Tom Poje

I didn't read your question thouroughly to see what you were asking all Notice 98-52 IV B says is that "....(a)s provided under section 1.401(k)-1(g)(2), an employer may limit the period used to determine compensation for the plan year to that portion of the plan year in which the employee is an eligible employee..." now, we also know that a plan with immediate eligibility can exclude employees who have not completed 1 year of service Notice 2000-3 Q-10 therefore, you indicated, according to the terms of your document the person was not eligible for the SHNEC until 10/1/02, so I would only use comp from 10/1/02.

depends on what the document says. safe harbor can be limited to any definition that satisfies 414(s), so it can be from date of participation. In fact, as I understand it, if comp will pass the 414s test, then you could exclude bonuses, etc

good discussion, points out the importance of specifying which edition of a book you are using! I will have to see if I can get this one added to the Coverage Answer Book!

see also an earlier thread regarding the ASPA Webcast Q and A on the New Comparability Regulations (8/1/2001) not sure when the thread would be. the 6th Q and A If a 401k has dual eligibility and the plan is top- heavy, do those eligible only for deferrals (who are getting the top-heavy minimum) now have to get the 5% [gateway minimum]... A. The preamble makes it clear that short-service employees may be excluded from the minimum gateway, although they are still required to receive the top-heavy minimum. Of course, Iwould add, in that case, you are required to test the plan in two parts.

Andy, I would still disagree with Carol. the only place all plans are aggregated is the average ben % test. but the concentration percentage is used when seeing if a 'plans' ratio percentage is greater than the safe harbor...and the ratio percentage is done only on the 401k or 401m or nonelective - on a nonaggregated basis. The example of the ERISA Outline Book(2001 edition) on 8.50 does a walk through of the ratio % that fails, and see how the concentraion percent is calculated. There is nothing in the example that hints or even implies that 'you might have to add back those bodies that terminated with less than 500 hours if the plan included a 401k portion when determining you concentration %." And Sal's pretty good about pointing things like that out. or, this is the way Larry Deutsch described it years ago (of course he could have changed his mind since then) There are two plans involved. The first plan is defined in 1.410(B)-7(a) This plan is used for all purposes except determining the average benefits percentage . This would include determining the concentration percentage and the mid-point. For your purposes this is the profit sharing plan only. The second plan is defined in 1.410(B)-7(e). this plan is used only for purposes of determining the Average Benefits Percentage. For your purpose this is the aggregation of the profit sharing and the 401(k). These two plans have different eligibility, and so a different set of excludable and non excludable employees. This point is illustrated in the combination of examples 2 and 3 in 1.410(B)-6(B)(4). in example 2 the eligibility of only the plan (or aggregated plan) is used for determination under ratio percentage test or nondiscrimanatory classification test (which includes the concentration percentage). In example 3 the lowest eligibility of any plan is used for determining the Average Benefit Percentage.

there is no so rule I know of. On the other hand, if you 'accidentally' miss the distribution (I didn't say that), then you can always use the self correction program to correct later. lets see...percentage of assets involve, number of participants involved, etc....almost sounds like an insignificant problem..you can avoid the problem for what 4 years under those conditions??? but really, the responses given were correct, if the amount is that small and the person terminated, you can always distribute the balance because it will be less than 5000. If the person is working then you dont have to make the distribution. I suppose if it is an owner and less than 5000 you run into the one exception

the document decides. Corbel's checklist has the following choices when setting up or restating the plan: Hardships: no yes, limited to non-elective account if account is 100% vested yes, limited to vested portion on non-elective account yes, limited to deferrals only yes, from deferrals and vested portion of non elective account yes, from deferrals and non-elective account if acount is 100% vested

give an example of exactly what you mean. I can't tell if you mean the number crunching end of things, what situations make good candidates, etc.

you could start with this one. you can only print this in Crystal (not from Relius custom reports) you will have to open the file then click on Report / Select Expert and delete 'plan name' I think you have to Refresh the report everytime you use it, but I could be mistaken. obviously you will have to modify this to meet your needs. I believe I have the details set so it will only print the most recent plan year you have on the system, if multiple years exist. good luck

what level of Relius are you on? I tried pasting your statement into a new formula on an existing report I have and I didn't get any error message upon checking it. I am still at 6.0. you also might try using PERSON instead of EMPLOYER, though it shouldn't make a difference.

now you are embaressing me. (I use SHMAC as well) SHUSH, I like that!

