Tom Poje

this one is considered no longer useful??? I must have missed that repeal back in 2014! Treasury Regulations § 1.501(k)-1. These regulations provide guidance under section 501(s) relating to nonexemption of Communist-controlled organizations. Section 501(s) was repealed by section 221(a)(62) of the Tax Increase Prevention Act of 2014, effective December 19, 2014. Public Law 113-295.

In my tradition of being long winded, instead of simply answering 'yes' or 'no'... I have the following notes that "magically" appeared from somewhere (they must have, since I don't have the cite which I usually include as well) probably come from a few years ago when the IRS talked about requiring passing ratio percentage test for nondiscrim if everyone was in their own group, then backed off on the issue.. but basically, at the moment, reasonable classification applies to 410b (coverage) (and indirectly to nondiscrim testing (401(a)(4). The second set of comments is the actually withdrawal of the IRS proposal. There is a potential problem for COVERAGE using the Average Benefits Test, due to the requirements of 1.410(b)-4(b), and whether the IRS believes that having each person in their own group is tantamount to “enumerating by name.” If they believe this, then the ratio test must be passed, because the average benefits test for COVERAGE requires a “reasonable classification” – and enumerating by name or having the same effect is by definition not a reasonable classification. When we are talking about the nondiscrimination testing under 1.401(a)(4) for rate group testing, there is a crucial difference. To satisfy nondiscrimination testing using rate group testing, each rate group must satisfy either the ratio percentage test (70%) OR the average benefits test. When determining if the average benefits test passes for a rate group for NONDISCRIMINATION purposes under 1.401(a)(4), it is a two part test: A. The nondiscriminatory classification test, and B. The average benefits percentage test. To pass the nondiscriminatory classification test, the coverage ratio must be at least equal to the midpoint between the applicable safe harbor percentage and the unsafe harbor percentage. The “reasonable classification test” does NOT apply – under 1.401(a)(4)-2(c)(3)(ii), the nondiscriminatory classification test including the reasonable classification test is deemed satisfied if the ratio percentage test for the rate group satisfies the midpoint test. So the 1.410(b)-4(b) problem never enters into the nondiscrimination testing, ‘cause when you pass the midpoint, it is deemed satisfied. ................. Announcement 2016-16 (released mid April (I assume 2016 since that is the announcement number)) Withdrawal of Proposed Nondiscrimination Rules Applicable to Certain Qualified Retirement Plan Benefit Formulas The Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) announce that they will withdraw certain provisions of proposed regulations published on January 29, 2016 (81 FR 4976) (“Proposed Regulations”) relating to nondiscrimination requirements applicable to qualified retirement plans under § 401(a)(4). The provisions of the Proposed Regulations that will be withdrawn are the provisions that would modify §§ 1.401(a)(4)-2(c) and 1.401(a)(4)-3(c). Following publication of the Proposed Regulations, the Treasury Department and the IRS have given additional consideration to the potential effects of the provisions that would modify §§ 1.401(a)(4)-2(c) and 1.401(a)(4)-3(c) on the adoption and continued maintenance of qualified retirement plans with a variety of designs and have concluded that further consideration will be needed with respect to issues relating to those provisions. Accordingly, the Treasury Department and the IRS will withdraw the provisions of the Proposed Regulations that would modify §§ 1.401(a)(4)-2(c) and 1.401(a)(4)-3(c).. Some examples of changes the proposed regulations intended are described below. Exactly what will get changed in the future remains to be seen. On January 29, 2016 the IRS issued proposed regulations that would require each rate group to pass the ratio percentage test if the plan did not satisfy the reasonable classification test. At this time the reasonable classification test only applies to coverage testing and not nondiscrimination testing. Plans that have grouped employees by name fail the reasonable classification test, and most likely plans that treat everyone in their own group would also be treated as an unreasonable classification. ..................................................................... I can only assume the estimator must really young if their is a daughter in the plan and you can pass rate group testing, avg ben % test etc. and provide 25% to owner and daughter.

I think what is being asked is the following: I start a Roth, so the 5 year clock starts ticking. I closed out the Roth 401k, but now want to exercise the 'buy back' option. I guess going by the term commonly used 'buy back' I am buying back the original start date of the Roth as well, though I couldn't say anything for certain.

without looking deeper into it, let's suppose the match had been per payroll. then I think you would have looked at the comp separately, and ultimately only combined comp to see if the person was an HCE. but I am guessing....

interesting, at 20,000/year at the end of 2006 the balance would have been 80,000 without gains. at that time the EZ rule was a balance of only 100,000 so you missed out the filing requirement back then. the 250000 limit was effective 2007. and the gains over the years have experienced some ups and downs, with 2017 being really good, so most likely this would indeed be the first year for filing.

