Tom Poje

I prefer something like for G M K knows all the tricks today its three point one four one six

you might try http://www.wklawbusiness.com/search?query=Pension-Employee-Benefits-Code-ERISA-Regulations-Volumes-January&tab=products and see if that is what you are looking for.

but the problem with rounding is that it won't work with the line secant, tangent, cosine, sine 3.14159 ......................................................................................................... the attached spreadsheet uses random numbers to generate a value pi explanation included. I believe you can type any character in any blank field and it will generate a new outcome though it may take awhile. I think I had it set to generate 100,000 pairs of numbers pi random number.xls

in The Coverage and Nondiscrimination Answer Book (12:90.1) I wrote it up as follows There is no requirement that the ADP test be performed first, followed by forfeiture of related matching contributions if there were excess contributions (see Q 9:15). Both Treasury Regulations Sections 1.401(m)-2(b)(3)(v)(B) and 1.401(a)(4)-4(e)(3)(iii)(G) indicate that the rate of match is determined after any corrections are made. IRS officials also agreed with this conclusion. [Q and A #18, 2004 ASPPA Annual Conference] Thus, aside from any document restrictions, it is recommended to perform the ACP test first, make any corrections necessary, and then perform the ADP test. In this way the HCE might not forfeit any matching contributions. of course, any comments made by IRS at such meetings do not necessarily reflect an actual Treasury Position, but the fact the regs specify related match is determined after any corrections seems to hold to this position

the question needs to be rephrased. a plan fails the test, so $x due to deferrals needs to be returned. can't change that fact. but what you are really asking is "when calculating the amount of gains, due you treat the $x of deferrals as being first in or first out?" 1.401(k)-2(b)(2)(iv)(B) says "A plan may use any reasonable method for computing the income allocable to excess contributions... 1.401(k)-2(b)(2)(iv)© provides the safe harbor method for calculating gains, e.g. numerator = excess amt, denominator = (beg balance + total contributions) I think, at least the software I am familiar with, an adjustment is made for other things like possible distributions taken during the year, which falls within the "any reasonable method" would it be reasonable to say "It is only the last defer that caused the plan fail so it should only be gains on that paycheck", but that really isn't quite true as the plan is tested over the whole year. so you have 2 HCEs, one deferred 10,000 on Jan 1 and the other deferred 10,000 on Dec 31. plan fails and refund is required, arguably it is not the first one HCE that caused the plan to fail only the second HCE and that at the moment he deferred, not before then - then how would you calculate gains on the first HCE.

there is no reason you can't perform the ACP test first, and if it fails, distribute the match. but if the ACP test does not fail it is simply a situation where that is not am option. unfair? arguably yes, but how is that any more unfair than all the other options? the HCE who (barely makes over the comp limit) causes the test to fail by deferring a higher % of pay but the refund goes to the HCE deferring the most? or for that matter, since deferring is entirely optional, why is there ADP testing in the first place? no such thing exists with 403b plans

Q and A 39 at the 2012 ASPPA Conference: Question A safe harbor 401(k) plan fails the §410(b) coverage with respect to its profit sharing plan component. Within 9-1/2 months after the close of the plan year, the employer adopts a corrective amendment, pursuant to Treas. Reg. §1.401(a)(4)-11(g). Does this amendment cause the 401(k) component to lose its safe harbor for the plan year in which the corrective amendment is adopted? Proposed Answer No. Regardless of the position taken by the IRS with respect to amendments made to a safe harbor 401(k) plan, an implied exception exists for any amendments that are necessary to correct a violation of the nondiscrimination testing rules, which is a fundamental requirement for a qualified plan. The IRS agrees with the proposed answer. of course your situation is different in that the deferral coverage fails, not the profit sharing, I would suspect you have to provide some type of a QNEC to pass coverage and the 3% safe harbor to those folks, but how you go about deciding who to bring in.... I guess as you say, treat like any other division for eligibility

