' together in a hurry. it is multiplying by a 'percent' and then dividing by 100. obviously, that should be corrected! interestingly enough, I must have discovered the problem, made a the correction to cell k13, but not copied for k14 - k22. try making the correction, then look at the suggested base % to run and try that. looks like it works. my apolgies for not spotting the error.

pasted together is the following "history" of the world from certifiably genuine student bloopers collected by teachers throughout the United States, from eighth grade through college level. Read carefully, and you will learn a lot. The inhabitants of ancient Egypt were called mummies. They lived in the Sarah Dessert and traveled by Camelot. The climate of the Sarah is such that the inhabitants have to live elsewhere, so certain areas of the dessert are cultivated by irrigation. The Egyptians built the Pyramids in the shape of a huge triangular cube. The Pramids are a range of mountains between France and Spain. The Bible is full of interesting caricatures. In the first book of the Bible, Guinesses, Adam and Eve were created from an apple tree. One of their children, Cain, once asked, "Am I my brother's son?". God asked Abraham to sacrifice Isaac on Mount Montezuma. Jacob, son of Isaac, stole his brother's birth mark. Jacob was a patriarch who brought up his twelve sons to be patriarchs, but they did not take to it. One of Jacob's sons, Joseph, gave refuse to the Israelites. Pharaoh forced the Hebrew slaves to make bread without straw. Moses led them to the Red Sea, where they made unleavened bread, which is bread made without any ingredients. Afterwards, Moses went up on Mount Cyanide to get the ten commandments. David was a Hebrew king skilled at playing the liar. He fought with the Philatelists, a race of people who had lived in Biblical times. Solomon, one of David's sons, had 500 wives and 500 porcupines. Without the Greeks we wouldn't have history. The Greeks invented three kinds of columns - Corinthian, Doric, and Ironic. They also had myths. A myth is a female moth. One myth says that the mother of Achilles dipped him in the river Stynx until he became intollerable. Achilles appers in "The Iliad", by Homer. Homer also wrote "The Oddity", in which Penelope was the last hardship that Ulysses endured on his journey. Actually, Homer was not written by Homer but by another man of that name. Socrates was a famous Greek teacher who sent around giving people advice. They killed him. Socrates died from an overdose of wedlock. In the Olympic Games, Greeks ran races, jumped, hurled the biscuits, and threw the java. The reward to the victor was a coral wreath. The government of Athens was democratic because the people took the law into their hands. There were no wars in Greece, as the mountains were so high that they couldn't climb over to see what their neighbors were doing. When they fought with the Persians, the Greeks were outnumbered because the Persians had more men. There were no wars in Greece, as the mountains were so high that they couldn't climb over to see what their neighbors were doing. When they fought the Parisians, the Greeks were outnumbered because the Persians had more men. Eventually, the Ramons conquered the Geeks. History calls people Romans because they never stayed in one place for very long. At Roman banquets, the guests wore garlics in their hair. Julius Caesar extinguished himself on the battlefields of Gaul. The Ides of March murdered him because they thought he was going to be made king. Nero was a cruel tyranny who would torture his poor subjects by playing the fiddle to them. Then came the Middle Ages. King Alfred conquered the Dames, King Arthur lived in the Age of Shivery, King Harold mustarded his troops before the Battle of Hastings, Joan of Arc was connonized by Bernard Shaw, and victims of the Black Death grew boobs on their necks. Finally, Magna Carta provided that no free man should be hanged twice for the same offense. In midevil times most of the people were alliterate. The greatest writer of the time was Chaucer, who wrote many poems and verses and also wrote literature. Another tale tells of William Tell, who shot an arrow through an apple while standing on his son's head. The Renaissance was an age in which more individuals felt the value of their human being. Martin Luther was nailed to the church door at Wittenberg for selling papal indulgences. He died a horrible death, being excommunicated by a bull. It was the painter Donatello's interest in the female nude that made him the father of the Renaissance. It was an age of great inventions and discoveries. Gutenberg invented the Bible. Sir Walter Raleigh is a historical figure because he invented cigarettes. Another important invention was the circulation of blood. Sir Francis Drake circumcised the world with a 100-foot clipper. The government of England was a limited mockery. Henry VIII found walking difficult because he had an abbess on his knee. Queen Elizabeth was the "Virgin Queen". As a queen she was a success. When Elizabeth exposed herself before her troops, they all shouted, "hurrah". Then her navy went out and defeated the Spanish Armadillo. The greatest writer of the Renaissance was William Shakespear. Shakespear