Tom Poje

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

this 7/1 stuff sounds silly to me. for articles discussing this, you might check under Benefits Buzz 10/14/02 article by benefits buzz. or try Noel Ice's excellent discussion. http://www.trustsandestates.net/Nutshell-P...m#_Toc536524792 in particular, see Article 2 for effective date and make up your own mind.

well, the problem is, especially when responding to threads, is jumbling things up. step 1 is 410(B) coverage - the above example might fail the 401(m) portion if you had enough NHCEs in the 0 group and no HCEs in that group. a very likely case. In that situation, you could still pass avergae benefits test - which would be both tests. step 2 is the ADP/ACP test, which again might fail if you have a bunch of NHCEs at 0, as is happening in this case. step 3 is the BRF, which works like the 410(B) with the exception that there is no average benefits % test to worry about. hopefully I haven't missed something in this very brief explanation.

do the math if the HCE makes 200,000, then to max him out at 40,000 takes a 20% contribution. the minimum for NHCEs is the lesser of 1/3 of 20% or 5%, so you would have to put in at least 5%. Then you still have to pass cross testing. if the HCE deferred 11,000 then the profit sharing is only 29,000 or a 14.5% contribution. 1/3 of that is 4.833333. oooooooooooooooooooooohhhhhhhhhhhhhhhh. a big savings of .17% that you have to give the NHCEs. plus you have to pass the ADP test, and if you go safe harbor you are giving 3% fully vested SHNEC to people that might be short term employees. you really have to base the decision on how easy it is going to be to pass your cross testing. obviously there is a big difference in E-Bars if you are giving a 40,000 or a 29000 contribution to the HCE

Austin: Diet is correct in regards to BRF (I was thinking of 410(B)) under 1.401(a)(4)-4(B) when testing current availability you satisfy 410(B) without regard to the average benefits percentage test. It is a special provision for BRF testing.

agree that rate group 3 fails (ratio percentage), obviously passes the safe harbor % since it is greater than 50%, so you need to pass average benefits percentage test. for the other groups, my understanding, is that you count those individuals who received at least as much... thus for group 1 you have 14 hce and 35 nhce so 100% rate group 2 how many ees can receive at least the $1000 you have 7 hce and 25 nhce 25/35 / 11/14 90.9%

And I thought I was a bit unstable! Nice response, obviously, you are anything but 'average'. I see you have a long way to go to get to the ASPA conference. oh well, I will be there!

It was announced to be 87,000, but do you know how that value was determined? 1994 Base $60,600 1992 avg wage index $22,935.42 2001 avg wage index $32,921.92 60,600 * (32,921.92 / 22,935.42) = 86,986.34 round to nearest multiple of $300 next year simply substitute the 2002 avg wage index into the formulas. the other numbers are locked in place. ...just another useless mathematical calculation brought to you by me.

This was from the Q & A board on Benefits Link (Derrin Watson's Board WHo's the Employer Illegal Aliens As Employees (Posted May 22, 2001) Question 100: What action should be taken when it is discovered that participants are in a plan due to supplying false information supplied by illegal aliens to the employer (fake social security numbers)? These individuals participated in the plan and received contributions. What should be done with the money contributed for these "participants?" For plan purposes, should the illegal aliens who worked be considered employees and participants, even though they were not legally employed? Should this be treated as an operational error and corrected under SCP? Answer: We start with the notion that the common law definition of employee is the basis for determining if someone is an employee for plan purposes. That common law definition, with all its various factors, does not consider whether someone is in America legally or not. In other words, if someone born and raised in this country would be considered an employee, then an illegal alien performing the same duties under the same conditions will also be considered an employee. ERISA does not contain any exclusions for illegal aliens. IRC 410(B) does allow a plan to exclude nonresident aliens without U.S.-source income, but that does not apply here. These workers definitely have U.S.-source income. They earned it by working in this country for the employer and being paid a wage for their services. I assume the plan does not contain a clause excluding from participation persons who are not U.S. citizens or who do not have a green card. (I’ve never seen such a clause.) Even if it had one, these workers would have to be counted in determining whether the minimum coverage test of IRC 410(B) was satisfied. So, in the absence of such a clause, if these individuals were eligible to participate before you knew that they had misrepresented their eligibility for employment, then they were eligible to participate notwithstanding that misrepresentation. If the plan covered all employees, or all employees in a particular job classification, then they are eligible under the terms of the plan and are entitled to their vested accrued benefits, the same as with any other employee. Hence there is no operational error to correct. The plan has been administered in accordance with its terms. The workers were employees and entitled to coverage. Issues relating to employees, including a detailed discussion of those factors which are relevant in determining that status, are discussed in Chapter 2 of my book, Who's the Employer?.