The basic document for an EGTRRA document for Accudraft has the following explanation of how the rules work. without looking not sure how other basic documents describe things, but I generally fall back on this one for an explanation... (e) 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. (f) Reemployment of a Participant Before a Break In Service. For any Plan Year in which the eligibility requirements under Section 2.1 are based on Years of Service, if an Employee Terminates Employment after becoming a Participant and is subsequently reemployed by the Employer before incurring a Break in Service, then (1) the reemployed Employee will reenter the Plan as of 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, as applicable, and (3) the Vesting Computation Period and/or benefit accrual computation period, as applicable, will remain unchanged. (g) Reemployment of an Employee After a Break In Service and Before the Entry Date. For any Plan Year in which the eligibility requirements in Section 2.1 are based on Years of Service, if an Employee Terminates Employment with the Employer either prior to or after satisfying the eligibility requirements in Section 2.1 (but before the Employee's Entry Date in Section 2.1) and the Employee is subsequently reemployed by the Employer after incurring a Break in Service, then the Employee's Years of Service that were completed prior to the Break in Service will be recognized, subject to the following provisions: (1) Determination of Years of Service for Eligibility Using the Rule of Parity. Any Years of Service completed prior to an Employee's Break(s) in Service will not be counted in determining an Employee's eligibility to participate in the Plan if those Year(s) of Service are disregarded pursuant to the Rule of Parity. If such former Employee's Year(s) of Service are disregarded under the Rule of Parity, then (A) the reemployed Employee will be treated as a new Employee for purposes of Section 2.1 and (B) the Employee's Eligibility Computation Period will commence on the Employee's Reemployment Commencement Date and subsequent Eligibility Computation Periods will be based upon the provisions of the definition of Eligibility Computation Period (with the Reemployment Commencement Date substituted for the Employment Commencement Date, if applicable). If the Employee has not satisfied the eligibility requirements in Section 2.1 as of the Employee's Reemployment Commencement Date and such former Employee's Year(s) of Service are not disregarded under the Rule of Parity, then the Eligibility Computation Periods will remain unchanged. If the Employee has satisfied the eligibility requirements in Section 2.1 as of the Employee's Reemployment Commencement Date and such former Employee's Year(s) of Service are not disregarded under the Rule of Parity, the reemployed Employee will enter the Plan as of the Employee's Reemployment Commencement Date. (2) Determination of Years of Service for Vesting. Any Years of Service completed prior to an Employee's Break(s) in Service will not be counted in determining an Employee's Vesting Interest in the Participant's Account balance if those Year(s) of Service are disregarded pursuant to the Rule of Parity. If such former Employee's Year(s) of Service are not disregarded under the Rule of Parity, then the Vesting Computation Periods will remain unchanged.

I hadn't thought about this before, but a bell just rang in the head and I guess if things are done properly, he gets 2 1099s one for the excess and the rest for the rollover. thus at tax time he pays the taxes on the excess. now, if he hasn't returned the excess then what happens when he eventually takes the $ out of the IRA? in other words, is the IRA keeping track of the basis? maybe telling them that will increase the pressure to get this done properly.

I would word it this way: The regulations are as follows 1.401(k)-2(a) (iii) Special rule for early participation. If a cash or deferred arrangement provides that employees are eligible to participate before they have completed the minimum age and service requirements of section 410(a)(1)(A), and if the plan applies section 410(b)(4)(B) in determining whether the cash or deferred arrangement meets the requirements of section 410(b)(1), then in determining whether the arrangement meets the requirements under paragraph (a)(1) of this section, either— (A) Pursuant to section 401(k)(3)(F), the ADP test is performed under the plan (determined without regard to disaggregation under § 1.410(b)-7©(3)), using the ADP for all eligible HCEs for the plan year and the ADP of eligible NHCEs for the applicable year, disregarding all NHCEs who have not met the minimum age and service requirements of section 410(a)(1)(A); or (B) Pursuant to§ 1.401(k)-1(b)(4), the plan is disaggregated into separate plans and the ADP test is performed separately for all eligible employees who have completed the minimum age and service requirements of section 410(a)(1)(A) and for all eligible employees who have not completed the minimum age and service requirements of section 410(a)(1)(A). In other words, you have a choice 1. All HCEs and only those NHCE who are not otherwise excludables (there is no reason to run an otherwise excludable test as their are no HCEs 2. Split the test into 2 - All who met 1 yr/age 21 and another test with all otherwise excludables (including OE HCEs) you have 2 tests, refunds in one test are not really related to refunds in another test. can't speak for other software, but Relius coding option 1 would be 'carve out' - you carve out all the HCEs and just those NHCEs who have met the 1 yr age 21 option 2 would be 'test separately' because you are indeed testing two groups separately ....................... by the way, there is no similar rule for purposes of Coverage

