Tom Poje

so we are stuck for 9 straight days beginning 5/10/15 and ending 5/19/15 next year it takes place in June

testing is permitted using any definition that satisfies 414(s) - 1.401(a)(4)-12 definition - plan year compensation but of course before you can get to testing you have to pass the gateway if you are cross testing, and that has to be a definition that passes 415 comp (though could be from date of entry)

if someone elected not to defer, and there were no other contributions, then the note from the ASPPA Conference would seem to apply - prior service disregarded If the person actually elected OUT of the plan, then I don't think it matters, as that is suppose to be a one-time irrevocable election, I would hold even if he quits and comes back later1.401(k)-1(a)(3)(v) makes no mention of quit/rehire, but simply says for the duration of the employee's employment with the employer (but it also adds " including plans not yet established" - so that would seem to me to be all encompassing)

Lori: the following are the IRS publications one for eligibility (participation) - page 5 has particular notes in regards to break in svc. and the other for vesting generally, once you have obtained some vesting you can't disregard any service because of the rule of parity, but then that is usually a 401k plan. at the ASPPA Conference 2010 the IRS individual noted If there is a vested amount, prior service cannot be disregarded, even if the vested account is attributable to deferrals. IRC 411(a)(6)© and (D). However, if there is a vested percentage, but no vested amount (i.e., no deferrals made in this example), the rule of parity does permit prior service to be disregarded. min partic standards publication 6388.pdf minimum vesting standards.pdf

1.401(k)-1(b)(4)(iii)(B) says you can't aggregate a safe harbor with a non safe harbor A and B are Basic match (assuming nothing else is different, e.g. comp definition) with A and B then for coverage you could A & B (C includable not benefiting) - as you said C (A & B not benefiting) or A B C all tested separately C is ADP tested as well

Austin - they plan to modify the 5500-SUP and include the following: Good place for us to SUP when we come for an audit. Guess that explains the name of the form.

I suppose what will be even more fun is the SUP asks trustee name and phone number

correct, if the key person gets nothing (no deferrals, match, ps, forf) then there is no top heavy required.)

it is also possible the following report may help (if you are not updating Relius for awhile) nothing fancy about, I had thrown this together months ago since we had started our 5500s already, of course no guarantees, but it appears to work 5500 count.rpt

well put, such document language almost sounds like "fail-safe language", for lack of a better term. (In some ways I'm surprised such language is permitted. it almost sounds like the language that was in documents when safe harbors first came out, and they said something like 'we will be safe harbor if we issue a notice' and the IRS said no you can't do that. I remember even talking about that with one of the folks from Corbel about that.)

you are leaving out the most important point 1.401(k)-3(f)(1) requires plan must be amended 30 days priors to the end of the plan year, effective as of the first day of the plan year making it a safe harbor. it does not sound like this was done, so plan is not safe harbor. even if they gave the notice - otherwise you have not followed the terms of the document. but the notice itself is not an amendment. there is nothing to stop them from providing a 3% QNEC (aside from a document that says no QNEC) and that could be used in ADP testing of course. I'm not sure there is an operational failure 1.401(k)-3(f)(3) says the follow up notice is required 'that states the safe harbor will be made for the plan year.' I don't see where it is required if it will NOT be made. generally you would do so because either 1. you will make the SHNEC in the given year and on a permanent basis going forward 2. make the SHNEC for the current and maybe next year 3. will not make the SHNEC but maybe next year 4. I suppose will not make the SHNEC and no intention the following year

same with us, on large plans we have never had the independent auditors question the change. Looking further at the specific instructions I do not even see where it says you have to be consistent from year to year, simply you have to be consistent when filling out the specific parts. In other words, don't use accrued gains on some parts and not on others, or I'm going to use accrued match but the accrued profit sharing is not included this year 5500 instructions: Note. The cash, modified cash, or accrual basis may be used for recognition of transactions in Parts I and II, as long as you use one method consistently

Mike: yes one such post from years ago http://benefitslink.com/boards/index.php?/topic/10750-5500-on-accrual-basis/ as I recall there have been others, and I believe the question may have even come up at an ASPPA Q and A.

without knowing all the facts / how the software handles things I suspect it may be 'fun' if the db is plan is begin of year val and the dc plan is the usual end of year I think smoke starts coming out from the back of the computer or the sides or whatever.

we import the deferrals for the year if plan fails testing, use allocated link to import assets (suppress contributions) and run the ADP test so gains are included in refund. top heavy could be run at this time. unless you are real close to 60%. T-39 of 1.416-1 clearly states that precise top-heavy ratios need not be calculated every year....may use computations that are not precisely in accordance with this section but can mathematically prove the plan is not top heavy... after running the reports, these are saved. then reverse the deferrals /match and reimport the assets to include contributions and report everything on a cash basis I have never seen anything that says you can't switch your reporting method on the 5500 nor that you have to have a note from mom informing the IRS of your intentions to do so... conventional wisdom would be that you don't flip flop every year, but if all other plans in the office are reported on a cash balance I don't see where the IRS would have a problem is you switched to a cash basis.