I would agree with Mike - Rooms are rooms (sleeping, that is) Hey, I can't speak for others, but I don't need anything fancy. Especially after running here and there all day.Yes, not quite as nice as the Hyatt, but that was unimportant to me. Mike didn't describe 'classroom' style. You sat at a table. That's right, you could actually write notes on a solid surface instead of on your lap (with your arms half folded up because you were packed in like sardines like at the Hyatt) As Mike mentioned, you didn't have to run across the street to attend a session you were interested in. (Or end up skipping it instead because you didn't want to go out in the rain) Mike said the exhibitors was better - he didn't mention that everything was in one room as well, another big plus. I cannot make a comment on the gala - we left Tuesday night - but then I never have hit the gala in prior years - I prefer the quiet chat room. Mike's comments are all positive, and you have to remember, his beloved Wolverines lost their football game that weekend, so think how much more positive he would have been if they had won! Oh, and if you were into it... we arrived Saturday. The Italians had a big party that night. No, huge party. All dressed to the max. Maybe you couldn't attend it, but you could certainly go down and watch. Let me think who you could have seen Have you heard of Robert Deniro, Sophia Loren, Tony Bennet...?

Amy Cavanaugh included a short section on Puerto Rican plans in the Coverage and Nondicrimination Anser Book (2nd edition) (Heck she 'suckered' me into editing much of the book, I should know!) According to her comments, filing for a determination letter is required under the Puerto Rico Code in order for the plan to receive favorable tax treatment. Form letters for requests are available on the Hacienda Web site http://www.hacienda.prstar.net. (web site is in Spanish only) Hacienda is the Puerto Rico Treasury good luck, amigo!

Lynn: I take it there is no 401(k) feature at the present time. If so, then it sounds like you will be ok. Plan year will be at least 3 months, you are going to give the safe harbor notice timely (e.g. effective date for the 401k feature of a new plan) the 402(g) limit is a calendar limit, not plan year. so technically the individual could defer 11,000 in December and 12000 in January 2003(but then could not defer again until 2004) or put another way, the government looks at the w-2 statements to see how much an individual has deferred for a given calendar year.

safe harbor plan must be 12 months, unless it is a new plan, then it has to be at least 3 months. the regs are interesting, it looks like you can't switch plan years and have a safe harbor in the year you switch! for a new 401(k) plan feature you can always use 3% for the NHCE as a look back year, since there is no look back year. as for testing comp, the regs say use 414(s) comp. the new Corbel documents definiton is simply any comp that satifies 414s may be used. I have seen some documents that specify comp from date of participation - in fact I think the old Corbel said that as well. So be careful, use the definition permitted by the document - it can be all year or just from the effective date of the 401(k) feature. unfair? hey the regs are the regs. what if you had a brand new company - calendar year plan, started 7/2/02. immediate eligibility. In 2002, your test has only HCEs -automatically passes. all nhces are otherwise excludable (less than 1 year of service) in 2003, your test has only HCEs. again, all nhces have not completed 1 year until 7/2/2003 - and you can exclude them from testing until 1/1/2004. In your case, it is not a new company, so you can't do that, but it is a new 401(k) feature, so you get the 3% for the NHCEs. make sure your document specifies this. remember, a safe harbor plan is deemed to use current year testing - and you can't use the 3% because that is a prior year! Lets be careful out there how the document describes comp for testing, etc that first year!

