Tom Poje

Austin: catch ups can also caused by a plan limitation - in this example 8% of comp

good grief, I show both status date and term date. that way when someone gets paid out he will have status Z, a status date, and his old term date. But then, I always have been a bit twisted. enclosed is report for non 401k plan (no deferrals are listed) count at bottom of report will be total census then total ineligibles and a net census, I figure that should be the number of bodies on the billing.

A bonus for passing one (or more) of the ASPA courses.

The individual will file a W-2 at tax time. One can't get around the fact the statement will say, for example, $12,000 in deferrals. Therefore, I figure the govt is going to say 'you have some excess deferral'. so I guess I would: have fun with the 1099s. excess deferrals in year they occurred, earnings in year distributed. remaining contributions over the plan limit and earnings in year they occurred. when you say the error occurred in pre-EGTRRA year I am not sure what year you are talking about. If you mean the error occurred before 2002, then ouch, because the person should have already paid taxes on the excess deferrals in the year they occurred and will now pay taxes a second time in the year of distribution.

ERISA Outline Book 11.345 (2001 edition) has the following: Plan that provides additional match: if plan provides match described ib 3 [which is the Basic Match]...but also makes additional matching contributions, the employer will have to determine whether all the matching contributions COMBINED[emphasis mine] (including those described in 3...) satisfy the formula requirements for the ACP safe harbor

you said plan has basic match, which would be: up to 3% = 100% match 4% = 50% match 5% = 50% match discretionary= up to 3% = 0% 4% = 50% match 5% = 50% match so combined you have up to 3% = 100% 4% = 100% 5% = 100% that would seem to satisfy what you call 'non-increasing' rule. the rule is not that the match can not 'increase', but rather the match at 4% can not be greater than the match at 3%.

In Relius the census element 'term date' refers to termination from the plan, and thus should only be populated if an employee was actually in the plan. The only census elements you would normally enter would be Status Date and status. by running eligibility the system should populate all other fields - category, term date, entry date, etc. The only exception would be a takeover case, in which other fields should be populated, mainly for terminees in a prior year (or period) click on Help, type 'takeover plans' and then choose census data required. These will tell you exactly what fields you should be entering.

410(a)(1) Minimum age and service: (i) age 21 or (ii) date on which he complete 1 year of service 410(a)(3) 1 year of service is generally understood to be completion of 1000 hours in a 12 month period 410(a)(4) Time of participation - (A) first day of plan year (B) 6 months after the date satisfying such requirements The IRS (informally) said you can use the maximum permissible under 410(a)(4) thus ignore plan's entry dates, because you could have written your plan to read first day of plan year and 6 months after ee attains age 21 or completes 1 year of service. Wouldn't hat be fun if you used comp from date of participation! In regards to 401(k)(3)(F), this is the new rule that was added a few years ago in regards to the ADP test "... exclude from consideration all elligible employees (other than HCEs) who have not met the age and service requirements of section 410(a)(1)(A) [note, 410(a)(1)(B) is not included, this refers to 2 year wait and does not pertain to 401(k)] the Q and A's are submitted to the IRS, and they provide answers, so the handouts can include these answers. At the conference, the Q and A's are then further explained and discussed - not all of them, but selected the IRS and or members of ASPA think need further clarification. The Q and A (#32) in particular, if I am not mistaken, was brought up by the IRS, and that is where they said they initially read 401(k)(3)(F) to only refer to age 21/1 year of service [410(a)(1)(A)]. Thus their original answer. But then they said that section is tied to 410(a)(4) which is date of participation. again, the Q and A's are not, or do not represent the official position of the IRS, nor have they been reviewd or approved by the Service or Treasury. Based on the regs cited above, I would agree with their position, you should be able to exclude the ees using maximum exclusion. However, it is not up to me decide how one should their run plan. One has to go with what one feels comfortable with, and what one believes one can justify (not "I needed to do it this way to pass the test"). In the example of an ee hired 8/15/01 (with quarterly entry dates) my understanding of the IRS position was under old rules option: ee is otherwise excludable for 12/31/2002, whether he is HCE or NHCE under new rules option: ee is otherwise excludable if NHCE and includable if HCE. Their initial position was that NHCE would also be includable because you only consider completion of 1 year svc and age 21 and don't consider particpation entry date.

