Tom Poje

that is my understanding.(unless they have since changed their description) it was from their basic document, as far as I can tell, it is independent of any particular plan's eligibility, simply a description of if...then for various situations.

insufficient info. ee hired 3/1/15 assuming they worked 1000 hours by 2/29/2016 then they have met the eligibility condition of 1000 hours in the initial period. unknown hours worked in 2016, so unknown if they had a break in service. if they did not have a break service the (old) Accudraft document provided the following description: (a) Reemployment of an Employee Before a Break In Service and After Eligibility Requirements Are Satisfied. For any Plan Year in which the eligibility requirements under Section 2.1 are based on Years of Service, if an Employee Terminates Employment prior to the Employee's Entry Date in Section 2.1, the Employee had satisfied the eligibility requirements in Section 2.1 as of the Employee's Termination of Employment, and the Employee is subsequently reemployed by the Employer before incurring a Break in Service, then (1) the Employee will become a Participant as of the later of (A) the date that the Employee would enter the Plan had he or she not Terminated Employment with the Employer, or (B) the Employee's Reemployment Commencement Date, (2) the Employee's pre-termination Year(s) of Service (and Hours of Service during any computation period) will be counted for all purposes, and (3) the Vesting Computation Period and/or benefit accrual computation period, as applicable, will remain unchanged.

at the 2010 ASPPA Conference, Q and A #3 DC plan is top heavy and has a plan year ending 12/31. The plan terminates on September 15, 2010. Normally, TH minimums are provided only if the employee is employed on the last day of the plan year. (Assume that there are salary deferrals during the year so that, if a top heavy minimum is required, it needs to be made.) Questions: (1) For the 2010 plan year, is 9/15/2010 treated as if it were the last day of the plan year, so that only non-key employees who are employed on that date are entitled to a TH minimum? (2) If (1) is Yes, is the 3% minimum calculated for compensation from 1/1/2010-9/15/2010? IRS Response: (1) Of course, if there is no employer contribution, there would not be an obligation to provide top heavy minimum contribution. But, if there were contributions to keys during the year, including elective deferrals, there is a top heavy minimum based on compensation and employment through 9/15/10. Plan must liquidate within a reasonable time under Rev. Rul. 89-87 or else 9/15 date may not be reasonable. There is effectively a short plan year for top heavy purposes. (2) Yes .............. As I recall, the IRS in the discussion added if the assets weren't paid out within a reasonable time then top heavy is based on full year of comp. of course such IRS responses don't necessarily reflect an actual Treasury position. And this is top heavy, not ADP testing, but I don't see why the logic is any different. I suppose it begs the question. Just what is meant by 'short plan year'. certainly the 5500 is not a short plan year in either your ADP test or the top heavy test in the Q and A. but in the case of the top heavy the IRS agreed the top heavy was not 'full year comp' but 'short plan year'! so now, if you are going to say you don't have a short plan year, then do you also say that even though deferrals stopped, I get to use full year comp for testing?

but it does go to show, the way the regs used to read you couldn't do that - even if anyone thought otherwise, or that it really didn't make sense, was stupid, etc.

the proposed regs for the use of forfeitures as safe harbors indicates In lieu of applying the ADP test, an employer may choose to design its plan to satisfy an ADP safe harbor, including the ADP safe harbor provisions of section 401(k)(12), described in §1.401(k)-3. Under §1.401(k)-3, a plan satisfies the ADP safe harbor provisions of section 401(k)(12) if, among other things, it satisfies certain contribution requirements. With respect to the safe harbor under section 401(k)(12), an employer may choose to satisfy the contribution requirement by providing a certain level of QMACs or QNECs to eligible nonhighly compensated employees under the plan. ...... so that looks like they are now saying safe harbors are indeed QNECs and QMACs

ultimately, one of the problems trying to answer a question. you answer it one way and then realize later the question pertained to slightly different conditions. (missing the point everyone in their own group) the IRS has said that if everyone is in their own group you can't use avg ben test for coverage. And the proposed regs wanted to apply that to nondiscrim testing as well, but they rescinded that item. I think most agree excluding terminees is a reasonable classification (I think even the regs imply this when they say you can do this but if they work over 500 treat them as includablle and not benefiting i, but irrelevant once you have everyone in their own group.

