Tom Poje

how does it satisfy 401(a)(4)? you would have to run the testing. I imagine on an allocation basis you would fail testing as HCEs general have larger account balance so would receive a larger % of pay by the time you divide contribution by compensation. so now you test on an accrual basis, but that also requires you pass the gateway minimum as for the document, is it possible to allocate a contribution based on balances? if each employee is in there own rate group, then there is certainly nothing to prevent you from allocating a contribution which, for all practicality is based on account balances, but again, you will be doing crosstesting, gateway minimums, etc.

you are correct, each HCE is in their own rate group, and must pass either the ratio percentage test or the 2 part avg ben test. there is no requirement that all rate groups pass either ratio % or avg ben test, but if some HCEs fail ratio pct test then it is probably a moot point that other HCEs pass ratio pct test, because those HCEs would pass the avg ben tes if you are depending on other HCEs to pass that test. The exception to the rule would be if you were doing component plan testing. for the avg ben test there is one and only one avg ben pct test, so it doesn't matter which HCE you are, it is all the same. (again, an exception would be if you are testing otherwise excludables separately, but then that group probably has no HCEs so there would be no reason to perform the test for that group of ees. the other part of the avg ben test is the non discrim classification test, which ultimately is the same midpoint % for each HCE. that can't change. you have a set NHCE concentration percentage for the plan and the midpoint is based on that percentage. now, each HCE might have a different ratio % and that ratio % has to be greater than the set mid point to pass. my 2 cents does add a valid point, if it is a DB plan then you have to worry about passing both normal accrual and most valuable accrual.

since the leased employees have met eligibility you fail coverage since they are not in the plan. this would require a corrective amendment to give them a QNEC to pass coverage. so you give them all 3% which is the same effect as a 3% safe harbor (except that you would have to run an ADP test but could include the 3% in the test. without knowing actually numbers - how much HCE deferred and his comp and if the children are in the plan and not deferring you are probably no off worse than a safe harbor. actually you said the plan started in 2016 so amend to immediate eligbiility. everyone is in owner defers 18000 and has max comp so ADP% is 6.9 2 children in the plan not deferring so the avg is only 2.3% so to pass testing they only need 1.15% to the NHCE (not 3% as required with a safe harbor) first year of plan, so top heavy determined at end of year. so give NHCEs 1.15% of pay or just enough more so plan is not top heavy. to be safe, make deposit by 12/31 (regs say you really shouldn't use contributions deposited after 12/31 in determining top heavy. but this sounds like it might not be as expensive as a safe harbor - and would never be if the owners children don't defer and the ADP avg is less than 5%.

so really no different (except the fact back in 1999 the suspension was 12 months (the rules back then) - of course the regulations changed that to 6 months instead of 12)

The comments I found years ago were: 1999 ASPPA Conference Q and A 46. A participant took a 401k hardship distribution pursuant to the hardship safe harbor rules, but was allowed to continue making 401k deferral contributions in violation of the 12-month suspension rule. What are the possible methods of correcting this error under APRSC? A. Start a full 12-month suspension when the error is discovered? B. Distribute impermissible deferrals and earnings? C. Return deferrals and suspend for balance of original 12-month period? • IRS response; Starting a new 12-month period doesn't meet the rules. • Deferrals (and match, if applicable) should be forfeited and the balance of the 12-month suspension should be applied. Of course, the employee should be made whole outside of the plan (i.e., no distribution from the plan to the employee) ..................... 8/10/2007 Benefits Link posting We have submitted a VCP to the IRS on this very issue. Initially, we proposed to take out the contributions that should not have been made plus earnings and this was approved. In attempting to implement this, however, we found that most of the affected participants did not have sufficient amounts in the money types in question (because of subsequent loans and/or withdrawals) to make this an unworkable solution. We went back to the IRS and they proposed a prospective suspension. The problem was that a number of years had elapsed between the time the amounts were improperly contributed, the first compliance statement was issued and then the second VCP request was submitted and resolved and a final compliance statement issued, that the participants who were impacted complained that the prospective suspension would be coming when they earned a much higher rate of pay. The bottom line is, if you are consider the refund method, take a look to see if there would be sufficient money in the participants' accounts to effect the refund. If not, then use the prospective suspension. (Note: wouldn’t try it other than under VCP)

probably more common with DB plans but basically- 6b ee is receiving an annuity 6c ee hasn't received anything I believe (though I could be wrong) for DC plans Relius treats anyone who is terminated and has received a distribution of some type as 6b and terminees who have received nothing as 6c hence, if someone has received a minimum distribution or a partial distribution they show on 6b I don't think I would lose sleep over it!

