Tom Poje

lets suppose a real simple case Fred made 10,000 and deferred 5%. he also had 1,000 in bonus. the HCE made 200000 and had no bonus. he deferred 5% and received the 4% basic basic match. Fred received the basic match of $400 - but that was comp less bonus. clearly this is unfair since plan fails 414(s). happens using total comp he received only 400/11,000 or 3.636% (if bonuses weren't excluded he would have deferred more and received a larger match. I would argue he must be bumped up on the match to $440 so he is at the 4% rate. do you have to increase the deferrals by a QNEC as well? well, you are being given a free ride on the ADP test with comp that fails testing, so I'd lean toward saying yes. you get a free ride on the ADP/ACP test but are excluding bonuses, which means at most 4% of bonus is being lost - and that is only true if all NHCE defer 5% or more. not sure if that is worth the plan design problem that has been created. I have never seen any recommendation as to how to correct, so I am only voicing an opinion.

through the generosity of my heart I am running a super special deal today. enclosed are two - that is correct - two for the price of one attachments! A few years ago the IRS had a phone forum or something along those notes. so there are some notes (the doc file) of the phone conversation which, buried somewhere in them, refers to the situation "Just what the heck do you do if the plan put the $ in a Roth account but it should have been regular deferrals" and it refers to page 36 of the PDF file. That is as close to a possible answer as I can find, but what do you expect, when you are getting such a special as 2 for 1? of course the big difference in your case is the person actually wanted Roth, but they weren't allowed, but still, they were impermissible contributions. correction guidelines IRS presentation.pdf correction guidelines IRS notes.doc

I tried a google search and haven't seen anything yet, though except for the fact of 'confirmation by the IRS' it seems a moot point since the adjustments to the limits are set forth in the regulations. somehow or other I was 'zapped' from Benefits Link a few months and had to be 'restored' (ha ha ha, I think I show as a member since 2015) but I believe I go back to 1997, and back then there used to be a Q and A Column board as well. My only attempt at writing something was an article on how plan limits were determined (which I had no clue so it required some research) shortly there after someone sent me a spreadsheet based on the article so I could check the numbers to see if they made sense. I tinkered a bit with that sheet since and have made it available in the past. all one needs to do is visit the one website for the consumer price index and enter the monthly values (e.g. even though the final numbers are based on July Aug Sept CPI figures you can enter Mar Apr May and you can generally know ahead of time if the rates will increase (sometimes months before. Takes all the fun out of waiting for the IRS to make an official announcement. what a learning experience, especially a few years ago when the limits should have dropped based on the regulations! note: there is a table I added recently for Taxable Wage Base. if there is no increase in Soc Security then there is no change to the TWB even though through the formula there could have been. indexed limits.xls

that is correct, most limits are beginning of the year e.g. 1.401(a)(17)-1(b)(3)(ii) "...for the calendar year in which the plan year begins." the 415 limit is the only limit that is based on the end of the year, e.g. 1.415-5(a)(2)"...applies with respect to limitation years ending with or within the calendar year. of course deferral and catch ups sort of disregard that as they are individual limits based on the calendar year. In 1993 the comp limit was over 235,000 and in 1994 the wonderful boys in Congress reduced things to 150,000. so a number of DB plans were amended from calendar year end to 12/30 year end (a short plan year by only 1 day), but it meant you could use the higher comp for one more year as you used the beginning of year limit. Just in case you pick up an old plan that has been around forever and has a 12/30 year end and you wondered why!

as long as the document permits different allocations to different people that is ok, you can discriminate amongst the NHCEs all you want. as I recall, though the brain gears don't spin like they used to so I could be wrong, many many moons ago (pre 86???) the HCE definition was simply 'the top 1/3 paid' so you would have had testing in the situation you propose.