One possible response, which is somewhat vague Facts: DB and DC (Safe Harbor 401(k)) plans are top heavy and a key employee participates in both. Therefore, they must be aggregated for top heavy purposes. But…. Is the safe harbor 401(k) still considered ‘not top-heavy?’ The Code implies yes, at least if the other plan is also a DC, then the safe harbor can be used to satisfy the top heavy in the other plan. However, since the top-heavy minimum is bumped up to 5% in the DC plan when combined with a DB plan, does that mean that the top heavy exemption does not apply? Maybe. This is a required aggregation group, so you need to determine the top heavy status on a combined basis. However, even if the top-heavy group is top-heavy, the safe harbor plan is not. But, you have an additional problem. If you are not providing the DB top heavy minimum, but choose instead to provide the 5% DC top heavy minimum, you need to make sure that everyone in the safe harbor plan gets the 5% contribution or you will blow the top heavy exemption. So, you have the choice of providing the 5% DC contribution to everyone (even those not in the DB plan) or you lose the top heavy exemption in the safe harbor plan. 2. Two participants are excluded by class from the DB. One defers and receives the safe harbor match. The other does not defer, so receives no safe harbor. Is a top heavy contribution required for this participant? Here, you have a safe harbor match plan. Therefore, there are people who are in DC only get nothing (they don't defer), and then there are people in the DB and DC who need to get either the 2% top heavy minimum in the DB plan or the 5% DC contribution in the DC plan. Again, if you have different levels of contribution in your DC plan, you lose your top heavy exemption. 2008 ASPPA Conference Q and A #38

for another discussion of the issue see slides 30 -33 of another presentation (which I found out on the internet) which discuss possible interpretations. A few years ago I gave a similar presentation (which is why I was to pull the Q and A so quickly). I know the limitations of my research and so, would simply say, the waters are somewhat muddy in regards to the issue. https://www.asppa.org/Portals/2/06-11-14%20Presentation.pdf (of course if your document says keys included for top heavy it is a moot point.) the Relius software offers the following choices 1.exclude current plan year keys 2. exclude keys as of top heavy determination date so there is simply no 100% consensus. top heavy presentation.pdf

As Mr T would say "I pity the fool" (who relies on my opinion!) as close as I can find an answer is from the following: 2011 ASPPA Conference #47 Margaret became a participant in a 401(k) plan in the 2010 plan year, which ends December 31, 2010. For 2010, Margaret did not satisfy any of the key employee tests. The plan is top heavy for 2011 because the top heavy ratio exceeds 60%. The top heavy ratio is computed as of 12/31/2010, which is the determination date for the 2011 plan year. For that calculation, Margaret's account balance as of 12/31/2010 is treated as a non-key employee account balance. During the 2011 plan year, Margaret marries the majority owner of the company. This makes her a more-than-5% owner of the company by attribution. Does Margaret receive a top heavy minimum contribution for the 2011 plan year? Should she have received a top heavy contribution for the 2010 plan year even though the employer didn't fund the contribution until 2011 after Margaret already had married the owner? IRS response. There is no guidance directly on point, but the most reasonable interpretation is that Margaret receives a top-heavy minimum contribution for 2011. For top-heavy purposes, a single determination date is prescribed by IRC § 416(g)(4) for determining both whether the plan is top-heavy and whether an employee is a key or non-key employee. While it would be intuitive to adjust this determination based on events occurring within the year after the determination date, this interpolates a condition that is not in the statute. Note that the House Report (H.R. Rep. No. 107-51) and Conference Committee Report (H.R. Conf. Rep. No. 107-84) accompanying EGTRRA § 613 both provide that the determination date is used for identifying who is a key employee in the following year. well, of course such responses don't necessarily represent an actual Treasury position, but at least they offered an explanation for their logic on this one.