you guys are so lucky to have great clients. sometimes I have participants who show up with 0 comp the following year and the comment "Oh yeah, they quit last year" so there has been one or two times the count at the beginning of the year is actually less than the prior year. why am I the only one who gets these clients?

agree, the 5500 ez files as a one-participant plan SF does not appear on the DOL website. in addition, by filing electronically you receive confirmation that the form has reached its destination. unless you pay extra for certified mail you have no such confirmation. even the IRS encourages people to file the EZ electronically as a one participant SF too many reasons not to file that way, certainly more convenient in my opinion

my 2 cents - that is not quite what is being asked I don't think. I believe this is what is being asked. I have a company with for example 120 active employees plan is terminated so it is impossible to accrue further benefits. for the 5500 do I put down 120 participants or 60 since only 60 have balances. I'm not sure of what the answer should be

agree, my mind has been on safe harbor plans and if the example refers to a plan that must satisfy 401(k)(12) the examples specifically call it a QNEC in regards to the form of a match

well, having electronically filed 1099-r through FIRE, I have always received a message something like *GOOD* so I guess I could see the possibility of receiving a message that says *BAD* like Austin, I use FT Williams and have never had an error after submitting. before then the possible message under the edit check on FT William might have been number of people reported as A on page 1 doesn't equal number actually shown on the pages listing the folks ee coded A but no balance reported, etc without knowing how Relius does things I can't say more. great import function on FT for SSA. I created a crystal report to export the date from Relius. what a time saver. I have a 32 plan MEP on Relius, which ended up with 198 people in total on the SSA

while I understand your point of 'legitimate grievance' the regs are not intended to create a windfall for someone. (In fact, as I recall, that is what the IRS said when they revised the correction procedures for missed deferrals) lets suppose we take it to an extreme. company missed deferrals 3000 / month for 6 months so they put 18000 into the QNEC account. throughout the rest of the year the person defers 18000 so he can get his tax break. such a great deal for the employee. would you say he has a legitimate grievance not to have the 18000 QNEC removed claiming he didn't know he would lose it? there are other similar situations where this occurs.suppose a company matches per payroll. the employee defers enough to max out defers by Sept, so he gets no match for the remainder of the year. he can't later claim "If I had known I would get a larger match by evening out my deferrals throughout the year that is what I would have done so please make up my match"

in example 3 of Appendix B the third paragraph referring to matching contributions says the employer makes a corrective Nonelective Contribution = to missed match, so it is a QNEC not a match

if it helps, straight from the "horses mouth" According to the IRS Website found at: https://www.irs.gov/retirement-plans/retirement-plans-faqs-on-designated-roth-accounts the 4th question under General Questions Does separate account refer to the actual funding vehicle or does it refer to separate accounting within the plan's trust? Under IRC Section 402A, the separate account requirement can be satisfied by any means by which an employer can separately and accurately track a participant’s designated Roth contributions, along with corresponding gains and losses.

received an interesting note from FT William what date should be put down on the form for the extension date if for example the date falls on a Sat or Sun and so is extended to the following Monday? well, apparently they talked with the IRS, and you put down the 'technical' extension date of the 15th, even though the 'actual' extension might be the 17th. gotta love stuff like that like. reminds me of a line from a W. C. Fields movie After hitting a golf ball in the water he complains to the caddy "Why are you standing there? You should be over here" The caddy replied "But you told me stand here" and WC Fields responds "Don't stand where I tell you to stand, stand where I tell you stand." well, ok maybe only a few out there even remember WC Fields, oh well.

a corrective contribution for a missed deferral is still a QNEC and not a 'deferral' - so the W-2 doesn't change indicating an increase in deferral, and for tax purposes the person doesn't get a reduced tax either. but QNEC are commonly used in the ADP test, so I'm not sure why you wouldn't include it in the test in a case like this.

when you file your taxes, the IRS looks at your W-2 to see how much you deferred. QNECs are not included so the 402g limit has not been exceeded - at least in the regular sense of the word. however the whole purpose of making a QNEC is for the lost opportunity to deferral - since the person was actually able to defer the maximum I'm not sure they should have received the QNEC, in which case it should be removed, or at least I could see looking at it that way. even under EPCRS Appendix B section 2 .02 F (F) Special Rule for Brief Exclusion from Elective Deferrals and After-Tax Employee Contributions. An Plan Sponsor is not required to make a corrective contribution with respect to elective deferrals (including designated Roth contributions) or after-tax employee contributions, as provided in sections 2.02(1)(a)(ii)(B) and ©, but is required to make a corrective contribution with respect to any matching contributions, as provided in section 2.02(1)(a)(ii)(D), for an employee for a plan year if the employee has been provided the opportunity to make elective deferrals or after-tax employee contributions under the plan for a period of at least the last 9 months in that plan year and during that period the employee had the opportunity to make elective deferrals or after-tax employee contributions in an amount not less than the maximum amount that would have been permitted if no failure had occurred.