I would say the catch is that employees should have been given the SPD or SMM indicating the availability of catch ups. so legitimately, if only HCEs knew about it, you could say under BRF the while catch ups were currently available, they weren't effectively available. proving it would be a whole other ball of wax. But you have a legitimate concern. (In some ways, it would be like having a safe harbor 401k. You automatically pass testing, so the IRS said you have to provide notification just so people know)

I don't recall who said it...Carol...???. I am going by what Larry Deautsch said a few years ago. the nondiscrimination classification test is found in 1.410(B)-4 - that is where the safe harbor/unsafe harbor table is discussed, etc. the average benefits % test is not found until 1.410(B) -5 but see also example 2 in 1.410(B)-6. it discusses 3 plans with different eligibility requirements. think of the three plans as being 401k, 401m and profit sharing. if you only look at the profit sharing, you can only conclude that the concentration test includes just the plan you are looking at. or consider an example with a profit sharing with 1 hce and 3 nhce, so you have a concentration % of 75%, which results in that deadly midpoint of 33.75. consider that only 1 nhce has an e-bar greater than the hce, so you fail testing. But if you included all eligible to defer (lets say there are more NHCEs) then you have increased your concentration %, and therefore you now pass. That makes little sense. The only test that includes everyone is the average benefits % test. But remember, the average benefits test consists of that test and the nondiscrim classification test. logically, why would you include everyone for part of the classification test (the concentration % portion) but then only include those includable for that portion of the plan when doing the rate groups?

Kocak: it does not matter whether someone is aware that catch ups are available - as long as the document allows them. suppose my ADP test fails. if the plan allows catch-ups, you don't have to refund or if someone inadvertantly deferred too much, same deal. catch ups are for situations in which someone goes over a plan imposed limit. I think most people think that catch ups are 'specifically and intentionally' chosen by a participant. this is not necessarily the case.

maybe a nuisance, but in reality, the plan has allowed the HCEs (after refund) to defer the absolute max every year. And that sounds like what they want. I have had clients say that is what they want, that they don't care getting a refund as long as they max out.

yes, with clarifications. I don't like the term average benefits portion because the average benefits test consists of both the Avg Ben % test and the nondisrim classification test. you run the risk of confusing the terms. 2. average benefits % test includes all contributions of 401(k), m and the profit sharing and forfeitures. when determining the Nonhighly Concentration Percentage (if you get to that point) is based on only those ees includable in the profit sharing portion, at least that is my understanding. I heard otherwise at the ASPA conference, but disagree with the speaker. (e.g. a person might be eligible to defer and quits with less than 500 hours. he is included in the avg ben % test, but is excludable from the profit sharing portion, and therefore not included in the NHCE concentration determination)

the person who received the top-heavy 3% is considered benefitting, therefore he must be kicked up to 5% to satisfy the gateway (but not the 8%). perhaps you could think of it this way. cross testing is converting a DC contribution to a DB benefit. so, you sort of like have a DB/DC combo plan. Now, what is the top heavy minimum in a combo plan? lo and behold 5%! hey there is method in the government madness. of course, things can get real strange. suppose you have a calendar year plan and ee works 1000 hours, enters 7/1, and definition of comp is based on date of entry.(def of comp is also comp - bonus) the person then gets either 3% top heavy based on full year, or 5% gateway based on total comp from date of entry or 8% of comp - bonus

any census verification uses the table PERSON, and addresses are found in this table. so all you have to do is modify the census report by adding the address fields. e.g. Open census report in crystal 'save as' to rename just in case you really mess up click on Insert / database fields, select PERSON and highlight the address fields. drag and place where you want

unless you are in some type of special 'daylight savings time' area, (e.g. fall back a month) you are out of luck. safe harbor plans have to 'exist' for at least 3 months. you are past the Oct 1 deadline. Remember the HCEs can defer 5% the first year, so not sure why the safe harbor is so important at this late date.

guess a lot depends on how the document is worded. since it is the first year of a 401(k), assuming language is in the document, the NHCE would be 3% in the prior year, so the HCEs could defer 5%. Now, 5% of comp from the effective date or 5% of total comp? could be either (obviously you can't defer on $ before the effective date) but the testing could be based on a 12 month period. see 1.401(k)-1(g)(2)"...use comp for the plan year or the calendar year ending within the plan year" of course, if the key person defers the big bucks, then you are going to be stuck with the 3% minimum top heavy for 2002.

Mike: yes, I agree, if plan has 2 year wait it should not shift to plan year after initial period. that way you do indeed have a 24 month wait. my comments were more of a reminder to be careful of what the document might say.