Tom Poje

Normally a plan has 7 months after the close of the year to file the proper forms with the IRS, which would bring a 9/30 plan year end to 4/30. Extensions are allowed up to 2 1/2 months. since that would be the latest for filing forms, it is reasonable to expect information no later than shortly after the latest filing deadline. Since we are now into June, its reasonable to expect information soon... that being said, there are some things to consider. Suppose plan has 1000 hr requirement to receive a contribution - regardless if you terminate or not. The company is still deciding how much a contribution to make. Thus, there may be a good reason why the valuation has not been completed. yes, that is a pain sometimes if you are terminated and want your money, but you may be entitled to more, and a lot of companies don't like dealing with a double payout. (on the other hand, some companies are slow in providing information...like pulling teeth to get the information. one can never be sure why there is a holdup. usually there is a valid reason) so, figure 9 1/2 months after plan year end as absolute deadline for filing forms, you should be provided with information shortly thereafter. by the way, I believe the regs require terminees to be provided a statement, while actives do not have to get one unless they request it.

Technically, there is no deadline for active participants. you don't have to provide a statement unless they request one. Honest. You can send out a valuation w/o statements. Now, once the val is done, and if participant request a statement, I think you have 30 days. so, to avoid a mess, statements are sent out with the val. The 30 days may impose fines, fees,etc. one of those circumstance issues. what you probably don't want is to get the DOL involved as a result.

ooops. Ray did not mean 'now official approval' but rather, that there is 'NO official approval' for this method. sorry for any confusion.

I believe the company must make the contribution, otherwise you are violating terms of the document - then the ees turn around and forfeit. I know some people now put in the document that forfeitures reduce/occur in year following termination to avoid an ee getting a contribution and forfeiting the same year.

you might try writing the Disclosure Officer at the nearest IRS District office. supposedly if the request is less than 50 people they will forward mail for free. "the letter can be no more than 3 pages. it appears the plan would need to write a letter for the IRS to forward stating that the plan is holdoing assets and who to contact, as opposed to a complete distribution package. The IRS also sets forth suggested language explaining the letter forwarding program. disclaimer should read In accordance with current policy, the Internal Revenue Service has agreed to forward this letter because we do not have your current address. The IRS has not disclosed your address or any other tax information and has no involvement in the matter. (all this comes from thePensionActuary issue Jan-Feb 1999)

I don't think you can leave out how forfeitures will be allocated - they are no longer definitely determinable. yes, they may reduce contributions, but when you have class allocations, I think you are getting into a touchy area. certainly the IRS has not addressed this yet. Why not do this: step 1 forfeitures allocated pro rata to all employees step 2 contributions made to each class it would seem to get around any problems. or, for that matter, why not invoke the old allowable method of forfeitures - based on account balances. you are cross testing anyway, I nearly forgot about that option!

Plan fails 414(s), so it is now non safe harbor. There is no 'nondisrim' test by rate groups like for profit sharing contributions. The closest you can come is to run your ADP test using a safe harbor definition of compensation (despite the fact ees weren't able to defer on some comp) This may cause plan to fail, and therefore require a QNEC /or refund. Note: according to the ERISA Outline Book, some IRS agents hold that a de minimis standard can be 3% - though even that is stioll a facts and circumstance issue. possible cite would be 1.414(s)-1(a)(2) ...even though a definition of compensation permitted under 414(s) MUST be used in determining whether the contributions (in your case, deferrals) satisfy a certain applicable provision (in your case ADP test), the plan is not required to use a definition of compensation that satisfies 414(s) in calculating the amount of contributions... Since you failed 414(s) you are violating the MUST listed above.

Comp limits, deferral limits, etc. are all tied into the CPI-U (Consumer Price Index) The numerator is:The average of the values for the three month period July, Aug, and Sept. The denominator is the three month average Oct/Nov/Dec 1993 which was 145.7667 You multiply this value by your original limit (e.g. $150,000) to obtain the new limit. The comp limit only increases in increments of 10,000, the deferral limit in increments of $500, the 30,000 limit in increments of 5000. You can obtain the CPI-U by calling (415) 975-4567 ---follow the instructions and enter code 2110. Its all computerized, you talk to no one, you eventually enter your fax #. (you will also get a CPI-W report - don't know what that is for.) The value for March was 165.0. therefore, if that figure remains constant the rest of the year you have: (165.0 / 145.7667) * $150,000 = $169,791 In other words, an early guess says next year the comp limit will probably be 170,000 because chances are that the index will continue to go up. (unless Congress changes the rules again!) The value for April should be out by now, I challenge someone to go out and grab it and report their findings!

I have no cite per se, but would refer to The Erisa Outline Book by Sal Tripodi,(produce via ASPA) in particular 7.194 (4th edition)- comments and examples are given on Effect of compensation limit. If the IRS won't buy Sal or ASPA, then the pension industry is hurting.