that is my understanding, you have '2 plans' one meets safe harbor so no testing. the second plan (for those with less than one year) is not safe harbor so testing is required. most likely there are no HCEs. but plan is also subject to top heavy so all the non key might have to get 3%, which means you haven't accomplished anything (except top heavy is 3% of the whole year not from date of participation as would apply if plan was safe harbor only)

how about "maybe"? (as in 'maybe' more useless Tom babbling!) The original safe harbor rules, Notice 98-52 VIII D has: D. Qualified Matching Contributions and Qualified Nonelective Contributions To the extent they are needed to satisfy the safe harbor contribution requirement of section V.B, safe harbor matching and nonelective contributions may not be used as qualified matching contributions and qualified nonelective contributions, respectively, under any plan for any plan year. For example, if a plan satisfies the safe harbor contribution requirement using a safe harbor nonelective contribution by allocating a 7-percent safe harbor nonelective contribution to all eligible employees, contributions in an amount equal to the first 3 percent of each employee's compensation may not be used as a qualified nonelective contribution under the ACP test. However, safe harbor nonelective contributions in an amount equal to the remaining 4 percent of each employee's compensation may be used to satisfy the ACP test (subject to the requirements of section 1.401(m)-1(b)(5)). unfortunately the example using the nonelective rather than the match. I can understand the concept of the additional nonelective being treated as a QNEC, but I'm not sure in regards to the match. Maybe if you make something above the match (e.g. match more than 6%) AND you use the rule to include ' up to 4% of the safe harbor match or whatever that rule is' then you are using a QMAC

at least 2 websites 'imply' you include the interest http://abaretirement.com/ePAG/aba-0e0-access-funds-web-e.html Interest and IRS Reporting on Defaulted Loans Interest continues to accrue on the outstanding amount of a defaulted loan. In addition, if the unpaid amount is not repaid within the applicable grace period allowed by the IRS, the Program will report to the IRS the outstanding amount of the loan and the outstanding interest as a taxable distribution, meaning it is subject to taxes and any applicable IRS penalties. After the loan is reported as a taxable event, it will continue as outstanding debt to the plan and continue to accrue interest. The taxable event does not extinguish the loan. https://www.wellsfargo.com/retirementplansite/worldbank/faq/ What happens if I default on my loan? When a Plan loan becomes subject to the Plan's loan default process and is eventually declared in default, Internal Revenue Service regulations require that the outstanding principal balance, plus the interest accrued through the date of the default, be treated as having been received as a distribution from the Plan. Therefore, should your loan be defaulted, the deemed distribution of the unpaid amount or the offset of the unpaid amount against your accounts in the Plan will be a taxable event in the year of default and will be reported to the Internal Revenue Service. An IRS Form 1099R or Form 1042 reflecting this loan default (for the year of the default) will be issued to you in the year following the year of the default. This form should be retained with your tax files. In addition, if you are under age 59½, the Internal Revenue Service may impose a 10 percent penalty. At the time you take a final distribution from the Plan, the amount deemed distributed will be offset against your account balance.

it doesn't matter if it is a basic safe harbor, an enhanced safe harbor or a QACA for ADP safe harbor you can match anything, but ACP safe harbor is limited to 6% of comp (in the eyes of the govt you can't expect most 'common' folk to be able to defer above that level. the way you described your formula, you basically have 100% up to 3% and 50% up to 6% 0% between 6 and 7% and then 50% from 7 to 9% that would fail the requirement that match doesn't increase as deferrals in crease. if you really meant 100% up to 3% and 50% up to 9% then you have ACP testing because match is on more than 6% of comp. just how many folks (besides HCEs) are going to be able to defer above 6%?

the default was changed to something like automatically send me notifications to everything I look at or something like that. took me awhile to find it, but if you click on your name (upper right corner), select account settings on the right side there is Other settings notifications (and you can turn the thing off)

I believe you remove G550 from your name and code B1 B for roth deferral, 1 for early withdrawal (if B1 gives you a BINGO then I expect to share in the winnings.)

normally earnings associated to the excess should be forfeited as well. otherwise, for example, you could give the owner a 20,000 match, collect the earnings and the simply forfeit the excess match, and someone has made out pretty good.

