Tom Poje

I think all it is simply saying is that based on the facts, without going any further, we know the plan passes safe harbor, so it for sure passes the midpoint. for example, if I have 2 NHCEs and I know my HCE is less than 1 of them, I know for sure I pass any safe harbor, since safe harbor is at most 50%. i dont have to worry about looking up the midpoint.

Stephen: Obviously you have to follow the terms of the document when calculating what to refund for 415 purposes. And it probably says refund deferrals first because that 'benefits' the person the most. You did not indicate how you calculated this amount. did you reduce deferrals down to the 415 limit, then calculate the match that has to be forfeited or did you calcualte both at the same time...e.g. calculate a smaller deferral, then the match that will be forfeited putting the ee at the 415 limit. that would be the most minimal effect. I would throw .08 of Appendix A of the self correction rules at them and say Sorry Charlie, this is what the regs say to do. The last two sentences are real clear on this one. (You did not indicate if the ESOP was leveraged, whether the HCEs received less than 1/3 the contribution etc, and that of course can effect you annual addition as well.)

the rule did not change, but rather an aditional option was added that you could treat all HCEs as having met 1 ye/age 21 no matter how long they worked. you can use either option.

Jim: If plan has a last day provision for profit sharing allocation, you could amend to a class formula as you desire. That is because no one has 'earned' a contribution for the year, and so there would be no cut back. If the profit sharing feature in the plan requires 1000 hours, then it is to late in the game to change that. (or I suppose, if 0 hours for death, and someone actually died, then again you are stuck since that person has already earned his right to a contribution) But yes, you can always contribute additional money to a safe harbor plan. in 2002 any additional amount would eliminate the free ride on top heavy, but that doesn't sound like a big concern here anyway. in your case, assuming 1 owner at $170,000 in comp and max deferral.... deferral $10,500 4% match 6,800 ps (desired) 17,700 which is 10.412% of pay note: the 1/3 rule does not take effect until 2002, so you do not need to worry about it this year. looks like in this plan the ps contribution to rank and file would be around 3 to 3.5% in the future.(providing you still pass testing)

correct. and the regs say (1.401(m)-1(e)(4)) that when applying the brf test to the rate of match you do not consider returnes of excess aggregate contributions. so return match first to correct failed ACP test, before worrying about BRF

If I undersatnd you correctly, you currently have a safe harbor 401-k with the basic match. you are suggesting that in 2002 the plan switch to the 3% nonelective. this could give group 1 9% group 2 ?? group 3 3% this would pass the 1/3 test so now if you can pass nondiscrim testing you are ok. you can not impute disparity on the testing since it wouldn't help. since 1.085^13 = 2.89, then you must have at least a few NHCEs who are 13 years younger than the HCE to pass the test.

catch up contributions are not considered when determining what % of pay a key employee has received. therefore, if the only contribution to a key was a catch up, the top heavy minimum would be 0. Catch up contributions are considered part of the balance and would be used to determine if a plan was top heavy. be careful! you did not indicate if there was a match. you can match catch up contributions - in fact, since most documents simply state they are matching deferrals, I think you would have to specifically state catch up contributions are not matched. otherwise you will have to provide a top heavy minimum for the % of match he received.

hmmmmmmmmmmm. the regs say: (Sec 613) The term 'top-heavy plan' shall NOT include a plan which consists solely of "(i) a cash or deferred arrangement which meets the requirements of section 401(k)(12), and "(ii)matching contributions with respect to which the requirements of section 401(m)(11) are met. basically, if the plan only has safe harbor contributions, it is not considered top-heavy but then the following paragraph follows: If, but for this subparagraph, a plan would be treated as a top-heavy plan because it is a member of an aggregation group which is a top-heavy group, contributions under the plan MAY be taken into account in determining whether any other plan in the group meets the requirements of subsection ©(2). now, I have no real clue what this paragraph is saying, especially with the word MAY thrown in there. Heck, I can't even figure out what subsection ©(2) refers to - that appears to pertain to top heavy determination replacing the 5 year look back with a 1 year look back.