that would be my understanding. the regs read gateway is satisfied if each NHCE has an allocation rate at least 1/3 the rate of the highest HCE; "however, a plan would be deemed to satisfy this gateway if each NHCE receives at least 5% of the NHCEs 415 comp" by the way, thanks for the other notes. Merlin: its Friday, its late. can you make me disappear

if a plan uses 1. up to 20% of the taxable wage base or 2. 100% of the taxable wage base the plan is deemed to be a safe harbor plan and normally doesn't need to be tested under general non-discrimination. on the other hand, if you have employees who received top-heavy only, you are only considered safe harbor is the plan passes coverage by treating these people as includable and not benefitting. (Otherwise you end up with a cross tested plan with 2 classes - one at 3% and another with an integrated formula.) ..... I've told people to try this before, run the numbers with 5.7% integrated at 100% TWB, then try nondiscrimination testing using the allocation method and imputing disparity. Your E-Bars should all be the same!

love your numbers! ee has to get 1/3 rate, but plan is deemed to pass if ee gets 5% of 415 comp. You actually threw a third requirement in that you have to check - top heavy. so you have 1/3 using plans def of comp: 1668 was that at least 5% of 415 comp? yes top heavy check 3% (55,000) = 1650 so he also received at least the top heavy. it was close! now, your opening statement says plan uses 414(s) definition for allocation purposes, but then turn around and exclude bonuses - and in this case pretty sizable. the 414(s) test on the individual is 25,000 / 35000 = 71.4% not a good start if your hces aren't losing much in allocation comp due to bonuses.

I agree you can have more than one val date, e.g. if you process things quarterly you would have 4 val dates, but eventually you have a val date = last day of plan year. Corbel's has "Anniversary Date (=last day of plan year) and may include any other date or dates..." New England protoype has ".. provided such designation includes the last day of each plan year as the valuation date" so I still wonder how a contribution can be made after the val date but before the determination date. that seems nonsensical, but maybe I am missing something (besides a few screws)

Again, I am guessing at best on this. We know you can limit comp to period of eligibility. The 401k arrangement starts 7/1. If it wasn't a safe harbor, I would test on date of participation (though I guess I could test on total comp.) depends on what the document says. Therefore, I would conclude that the SHNEC from date of participation would satisfy requirements and the plan would pass. My initial thoughts on a(4) - I was thinking of a safe harbor with a cross testing feature, and normally you would end up testing all contributions, and so therefore, since you have a non-elective contribution you might have to test using full year comp - even if you didn't make any other additional nonelectives. However, 98-52 VIII B clearly states that SHNECs MAY (emphasis mine) be taken into account to determine if plan satisfies a(4). since this is an option, it wouldn't have to be considered, so therefore I assume no further testing would be needed. Furthermore VIII B states that SHNECs are not subject to the same rules as QNECs (you have to run 2 tests, one with and one without QNECs). However, VIII also adds SHNECs are subject to the rules applicable to nonelectives under a(4). So, this poor boy gets confused. for a(4) I don't run 2 tests like I have to for QNECs. And it is optional to include the SHNECs in a(4) - yet they are subject to the rules applicable under a(4)! you gotta love it. I think you pass that - you are treating everyone equally, but there is no actual a(4) test to prove it since it is optional to include the SHNEC in testing.

my initial guess would have been 'yes', simply because I know I can limit the safe harbor to the period of eligibility, and in this case no one was eligible for 401k deferrals until 7/1. But this rule applies to new plans. I don't think there is any real guidance on a situation in which a plan adds a 401k feature. Q-2 of 2000-3 says I can calculate the contribution on a payroll basis (which would be period of eligibility) but that rule only applies to the match, so I can't rely on that. The 3% is still a non elective, and you have an existing profit sharing, and therefore people are eligible for the non elective the whole year. so, lets suppose no additional profit sharing has been made for the year. At that point, at the minimum, it would seem I would have to do a(4) testing - I would think that comp for 414(s) purposes would have to be the whole year - but I could be way off on this one.