going forward, if all the 'key' employees are age 50 or older, you could ament the plan and put a plan cap of '0%' on them and then they could defer up to $6000 which would be treated as a catch up. catch up contributions are not included in the ADP test, nor do they count in determining if you need to put in a top heavy for the current year. if there is a match you would not want to match catch ups as matching contributions would require a top heavy contribution (assuming assets are still over 60% for the top heavy test)

just for grins at the 2005 ASPPA Conference the IRS individual responded to a similar type question. of course, such responses don't necessarily reflect an actual Treasury position. What is really being asked here is “What does it mean for an employee to be employed on the last day of a plan year?” Consider the following examples: July 31, 2005 falls on a Sunday. If an employee's last day of work was on July 29, 2005 and the plan sponsor is closed on Saturday and Sunday, would the employee be considered to be employed on the last day of the plan year ending July 31, 2005? Employee terminates employment on February 23, 2005 and is paid two weeks unused vacation pay on his last day of work. Would this employee be considered to be employed on the last day of the plan year ending February 28, 2005? Following a hectic tax season, a CPA firm closes from April 16th through May 5th. An employee works on April 15 but does not return to work when the company re-opens in May. Would this employee be considered to be employed on the last day of the plan year ending April 30, 2005? December 31, 2004 was New Year's Eve and many businesses were closed that day since January 1st was a Saturday. If an employee's last day of work was on December 30, 2004, would the employee be considered to be employed on the last day of the plan year ending December 31, 2004? These questions were answered by an IRS representative in the following manner at the fall 2005 ASPPA Conference: Being “employed” on the last day of the year is not the same as working on the last day of the year. Employment is a “relationship” with the employer. If you are on vacation and someone asks you where you work, if you are still ‘employed,’ you have an answer, even though you are not actually working during the vacation period. So, if 12/31 is a Sunday and it is a business that is only open Monday to Friday, unless someone has been terminated from employment as of that day, they are still employed even though it is not a work day. So, your example 1: as long as the person wasn't terminated, he is still employed on 7/31 even though it's a Sunday and not a work day. Example 2. Employee is terminated prior to the last day; he is not employed on the last day regardless of how much money he is being paid upon termination. He is no longer employed by the firm as of 2/23. Example 3. The question is always “is he employed” during that period, not “is he working.” (BTW, seasonal employee rules were never issued, so let's not deal with “seasonal employees” here—besides, I don't think a three week shut down qualifies as “seasonal”). Let's just assume that everyone is on vacation. Are they fired (terminated) on 4/16? Unlikely. They are basically on a company wide vacation; they are still employees; they are supposed to come back on 5/5. Therefore, they are still employed as of 4/30. Example 4. Basically the same as opening comment about 12/31. Here, the company is closed 12/31 and last day of work was 12/30. None of that matters; what matters is “was he still employed on 12/31,” and the answer is yes (unless he was actually terminated on 12/30). (IRS Q and A #32, Fall 2005 ASPPA Annual Conference)

without knowing the particular software, if may simply be the way the software language is written, more or less an unintended consequence of what happens if , for instance a plan is processed once a year as opposed to processing monthly, etc.

I believe the only items you ever need to update are the first few items contribution limit compensation limit taxable wage base 2016 is the same as 2015 so unless there is some other change my brain gears aren't thinking of, nothing has changed

on Jeopardy they would ask you to rephrase the question, I'm sure. you can only exclude that person from coverage if the allocation requirements indicate terminated participants are excluded from receiving an allocation - just to make sure! if it is a 401k plan, and the person could have deferred (whether or not he did is irrelevant) then he has to be included in the avg ben pct test, because that test includes all contributions, and, after all, he did 'benefit' (or could have benefitted) under the rules for a 401k portion of the plan. as opposed to a profit sharing only plan in which there is no way he could have benefitted. edited to add: so, in a 401k plan he shows on the avg ben pct test, but might not show on the rate group test.

