Tom Poje

Robin: It is an option whether to provide a safe harbor contribution to the otherwise excludable group. It should be in your safe harbor notice. For example: This would be typical to language used in safe harbor notices: (4) A contribution equal to ______% . This contribution will be made to the ________ . If you are eligible to make a salary reduction contribution, but have not attained age 21 and completed a __ Year of Service __ Period of Service, you will not be eligible to share in the employer contribution selected above. You will be eligible to share in the contribution selected above (unless modified by this Notice) when you become a participant in accordance with the SPD. .............. Now, you are correct, if that group does not receive the safe harbor, you would have to test that group separately. since, hopefully, there would be no HCEs in that group, you should pass anyway. But, watch out for possible top heavy issues!

I just got the word from Relius-land - "fyi, we are fixing the following with the latest non discrim... 1) On the Average Benefit Percentage Test, ees who are includable but not benefiting cause the ee following to begin printing before advancing to the next line, causing havoc on the report 2) Amounts entered in the Non-benefiting non-excludables frame are not picked up in all totals: - Employees Benefiting report includes them in 401(a) but not (k) or (m) (they are listed but not added to the total for these columns) - Employees Included in Coverage Tests includes them in the Included for Base column, but not the Included in ABT due to this plan column - Average Benefit Percentage Test does not include them at all - Minimum Participation Test Summary includes them in Total Employees but not Total Non-Excludables (and therefore not 40% of Non-Excludables) - Section 410(B) Coverage Test includes them in 401(a) but not (k) or (m) 3) Current year terminees with less than 500 hours are not being handled properly, and are being counted as "not benefiting" when they should be "excludable."

My good buddy Mr Cline: Hope to see you again - good grief - only 4 months to the ASPA conference. you said 'This is just impossible to program.' In regards to the loan. I disagree, I think it is possible. Lets take a case of a plan having ps money only. ee is 40% vested, has $10000 balance and borrows $4000. If the system treated loans as it does distributions, it would calculate the vested balance in the profit sharing account as follows: ee had 10000, borrowed 4000, so balance is now 6000 in ps ans 4000 in loan. to calculate vested balance in the ps account I take the 6000, (and treating the loan as a distribution) add back the 4000, multiply by the vesting %, which of course says ee's vested balance is 4000. I now offset this by the amount of outstanding loan. his ps account could easily show end bal = 6000, 40% vested, but vested balance = 0. Confusing, yes, but in reality a true statement since the person has actually pulled out his vested amount. his loan account shows 100% vested. Now suppose he defaults on the loan. well, he is not due anything from the ps account, so that is correct showing 0 vested balance. A loan, for all practical purposes is a distribution and should so 100% vesting. It is simply an odd type of distribution that is intended to be paid back.

loans should be forbidden, but we know that won't happen. I think I have modified are reports so if fund name = loan, then show vesting at 100%. My mind is turning to jello (but peach flavored, so there is hope yet). I don't quite remember. I know on the certs I simply copied the loan end balance and print on the loan vested balance line. (And then modified the total vested balance) so, in other words, you are not alone. I would add that usually the loans come from deferral $ so maybe I don't have the same problem as $ coming from vested balances.

the way we have read the instructions is that line 1 is normally blank since distributions are almost always in cash. line 2 provides the trust EIN and then if its a profit sharing plan nothing else. absoultely great! the only thing we put on the form is the trust EIN, but we still file if there was a distribution.

it appears you will be able to do the following: terminate the money purchase plan, roll all the $ into the profit sharing plan, and simply have the one plan accomplish what you have the two do presently. At least everything I have read seems to indicate that. That would be a savings from the fact you only have 1 plan instead of 2. Ideally handled, would be in late December, to know your compensation, make your 10% contribution for 2001, then roll all the $ into the profit sharing before 12/31/2001 and file a final 5500 for the mp plan. whew! lots of stuff right at the close of the year.

