Tom Poje

be careful! Enhanced match can be anything equal to or greater than the basic match and satisfy ADP safe harbor. The 6% cap is for ACP safe harbor purposes. The govt assumes that most NHCEs can not defer more than 6%, hence the reason for the cap. But, for example a match of 100% of the first 8% deferred is technically ok. It is not that you can't have that, it is just if you do, you have satisfied ADP safeharbor, but you fail ACP safe harbor. When testing ACP safeharbor, combine all matches and run through the checklist: 1. No match > 6% of deferrals. thus 200% of the first 6% deferred is ok. 2. Combined formula does not increase as deferral increases. thus 100% of the first 5% plus a discretionary match on deferrals between 3 and 6% would fail. even though the maximum discretionary match would be 3% (beneath the 4% for discretionary) this formula would increase as deferral increases. 3. formula is at least as good as the basic match. it is only the discretionary match which is limited to 4% of comp not the combined. deferrals greater than 6% can not be matched. reminder:Proposed regs require there can be no eligibility requirements on the discretionary match either

I take it that when you say 'only the ADP test is performed you are saying nothing but 0's show up in the ACP test, and there are actually match contributions made int the accounts. the only 'disable' function is in plan specs, account definitions, sources if you elect the match source, one of the items is ADP/ACP test option. it should be set to ACP. if set to 'none' then nothing will show on the ACP test

company wants to put in a leveraged ESOP stock is of the parent company which happens to be oa European country, and publically traded on the stock exchange in that foreign country. is that possible, and/or does it even matter which foreign country it is? and are there other ramifications?

maybe my choice of words 'excluded' was not good, though within the context of the discussion it was probably ok. if the person is otherwise eligible, then he can not be excluded. I am going to be real lazy on your controlled group question, and quote ERISA Outline Book - hey it is late Friday, and it just past my 4:15 limit if 2 plans are permissively aggregated, as described in 1.410(b)-7(d)....the plans may not be treated as safe harbor 401(k) plnas unless they satisfy the safe harbor requirements when treated as a single plan. this means the safe harbor requirements made by the er to both plans have to be uniform 11.431 of the ERISA Outline Book 2003 edition

the instructions simply say If the plan is required to be disagregated and each disaggregated part meets any of the exceptions in line 3, check each box that applies and skip line 4. I would check 3d and be done with it. see also there is an example for line 4 (the examplke assumes that the 401k piece has no exception) that says if there was no profit sharing you would fill out 4 for the 410k piece and put down 3b as an exception for the nonelective piece, of all things. for part 4 I think the schedule T is a bit flawed because there is no 'term' for otherwise excludables 401k, otherwise excludable 401m and otherwise excludable nonelective. there is a term 'excludable' but I think that is something different

actually, according to the way you described the terms of the document the allocation makes sense. I don't think that is probably what is intended. I would imagine the whole thing is to be allocation based on plan comp, but insure that each ee receives 3% top heavy if necessary. top heavy skim would do that

so you have: 2 HCEs 3 NHCEs, all hired 2003, so worked less than 12 months, therefore 'can' be treated as otherwise excludable. In fact, since plan is safe harbor that provides only for those who met the 1 year, I believe you are forced to use otherwise excludable for testing purposes under 401(k) and 401(m). so I think you have the follwoing: statutory includable: 401(k) 3d, benefits all nonexcludable NHCEs - there are none! 401(m) 3d same otherwise excludable: this group consists of the 3 NHCEs 401(k) 3d 401(m) There is no portion of test, no one is eligible plan is top heavy, so there is a nonelective portion, but the NHCE aren't employed so not eligible. stat includable: nonelective 3d all benefit otherwise excludable: nonelective: I guess, despite the fact 2 ees quit > 500 hours, still passes since there are no HCEs in the group. logically that makes sense. If the plan had a 1 - year wait, then the NHCEs wouldn't have shown up anywhere at least that is my twisted logic