ah, my favorite type of plan, in which you end up with a mess of people with account balances that are so small they are simply more of a bother.

on the other hand, if there are no deferrals by key employees, the top heavy is the lesser of 3% or what key employees receive, so forfeitures would most likely be comp to comp anyway with no 'extra' to kick in

for the record, FT Williams form 5500 now carries the message: IRS Compliance Questions are no longer required and will not be submitted.

An employer is only required to provide a safe harbor to each NHCE who is eligible to participate in the plan. [i.R.C. §§ 401(k)(12)(B) and ©. thus, in the Code, as long as the NHCEs get the safe harbor you could arguably give the HCEs something less (assuming your document can handle that) the regs are similar To satisfy the safe harbor matching requirement, each eligible NHCE must receive a qualified matching contribution satisfying either the basic match or enhanced match. In addition, this requirement is not satisfied if the ratio of matching contributions made on behalf of any HCE is greater than the ratio of matching contributions made to any eligible NHCE at the same percentage of safe harbor compensation. [Treas. Reg. § 1.401(k)-3©(1), § 1.401(k)-3©(4)] Thus it appears to be possible to write a document to contain such a formula. so providing the HCEs are receiving at a lesser rate the regs seem to say you can do that (again, document permitting) K2Retire is quite possibly referencing a comment made at an ASPPA conference Assuming that the rate of match for HCEs does not exceed that of the NHCEs (and other such safe harbor requirements), the formula should be possible. [ASPPA Conference 2013 Q and A #22] in light if what the Code says and the regs say, this seems valid, but then any comment made at such Q and A doesn't necessarily represent an actual Treasury position, but at least in this case seems valid to me, but then consider the source (me) expressing that opinion and you might consider that a strike against it ............ again, I think it boils down to 'does your document permit it'. for example, most of the original documents were hard wired at "3 % safe harbor nonelective" but now many say "at least 3%.." because that is permitted under the regs. so can you do it? certainly looks like it does your document allow that? - hmmmm

I can't say for sure what is the correct interpretation of how the fail safe is supposed to work. After a bit of search, I did find the IRS comments (enclosed below) in particular paragraph 1 1. A fail-safe provision cannot give the employer discretion in determining whether the provisions require additional allocations or accruals. In other words, an employer cannot have discretion over which test it will utilize to satisfy the nondiscrimination and/or coverage requirements. To satisfy this requirement, the test (e.g., the average benefit test for coverage or the general test for nondiscrimination) which will be used to satisfy coverage an/or nondiscrimination must be specified along with the methods or optional rules (e.g., cross-testing) which will be used in running the test. The test and any optional rules cannot be incorporated by reference. In addition, any definitions of terms necessary in running the test and the optional rules utilized for the test must be set forth. so, does this paragraph mean a. like cross testing, before you get to testing you must run and pass your minimum allocation gateway. so, because you want fail safe language, before you run your coverage you are required to specify how you will pass (e.g. using the ratio percentage test) or b. this kicks in only if you fail coverage using any and all means to pass testing. in other words... To satisfy this requirement, the test (e.g., the average benefit test for coverage or the general test for nondiscrimination) which will be used to satisfy coverage an/or nondiscrimination must be specified along with the methods or optional rules (e.g., cross-testing) which will be used in running the test in the event you failed coverage testing using all other means in the first place. fail safe.pdf

