Tom Poje

it is Friday, it is late, and I am past my 4:15 limit oooooooooh. that is bad. time to go home. without looking it up, I think the otherwise excludable rule only applies to one year wait, not the two year wait scenario. somewhere in the back of my mind.... also, in regards to the two year wait. be very careful you aren't treating this as a 24 month wait. rememebr if the ee completes 1000 hours from date of hire - anniversary, and then 1000 hours in the plan year they get credited with two years - even though they may have only worked 18 months or something like that. At least, I seem to recall that is the way it works.

it hadn't been doing that last I checked, though I am still at 6.0, so I can't comment if you are at 7.0. I usually print the nondiscrim test for a(4) and look at the E Bars to see what is going on.

and Holland - the usual pair at ASPA

for purposes of the average benefits % test you must include deferral and match - so the system is doing things correctly. for purposes of nondiscrim under 401(a)(4) the system only uses profit sharing - and these E Bars are used for rate group testing (I think somewhere under this board I attached a word file describing Qtech and nondiscrimination module)

at this time, yes, I would hold that if there are no forfeitures/profit sharing allocated to people in a given year, then the plan is deemed to be not top heavy. I believe the IRS indicated they would issue a tecnical memo or something on this issue

man, it has been too long since I have done this, and I can see the notes aren't great (I deleted all references to Quantech/Relius) on this spreadsheet) Steps 1 - 9 calculates the E-Bar (without disparity) for the profit sharing only. step 12 or step 15 is the E-Bar w/ disparity (profit sharing only) I stink therefore I exist... oh wait, I think step 16 - 18 was a verification of the data on the report. step 16 would have been the E-Bar from the printed report (all contributions, no disparity) step 17 backed out the profit sharing E-Bar (no disparity) This would be the E-Bar on deferral and match only step 18 adds back the E-Bar (profit sharing only w disparity) I am not sure why I did that. I must have been checking something. sorry, my brain just doesn't function real well at times!

IRS Q and A #9 from the 2002 conference: Q.can you fund discretionary contributions more frequently than annualy, even though your document allocation date is only annual A. The allocation must follow plan terms by the way, as a reminder, the Q and A are only opinions, and have not been reviewed or approved by the Service or Treasury. On the other hand, sometimes they are merely stating the law as is - it is sometimes hard to tell which is which.

IRS Q & A #7 at the 2002 ASPA conference supports the idea that an individual who is eligible for deferral only (e.g. immediate entry, but has worked less than 1 year) is due a top heavy. The ERISA Outline Book says the same thing. So there are two places for support on this idea.

1.085 ^ 11 = 2.453 (please note that the spreadsheet was an explanation of Relius printout, so any terms (e.g. accum factor) match their print out. you might be calling them something else.

Table adjustments are as follows: SSRA = 67 Disparity NRA factor 70 1.002 69 0.908 68 0.825 67 0.750 66 0.700 65 0.650 64 0.600 63 0.550 62 0.500 61 0.475 60 0.450 59 0.425 58 0.400 57 0.375 56 0.344 55 0.316 SSRA = 66 Disparity NRA factor 70 1.101 69 0.998 68 0.907 67 0.824 66 0.750 65 0.700 64 0.650 63 0.600 62 0.550 61 0.500 60 0.475 59 0.450 58 0.425 57 0.400 56 0.375 55 0.344 SSRA = 65 Disparity NRA factor 70 1.209 69 1.096 68 0.996 67 0.905 66 0.824 65 0.750 64 0.700 63 0.650 62 0.600 61 0.550 60 0.500 59 0.475 58 0.450 57 0.425 56 0.400 55 0.375 step 4 is simply applying interest to the contribution over the number of years left to retirement. or, if you put the money in the bank at 8.5% interest, how much would it grow to by retirement. step 6 is simply the APR (Annuity Purchase Rate) for example 1983 IAF at age 65, 8.5% interest = 115.39 in other words, if you will, I have figured out a 'lump sum' on my contribution, now how much will I get monthly based on that amount and the mortality table chosen.

