Tom Poje

The ERISA Outline Book Chapter 4 Section V Part C has 2.e.Rule applies only to participants. Since IRC §411(a)(6)(D) and ERISA §203(b)(3)(D) refer to a "participant" having the requisite number of consecutive breaks in service, it is presumed that this rule cannot be applied to an employee who has not become a participant in the plan at the time the break in service period begins. Apparently then, the rule of parity does not apply to an employee whose break in service period began prior to the effective date of a plan, even if the employee would have otherwise been a participant in the plan if the plan had been in effect and even if the employee has incurred at least 5 consecutive breaks in service. ....................... This comment makes no mention of 'other plans' but reference the plan itself. Since a plan could exclude years prior to the effective date of the plan, I would say you look at each individual plan by itself, so if you were vested in an existing or prior DB that has no effect when looking at the 401k plan. as for voluntary after tax, again the ERISA Outline book 2c1a, when referring to the old rules indicated "Contributions that were treated like elective deferrals, such as qualified nonelective contributions (QNECs), could be disregarded for this purpose." since under the new rules you now include deferrals when determining vesting I would guess you include after tax as well because it seems to me after tax contributions are sorted of treated like deferrals. The only possible exception, at the ASPPA 2010 Conference (assuming the IRS comment is valid) is that if the participant never deferred (since they had no balance) you could disregard prior service even though the individual was 100% vested. (Q and A #8)

well, the instruction for the W-2 for who must file W-2 are as follows: Complete and file Form W-2 for each employee for whom any of the following applies (even if the employee is related to you). You withheld any income, social security, or Medicare tax from wages regardless of the amount of wages; or You would have had to withhold income tax if the employee had claimed no more than one withholding allowance or had not claimed exemption from withholding on Form W-4; or You paid $600 or more in wages even if you did not withhold any income, social security, or Medicare tax. ........ there is no "oh, and by the way, if they had no income but received a profit contribution for the prior year that was contribution in the current year, you need to provide a W-2 so they don't make a possible non-deductible IRA contribution" Guess it is sort of like working for two companies and coordinating deferrals. It is up to the individual to monitor whether he has an excess deferral, not one or other of the companies.

ERISA Outline Book has the following Chapter 4 Section V Part C 2.c.Cannot apply rule of parity once any degree of vesting is earned. Note that once a participant earns any degree of vesting (e.g., 20% vested under the plan's vesting schedule), there is no break in service rule that will permanently disregard his prior service for vesting purposes. If the participant incurs a break in service, the only rule that may apply to the prior service is the "one year break" rule discussed in 1. above, under which it is possible to get the prior service re-credited. 2.c.1)Elective deferrals included under rule of parity for post-2005 plan years. Treas. Reg. §1.401(k)-1(c)(1), as amended on December 29, 2004, provides that elective deferrals are disregarded only for purposes of IRC §411(a)(2). IRC §411(a)(2) addresses only the application of vesting schedules. Thus, these regulations require that elective deferrals be taken into account in determining whether the employee is 0% vested for purposes of the rule of parity. The regulations are effective for plan years beginning on or after January 1, 2006, although the regulations may be applied, at the employer's election, for earlier plan years ending after December 29, 2004. See Treas. Reg. §1.401(k)-1(g) (December 29, 2004). 2.c.1)a)Prior regulations had disregarded elective deferrals for this purpose. All of the vesting standards under IRC §411(a), including the rule of parity, were applied separately with respect to employer contributions other than elective deferrals, according to the earlier version of Treas. Reg. §1.401(k)-1(c)(1) that was published on August 8, 1991. Under that regulation, elective deferrals were disregarded for purposes of applying IRC §411(a) to other contributions or benefits. In other words, to apply the rule of parity to the employer-provided benefits (such as matching contributions or nonelective contributions) the 401(k) plan could treat the employee as 0% vested, even though he was 100% vested on the portion of his account balance derived from the elective deferrals, assuming he was otherwise 0% vested under the applicable vesting schedule. Contributions that were treated like elective deferrals, such as qualified nonelective contributions (QNECs), could be disregarded for this purpose. The IRS, at a Q&A session on October 25, 2004, in Washington, DC, as the ASPPA Annual Conference, acknowledged that the 1991 regulations should be interpreted this way. However, this rule was modified in final 401(k) regulations issued on December 29, 2004, as discussed in 2.c.1) above.

