Tom Poje

the example from the regs [Treas. Reg. § 1.411(d)-3(a)(4) examples 3 and 4] Facts. Employer N maintains Plan C, a qualified defined benefit plan under which an employee becomes a participant upon completion of one year of service and is vested in 100 percent of the employer-derived accrued benefit upon completion of five years of service. Plan C provides that a former employee's years of service prior to a break in service will be reinstated upon completion of one year of service after being rehired. Plan C has participants who have fewer than five years of service and who are accordingly zero percent vested in their employer-derived accrued benefits. On December 31, 2007, effective January 1, 2008, Plan C is amended in accordance with Code Section 411(a)(6)(D) to provide that any nonvested participant who has at least five consecutive one-year breaks in service, and whose number of consecutive one-year breaks in service exceeds his or her number of years of service before the breaks, will have his or her pre-break service disregarded in determining vesting under the plan. (ii) Conclusion. Under paragraph (a)(3) of this section, the plan amendment does not satisfy the requirements of this paragraph (a), and thus violates Code Section 411(d)(6), because the amendment places greater restrictions or conditions on the rights, as of January 1, 2008, to section 411(d)(6) protected benefits for participants with fewer than five years of service, by restricting the ability of those participants to receive further vesting protections on benefits accrued as of that date. Employer O's current vesting schedule is 3/20 In January 2006, Employer O acquires Company X, which maintains Plan E, a qualified profit sharing plan under which each employee who has completed five years of service has a nonforfeitable right to 100 percent of the employer-derived accrued benefit. In 2007, Plan E is merged into Plan D. On the effective date for the merger, Plan D is amended to provide that the vesting schedule for participants of Plan E is the seven-year graded vesting schedule of Plan D. In accordance with Code Section 411(a)(10)(A), the plan amendment provides that any participant of Plan E who had completed five years of service prior to the amendment is fully vested. In addition, as required under Code Section 411(a)(10)(B), the amendment provides that any participant in Plan E who has at least three years of service prior to the amendment is permitted to make an irrevocable election to have the vesting of his or her nonforfeitable right to the employer-derived accrued benefit determined under either the five-year cliff vesting schedule or the seven-year graded vesting schedule. Participant G, who has an account balance of $10,000 on the applicable amendment date, is a participant in Plan E with two years of service as of the applicable amendment date. As of the date of the merger, Participant G's nonforfeitable right to G's employer-derived accrued benefit is zero percent under both the seven-year graded vesting schedule of Plan D and the five-year cliff vesting schedule of Plan E. (ii) Conclusion. Under paragraph (a)(3) of this section, the plan amendment does not satisfy the requirements of this paragraph (a) and violates Code Section 411(d)(6), because the amendment places greater restrictions or conditions on the rights to section 411(d)(6) protected benefits with respect to G and any participant who has fewer than five years of service and who elected (or was made subject to) the new vesting schedule. A method of avoiding a section 411(d)(6) violation with respect to account balances attributable to benefits accrued as of the applicable amendment date and earnings thereon would be for Plan D to provide for the vested percentage of G and each other participant in Plan E to be no less than the greater of the vesting percentages under the two vesting schedules (for example, for G and each other participant in Plan E to be 20 percent vested upon completion of three years of service, 40 percent vested upon completion of four years of service, and fully vested upon completion of five years of service) for those account balances and earnings. [Treas. Reg. § 1.411(d)-3(a)(4) examples 3 and 4]

well, the right to continue to participate in a plan isn't a protected benefit, so I don't see why they couldn't be excluded in the current year. I haven't seen it addressed in regards to top heavy, but if someone is no longer an 'eligible' participant I don't see how they would receive top heavy. of course, if the person has worked, for example, 1000 hours, and the only requirement to accrue a benefit is 1000 hours (no last day rule), I don't see how you could exclude them from a current year non top heavy contribution. If the person really doesn't want the 3% he can send it to me and I will take that nasty burden from him, somehow and someway I will manage to get by carrying that weight.

