Tom Poje

so you issued a notice that basically says "We get a free ride on the ADP test in 2015 because we promise to give safe harbor contribution to anyway we hire (we have immediate eligibility) I have a problem (and the DOL might) if that is now changed to 6 months eligibility even though at the moment it might not effect anyone. you have changed what was promised that anyone would get the safe harbor. but then, that's just me.

I forgot to add, passing is the first step toward obtaining that valuable Smart Thinking Upstanding People Intelligence Determined so maybe someday you can have some great initials after your name

I assume you mean gap period income as opposed to income through the end of the plan year? answer is: no on gap income. see page 35 of the handout. there will be a quiz on the entire contents of the enclosed next Wednesday. we moved the testing day up so people could have time off for Passover or Easter. Depending on which may apply, have a blessed upcoming holiday! wrera.pdf

so just have the person show up one day in Jan, and sign a paper that says "I officially retire today, you don't have to pay me for my troubles today, it is my gift to you"

my thoughts would be: the company was going to pay me 10,000. I deferred it all into the plan. now it turns out, no, the $ weren't there, there was a bill for 10,000 that was paid instead. Therefore that 10,000 was never really mine. If I get the distribution for 10,000 it's like saying I have 0 comp, but I get 10,000 anyway. but that would be impossible. I need to put the plan back in a position it should have been. if I had 0 comp, I have 0 deferral, so no distribution to me.

I'm not sure I would refer such an issue as 'greed' or anything like that. even in the preamble to 401k regs the IRS noted 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. It could well be at the start of the year business was good and the ee deferred early as permitted, but then business went downhill and the sched C ended up insufficient. since the person, at least in this case, had no income, I don't see how the person could get a distribution - those $ simply didn't exist for them. whether those $ get tossed into a forfeiture account or returned to the company to pay 'expenses' (which I guess is why the sched C income was negative) I'm unsure.

I suppose the reg (1.401(k)-3©(2)) which says Basic Match formula....100% of the employee's elective contribution that does not exceed 3%... there is nothing in the regs that adds "excluding any catch up contributions" Kevin makes a good point, people must have asked about it, and it was clarified in the preamble.

lets say he deferred and his final paycheck shows up in Jan 2015. even for tax purposes it appears he 'worked' in 2015 as that is what his w-2 indicates, his deferral shows up on the 2015 ADP test, etc. but then, my brain gears don't always mesh properly

well you can't aggregate plans with different testing methods, so since you have HCEs in one and NHCEs in another you fail coverage. That would disqualify the plans, and the IRS isn't really out to have that happen, so EPCRS is available for such situations. so the question is, what is available? Failing coverage is a demographic failure. EPCRS indicates SECTION 4. PROGRAM ELIGIBILITY .01 EPCRS Programs. (1) SCP. SCP is available only for Operational Failures. Qualified Plans and 403(b) Plans are eligible for SCP with respect to significant and insignificant Operational Failures. SEPs and SIMPLE IRA Plans are eligible for SCP only with respect to insignificant Operational Failures. (2) VCP. Qualified Plans, 403(b) Plans, SEPs, and SIMPLE IRA Plans are eligible for VCP. VCP provides general procedures for correction of all Qualification Failures: Operational, Plan Document, Demographic, and Employer Eligibility. VCP also provides general procedures for the correction of participant loans that did not comply with the requirements of § 72(p)(2). .05 Correction by plan amendment. (1) Availability of correction by plan amendment in VCP and Audit CAP. A Plan Sponsor may use VCP and Audit CAP for a Qualified Plan or 403(b) Plan to correct Plan Document, Demographic, and Operational Failures by a plan amendment, Section 5 01.2 (c ) Demographic Failure. The term "Demographic Failure" means a failure to satisfy the requirements of § 401(a)(4), 401(a)(26), or 410(b) that is not an Operational Failure or an Employer Eligibility Failure. The correction of a Demographic Failure generally requires a corrective amendment to the plan adding more benefits or increasing existing benefits (see § 1.401(a)(4)-11(g)). .............. so I read that to say, yes, you correct, but use VCP.

I believe one of the reasons (if not the only reason) the rule for matching catch-ups in a safe harbor plan is to avoid NHCEs from receiving a lesser rate of match than HCEs, so that would apply to discretionary match contributions as well.

I should have been more specific, each word separately... how has 3 I has 1 wish has 4 I has 1 could 5.....

count the letters in each of the following words: how I wish I could recollect pi easily .......................... oh and happy Friday the 13th all.

if you pass ratio % test, then I don't see how it's possible to fail testing if you test on an allocation basis. everyone who received anything received 2%, so the numbers should be the same as the ratio % test. and there is no gateway when testing on an allocation basis.

well, since I wrote the regs, I can tell you the reason... oh wait, I'm out of my mind. let's pretend everything is the same in your example except for the fact the Key person is still participating. Then every year he gets a contribution, takes an in service distribution and the plan would never be top heavy, thus beating the system. If there are no other key employees, then it is a moot point because the top heavy (at least in the DC world) is based on how much contribution the key person received, which would be 0.

in some ways it is the opposite you have a document that is not safe harbor you issued a notice that says it might be a safe harbor if it was decided to go safe harbor then you issue a notice saying 'yes' and amend the document, at least 30 days before the end of the year. I know of no requirement that says you have to tell the people 'no', though I would probably do it anyway. see 1.401(k)-3(f) since your plan is not currently safe harbor you can amend with no problem, as far as I know.