Lori: see my comments on page 2 of this thread. if the person has never completed a year of service, then you would not have to increase the person to the gateway, but only if you test the plan as two separate plans -those that met statutory exclusions and the otherwise excludables.

hopefully this will be translatable. take a look and then ask questions. the terms C and D rate are what the govt uses

Brian: you are correct, or at least your description is more accurate mistyped words rather than misspelled. Thanks for sticking up for me! But I deserve the ribbing anyway. Being single I was going to say no one's my 'type' or maybe I haven't met Miss 'Type' yet. oh well, I gotta catch up some work

there are only 'three' ways you can have a short plan year. I say 'three' because the first is one of those 'food for thought' 1. initial plan year. It may appear to be 'short', but the allocation can be based on 12 months of comp, and unless you do some special wording in the document, you still end up without having to prorate limits, etc. (Obviously deferrals can't be retroactive, but that is a different issue) 2. switch plan years (Plan is switched from fiscal to calendar or whatever. in that case, you have a short year, and you prorate things. 3. last plan year (final 5500). this only occurs when all assets are paid from the plan. even if a plan is 'terminated', it is still 12 months along. remember it this way. when you fill out the 5500, do you code it as 12 months, or through the 'term' date. well, it will be 12 months unless you actuall paid the $ out. No proration until that actually occurs. Hope that helps describing that way.

You read too many articles early on. Everyone was jumping on this bandwagon that safe harbor plans were deemed not to be top-heavy. I recall reading many of them and thinking that it was great. then I read the actual Bill (I don't recall where I got it from somewhere on Benefits Link at one time) anyway, there is a key phrase that was missed by a lot of people. It involved the word 'solely'. basically, the plan is not top heavy if it consists soley of deferrals and safe harbor contributions. so now everyone was concerned about does that mean 'in a given year' or does that mean ' those are the only options possible'

Austin: Ha. Years ago (grade school) they used to make fun of someone and call him 'Austin Space'. (Of course, as a kid, that was a big television show.) Anyway, in regards to your question about why someone would elect out. Possibly a lack of brain cells. no seriously, there is a legitimate reason. honest. If you were working for a company that made minimal contributions, you might be better off electing out and putting into an IRA. I remember cases where someone might get 25 cents in forfeitures and wouldn't be able to get a full deduction in the IRA. The law may be unfare in this regard, but thats life.

Rosemary: my answer was a bit tongue in cheek, although that is the answer I have always been taught. Rereading your question, you indicated that HCEs signed the waiver for the 'current year'. I did not think one could even do that. certainly under the 401k regs 1.401(k)-1(a)(2)(iv) a"..a one time irrevicable election upon an employee's commencement of employment or upon the employee's first becoming eligible under the plan... on the employee's behalf to the plan and to any other plan of the employer (including plans not established) for the duration of the employee's employment" or, perhaps I would word it something like a one time election is not the same as a decision not to defer. If it was, a profit sharing only plan would be in trouble because you have in effect created a 'deferral' arrangement where one didn't exist. The 'irrevocable' part and 'including plans not established' seem pretty clear. The only question then, would be, could a participant waive participation at a future date if he was already in the plan? personally I don't think so. The current Corbel language simply says "an employee may , subject to approval of employer, elect voluntarily not to participate in the plan. The elction not to participate must be communicated to the Employer, in writing, 30 days before the beginning of the plan year." There is nothing in the document to indicate that the employee can then again elect to particpate at a later date. And again, I think it boils down to the regs implying that anything other than the one-time election will constitute a deferral arrangement, where one might not exist.