Brian: I can't stand it anymore. You should know by now that Mr and Mrs Wong had a child. It was black Thats because two Wongs don't make a white. oh well, yes 402(g) is excess deferrals

yeh, Dave. Don't settle a case like those described below. That would be a "bad job, Walt, bad job" >>It's time once again to consider the candidates >>for the annual Stella Awards. >> >>The Stella's are named after 81-year-old Stella Liebeck >>who spilled coffee on herself and successfully sued McDonalds. >>That case inspired the Stella awards for the most frivolous >>successful lawsuits in the United States. The following are >>this year's candidates: >> >>1.Kathleen Robertson of Austin, Texas, was awarded $780,000 by >>a jury of her peers after breaking her ankle tripping over a >>toddler who was running inside a furniture store. The owners >>of the store were understandably surprised at the verdict, >>considering the misbehaving little toddler was Ms. Robertson's son. >> >>2.A 19-year-old Carl Truman of Los Angeles won $74,000 >>and medical expenses when his neighbor ran over his >>hand with a Honda Accord. Mr. Truman apparently didn't >>notice there was someone at the wheel of the car when >>he was trying to steal his neighbor's hub caps. >> >>3.Terrence Dickson of Bristol, Pennsylvania, was >>leaving a house he had just finished robbing by way of >>the garage. He was not able to get the garage door to >>go up since the automatic door opener was >>malfunctioning. He couldn't re-enter the house because >>the door connecting the house and garage locked when >>he pulled it shut. The family was on vacation, and >>Mr.Dickson found himself locked in the garage for >>eight days. He subsisted on a case of Pepsi he found, >>and a large bag of dry dog food. He sued the >>homeowner's insurance claiming the situation caused >>him undue mental anguish. The jury agreed to the tune >>of $500,000.

Richard: See Appendix A of Rev Proc 2002-47 .02 Failure to provide top-heavy... "permitted correction is to properly contribute and allocate the required top-heavy minimum to the plan..." usually you also have to add earnings, though I believe you can ignore losses. what is interesting in the above example, such a contribution might cause the cross testing to fail. Depends on whether the individual is key or not - sometimes, as noted earlier, plans exclude keys from minimums. If everyone received 3%, then of course, the plan would simply test under the allocation method rather than accrual method. I guess technically you have to run the test, because the formula itself is not really a safe harbor formula since people are in classes, but it is a moot point, since everyone received 3% only. If the above plan had actually needed cross testing (for example 3% going to a young HCE and x% going to other HCEs) it would probably have to be broken up into component plans to pass testing - (e.g. some ees tested on an allocation basis, the rest on an accrual basis) ugh, too much extra work

interesting thought. a document has to include language for top-heavy. I do not believe there is or wiould be any requirement for the minimum gateway. consider a cross tested plan (pre-gateway rule) there is nothing in the document that specifies passing the cross-test, but you modify the contribution to make sure it does. I would think the gateway falls into the same category.

yes and no. how is that for a cop out answer. There is a Plan Correction Answer Book (Reisch/Ashton) actually, I think the second edition of that book is out, but a different editor on the cover, if my memory serves me correctly. we had received a trial copy (30-day deal) but not enough changed in the book for our purposes, so we didn't keep it. (Or maybe Reish has come out with his own Correction Book as well - I don't know) you are fairly new on the board, so you might not be aware that there is another spot on this board. I am not sure how you are logging onto benefits link. if you simply go to www.benefitslinl.com then select Q & A then scroll down to correcting plan defects, you can find Q and A 107. I think it should still be there. I had printed those out, so that is why I am familiar with them. I think they formed the basis for the Plan Correction ANswer Book.