The document we use has the option: Matched Employee Contribution Inclusions a. Elective Deferrals are included in the definition of Matched Employee Contribution to the extent select below i. [ ] Include a Participant's Catch-up Contributions in the definition of Matched Employee Contribution ii. [ ] Include a Participant's Roth Elective Deferrals in the definition of Matched Employee Contribution so it is certainly possible to exclude Roth. why someone would do so is another matter as it penalizes those who choose Roth deferrals. and as Austin pointed out, no you can't do that if the plan is safe harbor.

probably yes. Q and A #37 at the ASPPA Conference the question was asked if you could amend a plan that included salaried only and allow hourly folks to be eligible and the IRS responded in the affirmative. the recently released guidance provided 3 prohibitions and then indicated that for all other changes you need to provide a 'notice......etc.' so I guess you read that as saying what you want doesn't violate one of the prohibition you can do it, at least that seems to be the intent of the law. The situation you describe is not one that the 7 examples describe, but the examples can't cover everything. example 7 is close, though it actually goes from changes entry dates for nonelgibles and making it harder for them to enter. on the other hand, I suspect if the situation you describe was to suddenly permit a new owner to become eligible, it wouldn't be the intent of the law to benefit an HCE in this way, but maybe that is my own rambling way of thinking.

if your are talking about going back in time to before 2002 (has it been that long!) then yes he would be key under the 5 year old rule. but currently he would be former key. since he is former key his assets are not used to determine if plan is top heavy at all, though if plan is plan is top heavy he would receive the minimum. if I understand it correctly he was an owner on at least one point in 2014, so as of the determination date of 12/31/2014 he would still be counted as key, which sounds like what you described. as of the determination date 12/31/2015 he is a former key so ceases to be included (he comes a former key) in 2016.

in addition, without having run other software except Relius, I suspect none of them would indicate a key employee if you entered exactly 1%. reminds me of years ago ... I had one case we ran a projected ADP test in early Nov. one individual owned exactly 5%, was deferring the max the projected comp was 110,000.12 which would make them an HCE the following year I told them no matter what happens to make sure the comp did not go over 110,000, even if it means the person found 12 cents mysteriously sitting on his desk when he came in to work in the morning.

possibly a better way of looking at it you have 2 eligibilities. 1. service, first year is from DOH to anniversary and then switches to the plan year 2. age 20 1/2 this requirement doesn't switch to a plan year basis he certainly had the service requirement but as you indicated he didn't meet the age requirement of 20 1/2 until 7/1/15 if that is one of the plan's entry dates that would be his date of entry

but an HCE with 5 years of service will receive at a greater rate than an NHC who has only 2 years of service, and thus would fail the requirement all receive at the same rate. I think arguing 'but not for those who have the same years of service' fails because now you have imposed a type of allocation condition for receiving the match, which is forbidden in a safe harbor. taking a step further, lets suppose the only people with 5 years or more are HCEs. obviously that is discriminatory and not something the IRS would want to give a free ride on ACP testing, even if the NHCEs could grow into the greater match. Of course, such a plan design is still subject to BRF

I'm confused. If they were reported as a D in the past then they should have been 'removed' from the system, and unless they were rehired and then reported as an A they shouldn't be on the system. If you report the people as a D in 2015 then you shouldn't need to report them again. e.g. if you have a db plan and someone starts receiving a monthly benefit, you only report them as a D once, not every year (or at least that is how I understand how it works) even though the person was paid out in 2016, if I knew about it and hadn't filed the 2015 form, I would put him on the 2015 form in a situation like this (because we file electronically in a batch with other forms) again, as the instructions note if you had someone that should have been an A but you knew he was paid out you wouldn't bother putting him on the 2015 form as an A and then as a D in 2016. I don't see this being much different. you know the person has been paid out so it shouldn't matter whether you put him on the 2015 form or the 2016 as long as he gets pits on one of them. I don't expect the instruction to list every single possibility that could arise.

if someone had been coded an A (Active) then they need to be removed coding them a D (Delete) if they were never coded an A you would never need to report them as a D BG - if the person was never reported as an A, he is not on the SSA list, so if he returns to work there is no need to report him