Tom Poje

If you get lucky, and you are not using any other User fields you can do this. They are in PLANSTAT and you can use 12 USER ALPHA 12 USER NUMBER 7 USER DATE if you are using more fields than that, it can be done, whether intentionally or not Patti helped me figure that out last year. Somewhat convuluted, but I have a few plans where I do need to pull from the other USER fields. (To enter User fields, In planspecs choose the ACTIVITY button bar. you have up to 100, but as warned above, anything above 12 will take some special work)

I would assume the safe harbor notice indicated a 3% SHNEC would be made. As a result, I see no justification in making it a 5% SHNEC to satisfy gateway minimum. The gateway minimum, as far as I can tell, only requires the 5% (or 1/3) in any combination of nonelective contributions. Therefore, a 2% profit sharing appears fine - even if 0 vested. (Suppose you have someone who is active and only worked 1 year, so is zero vested. Would you argue that the gateway has to be meaningful in his case as well?) On the other hand, you indicated the ee is terminated. If terminees are excluded from the profit sharing, then that would require an -11g amendment, and at that moment I would say you have to provide a meaningful (vested) contribution. but then, my opinions probably carry less weight than the IRS Q and A's at ASPA!)

oooooooooooppppppps. here is the file

ok, I surrender. but I did try pulling most of the fields from psdberpl.rpt into my PlanList report. The data gets pulled so that is good news. I did not try to pull comp yr begin and end , and admin name this means PLANCOMP and ADMIN tables are not used in the report. So, logical conclusion is that one of those tables prevents global data from being pulled. (Or all of my data is under 'detail' section.) anyway, enclosed is a real crude version for you to pretty up. I simply placed the fields quickly into the report to see what would happen. Good grief, why I am spending time on it is beyond me, but Patti knows a sucker from previous crystal questions. after opening the report, you will need to click Report/Select Expert and delete the selected plan, that way the report has a chance of pulling data. I am not quite sure how these reports work in Crystal, I know quite often you have to choose 'refresh' if you want to rerun the report.

Haaron I have fond memories of Kansas City. my mom's parent's lived in Missouri, 804 E. 40 th street. I vaguely recall the park - maybe 1/2 mile away. at least within walking distance to a kid! My dad's parents lived in KC, Kansas - so I got to see both sides for a week or two every summer. I remember the stockyards, the (Herford) Building with the big cow on top. The old baseball park, with the 40ft high chain link fence down the line. I'll try looking at your report, though as I said, I got a blank report in Report Writer if administrator name was blank, so that might be the problem. If it is in your report, try deleting that field and see what happens.

ok, try putting something under administrater name. I tried it - if its blank, the report prints blank in Report Writer. If there is something in that field, it works - at least at this end. yet another unexplainable mystery

remember, Tom is at best a babbling idiot who has gotten lucky playing around in Crystal. I guess question number 1 is why you are trying to preview the report from Crystal, rather than to look at it under report writer. It is a DB report report, I suspect one of the fields it is trying to pull (e.g. something stupid like PLANACCESS) is blank, and the system freaks out at that point. No seriously, I mean it. I think I tried creating a report once to pull some fields, and if one of them was blank, you got nothing. I have the same problem sometimes in census if Beneficiary is left blank. or something similar to that, I don't recall for sure what field causes the problem. I would look at the report in Crystal, and make sure each field is completed, even if it is just a bogus value.

but see also form 5329 about the possibility of having the tax waived. There were a series of Q and A's regarding missed min distribution (Q and A 77-81 under the correction of plan defects)

yes, the IRS is different than what we probably have been taught. Or at least I assume most never learned to include profit sharing receivable. remember, it is from a Q and A, and does not necessarily represent an 'official' position of the IRS. On the other hand, who am I to argue with the points they made.