Just because I express an 'opinion' doesn't make it correct one way or the other. there are some things that perhaps are 'legal' but that doesn't make it 'right'. a good example, I suppose, would be slavery, which was certainly considered 'ok' at one time and protected by the law. so, I guess, at least for me, there is also an 'ethics' that come into the play. again, the fact that no thought of amending the plan for an nhce was ever considered before, and now an obvious hce, only considered an nhce at the momment because of the way the regs are written, well... interesting example of a takeover case for us. cross tested - well, not cross tested - just everyone in their own group.- to avoid the gateway the prior admin provided a 15% contribution to a few NHCEs, the same contribution % as the HCE received. Mathematically this was sufficient to pass nondiscrim testing. this one was really bad in my opinion. the 6 lowest paid NHCEs were chosen. 3 of them were terminated and only 20% vested to make matters worse! Even the iRS has said such plans don't pass the 'smell' test. This is just a short blurb from the IRS, but basically the comments include using the lowest paid folks, those withiout vesting, etc. Although these designs may allow the plan to satisfy the vesting or numeric general tests for nondiscrimination and the associated regulations, they don’t satisfy Treas. Reg. Section 1.401(a)(4)-1(c)(2), which requires that the provisions of Sections 1.401(a)(4)-1 through 1.401(a)(4)-13 be reasonably interpreted to prevent discrimination in favor of HCEs. Page Last Reviewed or Updated: 01-Apr-2016 [https://www.irs.gov/Retirement-Plans/Discriminatory-Plan-Designs-Using- Short-Service] conclusion of the story, we were worried the client was going to be angry because we allocated a gateway to all NHCEs which was more expensive though not that bad.. turns out the client liked out allocation better than what was done in the past.

I assume you mean basic match when you say 4%. as noted, if there are no other contribution the plan is top heavy free. If the one employee is not deferring, I would make sure I had a copy of a 0% deferral form on file. while you wouldn't think it would happen, a disgruntled employee could claim "No one told me I could defer and get a match. if I had known I certainly would have. how dumb do you think I am"

you could permissively aggregate plans 2 and 3 If you aggregate for coverage you must aggregate for ADP testing as well. (or vice versa) the key term is 'permissive' there is no requirement to do so. if plans pass on their own then there is no need to combine. even though you can't aggregate a safe harbor and non-safe harbor plan for other purposes, there is one avg ben pct test. everything gets combined

1.401(k)-1(4)(iii)(B) last sentence Similarly, an employer may not aggregate a plan (within the meaning of section 1.410(b)-7(b)) using the ADP safe harbor provisions of section 401(k)(12) and another plan that is using the ADP test of section 401(k)(3) so, the answer is no.

of course prior to 1997 this wouldn't have happened because your comp in the current year determined if you were an HCE. but someone out there in the industry begged to the IRS to make our life easier by using prior year comp to determine who is an HCE in the current year. and if the IRS is too dumb not to write the rules better, and give us a loophole, well dog gone it, lets take advantage of it. for all the years before did I ever consider amending the plan for anyone else? nope. I wouldn't do it, apparently I am in the minority, and others are glad to take the business from me.

in other words it is like catching a pass in football, (or whether a pass interference should be called). some hold it is obvious. he either did or didn't but under the current rules....

without researching further to see if anything has been indicated one way or another, 401(k)(12)(E) only says distributions and withdrawal requires are the same as 401(k)(2) which refers to deferrals. since you could pay for insurance via deferrals I would assume the same rules would apply to safe harbor, in other words it is not considered a 'distribution' in that sense of the word.. but then, since insurance in a DC plan is such a unique animal I could be wrong, not having dealt with it.

it is 2018. if the person has put away into the after tax for 35 years, then that goes back to 1983. A Roth contribution wasn't even possible "Under a Roth IRA, first enacted in 1998,....." (and for qualified plans it was 2006) so it would be impossible for the after tax contributions to have been a ROTH.

yes, but birds of a feather flock together so I guess MoJo and HoJo but I have an 'e' on the end of my name so it is not PoJo in your group

actually, it was Marvin Gardens, but the hotel clerk was keeping $1 for himself. Can't trust him, the bell boys or anyone I guess.