Q and A #39 ASPAA 2012 Conference A safe harbor 401(k) plan fails the §410(b) coverage with respect to its profit sharing plan component. Within 9-1/2 months after the close of the plan year, the employer adopts a corrective amendment, pursuant to Treas. Reg. §1.401(a)(4)-11(g). Does this amendment cause the 401(k) component to lose its safe harbor for the plan year in which the corrective amendment is adopted? Proposed Response No. Regardless of the position taken by the IRS with respect to amendments made to a safe harbor 401(k) plan, an implied exception exists for any amendments that are necessary to correct a violation of the nondiscrimination testing rules, which is a fundamental requirement for a qualified plan. IRS Response The IRS agrees with the proposed answer.

this is the spreadsheet that performs the calculations you simply plug in the CPI values. there is a link to that table noted on the spreadsheet. (you check the box for the first item) limits are determined using the July-Aug-Sep factors (July and Aug are known at this point in time and are entered. about the middle of the month Sept will be released) but in a few months you could plug in Jan-Feb-Mar 2015 (or other months) to get an idea if the limits will go up in 2016. The taxable wage base is calculated differently, though I see they just released a prediction it will rise 1.7%, so I have to see what that does to the formula I have for that. indexed limits.xls

as John note, which "test" the aggregation rules are in 1.410(b)-7 probably the one least thought about is the one that says "if you don't have the same plan year you can't aggregate even if you want to" so the two basic tests (ignoring BRF which of course you may also have to test) are coverage nondiscrim and there are 3 possible components to each plan 401k [ADP test] 401m [ACP test] nonelective [401(a)(4)] so in reality you have 3 possible coverage and 3 possible nondiscrim tests. double that if you test otherwise excludables separately. but the basic rule is "If you don't aggregate for coverage, you can't aggregate for nondiscrim." and the reverse is true "if you want to aggregate to pass ADP testing you must aggregate for coverage" if one plan is safe harbor401k and the other isn't you can't aggregate either. and as far as I can tell, you could aggregate for 401k but you don't have to for 401(a)(4)

my guess is 'yes', as I recall, under SCP when using a retro active amendment like that you are supposed to submit for a determination letter, so you probably will find out one way or another

agree with all the comments. until the IRS will actually tell us, it is a ' proceed with caution' otherwise why did they put in a special rule that says "yes you can amend to add a Roth feature", but any other amendment you can add with no problem at all. I agree you would think a discretionary with a last day rule could be modified, and maybe someday our grandkids will know the answer to that....

I agree with Lou, I don't see it as an excess deferral, you haven't exceed a limit. you have a failure to follow the terms of the document, so fix it so the plan is back in a position it should have been if the error had not occurred.

I was at that ASPPA conference and had seen the Q and A before the session. I asked one of the folks from Corbel about that particular question pointing out that the response said "as long as their is no effect on others" and asked him "If they make a profit sharing that would effect the existing group because they would now get less" His response was something like "Don't even raise the issue at this time. We are happy we have gotten them to at least open up the possibilities for amendments at this point" I am far from an expert on documents and amendments as stuff. Based on the IRS responses that you really shouldn't be making changes, I have misgivings about changing a profit sharing formula (as opposed to something like changing something that has no real change ...e.g. who head the trust or whatever.0 from a participant's point of view, let's say the ps contribution has been pro rata at 7% for years. now you amend to cross testing so the NHCEs will get only 5% (and the HCES max out). I could see an NHCE saying "I would have deferred more if I had known there was a possibility the usual ps was going to get cut back"

and as a side bar, is the account expecting a portion of any deferrals to be counted on the 2013 ADP test and the remainder on the 2014 test? Sample document language is as follows. (We never use this option) Compensation Earned in Limitation Year but Paid in Next Limitation Year. Section 2.5©(2)(E) of the Amendment defines Code §415©(3) Compensation for a Limitation Year to include any amounts earned during that Limitation Year but not paid until the next Limitation Year.

I'm not the one who does the document stuff so I don't know. that is just what I was told. It might be you would amend for something like that and then restate.

as an added note: the preamble to the regs on QACA indicate what was mentioned in the sample language I provided, namely only those who have affirmative election (which could be 0%) could be excluded from the default election. from the Preamble (the entire preamble/reg can be found at http://www.irs.gov/irb/2009-12_IRB/ar08.html ) D. Exclusion of current affirmative elections from automatic enrollment The proposed regulations provided that an automatic contribution arrangement does not fail to be a QACA merely because the default election is not applied to an employee who was eligible under the cash or deferred arrangement (or a predecessor arrangement) immediately prior to the effective date of the QACA and on that effective date had an affirmative election in effect (that remains in effect) to have elective contributions made on his or her behalf (in a specified amount or percentage of compensation) or not have elective contributions made on his or her behalf. Some commentators requested that employers be permitted to treat employees who did not affirmatively elect to make elective contributions under the plan as though they had affirmatively elected zero. These commentators stated that it would be administratively difficult to determine which employees had affirmative elections in effect prior to the effective date of the QACA. The regulations do not expand the exception for automatically enrolling current employees to employees who have not made an affirmative election. Under section 401(k)(13)©(iv)(II), only those employees who had an affirmative election in effect immediately before the QACA became effective are permitted to be excluded from having a default election apply to them.

