Tom Poje

k man: I think what he is saying is the following: you have a plan with 100% vesting. if you want, you can amend the plan to 2/20 vesting. certainly thats not a problem. you can't take vesting away from someone, so those ees already 100% vested remain 100% vested. so, you probaly can do what you asked about without worrying about BRF.

dang it, I knew I was guessing before! if the document uses 1-year bk rule then you restore all svc after ee completes a year of service. if it uses Rule of Parity then you lose svc for vesting, but only if you are: 0 vested had at least 5 consecutive break in svc. Deferrals are not considered when determining if you are zero vested. The 5 years could be more if you worked for a company greater than 5 years, but with the minimum vesting schedules in effect now, there is no way you would be zero vested. I always have to look those rules up in regards to break in svc. what a bother.

you are not alone. I even printed off the tax form and was confused how it really works. oh well.

so there will be no profit sharing contribution. pineapple has a valid point when he says you can't keep amending if it significantly favors HCEs. and technically, opting in and out of safe harbor every year is considered amendmens. on the other hand, every other plan year the HCE gets 'nothing' since you indicated there will be no profit sharing, so one could argue the amendments do not favor the HCE. hmmm. I suspect the IRS would catch on eventually and put a stop to something like that with a technical correction of some type. In other words, I wouldn't recommend the scheme, it just seems like you are pushing it. From another perspective, such a plan is a good way NOT to retain good help. but of course, a lot of companies don't think about that.

I think KJohnson is correct. I thought repayment restored years of service for vesting, but had nothing at all to do with eligibility.

sounds clever, and then the hce puts in the catch up as well. I suppose it makes more sense if the plan isn't top heavy, since you won't save much if you have to cover top heavy. (except for vesting)

My guess, whether 'educated' or not is up for grabs. your plan year runs from 6/1/01 to 5/31/02. plan limits deferals to 10%. plan is amended to allow catch ups 1/1/02 section 631 which is about catch ups says it applies to taxable years begining after 12/31/2001. That is very important, and a major difference from being plan years beginning after 12/31/2001. so if ee makes 80,000, for a given plan year, he is limited to 8,000. therefore, if you are in the plan year from 6/1 - 5/31 I would say he could defer 9000. the rest of the calendar year 6/1/2002 - 12/31/2002 his deferral is limited to a aximum of the 402 g limit of 11000 + 1000 catch up - whatever he deferred in the first half of the year. But he also is limited to 10% of comp in the second half of the year. Nuts. I would get rid of the 10% cap at the same time i amend the plan to allow the catch ups. i already have enough headaches. By the way, section 631 is found under Subtitle C -which carries the heading "enhancing fairness to Women' then says catch ups are ok for individuals age 50 or over. tricky huh? to get the measure through, we say its fairness to women, but then allow for everyone.

before going further, what does the document say for rehires? the thread started out saying an ee was rehired, and they don't want to let them back in until a year has passed. and different comments were made, all true (at least to a degree), but that still doesn't say what the document says. as to retroactive entry, I think even the ERISA Outline book says that is the problem with the 1 year bk in service rule. a person would have to retro entry and since an ee can't defer at that point it presents all types of problems. I don't think theeOutline Book says you couldn't do this, it's something to be aware of and the problem it causes.

open a can of worms and.... the new vesting only applies to match and not profit sharing. the new vesting rules only has to apply to new match $ if you so elect. (Personally I think one would be crazy to have old match operate under one schedule and new match under the new schedule) if you restate the document with an effective date of 1/1/2002 (which I think would be the most common date) then I think you have to give such termineen the 6 year schedule. You have to operate the plan as if the change was in effect. Again, if you restate and say that the vesting applies only to new $, then it would only be the new $ that get the schedule.

ugh, there is no easy explanation to what you have asked. At the ASPA conferences there is usually a session on cross testing, and I am sure the same applies to other such groups. My experience has been you have to have at least part of clue what is going on to make such sessions even worth while. (but please don't take that as a comment to discourage you if you have never looked at one before. As a general rule of thumb, if you have aa average 10 year difference in age between the HCE and the rank and file, you have a good candidate. Once you hit a difference of 15 or more, you have an ideal candidate. If all the employees are 18 years or more difference, an age weighted plan is the best way to go in a purely profit sharing plan. But it all depends on how many HCEs you are talking about in a given plan. Depends on whether you are talking about a plan that also has a 401K feature, etc. The ERISA Outline Book discusses a lot of the concepts and there are some examples as well. If you are doing anything in pensions that is a good resource to have anyway. I've been asked to add some material to the Coverage and Nondiscrimination Answer Book, so I take question like you ask and try to work them into the book. There are already questions like What are the steps in the cross-testing process, how is the ratio percentage test performed,etc.