Bah humbug. Thought you were sick of those puzzles. But a very Blessed Merry Christmas to all A late Hanakkuh to others and to the rest who don't fit either of those, I still wish God's peace on all.

careful, comments like that might make the Grinch's heart grow bigger.

lrm94 was replaced by a later lrm. (see the last few pages of the enclosed for cross tested language) unless you are using "fly-by-night prototype" I would be shocked that language limiting the number of allocation groups is in any PPA document, though I suppose it is possible, and if such language was actually checked then you would have to follow it and then be smart enough to find a different document. but there is certainly nothing that says "oh by the way, even if you check each person is in his own group in the new ppa document, you have to also follow the old LRM which says you are limited to the number of groups you can create via this method" lrm.pdf

so I guess you could change (via DER) the beginning balance in an account by 100,000. then enter the loan. then use the same DER and decrease that beginning bal ($ and units) by 100000.

for coverage, yes, everyone is included, so many show as includable and not benefitting. I believe, in answer to your question, how do you treat those not benefitting... well, ignoring the controlled group, if I had a plan with a last day rule or hours requirement for a match, they would not show on the ACP test. So, I think for BRF purposes, those people are also not included at all (e.g. they are not included in the deniminator

Mike - I wasn't referring to the ADP test. I read the question to say one plan has a discretionary match and the other has a tiered match which to me says they have inconsistent formulas. I only quoted the part of the regs that said you can't aggregate a safe harbor with a non safe harbor, I could have included the part that said you can't aggregate a plan tested using prior year with one using current year. I would hold if one plan has discretionary and another tiered that is inconsistent.

last sentence of 1.401(m)-1(b)(4)(iii)(B) Plan with inconsistent ACP testing methods ...similarly, an employer may not aggregate a plan using the ACP safe harbor provisions and another plan using the ACP test section at the ASPPA conferences the IRS personal voices the opinion (such opinions do not necessarily reflect an actual Treasury position, but using the reg cite interpreted it as:) Because the discretionary match does not provide a contribution on amounts deferred up to 4 percent, this would fail to satisfy the ACP safe harbor. If the first part is split off (100 percent on first 4 percent deferred), then what is left is a discretionary match (permitted in ACP safe harbor) of up to 100 percent of deferrals between 4 and 6 percent. But this means that, under this separate formula, there is no match on deferrals between 0 and 4 percent. This would violate the rule at IRC § 401(m)(11)(B)(ii) that matching contributions cannot increase as an employee's deferrals rise. [ASPPA Conference 2012 Q and A #45] If one or more match formulas are discretionary and could be implemented in such a way as to not satisfy safe harbor (e.g., not capped), then it cannot be aggregated with the safe harbor formula to determine if it satisfies the nondiscriminatory requirements under the safe harbor rules. [ASPPA Conference 2013 Q and A #21] Can't get much more Grinch than that! and since you have to run coverage the same as nondiscrim testing you can't aggregate for coverage.

one article (assuming it is correct) has the following Although for some plan purposes (like determining Key employees and Highly Compensated Employees (HCEs)), family attribution rules require that an individual be treated as owning stock that is owned by his/her spouse, the attribution rules of Internal Revenue Code (IRC) Section 1563(e)(5), which are used to determine controlled groups, provide an exception to the attribution of stock from an individual to his/her spouse if these conditions are satisfied: Each spouse has no ownership in the other’s business; Neither spouse is a director or employee or manager of the other’s business; Not more than 50% of either business entity’s gross income was derived from royalties, rents, dividends, interest, and annuities; and The spouse that owns the business can dispose of the stock at any time, without restrictions. Suppose a husband and wife each own separate, unrelated businesses. If the exceptions above are met, each individual will be considered to have sole ownership over their respective companies, without any attribution of ownership to the spouse. In that case, the two businesses will NOT be in a controlled group and each company can sponsor its own retirement plan without having to take into consideration the employees of the spouse’s company for coverage testing purposes. However, when the spouses in question have a child under age 21, the exceptions above won’t matter because a controlled group will be deemed to exist due to the fact that the minor child is attributed stock in each company, creating a scenario in which there is now common ownership across both businesses. This ownership attribution will remain until the child is no longer considered a minor. If both companies are considered part of a controlled group because of the child’s ownership, it may be difficult to demonstrate compliance with the 70% coverage testing if only one company is providing retirement benefits to its employees. http://www.consultrms.com/Resources/40/Controlled-Groups/71/Coverage-Testing-When-Spouses-Each-Own-a-Business the reg cite is 1.414(c)-4(b)(5)