if I understand your post, you have the following 401(k) - immediate eligiblity 401(m) - 1 year wait (with safe harbor) you did not indicate if any of the NHCEs have completed a year of service, worked 500 hours before terminating, etc. the safe harbor issue should only be relevent to top-heavy - plan does not get free ride. however, you indicated no NHCEs active on last day so they are not eligible for top heavy. On the other hand, if document says top heavy goes to all ees it would seem to me you would have to provide the top-heavy to owner and wife!!!! anyway, for coverage 401(k) - all benefit 401(m) - all benefit, if one defers 0 one's match is 0, unless there is another reason such as hours or last day provision. if none of the NHCEs worked 1 year, then for the 401m portion you have a scenario in which no NHCE is eligible and plan is deemed to pass. Actually, since plan is safe harbor, I think you are forced into testing otherwise excludable separately, but results are basically the same. those with more than 1 year pass there is nobody eligible for the otherwise excludable group - as mentioned above, it would only make a difference if any of them were active, because they would have to get a top-heavy. now, what happens if one of the NHCEs worked more than 500 hours? Interesting possibility. If one of those NCEs had completed a year of service, and plan provides top heavy to all ees, then that NHCE would not be otherwise excludable, and since worked more than 500 hours and terminated would not be excludable from coverage. what if all NHCEs are otherwise excludable? I think you are ok - even though an NHCE who worked more than 500 hours and terminated, did not benefit, the otherwise excludable group only consists of NHCEs, and therefore exception 3b applies to the otherwise excludable group. ha, maybe I have really confused you with all my speculation.

see also 8.81 of ERISA Outline Book 2003 edition Coverage: Permissive aggregation rules apply only to qualified plans under IRC 401(a). Qualified plans may not be aggregated with....SEPs...

tell the system the plan is top heavy, possible set to 'top heavy first' as well, though I don't know if that will really matter. I guess if the plan is not top heavy and you have some participants who fail an hours requirement you would have to zap the top heavy comp field in census after eligibility is run. based on the document language it sounds like it expects the plan to be top heavy anyway.

I had posted a Crystal Report version for Top-Heavy at one time. Of course, I don't know if the you can post reports anymore. sometimes it works, other times it doesn't. ANyway, if you have that report I would think you could modify that slightly (e.g. by divisions or something) to accomplish what you want. maybe it doesn't pull in-service distribution, but same thing, you could use user fields if you have those. good grief, I heard your sigh all the way down here in Florida!

I would hold 'it depends'. if it is an HCE who elects out then it would still be a safe harbor. Best example I can think of would be a 'safe harbor 401k'. to be safe harbor you have to provide the safe harbor to all NHCEs. Once an NHCE is excluded, the safe harbor goes out the window. I think the same logic would hold for the non elective portion, though as Mike indicated as long as plan passes 410b it becomes a moot point. people forget that you can test on an allocation basis. so if you provide a 10% comp to comp contribution and you pass 410(b) ratio % test, your 401(a)(4) rate group test will produce the exact same results. even if the plan is integrated at 5.7% you will produce the same results by imputing disparity. Hence, there is no need to test a(4)

believe it or not, only the owner would get the safe harbor match, and plan is not top heavy. In the case of a small plan, I would make sure that all NHCEs sgn something that says they are aware the safe harbor exists, that they have received notice, and they chose to defer 0. more so just to protect the owner, in case plan was ever audited

and remember, the govt is going to look at the person's w-2. if it is more than the 402(g) limit they will tax, whether you distribute the $ or not. you only have a few days left to fix that. and if you don't, then when the person takes an actual distribution, he will be taxed again.

