Tom Poje

My initial reaction would be to agree with Pax that it depends on how the document is worded - but with reservations. I think his case case C is more likely - it is awful hard to pass testing when an HCE is deferring 13% and whatever on the ACP side. In addition, as I understand it, the new catch-up regulations says a plan can not impose a limit of less than 75% of compensation and still meet the univeral available requirement - otherwise the catch up amount must be a pro-rata figure of the $3000.

where were the monies rolled? if an IRA, then the $ are treated as an IRA contribution. if another plan, the new plan should distribute the amount (adjsuted for earnings) see examples on page 11.146 of the ERISA Outline Book, 2003 edition.

tough call. ASPA has requested that administrators be given an option to implement the proposed regs at the earliest possible date. mainly because certain provision provide guidance where none existed. certainly the case you have falls into that category. hopefully IRS will respond positively to this request. But then will the IRS say it is all or nothing, e.g. you have to calculate GAP earnings, etc.

proposed regs 1.401(k)(3)(e)(3) will allow for a change in plan year, to one that is less than 12 months if the plan was safe harbor the year preceding and the year following. granted those are not 'official' yet, but at least it is a possible starting point for arguing the possibility...

I think that is a good question. My feeble brain isn't working so well at the moment (if it ever did) Lets say plan was safe harbor match. Mid year they decide to discontinue the safe harbor match. If I recall, they have to give 15 days notice of benefit suspension, or something like that. I would guess (based on the proposed regs) the plan would also have to be amended to indicate not just 'no safe harbor match', but also how the testing would be done. That seems kind of round about, but what else could you do. (As opposed to having it in the document ahead of time how testing would be done if....)I see written comments for the proposed regs were suppossed to be in by 10/22 so I guess it is a little late to submit anything - hopefully someone raised the point. My best guestimate!

under the proposed regs (or at least the preamble...) "...it is not permitted to provide that ADP testing will be used if the requirements for the safe harbor are not satisfied." .......... my understanding of plans that want to use the 'maybe nonelective' would be as follows 1 month before plan year begins, plan says they might go safe harbor. at least 1 month before the next plan year plan is amended to include the nonelective safeharbor language. I suppose the amendment could say "For plan year ending XXXX only" otherwise it would be permament. And every year go through the process. I can't say that the whole thing is necessarily a 180 degree turn by the IRS. when we were first amending documents we figured we put the safe harbor language in the documents just in case the company ever decided to go that route. But (at least in the case of the Corbel language) such language was written not as 'optional' (e.g. if the plan provides a notification about safe harbor), but rather 'required' contribution. we even asked them about that and they said that was what the IRS wanted. I would agree that is different than anything I read about how the safe harbor operates. To me it sort of defeats the purpose of provided the notice since it is a required contribution.

well, 'I' couldn't make it to give the talk, so the scarecrow (with that marvelous brain given him by the Wizard) showed up instead. He even shared a few pension songs. Wow. He looks a lot better than I do, and is a lot smarter, at least that's what I heard. Just one of the songs Yesterday, 65 it seemed so far away Now its come today, it’s here to stay I wish I had a 401k Suddenly, I’ve not half the cash I used to see Bill collectors shadow me Oh, retirement came suddenly My sa-vings are so low, I don’t know just where I’ll stay I did something wrong, I should have saved and put away 401(k)s, deferring’s such an easy way to save Now I need a place to hide away Oh its too late, for a 401k Mm mm mm mm mm mm mm

the best of both worlds. allocate 3% top heavy to the non keys if short on cash, otherwise simply allocate a 3% profit sharing across the board!

Suppose the following: If ee deferred 2%, then he is owed a 2% minimum. But now that means he has received a total of 4%, so he has to be given an additional 1% to bring him up to the 3%. Thats why you would want to exclude keys from th minimums. that way you never have to put something in, but if you wanted to oput an additional profit sharing in you could.

Facts 410k plan 1 ee, who is key obviously plan is top heavy if document says all employees receive top heavy, i don't see how you can get out of not giving the 3%. whats the matter, the ee doesn't want an extra 3%? I could understand maybe short of cash, but then how is ee deferring unless the cash shortage has arisen late in the year. I know of nothing (but I could always be wrong) that says a 1 person plan does have to provide top heavy. It would certainly be better if document said 'only non keys receive top heavy' There is no where in the posts you indicated one way or the other. For the current year, since it has not been determined if ee will be employed on the last day, the plan could be amended if need be...

Rate of match is determined AFTER corrections. see 1.401(a)(4)-4(e)(3)(iii)(G). so what should take place: Run ADP and ACP test Make any necessary corrections for failed test(s) Check for BRF issue. Related match is never distributed but rather forfeited. (Thank you for posting that question! I need to add that to my talk coming up for ASPA.)