never made much money and is famous only because of his plays. He lived at Windsor with his merry wives, writing tragedies, comedies, and errors. In one of Shakespear's famous plays, Hamlet rations out his situation by relieving himself in a long soliloquy. In another, Lady Macbeth tries to convince Macbeth to kill the king by attacking his manhood. Romeo and Juliet are an example of a heroic couplet. Writing at the same time as Shakespear was Miguel Cervantes. He wrote "Donkey Hote". The next great author was John Milton. Milton wrote "Paradise Lost". Then his wife died and he wrote "Paradise Regained". During the Renaissance America began. Christopher Columbus was a great navigator who discovered America while cursing about the Atlantic. His ships were the Nina, the Pinta, and the Sante Fe. Later, the Pilgrims crossed the ocean, and this was known as Pilgrims Progress. When they landed at Plymouth Rock, they were greeted by the Indians, who came down the hill rolling their war hoops before them. The Indian squabs carried porpoises on their back. Many Indian heros were killed, along with their cabooses, which proved very fatal to them. The winter of 1620 was a hard one for the settlers. Many people died and many babies were born. Captain John Smith was responsible for all this. One of the causes of the Revolutionary Wars was the English put tacks in their tea. Also, the colonists would send their parcels through the post without stamps. During the War, the Red Coats and Paul Revere was throwing balls over stone walls. The dogs were barking and the peacocks crowing. Finally, the colonists won the War and no longer had to pay taxis. Delagates from the original thirteen states formed the Contented Congress. Thomas Jefferson, a Virgin, and Benjamin Franklin, were two singers of the Declaration of Independence. Franklin had gone to Boston carrying all his clothes in his pocket and a loaf of bread under each arm. He invented electricity by rubbing cats backwards and declared, "A horse divided against itself cannot stand." Franklin died in 1790 and is still dead. George Washington married Martha Curtis and in due time became the Father of our Country. Them the Constitution of the United States was adopted to secure domestic hostility. Under the Constitution the people enjoyed the right to keep bare arms. Abraham Lincoln became America's greatest Precedent. Lincoln's mother died in infancy, and he was born in a log cabin which he built with his own hands. When Lincoln was President, he wore only a tall silk hat. He said, "In onion there is strength." Abraham Lincoln wrote the Gettysburg Address while traveling from Washington to Gettysburg on the back of an envelope. He also freed the slaves by signing the Emasculation Proclamation, and the Fourteenth Amendment gave the ex-Negroes citizenship. But the Clue Clux Clan would torcher and lynch the ex-Negroes and other innocent victims. It claimed it represented law and odor. On the night of April 14, 1865, Lincoln went to the theater and got shot in his seat by one of the actors in a moving picture show. The believed assinator was John Wilkes Booth, a supposingly insane actor. This ruined Booth's career. Meanwhile in Europe, the enlightenment was a reasonable time. Voltare invented electricity and also wrote a book calle "Candy". Gravity was invented by Isaac Walton. It is chiefly noticeable in the Autumn, when the apples are falling off the trees. Bach was the most famous composer in the world, and so was Handel. Handel was half German, half Italian, and half English. He was very large. Bach died from 1750 to the present. Beethoven wrote music even though he was deaf. He was so deaf he wrote loud music. He took walks in the forest even when everyone was calling for him. Beethoven expired in 1827 and later died for this. France was in a serious state. The French Revolution was accomplished before it happened. The Marseillaise was the theme song of the French Revolution, and it catapulted into Napolean. During the Napoleonic Wars, the crowned heads of Europe were trembling in their shoes. Then the Spanish gorillas came down from the hills and nipped at Napolean's flanks. Napolean became ill with bladder problems and was very tense and unrestrained. He wanted an heir to inherit his power, but since Josephine was a baroness, she couldn't bear children. The sun never set on the British Empire because the British Empire is in the East and sun sets in the West. Queen Victoria was the longest queen. She sat on a thorn for sixty-three years. Her reclining years and finally the end of her life were exemplatory of a great personality. Her death was the final event which ended her reign. The nineteenth century was a time of many great inventions and thoughts. The invention of the steamboat caused a network of rivers to spring up. Cyrus McCormick invented the McCormick raper, which did the work of a hundred men. Samuel Morse invented a code of telepathy. Louis Pasteur discovered a cure for rabbis. Charles Darwin was a naturalist who wrote the "Organ of the Species". Madman Curie discovered radium. And Karl Marx became one of the Marx brothers. The First World War, caused by the assignation of the Arch-Duck by a surf, ushered in a new error in the anals of human history.