it does not matter if there were prior contributions or account balances. rev ruling 2004-13 makes that real clear. this ruling is only 2 or 3 pages long and consists of 4 examples. do a search and print it off for your records. if no one defers, then there would be no safe harbor match for that year. not sure why one would have a 401k plan with no deferrals but thats neither here nor there. since the key ee received 0 there would be no top heavy anyway, but I think this plan would still be exempt from top heavy anyway. regardless, All the regs say is that a plan consist solely of satisfying 401(k)(12) [adp safe harbor] AND also of 401(m)(11) [acp safe harbor] satisfies top-heavy. I am troubled enough by that wording. a plan that has a SHNEC satisfies 401(k)(12). but what about the 401(m)(11) piece, which consists of some type of match. The regs could have simply said the plan consists of a contribution that satisfies 401(k)(12) - but it doesn't.

you are correct, if there are only deferrals and the safe harbor the plan is not considered top-heavy. be careful of forfeitures (or make sure document says forfeitures used to pay plan expenses) you are also correct. matches can be used to satisfy top heavy. I suppose another exception would be if plan had immediate eligiblity but safe harbor was not allocated to the otherwise excludables. in that case, the plan would be top heavy

http://benefitslink.com/IRS/revproc2003-44.pdf Appendix A.02 of rev proc says you can correct top heavy failure (page 50 of the above assuming it prints the same as mine) section 8.02 says insignificant factors (p29?) vs 9.02 significant (p.31?) correction period for significant is last day of 2nd plan year following plan year failure occurred. since all people are effected I would say it sounds significant, plan year was 2001 so I read that as being needed to be corected by end of 2003 if considered significant. I suppose if it is a small plan one could argue the problem is insignificant, especially if the amount is small, etc.

I see within a very short time you will hit 90,000 posts on the website! Wow! Who'd of ever thunk it! Except for problems with attaching files, the site has certainly helped increase my knowledge, and made some friends (even if one of them is a 3-eyed fish). keep up the good work!

lump sum doesn't come into play. a rollover need only consist of 'any portion of the balance to the credit' (402©(1)(A) and 402© (4) eligible rollover any distribution of all or any portion of the balance....[the exceptions are listed in this section e.g. min distributions]

otherwise excludable rule does not work with 2 year wait see 410(b)(4)(B) -Requirements may be met separately with respect to excluded group. If employees not meeting the minimum age and service requirements of subsection (a)(1) (WITHOUT regrad to subparagraph (B) thereof) subparagrapg B is the section that pertains to 2 year wait.

I would disagree with logic cited. suppose ee is 60% and his balance is $1000. Thus he is paid $600 and forfeits $400. Further suppose for the current year he receives $200 contribution. He has not been paid any of his vested % of that amount, so there is nothing to trigger an additional forfeiture at this time- he has not been fully paid out.

I can not tell from your description exactly what the situation is. you indicated that the HCE will defer in the safe harbor and will not participate in the non safe harbor plan. do you mean he is not eligible for the non safe harbor or that he is eligible and will not defer? The preamble to the proposed regs says "The ADP of an HCE who is ELIGIBLE to participate in 2 or more CODAs of the same employer is calculated by treating all CODAs in which the employee is eligible to participate as one CODA.

careful of mixing up the terms. HCE and Key ees. if hubby is simply an HCE because of comp, but is not Key (e.g. not owner) then wife is not key,then no top heavy due as result of her. ramifications: SCP allows self correction for missed top heavy. see Appnedix A, .02 (at least in rev proc 2002-47. my most recent copy of the self correction program is buried somewhere)

so now you have 2 things you are required to do. 1. forfeit upon distribution 2. not forfeit because eligible to receive a contribution. I would lean toward the first, ee has received a distribution, therefore has given up a right to the non vested portion. My understanding was the two monies were tied together. the person then receives a contribution at the end of the year. I would interpret the second condition to pertain to individuals who are 0 vested. Usually those people forfeit the year of termination. however, this condition overrides that and says provide the contribution and forfeit the next year. ........ By the way, there are other cases in which the law seems to say to do two things. The one that comes to mind are issues with top heavy. You ignore balances of those who perform no service after 1 year. So you stop counting someone. Now the ee receives a distribution. The law says you ignore the distribution after 1 year. so do you magically count the distribution for 1 year after previously ignoring the individual?

I gnore R easonable S ense