you said a mouthful. lets see how more confusing I can get. no matter what plan year you are doing, for purposes of coverage(read that as info for the schedule T), you want to treat the top heavy only people as benefitting. now suppose the plan was not cross tested. you then check coverage by treating those people as not benefiting. If you still pass coverage, you are considered to have a safe harbor formula and you are done. If you fail coverage, you include the top heavy people and run nondiscrim. at this point, you have a cross tested plan consisting of two classes. those at one rate and those getting 3%. ok, if the plan year begins before 2002, there is no gateway minimum test. ees with less than 1000 hours get top heavy only. when you run the Gateway report, the report automatically includes the top-heavy people. that makes sense since they are now eligible for the gateway, and the system will check for that. It should be impossible to run the gateway report if plan year is pre 2002, or put another way, don't run that report if plan is pre 2002. it has been noted elsewhere, that the gateway test has an error in the body count - it is double what it should be, though it does not effect the test results.

no problem, better to be safe than sorry. yes, if an ee never had 1000 hours[not just the current year], then they never would have entered the plan if the plan had required 1 year of service. therefore, those people would not have to be given the gateway minimum providing you test separately. of course, it might be in your best interests to not test separately if these people are young and low paid. it makes passing the non discrim test easier to include them. so consider weighing your options. (Just make sure your document would allow you to increase their contribution.) an extra 2% to a lowly paid young ee might save money if the plan would fail otherwise. and if it is people who never work 1000 hours...hmmm........what is their vesting percentage....you are looking at future forfeiture $

the regs are clear:(All the following are from the Federal Register, vol 66, no. 126, june 29, 2001 "Explantion of provisions" employee - defined in 1.401(a)(4)-12 is an employee (within the meaning of 1.410(B)-9) who benefits as an employee under the plan for the plan year. NHCE - 1.401(a)(4)-12 an individual who is not an HCE Gateway minimum is satisfied if each NHCE receives the lesser of 5% (of 415 comp, can be from date of participation) or 1/3 the rate of the HCE. An individual who does not otherwise benefit under the plan for the plan year is not an employee under these regulations. so, an individual receives a top heavy. does he benefit? obviously, yes. therefore, he must receive the gateway minimum. Careful. top heavy minimum is 3% of total plan year comp, no matter when you enter. It might be a larger contribution than the 5% gateway based on date of participation. There is one exception to the above: If the plan benefits ees who have not met the minimum age / svc requirements of 401(a)(1), the plan may be treated as two separate plans - one for otherwise excludables employees and one for other employees benefiting. If treated as two separate plans, the gateway need not apply to the otherwise excludable group. Note: This requires you to test separately -410(B) and everything. you can't test 410(B) as a whole, and avoid gateway minimum by cross testing separately. you can not have the best of both worlds. Further, I would add a caveat to the Fed Register statement. Suppose because of your immediate (or lesser eligibility requirement) you let an HCE into the plan. If you provide a larger allocation to that individual, you will have to satisfy the gateway minimum for that group as well.

not sure why it was suggested to pro rate integration level. if a 12 month period is used there is no call to prorate. If it is indeed a short year (effective date = 12/1, then you prorate at 1/12th)

since there is no hours requirement more deferrals, they should be on the average ben % test. (stopping short of statutory exclusion rule if you had immediate eligibility or something like that) It is optional whether you want to include these people in the rate group test. for instance, if some were HCEs it would only help to include them. (it is an all or nothing deal, you can't cherry pick, but you can change year to year) last I check the system was working, but we just switched from 6 to 7.3 so I can't say for sure.

Thanks Michelle! Interesting reading. Looks like the big answer is that no one knows for sure. Guess you follow the book's advice and rely on the determination letter if you get one.

which raises the question, and I figure Mike knows most of this stuff: (This one has been bugging me of late) It was indicated the plan was cross tested, so we will assume two classes the HCE other (who work 1000 hours) one ee eligible for the plan now works less than 1000 hours and so is not eligible for the contribution, but receives top heavy. That is because the document says he gets top heavy. But what in the document says you increase the amount to the gateway minimum? If you do so, yes, you are following the reg requirements, but what in the document says you have the right to do this? And so, have you failed to follow the terms of the document? In other words, do you need language in the document to justify increasing the top-heavy only people to the gateway minimum?