not quite sure what is being asked. all nonelective contributions would be used in the rate group test. you can't impute disparity on the 3% safe harbor nonelective contributions (nor on any QNECs) but they are still used in the test. as a side note: even though a fully integrated plan (e.g. 100% of the TWB at 5.5% excess) is deemed to fall into the category of not needing testing, if you were to test it on an allocation basis and impute disparity everyone would have the same e-bar. the formulas were written to work that way.

well, 1.401(k)-3(b) safe harbor contributions are referred to as 'qualified nonelective contributions' 1.401(k)-3© safe harbor matching contributions are referred to as 'qualified matching contributions' 10401(k)-4 SIMPLE Plans 1.401(k)-4(e)(3) the contributions are referred to as 'matching' contributions and 1.4019k)-4(3)(4) the contributions are referred to as 'nonelective' contributions so it does not appear the hardship rules apply, since neither of the SIMPLE contributions are defined as 'qualified', even though the yare fully vested.

they did indicate no change in the TWB because that is tied to the COLA. http://www.ssa.gov/OACT/COLA/cbb.html (no increase because no increase in COLA. (through the formula I have 122,700, but the lack of COLA overrides everything. same thing happened in 2010 and 2011)

arguably the guidelines of the enclosed LRM (page 126) should be followed. It is page 131 of the PDF file, as highlighted lrm.pdf

the CPI factor was released today, and as expected, based on the formula there will be no change next year in any limit. the three month total was only 714.915, barely above last year's 714.133. I see the govt announced no change in social security, I wouldn't think it will take them long before they make it official no change on the plan limits either.

maybe I missed it on your list, but in grade school, the entire class, almost in unison taking a deep breath through the nose when a test freshly run off the ditto machine was handed out

I guess I can only blame myself for trying to do something like this during this insane time of trying to get so much done with so little time left. Sometimes you just don't think quite clearly... Yesterday, I went over to the local Bass Pro Shop to get a small 9mm for home protection. When I was ready to pay for the gun and bullets, the cashier said, "Strip down, facing me." Making a mental note to complain to the NRA about the gun control wackos running amok, I did just as she had instructed. When the hysterical shrieking and alarms finally subsided, I found out she was referring to how I should place my credit card in the card reader!!!

or it could simply mean that is the way the auditor learned it (incorrectly) and it is awful hard to unlearn things, I prefer to give people the benefit of the doubt. if not, and they are just being pig-headed, then the line from The Holy Grail seems appropriate "You don't frighten us, English pig-dogs! Go and boil your bottom, sons of a silly person. I blow my nose at you, so-called Arthur King, you and all your silly English k-nnnnniggets"

I once had an auditor tell me I needed to put amounts for failed ADP tests as a payable because they were 'ineligible' as well. I pointed to the instructions for the 5500 which would seem to disagree (if you put them as a payable how can you show them as a distribution the following year? granted, deferrals made by ineligibles are less clear, on the other hand the instruction do say 'any elective deferrals returned to 'employees' (it doesn't say 'participants'. note: this is from the 5500-SF instruction, so the 5500 long form may differ slightly. Line 8e. Include on this line all distributions paid during the plan year of excess deferrals under Code section 402(g)(2)(A)(ii), excess contributions under Code section 401(k)(8), and excess aggregate contributions under Code section 401(m)(6). Include allocable income distributed. Also include on this line any elective deferrals and employee contributions distributed or returned to employees during the plan year as well as any attributable income that was also distributed.

not sure why they wouldn't put everyone in their own group with no hours requirement. I guess conceivably you could give 1 NHCE the same as 2 HCEs and test on an allocation basis and avoid the gateway which in effect is the same as passing the gateway on a 'broadly available' basis because 1/8 for NHCE and 2/13 for HCE is over 80% but that type of situation lends itself to possible abuse.

to be a little more descriptive, you can't use comp less bonus unless it passes the compensation test, then it would be considered a comp that fits 414(s).