Kevin: The question came up could you also amend for 2015 and I was assuming that meant they wanted to put in a corrective amendment at this time to include 2015. I read that as saying "can I toss in additional amounts for 2015 pretty much as a just in case" - but if you do fail 410b in 2015 then that implies you are bringing in people who couldn't defer , and it that case I would say that is pre funding the match because deferrals haven't even been made yet. I'd be a bit hesitant about even assuming such a failure before it happens.

if it was a safe harbor match I don't think it could be done because that would be prefunded a match which the IRS has said is taboo. or at least that is what I recall.

yes, an the deadline is 1.401(a)(4)-11(g)(3)(iv) 15th day of the 10th month following close of plan year e.g. Oct 15 for a calendar year plan. otherwise you have to use VCP

I think it is a debatable issue. In the case of a partner the deferral election is suppose to be in place before the end of the year. so let's say they put down 10%. end of year comes, it is determined they have no comp, so no deferrals. however, the IRS has no problems with deferrals being made throughout the year. the preamble to the 401k regs had the floowining note One commentator asked for clarification of the interaction between these timing rules and the rule under the regulations that treats a self-employed individual’s earned income as being currently available on the last day of the individual’s taxable year and whether this last day rule precludes a partner from making elective contributions during the year through a reduction in the partner’s draw. The restriction on the timing of contributions is not intended to prevent a partner from deferring amounts that are paid to the partner throughout the year on account of services performed by the partner during the year, and the final regulations have been modified to clarify this point. However, self-employed individuals who take advantage of this opportunity to defer amounts during the year must make sure that the amount contributed during the year will not exceed the limits (such as the limits of section 415) that will apply to the individual, based on the individual’s actual earned income for the relevant period. so, if the person had waited until the end of the year to determine the comp, and found there was none there would have been no deferrals. just because they 'took a chance' to defer during the year and then found out they had no comp, seems out to be a 'penalty' and say the plan has to provide top heavy. I myself lean toward saying no deferrals because the person wasn't entitled to make any deferrals, so no top heavy. this is different, than, say, ee deferred 10,000 and comp at end of year turns out to be 5000 so there is a 415 violation. but as far as I know, the IRS hasn't addressed the issue. the preamble simply doesn't address the issue entirely. even under EPCRS when there is a 415 violation, the deferrals are returned to the participant. but in this case, as far as I know, such deferrals are not returned to the participant because he wasn't entitled to them in the first place.

it is probably hard to prove one way or another, it really shouldn't matter if there are NHCEs or not (at least with only HCEs there is no coverage or nondiscrim testing) the LRM that came out in 2011 (see next to last page) warns of the possibility of creating a CODA where none exists (of course, if one exists there is the possibility of excess deferrals being generated) My guess it is not so much of a problem when there is just one owner (and / or family involved) If you have multiple partners and some are maxed out and others not it looks rather suspiciously like a CODA. of course the company could have put in 20 plans, one for each partner and could have accomplished the same thing to get around that, but that is another issue. As I recall, at one of the ASPPA Conferences, the IRS said they "would know abuse when they saw it" lrm.pdf

as I recall the questions was asked at an ASPPA Conference many moons ago, so many in fact, that... well, as I recall, the issue was discussed from the podium. and the original question was at 6% not 10%. the answer was basically as described above, but perhaps in more cautious terms. I believe the IRS suggested, as noted in the original post, this may be 'unreasonable' possibly subject to a BRF test - while yes currently available to everyone, effectively it was not. given the fact you are giving a free ride on ADP testing and if only HCES are able to take advantage of it, the IRS might have problems upon examination. suppose NHCEs were smart enough (ha ha ha), I said suppose to write the IRS and ask How come the HCEs can defer out the wazoo and get a match and we get nothing because we can't afford to defer but limited amounts would such a plan ever get caught? or maybe, perhaps put another way, if someone asked me to implement such a plan I would have them seek someone else to run the plan.

see situation 4 of rev rule 2004-13 it doesn't matter if there are only deferrals and safe harbor if there is different eligibility for deferral than for safe harbor. the way situation 4 is worded implies it doesn't matter if it turns out no one is otherwise excludable (or at least that is how I read it) the write up to situation is possible a little less clear. rev rule 2004-13.pdf

where does the time go? that long for this 'link' of course, I am a bit of a missing "link" but thanks to all who share their knowledge.

as I recall it doesn't matter if no one falls into the group, the regs simply read if there is different eligibility requirements then you lose top heavy free, but I don't have access to any notes at this time.. (resource material at one place I am at another) but I could be wrong with seeing the exact verbage

if I had someone making $9,840 at .635% he would receive 62.48 (not 62.484) and that fraction of a penny makes the difference. so as % of pay they received only .63496%. did he receive at least 1/3 the hce rate of 1.905 as required by the regs? no, and I don't think you can say "if I round.." just give them an extra penny, good grief. would the IRS push the issue for lack of a penny? who knows.