as always, the Q and A's do not represent an official position, bear that in mind. in response to the question re: otherwise excludable testing "...must you use the plan's entry dates or may it use the maximum dates permissible under 410(a)(4)? A. the employer COULD use the maximum dates. (emphasis mine) Would the same rule apply for purposes of the early particiaption rule under Code section 401(k)(3)(F)? The employer could ONLY use the one year eligibility of 410(B)(4) and not the maximum dates of 410(a)(4). I would add, when discussed from the floor, the comment was somewhat backtracked, indicating that 410(a)(4) and 410(B)(4) work together in tandem, implying that you can use the maximum 6 months in all cases.

it just came out in the proposed regs from, what was it, a couple of weeks ago. I liken it to the following:(ignoring the 1/3 rule) The gateway works somewhat like the top heavy minimum rules since the dc plan is tested on a benefits basis provide the top-heavy minimum for db/dc plans, which is 5%. cash balance plans would be like a top-heavy plan that is using the buy-back, so it increases to 7.5%. Maybe that is a goofy way to remember it, but my mind is already over cluttered

as for cash balance plans... not strong in this area, but I have from Notice 96-8: Section 1.401(a)(4)-8© as issued 9/91 provides safe harbor method for cash balance plans. ...'a cash balance could be tested for nondiscrim as though it were a defined contribution plan with actual allocations = to the amount of the hypothetical allocations credited for the year. In order to use safe harbor, certain design requirements that relate to accrued benefit and valuation rules that are unique to DB plans must also be satisfied. the revised regs in 9/93 did not change anything The proposed regs that just came out (you should be able to easily obtain these and not fully understand them) look like they require you to use the gateway required for DC/DB combos. In other words, it looks like you will have to satisfy 1/3 or 7.5% contribution. Of course, as proposed regs, these are not in effect until the final regs are issued, but.... so, before you can test under general nondiscrim, you have to meet the gateway, and it looks like it is going to be the db/dc gateway, at least in the future

in other words, if an ee is eligible for a nonelective contribution (including top heavy and SHNECs, he will receive something. since he received something, it must now be at least the lesser of 5% or 1/3. your comment may further complicate things. You said some people are losing their DB beneift. if so,(e.g. the DB plan still exists) you also have the issue of combo DB/DC plan, in which the 5% might be kicked up to 7.5%

Arch: you raise an interesting issue. under the revised rules of a few years ago 401(k)3F you can disregard the HCEs who would be normally otherwise excludable, and instead treat them as being includable in the group who met statutory requirements. If my safe harbor excludes those who are otherwise excludable, what happens?

looks like Dave 'Walt' Baker fixed the file attachment problem. Good job Walt, good job.

c'mon Austin. I still am curious about T-24 where it says to include contributions 'made after the valuation date but on or before the determination date' if, by definition, the determination date is the last day of the preceding plan year, how do I make a contribution after the valuation date but before the determination date?

Heather: you might try the following: open the report in Crystal click on REPORT SELECT EXPERT new and select PLANEE.CATEGCD Then tell it PLANEE.CATEGCD < 8 this should tell the report Select all employees whose cat code is less than 8. Therefore it should ignore any 8 (and 9) and any Letters (A, B, C, etc) Glad to hear the tip worked!

how are you not passing the ratio percentage test? e.g. if I give one group 3% and another group of ees 15% my ratio % test passes at 100%, under 410(B). If I fail ratio percentage because a bunch of NHCEs do not benefit then I am out of luck, but that would be true even if my formula was the same flat % to all employees, except in that case I might be able to use the ABT since I pas reasonable classification.

Earl (and others) Just to keep you up to date, the word from Corbel is as follows "We are going to issue something within the next week or so regarding this problem. Unfortunately, the volume submitter was approved right when the regs came out so there isn't any language in the document dealing with this and we can't add anything without going through the approval process again. So, we're going to outline the various options that are available to solve the problem. Again, we plan on having this within the next several weeks." ... so, they are aware of the problem, and I guess we will find out soon what we will need to do to our documents.

you could get real lazy, and when printing your report, select the categories you want to include on the report. I am assuming at 8.0 the button exists 'select category'. the trick is to select the report under 'custom'. e.g. if it is a census report, and you try to print from the census list the slect category will be grayed out, but under custom you get the option. don't ask me why it is that way. maybe it is a bug that has always existed.