Tom Poje

I vote yes while the example isn't the same, it is a situation of match based on years of service. and you are providing a different match based on years of svc

I'm willing to sit in the doghouse and say it is a BRF issue. The ERISA Outline Book would also seem to agree. briefly, very briefly the following would seem relevant. Not sure how you could say it doesn't fall into this scenario, just based on this. see chapter 11 Part E3 3.b.Nonuniform matching formulas. The discriminatory rate of match issue can also arise when the matching contribution formula provides a rate of match that is not available on a uniform basis to the eligible employees. 3.b.2)Example - match based on years of service....

Typical document language is as follows: Any Eligible Employee shall be eligible to participate hereunder on the date of such Employee's employment with the Employer. However, any Employee who was a Participant in the Plan prior to the effective date of this amendment and restatement shall continue to participate in the Plan. so if the plan originally had 6 months eligibility and no hours requirement, they would have entered. since they never worked 1000 hours vesting years would be zero. if plan was top heavy they should have received top heavy. since never worked 1000 hours could be treated as otherwise excludable for any testing. assuming best case scenario, person declined to make deferrals when first eligible so no failure there.

well, lets say you break the plan into two component plans he is either in plan 1 or plan 2. therefore, he is not in one of the plans. when you look at that plan the NHCE% = 0, but the HCE % will be greater than 0 therefore you fail if they are not all owners, you might consider amending to top paid group election in the future.

even the IRS says you can't defer on 'prior' comp. since it was impossible to defer on those amounts, I'd hold you could ignore those amounts of comp. this is different than a situation in which someone could have deferred, but simply started deferring later in the year.

another possibility, possibly missed because you are looking at other things, if plan is top heavy (pretty common for cross tested plans) then the person receives the top heavy and gets bumped to the gateway

impermissible deferral is only a violation of the terms of the document, not of the code/regulation pertaining to excess deferrals so I would think you simply get taxed when the corrective distribution is made. not any different than a failed ADP test distribution

reminds me of one of the first plans I ever worked on. looking at the data that had come in, there was misc pmts of $3 here 5$ there etc varying from month to month. so I called the client and asked and the response was those were loan pmts, and after a few more questions the response was, well, they pay back whatever they want whenever. I at least knew enough to tell them you can't do that, you are supposed to have level pmts. then the lady says, let me get my husband. this was a bit of a shock since there was nothing on the census to indicate such, and when asked, she said "I kept my last name" at this point, I knew it was way over my head. this was back in the days of family aggregation and both of them had big comps so the allocation was really screwed up. plus they both took loans which was also a violation for owners at the time. I simply said, let me get a hold of the actuary because this is beyond me. Not sure what took place in that conversation, but a few weeks later there was a note indicating they decided to find someone else to run their plan. sometimes you simply never know, the forms you send out can ask the right questions, but if the client is, well, I'll leave it at that. Not sure about the TPA who 'agreed' to run their plan either.

the only problem I have with your statement is you wanted to provide it only to those who deferred, at that point I would say you have a QMAC rather than a QNEC Even when providing a QNEC to selected employees (aside from 1-1 correction) you are someone limited, at least as far as I have seen in document. something like starting with the lowest paid or something like that.

again, I suspect, as long as you have proof you attempted to file timely, I suspect any penalties would be waived. I don't see how that is much different than when a business gets shut down because of floods or hurricanes or whatever and an automatic extension is granted so try checking the box "special extension" and fill in "I tried to file timely after the client finally provided the data after much begging and pleading for months, but by then the #$%^&^@*(!@&* filing system was shut down for a month. so even tough I had the data on a timely basis the problem is at your end." I'd used 2pt font or something similar.

I suspect if you have proof you made an attempt to file such penalties would be waived. ha ha ha. 1. you have at least 250 forms so you MUST file all of them electronically 2. we shut down FIRE for 1 month so you can't file some forms electronically 3. guess you are screwed.

BG- I'm not saying you can't use 1-1 to correct a failed ACP test, simply saying that your cite makes no sense in regard to a 1-1 correcting (since it talks about having to pass the ACP test after the correction) sorry for the confusion.

if you are using 1-1 QNEC your quoted cite makes no sense as it says the plan must pass the ACP test. I would be surprised if that ever happened under 1-1 correction. so you cite comes from a non 1-1 correction method (e.g. making a QNEC to all eligible ees) you quoted from Appendix A Appendix B contains the 1-1 language. Under this correction method, a plan may not be treated as two separate plans, one covering otherwise excludable employees and the other covering all other employees furthermore there are 4 different possibilities The contribution made under paragraph (1)(b)(iv)(A) is allocated to the account balances of those individuals who were either (I) the eligible employees for the year of the failure who were nonhighly compensated employees for that year or (II) the eligible employees for the year of the failure who were nonhighly compensated employees for that year and who also are nonhighly compensated employees for the year of correction. Alternatively, the contribution is allocated to account balances of eligible employees described in (I) or (II) of the preceding sentence, except that the allocation is made only to the account balances of those employees who are employees on a date during the year of the correction that is no later than the date of correction. Regardless of which of these four options (described in the two preceding sentences) the Plan Sponsor selects, eligible employees must receive a uniform allocation (as a percentage of compensation) of the contribution. (See Examples 1 and 2.) Under the one-to-one correction method, the amount allocated to the account balance of an employee (i.e., the employee's share of the total amount contributed under paragraph (1)(b)(iv)(A)) is not further adjusted for Earnings and is treated as an annual addition under § 415 for the year of the failure for the employee for whom it is allocated. ............ since it is referred to as a QNEC, I don't see how you can treat it as a QMAC and provide it only to those deferring. (But then I still have the Grinch in me leftover from Christmas!)