sounds like a good challenge Fred! ah, if I can get a moment free. I am not top notched Excel, so only have a real crude version I use as a number check for E-Bars, just to make sure the software I am using is doing things correctly. Most of the times it works ok, but I haven't written it to consider age def. nearest/last. - maybe yours will do that! Thanks!

you indicated that the orignal plan was a standardized plan - assuming the 'worse' case was checked - no hrs to receive a contribution and 500 hrs if terminated versus the new document, last day requirement. The rules are once someone has accrued a benefit for a given year you can't take it away. thus, in the year 2001, once someone has worked 500 hours, you would not be able to amend the plan FOR THE CURRENT YEAR. But you can always amend for future years. You did not indicate whether the plan was MP or profit sharing, so there may be other issues involved as well.

you are correct Dave in regards to .rpt

personally, I have found the report a bit cumbersome, but I suppose that's my fault, since it is a crystal report I should be able to modify it and produce something to my liking.

ok, I see where a number of people have downloaded the other report, haven't heard any negative feedback, so lets try another one. 6.0 report, designed to provide much of the info for the Schedule I. We have one person in the office who fills the forms out, so it is a big help to him. There are certain user fields that can be used, I think they are actually indicated on the print out. as with any report, certain modifications might be needed. e.g. I think I have a different version if forfeitures don't reduce contribution. or if forfeitures in suspense at begining of year are used to reduce the contribution. I don't think I have worked that one at yet. Since Relius doesn't distinguish between types of distribution (e.g. corrective distribution vs regular distribution, you may have to adjust the report a little bit in some cases) anyway, report is intended to give a good start toward the 5500.

which in effect can make a big difference if you are going to use prior year testing when performing the ADP/ACP test. Obviously, using half year comp will produce twice the number in this first year. But then what if you want to make a profit sharing contribution...you would probably want to base that on full year comp, so, as Mr Cline point out, just exactly what are you trying to accomplish, and let that rule how you write the document.

has anyone else tried the latest version from the website bulletin board? while it uses the defaults as coded in plan specs which is a great feature, i have encountered the following problems (curious if anyone else has): 1. printing of avg ben % test. if ee is includable and not benefiting, the ee might cause the report to print out of alignment...e.g. the next participant starts printing in the middle of the report. 2. the non-benefiting non-excludable feature no longer works with the avg benefits % test 3. coverage appears to be including terms with less than 500 hours. (or at least a few extra bodies) I saved the old version of rdiscrim and have gone back to that for now.

I plead ignorance to your question. just what do you mean by batch MEA calculations?

fun stuff, huh? aint it odd how a 'simple' formula can be understood in at least 2 or 3 ways? made for an interesting discussion, each of us defending a position and oblivious to the other individuals view of the issue! and yet another possible argument... for coverage purposes the IRS does not say you actually have to defer, you simply have to be able to defer. so, does the document say I have to defer > nothing to satisfy a quarter requirement? and if it is silent, then how do you address the issue. from the original thread it said 'after the individual has deferred for 4 quarters'- just what does that mean? (You can have your document, I have enough headaches)

for a further discussion, see ERISA Outline Book, 11.249 (2001 Edition) possibly chapetr 11 part E.3.b in earlier editions as well. '1.401(a)(4)-4(B)(2)(ii) disregards a service condition for determining whether an optional form of benefit is currently available on a nondiscriminatory basis. this rule does NOT apply to determing whether the current availability of a rite or feature, such as rate of matching contribution is available.' I don't know if that helps or not. I can not tell from the original question if the formula stated is 1. every year ee gets 50% and at the end of the year will get an additional match if he deferred each quarter. or 2. ee defers for 3 quarters. If he defers in a 4th quarter, then he gets 100% every quarter after that point in time. certainly, if match is based on service e.g. 50% for 3 years and 100% after 3 years you have to test - there are enough examples of those scenarios. I am not sure how this is any different than that. In case 1 you might be able to argue otherwise, although if it was a company with high turnover, then 'effectively' only long term HCEs might be benefitting. well, suppose its a golf club, with lots of seasonal help. that help would only be able to defer maybe 2 quarters each year, where the owners could easily defer 4. Dang, I think I talked myself out of that possibility as well. I would test for BRF.