1.410(b)-7c2 says you have to disagregate the ESOP from the non ESOP in coverage testing. not even a choice. therefore you have to disagregate for a(4) testing. Because of that, I don't see how the ESOP could count toward the gateway minimum. but that is my logic, and I could be way off. I would think the ESOP could satisfy top heavy, but it would become moot if you have to provide a gateway under the other plan anyway. If the HCEs received 16% in the cross tested plan, then the NHCEs must receive a minimum of the lesser of 1/3 of 16% (5.33%) or 5%. Thus you could give them 5% then try testing

it is not a matter of 'can each now run nondiscrim on its own' its a matter of 'each company has to run nondiscrim on its own' (all employees of the other companies who have met that plan's eligibility treated as includeable and not benefiting. also, you can not exclude terminees with less than 500 hours from the other companies since they were never participants)

Bill: I separate the safe harbor from the other nonelective on an allocation report with the following under DETAILS: Safe Harbor Contr= StringVar AcctType; AcctType:={RPTPLANACCT.TYPECD}; If (AcctType='B' or AcctType='A') and {RPTPLANACCT.ACCTID}>799 Then {RPTEEACCT.CONTRAMT} Else 0 and then do a sum total. Same for the other nonelectives, except AcctId <800 of course, this means when number accounts all safe harbors start at 800

for gateway minimum, if someone gets 0 non elective they are not benefitting and so no gateway is required. but I am not sure I understand the question. 3 companies each has its own formula for example company A 4% Company B 2% Company C 0 % Since it is controlled group, plans could be tested unaggregated (e.g. look at company A and treat all ees of B and C who meet eligibility of A as includable and not benefiting. If each plan can pass, then assuming safe harbor formula no additional testing need. If plans have to be aggregated to pass coverage testing, they still could be tested for a(4) on an allocation basis then no gateway would be needed if they pass.

Rate of Match is a BRF issue, which compares HCEs to NHCEs, so you can always favor NHCEs if you desire (if your document is written as such) If plan fails ACP test as well, you could distribute the match first. Excess aggregate contributions are not considered when testing the rate of match. There is nothing I know of that requires you to run the ADP first. Also see 1.414(v)-1(d)(2)(iii) excess contributions that are treated as catch-up contributions are still considered excess contributions. Therefore it is permitted to forfeit related match.

by law vesting is a 12 month period. see 411(a)(5) thus you will have overlap of hours. such a deal, work one day get full credit. I suppose you could switch to elapsed time?????????????Maybe that constitutes a change in 'vesting schedule' so it wouldn't effect those with 3 years????

I have seen 3% listed as a rough guidline, and a rough guidline at best. so, I would say your 4.57 sounds high

why? if the profit sharing is comp to comp or even integrated, then that formula is safe harbor as well. unless i am missing what you are asking.

that depends. An enhanced match satisfies ADP safe harbor, if less than 6% of compensation satisfies ACP safe harbor as well, otherwise you have ACP testing to perform. The additional nonelective contribution merely eliminates the free ride on top-heavy.

safe harbor is not a QNEC, to avoid confusion I call them SHNECs. HCEs can be excluded from the SHNEC but it is all or nothing as far as I know you can't give to some and not others. SHNECs are included in the cross testing, rate group testing, etc. Possibly set up as follows SHNEC to NHCEs owners not be attribution x% profit sharing owners by attribution (the son) y% all others z% if son is youngets ee he could never get more than the NHCEs possibly could do component testing, with son and some NHCEs and test using allocation method, but thats a bit more than what I would discuss here.

terminology: 410(b) is simply how many NHCE bodies covered compared to HCE bodies covered. Assuming 410k safe harbor with 3% nonelective - no match then you have 2 410b tests 401(k) - I would assume automatic pass since all can defer nonelective - since all receive safe harbor this also passes Amounts testings: deferrals (ADP) - don't need to do since plan is safe harbor nonelective portion - pass/fail will depend on what additional contribution is made. if the intent is to give the owners more, then you would have to cross test. because of son's age you would want him in a group by himself. there is almost no way you can max him out without giving away booka-booka bucks to the NHCE

another possible thought for the future. you did not indicate why the people are HCEs. If it is not due to ownership, I would consider amending to use top-paid group.

bak·er's dozen (bkrz) n. A group of 13. -------------------------------------------------------------------------------- [From the former custom among bakers of adding an extra roll as a safeguard against the possibility of 12 weighing light.] ............. maybe they are actuary bakers and using a setforward?

The Butler: generally, it will only help your testing to impute disparity, though that is an assumption and you wouldn't have to. Quite possibly, a 'poorly' written document will list the 'assumptions' and you are stuck. Quite an oxymoron having 'required assumptions' but I have seen it. I suppose if you had an NHCE with comp greater than the TWB or covered comp if might hurt to impute, or if you had a bunch of NHCEs with less than 5.7 (or an EBAR less than .65) you would not want to impute disparity. pax: obviously you are not a sports fan. practically every football weekend I hear the following on Monday: "The coach couldn't have been using his brain when he thought up that play", or at least something similar.