Thanks Michelle. I have the 2001 edition, and the book has changed enough I can't find your reference. In Chapter 15 there is a Table/Checklist dealing with short plan issues. In the table under Deduction limit, it says that it is based on the employer's taxable year. (And then further adds that if the tax year is short, then the comp dollar limit would apply to calcualte the 15% limit for the short plan taxable year. I am confused at this point to exactly what is going on, but maybe that will help in the answer. If it is a brand new company, how the heck does anyone have compensation going back to 1/1? It was indicated the doctor was starting his own practice, I assume on 12/1. I would further assume that he would only be able to count compensation for deduction purposes from 12/1 on, so even if the the limitation period might be 12 months, there won't be much comp to use for deduction purposes. Kevin Donavan's talk at the ASPA conference a few years ago did cite the same Q and A 84, but in his section on compensation, he points out that 1.401(a)(17)-1(B)(3)(i) that the annual compensation limit is applied th the compensation for the plan year on which allocations are based. Since the company appears to have started on 12/1, the allocation would appear to be based on comp from 12/1 and therefore a strict reading of this would say you end up prorating the comp limit. I guess this is different than an initial plan year of an existing company in which you are using someone's full year of comp even though the plan year may have started on 12/1 The best comments I can come up with would be: Remember that Q & As are opinions expressed by one or more members of the IRS but don't necessarily carry a lot of weight. (Though I am sure we really heavily on them from time to time, don't we?) And some are very reliable! BFreesaid that hours for vesting are not normally prorated for the short year. Actually, I thought it was required that vesting MUST be a 12 month period. If you want to be more generous and credit someone with less than 1000 hours, obviously, that is something you can do. oh well, I am rambling....

Kocak- when pointing out something from the ERSIA outline book, specify what edition! (If I look at that page in the edition I have, I won't find anything related to this topic) Based on the comments I have seen, I assume most people are using this resouce[which is great], but might have different editions. If you don't have the book on your shelf, then I will give you credit for knowing a lot more than I ever will!

I was referring to plans that do not carry such language as you indicated.

as noted in the other thread, I believe you can't have a safe harbor if the plan is an existing 401. remember, you can't have a 401k plan and switch in the middle year to safe harbor, and I believe the same logic applies. see Notice 98-52 Section X A plan will fail to satisfy the ADP safe harbor or the ACP safe harbor for a plan year unless (i) the plan year is 12 months long or (ii) in the case of a new plan.... maybe it is not fair, but the regs are still the regs! It appears if the plan 'is/was' safe harbor, you are stuck testing for the short plan year

see Notice 98-52 Section X A plan will fail to satisfy the ADP safe harbor or the ACP safe harbor for a plan year unless (i) the plan year is 12 months long or (ii) in the case of a new plan.... oops, you do not have a new plan. I am not sure how you are going to get around the 12 month rule. I don't recall seeing any transition relief for a plan that wants to switch plan years.

MBCarey's statement that the plan gives the minimum gateway of 3% and passes the 1/3 gateway test is a bit confusing. The minimum gateway is either 5% of 415 comp from date of participation or 1/3 gateway. There is no '3% minimum gateway'. One would expect that the 3% top heavy minimum based on full year comp to satisfy this for someone who enters midyear, but I guess you always need to verify this is true.

you are correct, after tax contributions do not work if the only ones who make them are HCEs.

you are more than welcome. Have a great Thanksgiving!

yes, that is conceivable, assuming the document doesn't have a cap on deferrals (I have never seen one with a $ limit, though I have seen them with a % cap) I would add the caution if ee deferred 11,000 on Dec 31,2002 (even though it was in Dec, it probably wouldn't be reflected until the first paycheck in 2003. talk about blowing it. but yes, it is possible. Of course, that would give the ee 23,000 in deferrals for the plan year, and at max comp 11.5% deferral rate. talk about blowing the ADP test out of the water! The easiest way to remember things is that the govt is going to look at the w-2 statements. add them up, and see if the ee deferred too much in the calendar year. Except for passing the test, you could defer any amount for a fiscal year plan.