Tom Poje

ha ha ha Mike, you should have posted this under the humor section "the fact that ADP/ACP testing is, relatively speaking, understandable"

as Lou S indicated in the 2nd post, the other plan has nothing to do with the testing in plan 1. (otherwise the question literally becomes "if you are in 2 unrelated plans does that eliminate catch-up contributions entirely") So I incorrectly assumed the question was asking "the ee could defer 24,000 in total between the plans, therefore can I treat 6000 as catch up in plan 1 [before running the ADP test].

Interesting. for a 401k plan do you provide a copy of the ADP test? that is nondiscrimination testing for deferrals (and match). if you provide that, why wouldn't you provide nondiscrim testing for the nonelective portion?

haven't changed my mind. the case we are talking about involves unrelated employers. the article I posted says the following, but since it has only been downloaded once I can only assume that was a complete waste of my time and trouble. Special Rule for Participants in Multiple Plans of Unrelated Employers. An issue arises when an individual terminates employment with one employer in the middle of the year and begins employment with an unrelated employer. If that individual participates in a 401(k) plan sponsored by each employer, his elective deferrals to each plan might not exceed a statutory or plan limit. In addition, his contributions might be permissible under the ADP test. In this event, a catch-up eligible participant may treat contributions in excess of the 402(g) limit as catch-up contributions. This treatment, which is generally consistent with the operation of the section 402(g) elective deferral limit, is deemed to have no impact on the plans -- they will not have to rerun their ADP tests to exclude the catch-up contributions. See Prop. Reg. § 1.414(v)-1(g). so my point, and perhaps that is where the confusion comes in, you do not say I deferred 18000 in one plan and 6000 in another plan. therefore, when I run my ADP I can treat 6000 as catch up and so use 12000 when I run my initial test. you still have to use 18000. but then, I'm not sure the direction the original question is going in. If you fail the ADP test and the person is catch up eligible you can treat up to 6000 as catch up, but that is true whether or not there is another plan or not. The fact the person deferred in another plan is pretty much unrelated to the issue

at least in the proposed regs there is no 'catch-up' in the 'plan', because no plan limit was exceeded. let's suppose the person deferred 18000 in the second plan. so he has 36,000 in deferrals for the year. which plan is disqualified because it accepted amounts over the deferral limit? neither plan, because in the unrelated plans no limit was exceeded. It is up to the individual. the IRS will tax him because it add all the W-2s and determines there is an excess. If the person doesn't request one of the plans for a distribution of the excess, then some day down the road when an actual distribution is taken he will be taxed again. certainly 'unfair' but that is how it works out.

as noted in the following article (page 6) participation in multiple plans of unrelated employers, such amounts would not be treated as catch-up contributions, and would be included in testing. granted, this was in the original proposed regs for catch-up, the current regs are silent on the issue. no reason is given why that particular item was not included is not provided. (The original propsed regs also included an example of having a 0% plan limit on HCEs and still permitted them to make catch up contribution because that was a plan imposed limit) I think the reason being, is answering the question, what 'plan' limit did the person exceed? unless you aggregate unrelated employers no limit was exceeded, which is what the ERISA Outline book seems to say, it is an individual limit that is exceeded, not a plan limit. catch up contributions.doc

I don't think so, based on the ERISA Outline Book wording, the plan doesn't have a catch-up, it is the individual. the IRS 'knows' [ha ha ha] the person's age, so it sums the W-2s and says the person has 23,000 in deferral which is ok because he is age 50 or older.

the following could happen ee defers 6000 at the new company. so snapshot at the end of the year shows he has deferred 24000 in total for 2015 which is perfectly all right, neither plan is in violation because neither plan has accepted amounts over the deferral limit. The individual is fine as well, as he is entitled to defer that much for the year. In fact, I see there is even an example in the ERISA Outline Book Chapter 11 Section XI Part F1.b.1)a) "In effect, then, the individual has treated a portion of his elective deferrals as catch-up contributions, even though neither plan treats any of the elective deferrals as catch up contributions" emphasis mine. I have read an even stranger scenario. to keep things simple, suppose he is not catch up eligible. no match at company A. ee defers 17,500 changes jobs to company B, which has a match. he defers 17,500 and gets a full match. All of Plan A is treated as excess deferral. that sounds like cheating, but I understand that is possible as well. ...................

Sal and I are saying the same thing, in fact in 4.a.5 of his book (2012 edition) he even notes it is the preamble that says a person needs to receive a nonelective contribution to be considered for the gateway. Why they put it in the preamble rather than the regs (or didn't change the regs to clarify things is beyond me) But even the preamble's wording implies people looking just at he regs questioned whether a gateway had to be provided to those who received no nonelective. I still don't see anywhere that implies if a person receives nothing in the DB and they receive no nonelective in the DC they should still receive the special gateway.