they (IRS) used an example something like new plan 1/1/2001- 12/31/2001 contribution made in 2002 so for first year (to see if top heavy needed in 2001) you include the receivable. now you look at 2002. balances as of 12/31/2001 would be 0 unless you included the receivable in 2002 as well. I think the question came about because someone had a plan that would be top heavy unless the receivables were included. this individual's argument focused on what : the term 'account balance' (found under 416) should mean. or rather account balance plus adjustments for contributions made after the end of the year. The argument being the the adjustment doesn't refer to receivables - those are already part of a person's account balance for all other purposes - rather it refers to waived minimum funding deficiencies. In other words, the requirement has the effect of determining top heavy status as though the contribution required under 412 had actually been made. I hope I haven't abbreviated the synopsis too much. I'd copy and post the question/answer from the cd rom, but not quite sure I have the right to do that, and if ASPA is going to do it anyway, then you will read it there anyway. hope that helps.

not sure when ASPA will post the Q and As. we left Tues night and did not stay for the final wrap up session, which is today (Wednesday) the original question was that no forfeitures or contributions were allocated. there was no discussion as to 'what if only forfeitures were allocated', except purhaps to have forfeitures reduces contributions (or pay expenses)

the following were from the IRS Q & A. the comments only express opinions. they do not reflect any official position, nor have they been approved or reviewed by the Service or the Treasury. (so basically they were like opinion letters, can you rely on them for your particular situation? well, not really, but they might provide a good starting point. otherwise excludables - Q. must the employer use the plan's entry dates or the maximum entry dates permissible? A. use 1st day of plan year or 6 months after meeting the 1 year wait. (That is of course slightly different than dual entry dates.) for top heavy - include receivable profit sharing contributions. (That is different than what I ever learned, except of course in the case of a first year plan. Interesting discussion on this one!) minimum distributions - Q under the new rollover rules can an individual rollover an amount from an IRA to a qualifed plan and delay required minimum distributions? A. YES. small distributions - Q. ...amounts are small, many are less than $15. Is there a de minimis amount (that one can skip paying)...? A. No, there is no de minimis rule

yes, but look at the numbers and do the math. consider an owner making 200,000, no deferrals, and you provide 40,000 contribution. that is 20% of pay, so the gateway is 5%. (A difference of 4 times) 1.085^17 = 4.0026, so if you have a considerablly younger workforce (difference in ages is greater than 17 years), then an age weighted plan will actually require a smaller contribution, because you pass the gateway not by using a minimum allocation, but by using smoothly increasing rates! And generally under that scenario you always pass cross testing as well!

Compensation is never prorated in determining HCE. The law is clear on that one, it is the prior twelve month period (or in the case of an off calendar year, I guess you could make a calendar year election to make your life easier - but it is still 12 months.)

look up in the dictionary what 'irrevocable' means.

At the ASPA conference, the IRS voiced the following opinion. This is an opinion only, of course, and does not reflect any official position, nor has it been reviwed or approved by the Service or Treasury. but at least it is something to go by... Q. A plan has the following possible contribution types: 401k, 401m and discretionary profit sharing. No discretuionary profit sharing will be made in the future. Can the matching safe harbor contribution satisfy top-heavy...? A. Yes, however, if no profit sharing contribution is made such that the only current contributions are elcetive deferrals and safe harbor match, then the plan is not top heavy. This one was actually asked twice under the Q and A (21 and 33) and though posed slightly differently in the two questions, the answer was still the same.

I'll respond, mainly for an explanation reason. you said "does the general nondiscrimination test apply because people are getting different rates?" look at it this way: there are 'always' 3 nondiscrimination test ADP for deferrals (maybe QMACs and QNECs) ACP for match (Maybe QNECS, QMACs and after tas 401(a) for the non-electives. if the plan is a safe harbor plan, you are deemed to pass. (Same logic with a safe harbor 401k - you are simply deemed to pass) so, you have different rate, but they end up getting tested under the ACP test. the acp test is the general nondiscrimination test for matching contributions. as for step 3, the actual regs in 1.401(a)-4 simply says "current availability...is satisfied if....satisfies section 410(B) (w/o regard to the average benefits percentage test)." in other words, pass either ratio or nondiscrimination clssification