I think the IRS reasons that the 3% safe harbor is tied to deferrals (e.g. you get a free ride on the ADP test). since it is related to deferrals, you can not use it as part of integration...you would not integrate a match, or a QNEC, so the logic is the same. also, because you can't integrate it, you also can't impute disparity on the 3% if you are using it for cross testing purposes.

that would be my understanding of the rules - he has to hit max deferrals before he can do catch up. there has been some discussion of imposing a plan limit of 0% on owners. therefore he has hit the plan limit, and by logic, he should be able to put in a catch up of $1000. I see nothing that would prevent soeone from doing that. I don't think you can impose a 0% deferral limit on a plan wide basis and accomplish the same thing. that definitely sounds discriminatory. perhaps if you put a cap on certain (or all people) you would have to do a BRF test. if the individual is an hce it should be ok since you can generally be descriminatory against hces. I don't think anyone knows for sure.

I would add the following comments: (they may seem obvious, but if you haven't used the import that much, maybe you aren't aware of them) save your DER routine as delimited file format use full century in your spreadsheet and import format remember to strip commas from your excel sheet if you have columns in your sheet you do not want, you do not have to delete the, you can use 'pad' in your import as a place holder I would make sure that the last column in your excel sheet has an item for all ees- even if you have to add a dummy character and pad it out in the DER. Due to the way clients fill out excel sheets you sometimes have an individual record that ends earlier than expected.

you didn't indicate how familiar you are with modify reports. all you should have to do is open the report in Crystal, go under details and @distramt, the formula is: {RPTEEACCT.DISTRAMT}+{RPTEEACCT.LNDISTRAMT}+{RPTEEACCT.PREMAMT}+{RPTEEACCT.HARDA T} + {RPTEEACCT.HARDALLAMT} + {RPTEEACCT.INSVCAMT} delete {RPTEEACCT.PREMAMT} from this expression and add it as its own item under details. subtotal for lines 6a, 3 and 2 and grandtotal for the footer. do the same for shares.

its 613(d) of the EGTRRA stuff ...paragraph (4) of section 416(g) is amended by adding the following... (H)...the term 'top-heavy plan' shall not include a plan which consists SOLELY of.... emphasis is mine. This has been missed in a lot of write ups.

just what do you mean by 'account activity' report? Do you mean summary of account? or is there a particular report you like and you simply want a modification of it? should be easy to do.

KJohnson: Yes and No. The regs clearly state a plan's whose contributions consist SOLELY of safe harbor contributions is not deemed top heavy. In this case, there will be additional contributions, so the free ride is not there. There is some argument what is meant by SOLELY. Does that mean forever, or is on a plan year by plan year basis. General thought from the ASPA conference was that it was on plan year basis.

I am sure the software will be written to handle it, but the question will be the timing. some changes, like catch up contributions, really doesn't need to be done until the end of 2002. but top heavy, that is here and now in another month and a half. throw in Thanksgiving and Christmas.... are you a betting man Butler?

the new rules are effective for plan years begining 1/1/2002. Interesting, though. you could end up with some former keys as a result

and to clarify James' statement. this is a correction permissablen under the SCP program.

wow, you said a mouthful! I don't have to run and ADP/ACP test because of the match, but what about top heavy? Since you said the plan will be cross tested, that implies there will be more than safe harbor contributions, therefore you will have to provide top-heavy as needed. If so, do I need to deposit an additional contribution for those participants who elect not to defer? What about a cross tested plan using the gateways? Yes, those that don't defer will need top heavy. The matching contributions to others can satisfy their top heavy, but since you have to put in a gateway for all employees, it probably wouldn't come to that. the gateway will satisfy top heavy. Would any part of the match be used to satisfy the gateway allocation? No If you use a 3% non-elective, it can be used in cross testing, but you can not impute disparity on that piece.

its the regs, there doesn't have to be rationale. hence, a grandchild's ownership interest is attributed to the grandparent, but a grandparent's ownership is not attributed to the grandchild.