I like the line "would not have been subject to tax" does that mean you know in the future there will be no tax on any withdrawals?

perhaps a better way of thinking about it. the govt looks at the W-2 and assuming their computers are intelligently programmed will see that he had too much in deferral. therefore, whether or no he gets a distribution by April 15 or not, the excess is still treated as income and will be taxed in 2017. if he didn't get a distribution and may not even know about it, the IRS will 'gently and lovingly' tell him, if I (as a Grinch, of course) understand how it works. now, if the amount is not distributed by April 15, then it will show up as a distribution in 2018 (or whatever year) and he will be taxed again. and, as I recall, if he is not 59 1/2 there may be the early distribution penalty.

now I feel like a kid "Made you look" another cite would be from the min distr regs 1.401(a)(9)-5 Q/A9 (b) exceptions The following amounts are not taken into account to determine if a min distrib has been made (3) Corrective distributions of excess contributions. by the way (1) is deferrals returned because of 415 limits (2) is return of excess deferrals (4) is deemed distributions of loans

I would look at it this way. Anytime some type of comp is excluded you need to run a comp test, but wait, since it is only fringe benefits that no matter what the results you get a free ride. not much different than 'running' a top heavy test and saying, but wait, I get a free ride since this is a safe harbor and no other contributions are made. or, I made a profit sharing contribution to the plan. I need to run a nondiscrim test, but wait, since the allocation was comp to comp I get a free ride.

taking it one step further. let's say everything was paid out 1/31/2018. without extension the forms are due 8/31/2018 with extension they are due 11/15/2018 if the 2018 forms weren't released until 2019 you would be unable to file and meet the filing deadline. so you are permitted to use the prior year form. The instruction for the 5500 indicate (this is form a few years ago, but the same rule applies) (2) If the 2015 Form 5500 is not available before the plan or DFE filing is due, use the 2014 Form 5500 and enter the 2015 fiscal year beginning and ending dates on the line provided at the top of the form ............................. with FT William you have to create an 'extra' plan form or duplicate plan form or whatever it is called. so you would end up with a plan year end 12/31/2017 and then another with the correct dates, but on a 2017 form.

actually neither plan accepted amounts over the limit, so it is not a plan issue so all amounts are included even if it is an NHCE it is strictly an individual limit in this situation..

non calendar year plans and catch ups, etc give me headache never tried this before, but maybe the system could be tricked, in census reg. compliance/additional test amount there is a field for other plan amount. so if you enter 6000 there maybe the system will think he has an extra 6000 toward the 415 limit and so treat 6000 in deferral as catch up. then if it works you could take out the amount. grasping at straws....

Bah Humbug. goes against everything the Grinch stands for, but as 401king notes you can keep deferring. if you insist on cites, here are a couple (which I put in the Coverage and Nondiscrimination Answer Book Q 12:11 : The preamble to the final 415 regulations states that: As noted above, the final regulations provide that a plan cannot take into account compensation in excess of the section 401(a)(17) limit. In addition, the final regulations provide that elective deferrals can only be made from compensation as defined in section 415(c)(3). However, in applying these two rules, a plan is not required to determine a participant's compensation on the basis of the earliest payments of compensation during a year. [Emphasis added.] Issue 2012-1 (Mar. 20, 2012) of the IRS Employee Plan News offers the same advice: “We're Glad You Asked #2” We have a 401(k) plan and some employees’ compensation will exceed the annual compensation limit this year. Should we stop their salary deferrals when their compensation reaches the annual compensation limit? How do we calculate the employee’s matching contribution? Unless your plan terms provide otherwise, the salary (elective) deferral limit is applied uniformly to the compensation that the employee receives throughout the year. [https://www.irs.gov/pub/irs-tege/epn_2012_1.pdf]