this actually sounds a bit like Three men checked into a hotel room and were charged $30 for which they paid $10 each. The next day, the manager realized that the men had been overcharged since the real price is $25 for the room. The manager gave the bellhop $5 to return to the three men. On the way to their room the bellhop decided to keep $2 for himself so he wouldn't have to make change. The bellhop gave $1 to each man. The three men had now paid $9 each, or a total of $27. This, plus the $2 the bellhop kept for himself, makes a total of $29. What happened to the other dollar? SOLUTION Nothing happened to the dollar. All the money is still there. Yes, they each ended up paying $9 each for a total of $27. Plus the $3 they got back is a total of $30-it's all there. They were supposed to pay $25 but they paid $27, which makes sense because the bellhop kept $2. Charges: $25 for the room + $2 for the bellhop=$27 $30 initial charge - $3 refund = $27 Each paid $9 and $9 x 3 = $27 The trick is in the statement, "The three men had now paid $9 each, or a total of $27. This plus the $2 the bellhop kept for himself makes a total of $29." The $27 is the total payment and $2 is a cost, not a payment! It just happens to add up to $29 giving the illusion of a missing dollar. thus the illusion, you are paying the loan off and having a 50,000 rollover at the same time. tricky.

I'm not sure quite how you are accomplishing this. you have a 50,000 loan balance. you can't simply take your 50,000 IRA and rollover into the plan AND pay off the loan at the same time. your rollover goes into the rollover account. now, if you want to pay off the loan, you take a 50,000 distribution from the loan to pay off the loan. if you are trying an end around and simply paying off the loan at the same time, then how is it a rollover?

only because it is Friday.... technically, the initial premise is incorrect. suppose you are sitting on Short Line railroad, just 5 squares from GO, collect $200. you roll a double 3, but that is the third double in a row so you go directly to jail. do not pass GO, do not collect $200. that is the rule of Monopoly. the regs are similar, if you don't pass the gateway, that means you never went through the gateway. you never reach nondicrim land. you can't collect $200. Wasn't the IRS clever for choosing such a descriptive word like 'gateway' to describe things. Well, ok, maybe clever is giving them too much credit.

of course after you don't provide a contribution to one of the owners kids or an HCE who was liked they will get back to you and tell you the provided term date was bad, the person really quit on 12/31. nudge nudge. wink wink.

any NHCE eligible to defer must receive a safe harbor. so I don't see how that is possible. there is no 'safe harbor pass for free' for part of the plan and 'test the other part of the plan that has people who don't receive the safe harbor' so the only way you could beat that, I guess, is to exclude the group from deferring entirely. Bet that would go over well for the folks who are used to deferring.

I like that. though I was hoping you would have said let's go back to the glorious old days of vesting 100% after 10 years service and let the person go after 9 years since he is 0% vested.

I would still disagree with Larry on this one. it does boil down to a facts and circumstance. I tell the company I'm starting a new job in 2018. so they are making up the work schedule for the last week. oh, he never works on Sunday so don't schedule him that day. too bad but good for us, now we don't have to give him a contribution either. even if he was willing to work that day, we could still have not scheduled him and he is out of luck because he quit and didn't work the last day. I'm willing to bet the DOL would be interested

well, I have nothing else to go on, but based on their form, it looks like they treat it as a legitimate hardship. at least they give description of items, rather than simply 'funeral expenses', because ultimately that is why this is the topic here. it's the best I could come up with searching the internet. and since they indicate they cover Legislative and Judicial I figured they know more than I do. I found no site that said, burial expenses only. if you want to go to the funeral, too bad. (which of course would be the ultimate hardship) of course, it is suppose to only be for the necessary expense, so if you put up at the Ritz or wherever for 3 weeks that might be pushing it.

if airfare is covered, then this means that SavingsPlus is in deep deep trouble. but then that covers a big chunk of California so that hardly covers anyone.... they list air travel, hotel under funeral expenses for hardships. oh wait. maybe they mean booking and air and hotel for the body to be shipped to its final destination. silly me. https://www.savingsplusnow.com/tcm/savingsplusnow/static/401k_Hardship_Withdrawal_Booklet.pdf Savings Plus is the 401(k) or 457(b) plan available to most State of California employees, including employees of the Legislature, Judicial, and California State University (CSU) system.

we have never checked that box. I imagine if you handed to adoption agreement to a client to fill that out, they might check the box without even knowing what that implies.