be careful if you do nothing - let's suppose she quits in 3 years and gets paid out the same year (or even the following year). someone else might run the data that year and might look at the current year data and say "I don't need to report anything on her because she was never reported as having a balance " and therefore she will never be coded a D to take her off the list. who would remember that she was reported years ago?

the draft form 5500EZ has a spot for preparer at the very bottom of the last page the form 5500-sf for 2015 hasn't been released yet, but I suppose they will simply remove the words "optional" for trustee, and add 'prepared by" at the bottom of the page as well. Guess it will look just like the long form 5500 I can't imagine there being a difference between small plan filing requirements and one person plan requirements. so now when somebody looks at the form on the DOL website and they wonder "What idiot filled out this 5500 so bad last year" they will know it was me. oh well, at least I will be known for something. new EZ.pdf

Here are some changes listed on the draft form 5500-EZ. I suppose the same rules will apply by the time they release the instructions for the 5500-SF as well. Trust information on line 4 is no longer optional. You are required to answer these questions relating to the name and EIN of the trust, and the trustee’s name and telephone number. Preparer information on the Form 5500 is no longer optional. You are required to answer these questions relating to the preparer’s name, address, and telephone number. ................ I knew the trust info was coming due to the 5500-SUP, but the preparer info caught me off guard.

based on the limited data, there is another possibility - and I've seen it arise often enough. 3 HCEs are shown on the minimum gateway test at 5.26%. If it is one of those HCEs that is causing the test to fail (e.g. they are the owners kid and they are 21 and the NHCEs are age 30 then the plan would have a chance of passing using component plan testing. e.g. pretend you have 2 plans, one plan has the young HCE and one NHC. test this on an allocation basis. (all other employees included at 0 and the other plan consists of all other employees. tested on an accrual basis. treat the 2 people as 0

or put another way: you have a document that indicates the plan is not a safe harbor. therefore, plain and simple, the plan is not a safe harbor. years ago that was one of the Q and As (sort of) the employer gave out a notice indicating the plan was safe harbor, but it was never amended to do so. The IRS indicated the plan was not safe harbor, with the same comment as John: might have some hard feelings amongst the employees. of course, there is nothing to stop the employer (assuming the document provides for a discretionary match and the cash is available) to make a match similar to what the safe harbor was at least up until the point of time the SMM is passed out.

you didn't mention minimum participation (you can't aggregate plans to pass that test)

ERISA Outline Book 6-Sec III Part D 3b1 (Readers Digest Condensed Version) accrued benefit is a protected benefit, so you can't freeze accruals, convert to equivalent account balance and merge/transfer assets merged plan could be one that complies with 414(k) [i have no clue what that entails] there could be a surviving DC plan that protects the transferred DB benefits through paid up annuity contracts that guarantee the benefits accrued under the DB and protects the optional benefits available.

the reason this works: the APRs are at the extreme end of things. for example UP 84 at 8.5% age 65 APR is 95.38 1983 IAF at 7.5% age 65 APR is 122.64 again, part of the formula to determine an E-Bar is to divide by the APR, and if everyone has the same retirement age it is a constant so unless you impute disparity it really shouldn't matter which mortality you use.

Q and A 21 at the 2013 ASPPA Conference If plan has 2 or more matching formulas, one satisfies ADP safe harbor are all formulas looked at together to see if ACP safe harbor is satisfied? proposed answer: ...If both formulas are discretionary and could be implemented in a way that may not satisfy safe harbor, then the formulas need to meet safe harbor on their own. IRS response: the second discretionary formula that would not meet safe harbor independently would need to meet ACP testing. so my "guess" on different possibilities are the following: based on the IRS comment I would say no because the discretionary wouldn't meet safe harbor independently. however, as I recall, you could use up to 4% of the ADP safe harbor match in the ACP test so even a discretionary match to HCEs probably wouldn't be a problem. You would lose top-heavy free. I don't believe coverage is a problem, because you look at all who could receive a match in any way shape or form.