Bye Bye Miss American Bye..oh wait it's Pi, pi, mathematical pi but maybe only someone as 'irrational' as me can enjoy this. I don't even understand how or why the link I posted pops up the way this does ( then skip to the song if you want to avoid some preliminary comments) A long, long time ago Long before the Super Bowl and things like lemonade The Hellenic Republic was full of smarts And a question resting on the Grecian hearts Was "What is the circumference of a circle?" But they were set on rational numbers And it ranks among their biggest blunders They worked on it for years And confirmed one of their biggest fear I can't be certain if they cried when irrationality was realized But something deep within them died the day they discovered pi. They were thinking CHORUS: Pi, pi, mathematical pi 3 point 14 15 92 65 35 89 7 932384 62 6433832 7 (not rounded) VERSE: Well this kind of pie is different than most It hasn't got berries, ain't spread on toast And that's how it's always been We keep extending its decimal places Pushing our computers through their paces But we'll never reach the end So why the fascination with A number whose end is just a myth Whence the adulation For mental masturbation It might have something to do with the stars To calculate distances from afar But that's just a guess 'bout the way things are Regarding the precision of pi I am pondering CHORUS: VERSE: Now I feel that I should mention Pi is applicable in any dimension At least as far as I know If there were no Pi we'd be missing things Like marbles and mugs and balls of string And sports such as soccer and curling The orbs in their celestial paths Navigate along elliptical graphs Ellipses have pi in them too Just one side of them has grew You can see pi in most everything It's in Cornell's Electron Storage Ring And also in slinkies and other springs And that's why it's important to know pi You should memorize CHORUS: OUTRO: Once one night I had a dream That pi was gone and I had to scream Cause all pi things had disappeared (pause) Can you imagine a world like that Circles aren't round and spheres are flat It's the culmination of everything we've feared 'Twas a nightmare of epic proportions One that gave me brain contortions Oh wait! I mean contusions They put me in some institutions But then I escaped and now I'm free To sing of the virtue of pi CHORUS:

if the document hasn't been restated it might be in the 415 amendment that was required here is a sample [ ] (I) Compensation Earned in Limitation Year but Paid in Next Limitation Year. If this paragraph (I) is checked, then effective as of the first day of the first Limitation Year beginning on or after July 1, 2007, Code §415©(3) Compensation for any Limitation Year will include any amounts earned during that Limitation Year but not paid during that Limitation Year solely because of the timing of pay periods and pay dates if: (i) these amounts are paid during the first few weeks of the next Limitation Year; (ii) the amounts are included on a uniform and consistent basis with respect to all similarly situated Employees; and (iii) no Code §415©(3) Compensation is included in more than one Limitation Year.

well, if the document has something like the following: 15. Post Year End Compensation [ ] Determine Compensation using Post Year End Compensation NOTE: If selected, amounts earned during the current year and paid during the first few weeks of the next year will be included in current year Compensation .................. and the box is checked I would follow the terms of the document and include in 2013. if unchecked I would follow the terms of the document and include in 2014 ..................... now finding it in the document might be another story....

forgot to add, you are supposed to chant Cosine, Secant, Tangent, Sine 3.14159

So go and celebrate at 1:59 even if the ADP tests aren't finished.

there is an odd regulation, not sure how it actually works in practice Within 12 months after the close of the plan year in which the excess contribution arose, the plan must distribute to each HCE the excess contributions apportioned to such HCE under paragraph (b)(2)(iii) of this section and the allocable income. Except as otherwise provided in this paragraph (b)(2)(v) and paragraph (b)(4)(i) of this section, a distribution of excess contributions must be in addition to any other distributions made during the year and must be designated as a corrective distribution by the employer. In the event of a complete termination of the plan during the plan year in which an excess contribution arose, the corrective distribution must be made as soon as administratively feasible after the date of termination of the plan, but in no event later than 12 months after the date of termination. If the entire account balance of an HCE is distributed prior to when the plan makes a distribution of excess contributions in accordance with this paragraph (b)(2), the distribution is deemed to have been a corrective distribution of excess contributions (and income) to the extent that a corrective distribution would otherwise have been required. [Treas. Reg. § 1.401(k)-2(b)(2)(v)]

I fixed the example it should have been a 6 not 8 the original example said you could have made it 10 10 and 10 8 or 20 16 but I can't type

that is the purpose of the shift. I know the software we currently use won't shift with prior year testing so we have to show it on paper, but that doesn't make it incorrect. it also won't shift any HCE so it will return a message saying you can't shift when you could have. the classic example was from the regs many years ago which was HCE 10% 10% NHC 10% 06% the regs back many years ago said you could shift and end up with HCE 0% 20% NHC 0% 16% which would pass the ACP test using the 1.25 times test. of course the example from the old regs goes back far enough that 15% was all that was deductible in a ps plan and deferrals counted toward deductibility, so you would never be able to actually deduct it!

assuming all bells and whistles are the same, then yes by that I mean you don't have some screwy like prior year ADP current year ACP you aren't using comp less deferrals in prior year and total in the current year, etc. if you have a last day rule for match you can't shift deferrals for that person because he can't have anything on the ACP side ERISA Outline Book also agrees chapter 11 section IX part C.2

then possibly, though I would go beyond saying that would be a hyper-rare situation, because you still have to pass facts and circumstances, which, I would guess, if the plan involves cross testing would toss that out the window. (But I have too many ADP test to run to worry about the possibility of this situation (much less proving facts and circumstances))