you did not indicate which report you want the loans to show as 100%. for instance, on the summary of accounts I had to modify the crystal report so that the vested balance that prints is "if {RPTPLANACCT.ACCTNAM}='Loan' then Sum ({RPTEEACCT.ENDBALAMT}, {@AccountGroup}) else Sum ({RPTEEACCT.VESTBALAMT}, {@AccountGroup})" Basically, this statement is saying that if the account is named loan, instead of printing the vested balance, print the end balance (e.g. since vest bal = end bal you are at 100%) otherwise, print the vested balance. so it is really a matter of modifying the report you are using. (On the other hand, if the loan is taking from vested $, then the account from where the loan was taken is going to show the wrong vesteing. think about it. Suppose you had $10,000 in a 20% vested account. your vested balance is 2000. now suppose you took a $2000 loan. you would want to have loan account = 2000, vested 2000 other account 8000, 20% vested, but vested balance = 0 since you are already showing it vested elsewhere. ugh. no wonder you should only allow or take loans from fully vested accounts. it is just begging for headaches.

perhaps you are thinking of the correction method in which ineligible people deferred. the plan is retroactively amended to make eligibility more liberal. usually that would only involve NHCEs. see Q & A 107 (Correction of plan defects) for more discussion of deferrals exceedin plan limit. basically, return $ plus earnings.

ok, this is the way I think of it. To satisfy ADP safe harbor, you have to provide 1. Basic Match 2. enhanced match or 3. Safe harbor Nonelctive Contribution (which I affectionately call SHNEC just cuz I can't stand typing the silly words over and over) at this point, you have done nothing to satisfy ACP safe harbor. note that the enhanced match could be anything, as long as as it is a better deal than the basic match in all possible scenarios. Therefore, it could be greater than 100%, it could be 100% up to 8%, etc. now you have to satisfy ACP safeharbor. if you provided the Basic Match, you have satisfied ACP safe harbor. if you provided the enhanced match, you MIGHT have to run the ACP test, if the enhanced match was greater than 6% of deferrals. (or if there are after-tax contributions) if you provided the SHNEC, then to satisfy ACP safe harbor you need some sort of match. the discretionary match is limited to 4% of compensation. so suppose you provide a 66.66% match up to 6% deferred. This satisfies the cap on deferrals (no more than 6%) and the maximum match is 66.66% * 6 = 4% of compensation which satisfies the limit on comp. If I remember correctly if you exceed the limits, then you run the ACP test either on just the amounts exceeding the limit, or, you could test on all match. If no discretionary match is provided, then there is no ACP test, no safe harbor needed, etc. Note: the SHNEC does not satisfy ACP safe harbor, the ACP simply doesn't exist. Now, can you provided the Basic Match or Enhanced match and still provide the discretionary match? yes, but why would you, it just confuses my simple brain. and those limits will kill you.

September's CPI has just been released. It is 181.0 So, based on my understanding of the regs, this gives us the following limits for 2003: Comp limit 203,180, so we stay at 200,000 415 limit 40,636, so we stay at 40,000 DB limit of 162,544 so we stay at 160,000 guess there will be no changes for 2003. Based on the numbers, I figure the CPI index needs to be 182.3 for the comp limit to be 205,000 and the 415 limit ti be 41,000. It is reasonable to expect that should easily happen for 2004.