I think you are reading too much the letter of the law - simply cuz it doesn't say rollover 'plus any earnings that may occur' Pretend the rollover didn't exist. the plan would have less earnings cuz it had less money. Its not like the earnings would still be there, and they simply got allocated to the rollover in addition to the other accounts. thus, it would seem logical not to include earnings.

given the conditions cited, should be able to test using statutory exclusions as well... 1 group all <21 <1 yr svc 2nd group, >21 and 1 yr svc that might help

1.401(a)(26) no longer applies to DC plans so participation % is not in question. 2. For 410(B) purposes, an employee who elcts out is treated as a. includable and benefiting for 401(k) b. includable and benefiting for 401(m) c. includable and NOT benefiting for 401(a)(4), so if there is a profit sharing contribution or forfeitures you may fail. Please be sure to make a clear distinction between Election not to participate and choosing not to defer. Election not to participate should be a one time election, at the time first eligible. I would require a signed form of some type. That would be unusual to have so many employees choosing this option. Yes, those employees are not included in ADP testing. But those employees can never be in another plan of the employer either.

I will agree with above comments. use a safe harbor definition for adp test.If plan fails test, use corrective means as allowed by document. hopefully there is no ps contribution (forfeitures) as well. if yes, then would appear avg ben test needs to be done. sorry for the confusion.

While no set de minimis amount has ever been determined, according to some IRS agents, 3% or less is considered de minimis. it appears you fail that. so, now it appears the plan fails. you have two choices: 1. amend plan to satisfy 414(s) and continue to rely on safe harbor rules. (sure....no problem) 2.don't rely on safe harbor rules - in other words test under nondiscrim (avg ben % test, etc.

There doesn't appear to be anything in the guidelines indicating when the notice must be given. The opinion in the office here would be around the time the contribution is made. Sorry I can't be a bigger help on that. Based on the notice given by the IRS, it seems the most important thing is identifying how the contribution is split among different classes.

first, this is how Qtech calculates vested balance. Ending balance + prior distributions multiply by vesting percentage this is ees vested balance (as if he hasn't received a distribution) then system subtracts distribution actually received. Any difference is remaining distribution. If ee has forfeited money, system is not smart enough to add that back into the equation, so things get messed up. Possible workaround would be to enter distribution as a positive number in prior yr distribution field via DER. This will 'negate' the distribution, so like the forfeiture it will be ignored. Since you are running confirmation required, that implies share accounting, and therefore compounds the problem. Again, the real problem is the forfeitures. they don't get readded to the equation. example: ee has balance of 1000, is paid 700 so ending balance is 300.(someone goofed) system calculates as follows end balance = 300 distribution= 700 toatl = 1000 vested at 80% or 800. has been paid 700, so vested balance is 100. printout shows ending balance 300, 80% vested, but vested balance = 100. That actual maked sense, but looks extremely funny. If forfeitures were involved, the numbers really get messed cuz system ignores them. hope that helps.

I think what happens is as follows: If you return $4000 in deferrals, then the match related to the deferrals would be forfeited to all others. since the HCEs are at the limit, they could not receive the forfeitures. The alternative would be to return $2200 in deferral. The $1800 in match is left in the plan and treated as a match for next year. For all practical purposes ee receiced 7800 in match, and you have already deposited match money for next year match. It appears you could also simply treat $4000 in match as applied toward next year's match. In other words, ee only received 5600 in match this year. (see 1.415-6(B)(6)(ii) I think their is no discriminatory rate of match in the current year because 415 limit overrides. (ee would have gotten 100% rate if not for 415 limit)

Ervin is correct. Top heavy minimums are required. eligibility for profit sharing has nothing to do with it. EE is a participant and could have deferred.

1.416-1, M-19 but remember: standardized master/protypes can't use this option another reason to avoid standardized plans!

I am all for sharing and think it's a great idea, but first things first. I have to see the reaction at the users group meeting. there may be ways of improving the ADP report I have.

what do you have for trade? Do you have somebody up there you can trade for the report? Heck, I figure I might as well try and get something out of the deal. maybe I can be talked into sending it to the next user's group meeting up there.

if no HCEs 'benefit', a plan passes coverage. see 1.410(B)-2(B)(6). However, if an ee elcts out, for purposes of 410(B) he is considered benefiting for the 401(k) and 401(m) portion. He is considered includable and not benefitinf for the 401(a) portion. Thus, if you exclude them (the HCEs) the plan will pass, but if they elect out, the plan will fail.

suppose the rollover wasn't there. the plan would have had $500 less in earnings. so, the earnings on the unrelated rollover don't effect the top heavy calc either.

as long as he has received 3% in ps contrib + forfeitures, he is covered. no additional contribution should be required.e.g. if this formula is by division and he received 5%, he is covered.

that would be correct. Officer status only applies to 'key' employee (top heavy determination)