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well, those particular nondiscrim regs came out way back in 2001 and in all that time I've never seen anyone suggest that idea, nor have I heard the IRS say or imply that current document providers have it 'messed up' and they need to provide other special language. The preamble to those regs simply says that if an NHCE benefits under both plans you can aggregate the 2 to determine if they satisfy the gateway (p11 of the pdf) In fact, if you read the regs themselves, there is nothing in them that says an NHCE must be 'benefiting'. 1.401(a)(4)-8(b)(1)(vi) says "each NHCE must receive an allocation rate of at least 5%..." but the preamble explained that as someone who actually benefits. (page 7 of the pdf) nondiscrim regs.pdf

as a result, for coverage, those in one group received a match but no nonelective and would be treated as includable and not benefiting etc.

it is found in the regs matching contribution are 1.401(m)-1(a)(2)(i)(B) Any Employer contribution to a defined contribution plan on account of an elective deferral

the sample notice for safe harbor plans provided by the IRS had the following language to be included: Safe Harbor matching contributions will be based on a ______________________ basis. (e.g., payroll basis, annual basis, true-up will be made at end of year if you change election percentage, etc.) so if your notice had such language and indicated "annual basis" you would be changing something. arguably that would be a problem. There is still nothing in the regs that talks about issuing a new notice if something is changed. I realize the whole thing is in many stupid since it doesn't really change anything, but at what point do you draw the line what you can do and cannot do. ............... I can't say 'it's not a document issue" - since the documents we use (for better or worse) are pretty specific and you have to indicate how often the match is provided, if it is true-upped, etc.

I am not so sure on the comment "the participant cannot pay back the impermissible withdrawal" the IRS 401k fix it guide, dated 1/23/2015(less than 5 months old) item 10 implies it can be done http://www.irs.gov/Retirement-Plans/401(k)-Plan-Fix-It-Guide

I'm not quite sure how that calc would be different from a spreadsheet that simply calculates a sole proprietor - and if you had a 60-40 ownership you would simply use 60% on one and 40% of gross profits on the other. buried on my computer is a file date from 2007 where it cane from I have no idea looks like it might do what you want though no instructions, but what the heck would you need those for anyway. this one looks like it would be used if you had w-2 comp in addition to gross profit to split. Net_Earned_Income_Determination_version_with_Partner_W2.xls

I'd be cautious of the statement "the internet is here to stay"

well, the instructions for someone who hasn't been reported says 'isn't required to report them' (as an A) if they have been paid 'some' of their benefit.(but I have never followed that instruction I guess using the same logic (though logic never applied to any of these of forms), since they have been paid some or all of their benefit you 'could' report them as a D. I'm not quite sure when condition 3 arises, except maybe for a lost participant. A participant who has not been previously reported is not required to be reported on Form 8955-SSA if, before the date the Form 8955-SSA is required to be filed (including any extension of time for filing), the participant: 1. Is paid some or all of the deferred vested retirement benefit (see the Caution below), 2. Returns to service covered by the plan and/or accrues additional retirement benefits under the plan, or 3. Forfeits all the deferred vested retirement benefit. That being said, I have always waited until someone is fully paid out before reporting them as a D

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well, I guess if you have 20 ees, (1 HCE and 19 NHCEs) and all 6 NHCEs term > 500 hours you would have 13/19 = 68.4% which would indeed fail ratio. if even one of those term < 500 hours then you should be above 70%. if document has fail safe language it would tell you who has to get a contribution (either last to quit or most hours) if no fail safe language, I'd still be a bit surprised if plan fails avg ben pct test tested on an allocation basis and imputing disparity should be enough to pass (unless the HCE has comp less than taxable wage base)

I'd be curious on more details. If you fail ratio %, even with a top heavy minimum, that implies less than 70% of the NHCEs benefit, which in turn implies more than 30% turnover, which means a partial termination. (Unless you are talking a plan with very few NHCEs) and yes, it is possible to have a plan that allocates top-heavy to all participants, not just non-key employees that could cause this to happen, but also means that the NHCE who quit all worked over 500 hours as well. In such a case you would have to make a corrective amendment to provided a contribution to a few of the terminated ees, it would have to have substance (which means you couldn't simply make a contribution to a 0% vested employee, etc)

I haven't posted this for a while. I don't know if FT William still has it available - at one time they had pulled this custom report and had it available. I have never had a problem with it as far as pulling data from Relius and then pasting it into the FT William file and then importing it into the SSA file on FT William. (after just running it for a particularly large plan I am thankful for it) the notes my be a little old, but heck, I'm getting to lazy to post something for nothing. sorry, I can't attach the 8955sample.csv because benefits link doesn't allow a csv attachment.. notes on SSA report.doc SSA .rpt

in other words, sort of a bassackwards method of asking the same question as that which is on the 5500 for large plans, but instead of making it easy and asking 'how many terminated people with balances do you have' it asks how many active people do you have (whether they balances or not)

I will be 76 by that date and hopefully will have that date off anyway, though probably no $ to celebrate. 1/23/45 is an even less viable option.

think of it this way: deemed distributions means the 'distribution' took place even though there was not a distributable event. so a person who is active generally can't get $ out of the plan because there is no event such as termination, in service, etc. so a defaulted loan falls into this category. in your example, the person has terminated, which, in most plans would be a distributable event so that would be treated as a benefit paid (even though they received nothing more at this time - they did receive it earlier in the form of a loan)