Tom Poje

1.401(k)-3(h)(2) ...A safe harbor MAY also be taken into account for purposes of determining whether the plan satisfies section 401(a)(4). Thus these contributions are not subject to the limitations of QNECs under 1.401(k)-2(a)(6)(ii), but are subject to the limitations generally applicable to nonelective contributions....except for purposes of satisfying permitted disparity) ao, if it was purely a QNEC, then yes, you would have to satisfy a(4) with and without the QNEC. But since this is a SHNEC then you may combine with all other nonelctives, as the regs point out there is nothing in the regs that mentions everything has to be made at the same time. If the HCES were receiving the SHNEC early in the year (e.g. 3% of max comp) and everyone else at a later, then you have an issue, because the HCEs have a chance to earn gains over the whole year and others don't, clearly discriminatory, but you do not have that in the case you described

What exactly does your notice say? The IRS did indicate a few years ago it probably should contain the following: It is the intent that the safe harbor contribution be made throughout the year. There is always the possibility that such contribution will be reduced or suspended during the year. If a reduction or suspension is necessary, a supplemental notice will be provided, and such reduction or suspension will not apply until 30 days after the supplemental notice is provided. I myself would see no problem changing things for 2017 as issuing a new notice at this time still provides people with enough time to 'make an informed decision on deferring"

no, because the definition is governed by the Code 414(q)(1)(B) which says "for the preceding year" no one, no document provider has the authority to change that. you might possibly be thinking of using 'calendar year comp' for a non-calendar plan year, but you still can't use current year comp.

ok, that makes more sense. more accurately then, you have 2 plans as part of a controlled group. so 2 choices 1. if they are not permissively aggregated they both pass testing on their own and separate tests are run for ADP testing 2. plans are permissively aggregated, therefore ADP tests are aggregated as well. when aggregated a person from plan B who did not have a refund when tested separately now has a refund. yes, while that seems unfair that can happen, but it could well be the overall result is the total refund is a lot less than when each plan is tested separately.

1.410(b)-7(d) If an employer treats two or more separate plans as a single plan under this paragraph, the plans MUST be treated as a single plan for all purposes under sections 401(a)(4) and 410(b) ............ in other words, if you combined them coverage you have no choice but to combine them for the ADP test. if you don't combine them for coverage then you can't combine them for ADP testing. and yes, it could happen that someone who might normally not get a refund if tested separately gets a refund if you have to combine.

my understanding is yes you could have both (a Solo plan is not a SIMPLE plan), so unless perhaps there was special language in the document for whatever reason that said it is the only plan... (but I have never had or worked with Solo plans. I thought they were simply regular plans except limited to owner/spouse only. I didn't think there was any other special language) this particular website (see bullet point 2 would agree) https://www.401kinabox.net/SoloDefinedBenefitPlan/Index

C'mon and get in the spirit it is a holiday tradition on their part I recall they did that last year as well. so 'bah humbug' and all of that.

if they make a profit sharing contribution , how does the small CPA firm look for nondiscrim testing. ... since it is small and some of the staff quit you now have 2 rate groups. assuming the one CPA is an HCE will probably pass, but....

from the following web site (which is the way I have understand it as well) http://www.groom.com/resources-178.html •Top-Heavy Plans: In determining current year contributions for key employees in a top-heavy plan, catch-up contributions are ignored. However, catch-up contributions made in prior years are taken into account in determining whether a plan is top-heavy (i.e., as part of the account balances). See Prop. Reg. § 1.414(v)-1(d)(2)(iv). .......... in other words, in the current year, it is as if catch up contributions didn't exist, they weren't even made. or at least that is how I would describe it. but for future years they are in the account balance to determine if a plan is top heavy (just not how much) now, if your document says all participants receive top heavy, then the key employee receives, but that increases his contributions, and the vicious circle goes on until you hit 3%.

yes and no?? suppose the person deferred 1% and made 9000 comp and had 1000 in bonus. since comp test failed, do you say "when figuring the match I have to figure things based on total comp" or do you say I can't use comp less bonus to determine what I can defer because that fails 414s the person couldn't defer on 1000 so I need to make that up as well? in other words, if I had used total comp to start with he would have deferred an additional $10. since this is a safe harbor and you are getting a free ride on testing on both tests not just ACP I haven't seen the issue fully addressed before, nor even thought about it this way, except for the comment/suggestion the document should address how to handle things if plan failed 414s, which of course they don't. if the plan wasn't safe harbor, you still fail 414s which means normally you would try testing both ADP and ACP using total comp. so how do you fix 'both tests' in the situation of a safe harbor where you can't test using comp.

since you fail 414(s) that implies the HCEs are favored by the situation (they probably have comp > comp limit so excluding bonus) as you said, including bonus reduces match on people. but...the person had no chance to defer on the bonus, so arguably you need to provide a make up deferral for lost opportunity...ugh, but that sounds reasonable to me (but then I dress oddly, so what do I know) as for testing, if you fail 414s you can't use that definition of comp in testing, there is nothing wrong in using a definition of comp that satisfies 414s even though it is not the same as comp used for allocation purposes.