I didn't look at the statement that said "If running the test on just the ps" for coverage, you wouldn't do that because you look at all nonelective contributions ... ERISA Outline Book has the following Chapter 8 section V C6 last sentence "If an employer wants the flexibility of testing the plan for compliance under the average benefits percentage test, in the event the plan fails the ratio test, it should not adopt such 'fail safe' language. as I recall, this comes about as part of the definitely determinable rule. it is a trade off for the 'flexibility' of instead of amending the plan within 9 1/2 months you get the chance to fix the plan any time, by bringing in people under a set of specific guidelines. the language from FT William for this section is If the application of the rules described above causes the Plan to fail to meet the minimum coverage requirements of Code section 410(b)(1)(B) as of the last day of the Plan Year (the Plan does not benefit a percentage of Nonhighly Compensated Employees that is at least 70% of the percentage of Highly Compensated Employees who benefit under the Plan) for any Plan Year with respect to contributions described in this Section 4.03 because such contributions have not been allocated to a sufficient number or percentage of Participants for such year, then the list of Participants eligible to share in such contributions for such year shall be expanded to include the Participants described in the Adoption Agreement. back in the early 90s (long long ago) when I did Pentabs support at Corbel, I remember asking one of the lawyers about this and a particular document that said it could be used for either avg ben test or ratio percentage test, and he indicated "Yes, that is what the Corbel document said, but the IRS made us change the language to be ratio % only. the basic document copy I have from them (EGTRRA) has similar language to FT William (m) 410(b) ratio percentage fail-safe provisions. Notwithstanding anything in this Section to the contrary, the provisions of this subsection apply for any Plan Year if, in the non-standardized Adoption Agreement, the Employer elected to apply the 410(b) ratio percentage fail-safe provisions and the Plan fails to satisfy the "ratio percentage test" due to a last day of the Plan Year allocation condition or an Hours of Service (or months of service) allocation condition basically saying, well, yes, maybe you could of passed by using the avg ben test, but if you said fail-safe and you fail ratio percentage test, you are "out of luck sucker"

that would be my understanding, if you have fail safe language you 'eliminate' the avg ben test (at least for coverage purposes)

you are probably indicating that base pay is used for allocation purposes. (e.g. exclude bonus or commission, etc) that has nothing to do with HCE determination which should be total pay. that would be no different than using comp from date of entry for allocation purposes, you would still use total pay to determine if the person was an HCE

for instance, depending on the document, this is language in one FT William document (which is similar to the LRM language from the IRS Participant is included in more than one group, the Participant's share of the contribution allocated to each group will be based upon either the amount of service or the Compensation for the part of the year the Participant was in the group.

for better or worse, the regulations require you to include in testing anyone who met eligibility to enter the plan, terminated and worked more than 500 hours. so of the 5 employees, despite quitting the 3 must have worked over 500 hours, so you only 2 of 5 benefiting or 40%. to keep it simple, the regulations generally require 70% for coverage (without getting into other possibilities) so without knowing more details it sounds like your TPA is providing correct information. e.g. it is possible early retirees are eligible for a contribution depending on document language and sometimes that is missed. all the credit in the world to you for following up and asking.

The idea for this one came as a response to all the article about how the pension system is broken, 4019k) don't work, etc. we all know it's is never the participant's fault, as Harry Belefonte clearly explains in Jamaica Farewell Along the way I will squander my pay For that fun that comes daily on the mountain top I'll take expensive trips on sailing ships and I'll keep spendin' and spendin' and never stop Now its sad to say I'm in a four-oh-one K I'm not deferring or puttin' away My heart will be down When 65 comes around Because I'll have so little cash left to spend in town Sounds of laughter there everywhere And the dancing girls oh they sway to and fro I must declare that my heart is there Though my retirement savings they are real low Now its sad to say I'm in a four-oh-one K I'm not deferring or puttin' away My heart will be down When 65 comes around Because I'll have so little cash left to spend in town An S-U-V and theres plenty of beer And the poor gas mileage I dont really fear I spend a lot on the things that are nice And my promise is that I will save next year Now its sad to say I'm in a four-oh-one K I'm not deferring or puttin' away My heart will be down When 65 comes around because I'll have so little cash left to spend in town My heart will be down When 65 comes around because I'll have so little cash left to spend in town jamica.mid

hardly Andy. I've been posting old songs. I think I have 14 in all, but it is a matter of finding the words in spot and the music in another, some day I'll get time to post some more