hopefully you have the ERISA Outline book sitting in your back pocket (assuming you have an extremely large back pocket)... if you know the right place to look..... I don't think you will find it under nondiscrim testing. however under Coverage Chapter 8 Section VIII Part B 6 gives a discussion on the topic. otherwise excludable employee disaggregation is separately elected for each disaggregated group. basically a plan with 401k, 401m and nonelctive could have anywhere between 3 and 6 test depending on how you test things. and since you have to test nondiscrim the same way you test coverage then you have to be able to run the tests on a money source basis as well. but I didn't think that would work in your case if the young person is treated as OE for profit sharing purposes because you need him for the rate group.

I think your point 3 is probably the best guide. he received the top heavy so he now needs the gateway. but if you based it on profit sharing comp he has no comp and then all you can do is bang your head against the wall. Based on a situation like that, I think you have to use the least stringent eligibility definition for purposes of comp. And if you had someone else that was eligible for part of the year for profit sharing, it wouldn't make sense that person only received gateway from date of participation based on profit sharing, because his gateway would be 'less' than the person who wasn't eligible for profit sharing. (in some ways this is no different that testing controlled groups and using least stringent eligibility) Of course you could treat him as otherwise excludable and assuming no HCEs in that group then no gateway needed, but you indicated that doesn't work for testing. as for Relius, there is DER and prior participation amounts that could be entered. since the plans we run satisfy any comp definition (e.g. we don't exclude bonuses, etc), we have always plugged the prior participation under bonus and in plan specs uncheck the boxes so the comp isn't used for allocations except for top heavy, but I think you have to override in census. but since it is generally only one or two people that it pertains to, we never worried about that. one of those, which takes longer to do - set up a DER and enter pre participation comp amounts or simply override.

in itself, no, since it is clear you can amend a schedule. however, there is 1.401(a)(4)-11(c) which says plan can not discriminate in favor of the HCEs in regards to vesting, but even that adds "other than the method of crediting service for purposes of applying the vesting schedule." as was mentioned above, if it was mostly owners at the start of the plan, and then within a short time the plan was amended arguably it would fail 11(c). more of a fact and circumstances test, as mentioned in the regs. or another way of looking at it, net effect on Day 1 only HCEs were eligible at 100% and Day 2 when other employees were eligible there was a 6 year graded. not much different than saying, we have 2 vesting schedules, 1 for HCEs at 100% and another for everyone else. so I guess one question would be is how long has the plan been around?

Belgareth I'll look especially for those items when I stop to steal...I mean, to pick up those items for repair. I just noticed why I like your name BelgAretH

put another way. any NHCE who receives a non-elective contribution must receive the gateway. the non-elective can be profit sharing (or forfeiture). A non-elective is not a match or deferral.

As Belgarath points out, the date of the amendment is important. the question becomes how many years of service does someone have on the date of the amendment. without getting into the details, part of the comment in the ERISA Outline book is as follows (ERISA Conference argues new vesting schedule applies to new accrual, IRS argues, no you told the person he is x% vested, you can't reduce that for future accruals.) 1.c.Which interpretation is correct? The ERISA Conference Report represents the intent of Congress, but the Treasury is not required to follow legislative history. The language in the Treasury regulation seems to side with the IRS interpretation. See Treas. Reg. §1.411(a)-8(a). The "conventional wisdom" is to use the IRS interpretation, since the IRS will argue that approach in an audit situation. The IRS interpretation also is simpler from a plan administration standpoint. Check the plan language first. If the plan is ambiguous, the plan administrator (or other responsible fiduciary) will need to interpret the terms of the plan and should follow an approach consistent