in a post a few weeks ago, someone noted the following from the ASPPA Conference, so I would believe the IRS is simply taking a reasonable approach based on all the facts. (Hence it will apply to all forms not just the EZ. I am still hoping they will at least (by 2017) determine large plans based on those with balances instead of total participants. .................... add some comments from ASPPA Annual - Judging by comments made in several sessions, the new 5500 will not be ready for 2019 - Current estimates indicate that software providers will need at least 2 years to develop, code, and test the systems for the new 5500. This would mean that they would need to have guidance early 2017 to be functional for 2019. This does not seem to be even remotely likely - DOL funding is an issue. No funding, no guidance, no new 5500 - Don’t expect any big changes until a few years into the next decade - IRS only changes could come sooner but were once again delayed The best way to avoid dealing with major changes to 5500 reporting? Retire early (at least that was the closing argument made by Janice Wegesin)

while it is the EZ, I would expect the same for SF and 5500 IRS Compliance Questions. The IRS has decided not to require plan sponsors to enter the preparer’s information at the bottom of the second page of Form 5500-EZ for the 2016 plan year and plan sponsors should skip these questions when completing the form. The IRS has decided not to require plan sponsors to complete questions on lines 4a through 4d, 13a, 13b, 14, and 15 for the 2016 plan year and plan sponsors should skip these questions when completing the form. The IRS expects that the above questions will not be included in the 2017 Form 5500-EZ. so maybe we will never answer those questions! in fact, the verbiage seems to say they won't even be on the form.

if plan has a 1 year wait, then nobody newly hired will enter anyway or maybe I am missing something.

the gateway shouldn't be a problem, only those receiving a nonelective need the gateway. unless there is a heavy concentration of HCEs in the one division I would be surprised if there was a problem, but of course not knowing the numbers... you are correct, each person in their own division is not a reasonable classification for coverage.

guess the folks on SNL need to moooooooooooooooooove over and make room for you.

you guys are milking this item the best you can, aren't you?

part of my 'tradition' is to send goodies this time of year (Thanksgiving or Christmas) to my co-workers in the other office. I greatly appreciate their help, and my way of saying thanks (This is on my own, would never dream of being reimbursed) well, this started a running gag about cows over the last few years, because the candy is cow themed. I placed an order yesterday, and asked 'Homer' the Holstein to write the people's name on the gift boxes. of course, I forgot to include the names on the order form, so had to send a follow up e-mail with that info, and I included a 'picture' of the animal that makes the horse apple candy. so today out on their face book page, lo an behold the picture shows up. too funny. it can be found here: https://www.facebook.com/pages/Baraboo-Candy-Company/262846608798 if interested their actual website is http://www.baraboocandy.com/ I like the gift boxes that include a sampling of many of the different items. they come in cute white boxes with cow spots and everything. cow pies and moo chews and udder fingers. what more could anyone ask for?

I don't think you can do that, though when you run a transaction you can specify an amount such as $50 to generate an amort schedule you would have to use one of the excel spread sheets that exist (I guess)

back in 2010 I gave an ASPPA talk on distributions and this is what I had for missed minimum distributions. sorry, these are the actual notes, so you have to put up with the dry humor that I included. but basically it is about the same as jpod indicated ............................................................... Oooops. You missed the minimum distribution, now what? Make sure there is enough evidence in the folder that your co-worker gets blamed. It's not my job to run the train. The whistle I don't blow. It's not my job to say how far, the train is supposed to go. I'm not allowed to pull the brake, or even ring the bell. But let the damn thing leave the track, And see who catches hell! ............................................................ You can’t ask for the penalty to be waived until you have actually taken the distribution. This is proof you are trying to fix the situation as soon as possible. Fill out form 5329. Write letter begging for mercy, explaining the reason you didn’t receive the minimum distribution was the incompetence of the investment house or something similar. Years ago, it was required to send in the 50% penalty and hope the IRS would have leniency and waive the penalty and return the money. Now simply send in the letter with the Form 5329, and if they don’t accept your lame excuse they will bill you.

even under EPCRS, if a correction was made for a missed contribution, there is no mention of a need of going back and amending a prior year 5500, nor have I ever seen any comments made by the IRS that you had to do this (even as a clarification note) of course that doesn't mean they just assume that everyone does indeed amend a prior 5500, but I suspect they would find that it isn't done! the issue of 415 shouldn't apply to missed contribution. for example. Fred missed receiving a top heavy in 2015. he quit early Jan 2016. if 415 applied based on 'when' the contribution was made for a missed contribution, he wouldn't be able to receive it because of a 415 violation in 2016. that makes no sense.

maybe I am missing something. I have a 401k plan. I am going to terminate and put in a new 401k plan. why not just amend the old plan, or switch asset providers if that is the goal?

well, the reg cite says '...and ending 12 months after distribution of all assets from the terminated plan" but there is enough space in the margin I can write in crayon (I think you have to use red crayon) if I need to change it to be something else. at least without doing deeper research than that.

good cite by ETA, and I would point out, it is 12 months after the final distribution is made, not 12 months after the termination date.

would agree if QNECs were for missed deferrals. I did not read the original question that way