I have never split those values out, though I have pulled out 'fees' as a separate item. we don't do much share accounting so there is little need to do what you desire here. all that being said, on your basic Relius Summary of Account, you have the following: Sum of @gainamt - this is supressed. It is the sum of all gains (interest, dividends, fees,etc) you also have @CalcAcctGainAmt - this is what prints, and in addition to all gains, includes unrealized gains. so, you might simply try subtracting the two values to obtain the unrealized gain amount. logically that should work. (This is in Footer #6 - you should be able to use similar logic in the other footer as well)

Eric: Given the conditions you cited, I am not sure why it would take significnatly longer to admin the 401(k) over a SIMPLE. It doesn't sound like you are talking having loans, hardships, etc. Only you and your wife so census collection is not much. No ADP test to pass since you are both HCE. The only extra I see is the 5500, which I think can be the EZ if I am not mistaken. So, the big difference would seem to be the admin cost vs the potential to put away a larger sum (or smaller sum) in a given year. (required match in the SIMPLE vs. discretionary match / or profit sharing contribution in the 410(k))

I suppose it will be interesting to see how the new regs effect a plan status. remember you are losing 4 years of prior distributions that might have prevented a plan from being top heavy. I can think of one plan I process that might have an ugly surprise coming up. I know the new regs are plan years begining in 2002. Now, does that mean to determine if I have to issue top heavy in 2002 I use the new rules or does that mean I use the new rules for the first time by looking at 12/31/02 and determining if my plan is top heavy for 2003?

is top heavy an issue? that might make a difference between having one plan as opposed to three plans. also, if eligibility is different between the plans, then it makes a big difference when you test - depending if you permissively aggregate the plans or test each plan 'separately' by treating all other ees who meet the eligibility in the tested plan as includable and not benefiting.

conceivably you could write a formula: safe harbor match for nhces is 100% on first 3%, 50% on next 2 % hces 100% of the first 4%. if everyone deferred 5% everyone would get 4%. however, the rate for the hces is better at one point in time. or you might have 2 divisions with the same formulas. as long as no HCEs are in the one division it would be possibly to have that formula accrue at a faster rate.

The above report is a one page plan spec in Crystal report format. (Quantech/Relius 6.0) There are a few items that are pulled from user definable fields - e.g. plan name is user alpha field 11 and 12 because I didn't want to print the company name attached to it. definition of comp is user alpha field 1 -e.g. date of participation or YTD actual hours to receive match is buried under hours for retirees because you might be running plan monthly but have a 1000 hour requirement and therefore you have match hours = o just so the system will allocate the match each month. if you have downloaded, and tried it, any comments greatly appreciated. 1. we are seeing if this feature works. 2. I am seeing if its worth putting more reports out here. thanks!

I think you are correct in regards to the 1099, except no new W-2 gets issued. remember, the amount of derrals is reported on the w-2. so if you work for a number of companies, the govt can (and I imagine they do) add up the deferrals from all w-2s. if it shoots above 10,500 I have to believe it red flags it or something. Its up to the filer to claim it somewhere on the tax form, hence getting taxed that year, and then again when they receive the actual distribution. double taxation! what a scheme.

you can always exclude anyone you want from the plan, but as Weddell pointed out, you might not pass coverage. If there is such a high turnover rate you have the option of a 2 year wait 100% vesting - maybe none of the others will come in anyway. even a 3/20 vesting schedule means you will have a lot of forfeitures if the high turnovers leave after 3 years or less.

I include with the distributions (benefits paid) The schedule H actually breaks out the benefits paid into beneifts paid to participants, insurance carriers, and others. The instruction for the H do not mention insurance premuims per se, but the 5500 preparers manual says to include them there.