I think the common quote among pension gurus would be 'does it pass the smell test?' my gut feeling would be this is a rather aggresive interpretation of things, and I would be worried an IRS agent would disallow it, possibly on these grounds: The ACP test consists of those 'eligible' for the match. you are treating a deferral as a 'match', but that is different than saying the individual is actually eligible for the match - at least in my opinion. Using your argument, if I failed 410(B) coverage for the 401(m) portion of the test, I could treat some NHCEs deferrals as a 'match' and then I would 'pass' 410(B). ugh. now it really smells. my opinion only, of course.

yes. the 3% non elective satisfies the ADP safe harbor, and the discretionary atch satisfies the ACP safe harbor -though any match above 4% of comp would be subject to ACP test.

assuming the plan you mentioned has no 401(k) arrangement, then the notice can be given as late as the effective date of the 401(k) arrangement Q-11 of notice 2000-3 (such plans are treated as 'new' plans.) In other words, the 30 day notice is waived for the first year of a new plan. or another way of thinking of it:(example) pretend all employees were hired June 1 (treat as if they are all new eployees). New plan begins June 1. You do not have to give 30 day notice to new employees, you simply tell them a safe harbor exists. the 401k arrangement must be at least 3 months long if they wait forever to put it in.

in regards to deferral limit, I would add this thought as to remember the rule: you file your individual tax forms with all your w-2 attached. the govt is going to add up the deferral amounts to see if you exceeded the 402(g) limit. this counts for all plans for all employers, so you know that it doesnt matter if the plan is fiscal year. your w-2's are on a calendar year basis. as for the catch-up, the only possible caution: plan has to allow for catch-ups. you can't simply make them. therefore, I think you have to amend the plan by 5/31/02 as well.

answers, I think!

as regards to question 2, if I understand you correctly, Harriet had a SIMPLE plan and wishes to dump it in favor of a SEP. The law clearly states that a SOMPLE must be the exclusive plan for the year. at the ASPA conference (2000) [question 36] what if a qualified plan is established after the SIMPLE plan is funded? the SIMPLE is invalidated and contributions must be returned by the due date of the employees tax return. This particular question is cited in The ERISA Outline Book as well - 2001 edition , page 12.21 I would assume this includes gains/losses, etc. Remember, the exclusive rule for SIMPLEs includes 403(B)s, 457s and SEPs as well. Note: as your questions deal with SEPs and SIMPLEs, you might wish to ask them in the SEP/SIMPLE board. There are a lot better experts in regards to these types of plans than I am!

The regs require you to use on of the definitions that satisfy 414(s) - and the typical document will define 414(s) comp as being from date of participation, so that is what you have to use. If you are processing the plan only once a year on Relius, then the system has to be 'told' what comp to use. there are a couple of ways to do this, otherwise the system will use whatever comp (e.g. ytd comp) that you plug in census.

good point, the original post doesn't say. it just says the individual wasn't deferring. I took it to mean the ee was hired last year, became eligible this year. e.g. could have been hired 2/1, completes 1 year and then retro enters at 1/1/ could be an hce, could be nhce.

There is no problem with retroactive entry dates, its just you can't defer on that money. But if my last paycheck was $10,000 (ha ha ha) ok, if your last paycheck was 10,000, and assuming you can change deferral election at anytime, and assuming your plan allows you to defer any amount as long as you dont exceed 7% for the year, you should be ok. well, no, you still cant defer 100%, it would be 100% after FICA taxes are taken out. personally, 3 days before the end of the year, an HCE involved, etc, the whole thing smells, especially like trouble.

not sure what you are asking. it sounds like you have a 401k profit sharing plan with the following classes: 1. owners at 13.25% (assuing the kids dont work there) 2. rank and file at 4% does the document say these %s are pro rated depending on how much the contribution is? if not, you are locked into the formula - almost like a money purchase. If plan has a last day requirement, I would amend to simply a class plan with no %s listed. next year you have to give more than 4% anyway, since you are stuck with 1/3 the HCE rate. If you exceed the 15% deduction limit you are stuck paying the nondeductible penalty.

one, the limit is only 10,500 not 10,600! This one may hinge on exactly what the document says or the enrollment forms say. sometimes they say 7% per payroll period maxium, or the form says enter a value, maximum of 7%. At that point, I think there is little you can do. especially since it is obvious you didnt let anyone else do this and the person involved is an HCE

it doesnt even matter that the ee resumed work. he was a participant, and all nhces, regardless of hours worked or last day must receive the 3% safe harbor

Hello Mike! great to see you on Benefits Link! guess I can retire from trying to answer questions and let an expert take over! go Wolves!

your annual notification to the client should have a toggle box that could be used for that purpose. again, once an ee has completed 1 yr svc/age 21, he will get the safe harbor even if he works less than 1000 hours in a given year. see enclosed sample notification

you can NOT place an hours or last day requirement on the safe-harbor contribution. you are permitted, in the case of a plan that has immediate eligibility for deferrals to place a year of service/ age 21 requirement. In other words, you can exclude those who never would have entered the plan if there was a 1 year / age 21 requireent. but once someone has worked 1 year (e.g. completed 1000 hours) and attained age 21, you can not exclude them. in some ways, this is no different than implementing the 'otherwise excludable' option available for adp testing, coverage testing, etc.