this one is real simplethis one has an example under EPCRS Example 24: Employer J maintains a money purchase pension plan. Under the plan, an eligible employee is entitled to an employer contribution of 8% of the employee's compensation up to the § 401(a)(17) limit ($220,000 for 2006). During the 2006 plan year, an eligible employee, Employee W, inadvertently was credited with a contribution based on compensation above the § 401(a)(17) limit. Employee W's compensation for 2006 was $250,000. Employee W received a contribution of $20,000 for 2006 (8% of $250,000), rather than the contribution of $17,600 (8% of $220,000) provided by the plan for that year, resulting in an improper allocation of $2,400. Correction: The § 401(a)(17) failure is corrected using the reduction of account balance method by reducing Employee W's account balance by $2,400 (adjusted for Earnings) and crediting that amount to an unallocated account, as described in section 6.06(2) of this revenue procedure, to be used to reduce employer contributions in succeeding year(s). so the excess $ are simply held is suspense and used in a future year. the example above was for a money purchase but could apply to a ps as well. so really I guess you have 3 choices 1. simply reduce the contribution as indicated in this example and allocate in future years 2. take the total amount allocated as a whole and reallocate using correct comp across the board 3. possibly increase contribution to others - this works with a required formula as in a money purchase plan because you could amend the plan to a higher % as indicated in example 25. in your case probably not viable, unless you were talking about a 2016 ps contribution, because obviously it is not to late to change that. I hardly see asking something like that a 'stupid' question. remember, under EPCRS you are trying to put the plan in a position as if the error hadn't happened. so in #1 reducing the contribution works because if correct comp was used the person would have received less. #2 works because now you are simply using the same total contribution but reallocating it based on correct comp.

no, a SHNE is not a 'separate' animal so for testing you have 410b - deferrals 410m - match and after tax 401a - ps nonelective and SHNEcs

A PS is a nonelective contribution and a SHNEC is a nonelective contribution so if you have only one of those you still test the 401(a) for coverage. I could not tell from your comments when you said a plan has no PS exactly what you meant. (I have seen people refer to a SHNEC as a 'match' even though they know it is 3% to all), so I make that comment just to make sure. If you have neither, then you can't fail coverage for that portion of the plan no HCE benefitted (1.410(b)-2(b)(6))

the old forms bring back memories... in 1992 Had a plan by chance named Advanced Women .... and appropriately by chance it turned out the Codes we had to fill in were C Participant Directed H Top Heavy I Permitted Disparity K Prototype

if you are simply talking about last year's allocation, start by simply rerunning the thing (allocating the same $ amount) and see what needs to be moved. then of course an adjustment needs to be made for earnings. under self correction there is nothing to 'file' with the IRS, you really want to have some type of documentation on what was done in case there was an audit. did the people above the comp limit make that much more or are you talking about a small amount of comp above 265,000? Note: If you are talking about a number of years that need corrected then as I recall you may have to use VCP, but again without knowing actual amount involved and time period it is hard to say. still, good catch on your end to recognize this as an issue

under EPCRS you could reduce the overage (as someone indicated getting HCEs to agree might be difficult) the alternative under EPCRS (example 25 under Appendix B) this particular example was a money purchase formula so had to be amended under VCP to correct things this way. if it is profit sharing I imagine you simply follow the guidelines and allocate more the NHCEs without VCP Correction: Employer J corrects the failure under VCP using the contribution correction method by (1) amending the plan to increase the contribution percentage for all eligible employees (other than Employee W) for the 2003 plan year and (2) contributing an additional amount (adjusted for Earnings) for those employees for that plan year. To determine the increase in the plan's contribution percentage (and the additional amount contributed on behalf of each eligible employee), the improperly allocated amount ($2,400) is divided by the § 401(a)(17) limit for 2006 ($220,000). Accordingly, the plan is amended to increase the contribution percentage by 1.09 percentage points ($2,400/$220,000) from 8% to 9.09%. In addition, each eligible employee for the 2006 plan year (other than Employee W) receives an additional contribution of 1.09% multiplied by that employee's plan compensation for 2006. This additional contribution is adjusted for Earnings.

It took me a little bit to figure out how to delete the Grinch picture I was using. I did have to log on, fortunately I had 'remember me' for the password so I didn't have to enter that. Unable to do enter anything under the forum "How to use the message Boards", it treats me like I am logged out and it doesn't remember my password.