clarification when you run coverage testing you pass if ratio % > than the safe harbor and whatever else (e.g avg ben pct test) if that fails, you can get by if ratio > unsafe harbor and you have a note from your mom that says it is ok, you sacrifice a goat and a bunch of other stuff (or something like that) when you run nondiscrim you need to pass at least the midpoint. the unsafe % is only used to determine what the midpoint is when performing this nondiscrim test.

assuming there isn't something completely strange going on, if you have 2 separate plans, then it is your choice to aggregate or not aggregate. but if you aggregate for ADP testing you aggregate for coverage as well. it is not I will aggregate for coverage but not ADP or vice versa. if you choose not to aggregate there is one possible issue that is missed. for coverage, when looking at plan A, you treat all employees who met the eligibility as includable and not benefiting. same for the match portion, but you can not exclude terminees less than 500 from B, as that rule only applies to 'participants'

Section 4 of the just released (January 4, 2016) Rev. Proc. 2016–8 says: 4) In general, plan amendments whereby sponsors amend their plans by adopting, word-for-word, the model language contained in a revenue procedure which states that the amendment should not be submitted to the Service and that the Service will not issue new opinion, advisory, ruling or determination letters for plans that are amended solely to add the model language; and

Officially or unofficially? they have never really released any 'additional' possible amendment, but at least at the ASPPA Conference they have expressed an opinion you could modify some things. Q and A 37 2012 ASPPA conference A safe harbor 401(k) plan covers only salaried employees of Company X. The plan passes the ratio test under IRC §410(b). The plan year ends December 31. In June, X decides it would like to open up the 401(k) plan to the hourly paid employees, effective on July 1. Would this amendment be a violation of IRC §401(k)(12)? ASPPA Response No. Although certain amendments to a safe harbor 401(k) plan are not permitted to be made effective on a date other than the first day of the plan year, this is not one of those types of amendments. The amendment solely applies to employees who are not otherwise covered by the plan. The safe harbor rules simply treats these individuals as newly eligible, and the safe harbor notice provided prior to the beginning of the plan year would not have had to be distributed to these employees before July 1. The IRS agrees with the proposed answer as long as there is no effect on the already-eligible employees. [and again, one has to remember, any such IRS responses are guidelines and don't necessarily reflect an actual Treasury position.] ................ This one sticks in my mind because I asked one of Corbel's lawyers (and for lack of a better term one of ASPPA 'higher ups') about this before the Q and A. I used the example suppose the company decides to put in 50,000 in profit sharing. if you change eligibility then the already eligible will now get less. He simply looked at me and said "It would be better not to raise that point during the Q and A. We are happy to have gotten them to agree at least to this much" even after a few years, I'm still uncomfortable with the lawyer's response.

debatable issue. obviously the notice was provided. could you amend and give a new notice this late? the 30 day rule is to provide an employee to make an informed decision (basically, as to defer or not) but that 30 days is simply a guarantee you gave someone sufficient time to make a decision. If you give someone less than that you don't have the 'guarantee' if the issue ever was raised. If the safe harbor is a match then it is probably pushing things. If it a 3% shnec, then changing the ps formula probably has little effect on someone's decision to defer or not. no one has accrued a ps contribution, so certainly in a non safe harbor plan you could change the formula before the plan year begins. even in the case of no plan changes, the IRS has even said if no timely notice was provided with a 3% SHNEC you can probably get away with the notice provided ASAP

so an owner less than age 50 can defer 7%, but Mr. just barely an HCE due to comp but catch up eligible would be limited? probably a problem

I believe it can be done if it is limited to HCEs e.g. HCEs limited to 5% deferral which would accomplish what you want.

Mike, it will be for 2015, just my brain is on a hard freeze even though I'm not up north, so it is 53,000. owner set up the plan (sponsoring employer) for one company, but others may adopt it. he is basically 100% owner of both companies.

1 plan, 2 related companies. all employees eligible. owner takes 150,000 at company 1 and 120,000 at company 2. cross tested plan, owner is in own group. is he allowed to take 52,000 from company 1 and therefore at 415 limit so nothing from company 2. (or split the 52,000 between the companies in any way shape form he wants?)

reminder: without looking at contribution numbers, you can't avoid the gateway by component plan testing 1.401(a)4)-9©(3)(ii) or put another way, the NHCEs must receives at least 1/3 the rate (or 5%) of the HCEs before you can split the plan into component plans.

the paragraph that comes right before (3)Tables is (iv)Benefits commencing after age 70

1.401(l)-3(e)(3)