Mr. Phish: A slight revision to your statement The amount has been raised to $50 for deliver of small benefits for corrective distributions under the EPCRS program. Again, that is for corrective distributions only, not the distributions talked about above. And, if you overpaid someone, you no longer have to request return of amounts less than $100.

the effective date was for plan years after 1998 it was from SBJPA basically it was worded something like take into consideration all those employees who have have met the statutory minimums (age 21 and 1 year of service) AND also add in those otherwise excludable employees who are HCEs. again, you are not excluding or testing separtely any HCEs. and again, that is an option. you could still test them separately and run 2 tests (if you are out of your mind) just kidding, there may be a time when you want to do this. I suppose for example, what if the only new hire was the owners kid and he deferred 15%. I would want to test him separately as an otherwise excludable. as for the term 'moderator', Dave Baker pays us in compliments. Dave asked a bunch of different people to sort of keep an eyeball on different boards. I ended up with cross-testing. I can tell you I have learned a lot from the boards. when someone asks a question, I am fool enough to look up the answer just to see if my initial thoughts were correct. Can never stop learning, can you? and it is obvious you are intelligent to keep asking questions. A sign of a true genius in my opinion. I am usually to shy to ask questions.

also, if you run an amortization schedule on an existing loan your print out may indicate a different loan payment! this may happen when there are only a few loan payments left, or if extra payment have been made. you have to make sure you model before printing (and enter the monthly loan payment). otherwise, the system will look at current loan balance # of remaining payments, and recalculate the monthly loan payment. This is only on the printed amort schedule, and doesn't effect the actual loan payment. ok, maybe they have changed things since the last time I checked this report. It has been awhile.

what you have on the ADP/ACP test is the following: under the new rules, an HCE who would normally be treated as 'otherwise excludable' is treated as having met the age 21/1 year of service. Therefore, in this example, the owners kid is included in the big test you run. great stuff if he doesn't defer! but because you did this, there are no HCEs in the otherwise excludable group, so there is no need to run the test. that is what you are thinking of. Of course, you still have the option of using the old rules as well. as for schedule T, yes you have to disaggregate, and that is where you can end up with an HCE in the otherwise excludable group, and not on the ADP test! You are correct, you 'might' be able to check all NHCEs benefit, but remember, at that point you might also have 6 'plans' 401(k) 401(k) otherwise excludable 401(m) 401(m) otherwise excludable nonelective nonelctive (Otherwise excludable) and if in one of them an NHCE doesn't benefit, you can't check your box.

pmacduff: that should probably be 'shy' dog. I will be at the ASPA conference, but not doing anything special. Too bad. I 'discovered' a couple of 'lost' Beatle pension songs. oh well. Actually, the boss is running a booth this year, so I will be there part of the time.

One possible exception to the ER getting a separate Trust EIN would be to use the trust EIN of the place where the assets are held- e.g. Manulife, Lincoln, etc. reminds me of a song I wrote a few years ago, that came about because we needed to get EIN numbers. I shared it before, but in case you missed it: Old Macdonald Old Macdonald had a plan He needs an E-I-N And in this plan he has match E-I E-I-N There’s a deferral here a deferral there Here a match, there a match Everywhere a match match Old Macdonald had a plan E-I E-I-N Old Macdonald ran a scam I-O I-O-U And in this scam he stole the dough I-O I-O-U Steal a few bucks here steal a few bucks there Here a buck, there a buck Everywhere a buck buck Old Macdonald ran a scam I-O I-O-U Old MacDonald is in jail D-O D-O-L He hasn’t got a chance of bail D-O D-O-L Steal a few bucks here serve a little time there Here a year there a year The judge gave him about 20 years Old MacDonald is in jail D-O D-O-L Old MacDonald’s on parole And living in RIO He has a big fat Swiss Account RIO – R-I-O With a pretty girl here and a pretty girl there Here a grand there a grand He’s got about 500 grand Old MacDonald’s on parole And living in RIO Old MacDonald should be alarmed E-I E-I-O His former help will do him harm E-I E-I-O There’ a gunshot here and a gunshot there Here a shot there a shot Everywhere a gunshot Old MacDonald bought the farm E-I E-I-O

one exception that comes to mind would be a controlled group scenario, where there is a group who is not benefiting. I am sure there are other 'odd' situations that might arise. But you are correct, generally the plans would pass.