The last few pages of Publication 560 (p21 - 23 of 2003 Publication) is a deduction worksheet for Self-Employed. While it doesn't 'provide' a chart for an 'integrated' rate (the table is a flat %) I believe you simply would make an adjustment on an individual basis to take integration into consideration. The instructions simply say 'plan contribution rate' and in the excel sheet the rate was 11.424% plus 5.7%>twb. I would hold that is the rate (That rate would vary depending on how much comp one has once above the TWB) in other words, on the excel sheet the contribution was 29,289 and comp limited to 200000 so the plan contribution rate (for this individual) was simply 29289 / 200000 = 14.6445%

Nondiscrim testing: in a 401k plan it is the ADP test. do you indicate anywhere on the 5500 that you perform such a test? Nope. same holds true for any nondiscrim testing. its all the same thing. but you do it because if plan fails and you dont make corrections soon enough you are in deep.... now, if you are applying for a determination letter, you could attach a schedule Q. that would be about as close to a filing requirement as I can imagine.

ok, modified slightly to take into consideration the 415 $ limit, and then added a field to enter desired plan contribution amount. after you make an initial % guess to run, it will suggest an amount. of course it wont work in every case, but looked like it was working if owners contribution is less than the $ limit.

you get what you pay for. no instructions provided for this spreadsheet, if you are targetting a certain $ amount for the contribution modify the % in dark green and see what appears in total contribution. absolutely no guarantees on this. I don't recall if there were problems if the comp ended above the $ limit, but I thought I had ironed out most of the problems. But then, remember, at times I'm an idiot doing stuff like this. edited: now I remember, it won't cap at the $40,000 limit

yes, no maybe so the propsed regs have the following (this is from the preamble) These proposed regulations would CLARIFY (emphasis mine) 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. I know, I know, they are only proposed. on the other hand, this does not read as a change to the law, but simply a clarification of the way you are suppossed to be doing things ......... now, you are allowed to exclude 'otherwise excludables', but in your case you've got some people in the 6 - 12 month range who will get. Q-10 of 2000-3 simply says says a plan need not be satisfied with respect to both plans in order for one of the plans to take advantage of the ADP safe harbor. I think you are ok in regards to this, but you would be required to test otherwise excludables separately. this would eliminate the free ride on top heavy.

no, that is an option permitted under the rules as we know them. However, you do not get the free ride on top heavy (if there are no other contributions) in other words, you would have to provide minimums if the plan was top heavy.

I would take the following stance on the proposed regs, especially when you read the preamble sometimes it says something like "this clarifies...." I'd hold that is the IRS way of saying you really should be doing it this way. This would be different than the proposed regs which will do away with bottom up QNECs. That is not a clarification but rather a change. as for the idea that it doesn't make sense to do coverage one way and nondiscrim testing another, actually that is what is taking place. and not just using prior year testing. consider the rule which says all HCEs can be treated as meeting the 1 yr age 21 requirement even if they haven't. there is no similar rule in coverage.