if you had a last day rule for profit sharing, then you can amend anytime because no body has accrued a benefit yet. if there is no last day rule then you couldn't amend to change the formula ................ my gut feeling is no you couldn't change based on the IRS last comment at the ASSPA 2012 conference, when asked if you could amend a safe harbor to let new people in, Q 37 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)? Proposed 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. ....... as a side bar, I was told our document provider indicated don't even bother submitting a restatement with mid year changes to a safe harbor plan.

sometimes the easiest answer is to simply look and see what document language is available. for example, the document language from one adoption agreement has: 8. Automatic Enrollment (Traditional or QACA) a. Indicate who will be eligible to receive automatic contributions: i. [ ] Eligible Employees who have not made an Elective Deferral election ii. [ ] All Eligible Employees to the extent that no election was made or their Elective Deferral elections are less than the automatic enrollment amount iii. [ ] Other: but then maybe a different document wouldn't have such provisions.

ha ha ha my apologies. I certainly didn't intend that.

Aye, pirates and scallywags, all of them!

"Aye" red wear U cud ewes: :S Description: The "S" represents a joking smile and may also be short for "sarcastic." It is used to express sarcasm and may be used after a sarcastic or joking comment that should not be taken seriously. :-7 Description: Represents a tongue-in-check expression. Can be used after a sarcastic comment, since it can be hard to convey sarcasm in a text message. ;s Description: The "s" may represent a playful smile or may simply stand for "sarcastic." The winking eye implies the person is joking. ^o) Description: The ^ represents a raised eyebrow. Can be used after making a sarcastic comment.

back in 1993 the comp limit was 235,840 and with a wave of the wand the following year it was 150,000, so not quite unprecedented. but I do like the idea of having a sarcasm icon!

At the 2012 ASPPA Conference Q and A 37 : (reminder such responses don't necessarily reflect actual Treasury guidance, but at least it is something to fall back on) 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)? Proposed 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. IRS Response The IRS agrees with the proposed answer as long as there is no effect on the already-eligible employees.

The Aug rate was released yesterday so we have 238.250 for July 237.852 for Aug awaiting Sept unless it dramatically, and that would be a super dramatic drop to go under 233.000 then the limits next year will be 6000 catch up 18,000 deferral 265,000 comp 53,000 415 limit 120,000 HCE limit or I guess our wonderful govt could hop in and say Sorry, no more increases.

I guess it is sort of like related match on a failed test. the regs say you are permitted to forfeit it. guess that means you don't have to forfeit related match instead of normally you wouldn't do this (especially if someone was 100% vested) but in this case you are permitted to do it.

he doesn't like the schedule SF, he would rather fill in the Schedule Aye and all the attachments Schedule Arrrrrrrrrrrrrrrr and schedule Sea

in case of an audit, at least you will be available to get him off the hook.

A pirate with a wooden leg wanted to buy fire insurance for his peg leg. The first actuary quoted an annual premium of $500, estimating that the leg would burn once in 20 years and the value of the leg is $10,000. The second actuary quoted an annual premium of $50. When the second actuary was asked how he arrived at such a small figure, he replied, "I have this situation in the fire schedule rating table. The object is a wooden structure with an upper sprinkler, isn´t it?"

but what category do you list them under? they aren't 1. active 2. retired/separated receiving benefits (though the instruction don't say it these would be annuity or min distrib folks) 3. other retired or separated ENTITLED to future benefits (i.e. any individual who separated and who are entitled to begin receiving benefits under the plan in the future) 4. deceased since they currently fit none of the categories just where are you including them? item 3 because they MIGHT(e.g. if the plan terminated and they vest them at 100%?) nothing in the instructions say MIGHT be entitled to future benefits if that was true, then if your document allowed for immediate forfeiture of 0% vested people, you would have to count those people because they might come back and have their forfeitures restored, or someone who was partially paid out might return and pay back their distribution and have their forfeitures restored, as a side note, and it doesn't necessarily mean it how you are supposed to handle it, but I believe Relius treats 0% vested terminees (who have a balance) as not included in the count