Generally the answer is no, but that depends on your document itself. A number of years ago the regs had this rule most people referred to as Family Aggrevation. In 1997 it was eliminated, though if I recall, you could actually retain it...or, perhaps, you could keep it depending on how your document was worded. (But only for allocation purposes)Some documents merely referenced the regs instead of actually saying you prorated the compensation. anyway, it is restatement time. and so, unless you have a DB plan that specifically stated you pro rate the comps, and you are trying to keep costs down, you restate your document properly, if need be. The following is from Sal Tripodi's checklist for operational compliance during the GUST Remedial amendment period: B. Repeal of Family aggregation 1. Begining with 1997 plan year, family aggregation provision MUST be ignored when running coverage and nondiscrimination 2. What was the first plan year in which the plan's aggregation provisions were ignored to determine the amount of contributions allocated to a participant or the benefit accrued for a participant?

the document should describe the different classes or groups, and then generally will specify the allocation will be comp to comp in each group. e.g. Section ﷡﷡﷡﷡﷡ For each Plan Year, the Employer shall contribute to the Plan for each Class of participants such amount as shall be determined by the Employer. The Employer shall notify the Trustee, in writing, of the amount of contributions for each Class. ﷡﷡﷡﷡﷡ (1) Each Participant shall be assigned to a Class of participants as follows: Class A ﷡﷡﷡﷡﷡ Class B all others (2) The contribution made by the Employer for Class A shall be allocated to all Class A Participants in the same proportion that each Class A Participant’s Compensation bears to the total Compensation of all Class A Participants. (3) The contribution made by the Employer for Class B shall be allocated to all Class B Participants in the same proportion that each Class B Participant’s Compensation bears to the total Compensation of all Class B Participants. ﷡﷡﷡﷡﷡ As of each Anniversary Date any amounts which became Forfeitures since the last Anniversary Date shall first be made available to reinstate previously forfeited account balances of Former Participants, if any, in accordance with Section ﷡﷡﷡﷡﷡ .The remaining Forfeitures, if any, shall be added to any Employer contributions made to each Class of participants pursuant to Section ﷡﷡﷡﷡﷡in the proportion that the contribution made to each Class bears to the total contributions made to all Classes and allocated in the same manner as such Employer contributions are allocated. Provided, however, that in the event the allocation of such Forfeitures provided herein shall cause the “annual addition” (as defined in Section ﷡﷡﷡﷡﷡) to any Participant’s Account to exceed the amount allowable by the Code, the excess shall be reallocated in accordance with Section ﷡﷡﷡﷡﷡. then every year a notice similar to the following should be provided: ﷡﷡﷡﷡﷡ ﷡﷡﷡﷡﷡ BE IT RESOLVED, for the Plan Year ended ﷡﷡﷡﷡﷡, the Corporation shall make a profit sharing contribution of $﷡﷡﷡﷡﷡, which shall be allocated as follows: Class Amount ﷡﷡﷡﷡﷡ $ ﷡﷡﷡﷡﷡ ﷡﷡﷡﷡﷡ $ ﷡﷡﷡﷡﷡ ﷡﷡﷡﷡﷡ $ ﷡﷡﷡﷡﷡ ﷡﷡﷡﷡﷡ $ ﷡﷡﷡﷡﷡ BE IT FURTHER RESOLVED , that the officers of the Corporation and the Trustees are authorized to take any action necessary to implement this Resolution. Certificate I, __________________, the duly elected, qualified and acting Secretary of ﷡﷡﷡﷡﷡, hereby certify that the foregoing is a true copy of the Resolution adopted by the Board of Directors on the ____ day of _____________, ﷡﷡﷡﷡﷡ _______________________________ Secretary

if he was a 5% owner any time during 2001 he is still key. if he was only key because he was an officer then he becomes former key, and you exclude him entirely from the test.

no. sec 616 of EGTRRA added paragraph 12 to section 404(a) ... "for purposes of paragraphs 3,7,8 and 9 the term compensation shall include amounts treated as compensation under paragraph C and D of section 415©(3)" you no longer reduce comp by deferrals!

Kate: Thank you for your kind comments. as I said, I had an absoulte riot giving the presentation. The shirt was a bit toned down from some other 'wardrobe' I have worn, but the boss wasn't sure if ASPA was ready for anything more - at least on my first attempt. Hopefully next year I can do another talk. I don't have the ability to simply stand behind a podium and talk - either nerves or a bit of hyperactivity or whatever -you must have noticed I kept moving, - I also set a goal of not just proividing some imformation, but doing it in a way that might help people remember things better - or hopefully at least enjoyable. sounds like I at least accomplished that. the so-called 'survey' was unplanned, the idea only came to me the day before. (Well heck, when you are single...) again thanks!