If there were no NHCEs eligible in the prior year, then I would hold you are left with a 'plan' (at least for testing purposes) which consists only of HCEs, which is given a free ride under the regs. Lets say I had 2 NHCE who were ineligible in the prior year, and are now eligible. If I count them because they are eligible now but had 0 last year then test would fail. But lets change things a bit. Suppose one of them was eligilbe last year, deferred 5% and quit last year. In the current year I am left with one NHCE. now when I use prior year testing would I use his '0' from last year, simply because he is eligible this year? That wouldn't seem to make sense to use an average of 2.5%. or for that matter, lets say both of them quit. Would you say there is no test because you only have HCEs or would you still compare the results to the prior years average.

I would think your document provides for 1. 3% SHNEC 2. discretionary profit sharing, and for the year in question this was equal to 5%

I believe since there are no eligible NHCEs you automatically pass. If you followed the logic of saying "since no eligible NHCE in 2003 is my NHCE ADP % 0%." then a plan with only HCEs could never pass whether you use current or prior year testing.

Matt: sorry for not responding on this one earlier. guess I forgot. consider the follwoing simple example. A 3 % top heavy was provided an NHCE, the only NHCE, and the HCE received no non elective contribution. therefore ratio % test passes. The reason the NHCE received top heavy was because the HCE deferred 10%, the only deferrals in the plan. If you were to run the average benefits % test, it would fail, therefore the average benefits test fails. while that example is a bit extreme, it does provide the basis why a plan could pass ratio % (a test based on non elective contributions only) and still fail average benefits percentage test ( which includes all contributions)

it does not sound like he really terminated, rather switched 'jobs'. It sounds like he would simply be a 'former key' and therefore excluded entirely.

well, you can certainly code the plan specs so safe harbor only goes to those having met 1 year wait. testing wise, you can tell non discrim system to include or exclude otherwise excludables. (In fact you could do the same with the ADP/ACP test, but since it is safe harbor that shouldn't matter. But I dont think there is an easy way of performing the ADP including otherwise excludables and the ACP excluding them) If you are printing the coverage reports, you would have to print the reports twice - once with and the other without and cross out the tests you dont want. I dont know of any other way. Again, since it is safe harbor , it would n't really matter since all benefit

Andy: I would generally agree, with a cross tested plan the SHNEC is better than the SHMAC, generally because you are forced into giving 3 % anyway. one note of caution. you can simply 'give' the gateway unless the document allows. e.g. If I recall correctly, the Corbel document has a snap on amendment to accomplish this. not sure if my notes will contain everything. part 1 is a walk through of safe harbor plans (mainly because of the questions that keep coming up on this website) plus what the proposed regs includes for safe harbor plans, and then I get into a discussion on the cross tested end, though I did lean more towards some 'tips'. I mean what can I say, yes, you include the SHNEC in rate group testing and it counts towards the gateway. No, you don't inlcude the SHMAC excet in the avg ben % test. Survived hurricanes 1 through 4 down here. joy of joys!

union ees are always tested separately from non union employees, so it wouldn't have any effect on your testing non union employees if you were to bring the union people into the plan. they have to pass their own ADP test. There is no ACP test as that is deemed to automatically pass (1.401(m)-1(a)(3)) Not sure what else might effect things. I believe if the plan is top heavy you would have to provide top heavy minimums.

I don't think setting up2 plans accomplishes anything, you cant get around the top heavy issue. this raises questions as to how the document reads. with a 2 year wait, ees are 100% vested in the profit sharing $. however, the top heavy $ could be subject to vesting. not sure if that would even be addressed. in addition, If a profit sharing contribution is made (e.g. 5%) you end up with some people at 5% and those with less than 2 years at 3% (top heavy minimum) for sched T all benefit, but now you need to test treating top heavy only ees as includable and not benefiting. if that fails, you have to test for non discrimination.

I'll go along with Belgarath - Oct 15 is as good a date for a deadline as you can get. very appropriate. I'll go for 10:15 as well.

the exception being (of course) the SSA since that has social security numbers

I read it to say there is no 'first plan year' if you aggregate with another plan. simply SOL, you have a bunch of people at 0. (I would be the first to admit my guess would have been you would have used 3% and then use a weighted average, but then looking it up.....) is there a reason the plans have to be aggregated?

I see the number of posts at the time I write this is 99,265. Any guesses what day the magic 100,000 will be reached? I am sure that is some actuary out there who knows, e.g. "what day do you want it to be" and obviously such individually would probably post enough on that day just to make it happen. therefore, maybe this useless and nonsensical contest shouldn't be open to them.

if plan is top heavy, then you would have to provide the minimums to those who are eligible to defer and employed on the last day, even though they are not eligible for the profit sharing... was that what you were intending to ask?

well, I don't know how many 'points' any of you get for your 'conclusions. maybe some partial credit. lets see what Notice 98-1 says. In particualr the second paragraph of section V!!!!!!!!! Looks like it says adding a match feature gives you the right to use 3% BUT only if you don't aggregate with another plan that had a match faeture in the prior year. V. FIRST PLAN YEAR RULE UNDER PRIOR YEAR TESTING METHOD Section 401(k)(3)(E) provides that, for the first plan year of any plan (other than a successor plan) that uses the prior year testing method, the ADP for NHCEs for the prior year is 3%, or, if the employer elects, is the ADP for NHCEs for that first plan year. For this purpose, the "first plan year" of any plan is the first year in which the plan, within the meaning of section 414(l), is or includes a section 401(k) plan (i.e., the first year a plan provides for elective contributions described in section 1.401(k)- 1(g)(3)). However, a plan does not have a first plan year if for such plan year the plan is aggregated under section 1.401(k)-1(g)(11) with any other plan that was or that included a section 401(k) plan in the prior year. Section 401(m)(3) provides that rules similar to the rules of section 401(k)(3)(E) shall apply for purposes of the ACP test. For purposes of the ACP test, the "first plan year" of any plan is the first year in which a plan, within the meaning of section 414(l), is or includes a section 401(m) plan (i.e., the first year a plan provides for employee contributions described in section 1.401(m)- 1(f)(6) or matching contributions described in section 1.401(m)- 1(f)(12), or both). However, a plan does not have a first plan year if for such plan year the plan is aggregated for purposes of section 1.401(m)-1(g)(14) with any other plan that was or that included a section 401(m) plan in the prior year. For purposes of this notice, a plan is a "successor plan" if 50% or more of the eligible employees for the first plan year were eligible employees under another section 401(k) plan (or section 401(m) plan, as applicable) maintained by the employer in the prior year. For example, in 1998, Employer H sponsors Plan T, a section 401(k) plan. In 1999, Employer H establishes Plan U, also a section 401(k) plan, which had 200 eligible employees, including 100 employees who were eligible employees under Plan T in 1998. Plan U is a successor plan. If a plan (other than a successor plan) uses the prior year testing method and for its first plan year the plan determines the ADP or ACP for NHCEs for the prior plan year using the ADP or ACP for NHCEs for that first plan year (in lieu of 3%), then the use of the prior year testing method in the next testing year is not treated as a change in testing method. Such a plan would not be subject to the limitations on double counting described in section VII.B. for that next testing year. If a successor plan uses the prior year testing method for its first plan year, the ADP and ACP for NHCEs for the prior year are determined under the rules in section V of this notice.

understand that. the way I read the reg (and of course I could be wrong) would say ee had 10,000 in deferrals. but of that 3000 is excess due to failed test. suppose the catch up rule didn't exist. in that case you forfeit the match. (Unless you were lucky and failed ACP test as well and 'ran' and 'fixed' theACP test first.) I don't see where the catch up rules have changed anything (note the regs still say you have excess contributions), except instead of distributing the deferrals you left them in the plan