Tom Poje

see 1.410(b)-6(b)(2) which, as I understand the rules says if you have dual eligibility you have to satisfy all the conditions... so let's say you try to invoke the otherwise excludable rule for testing. how many people satisfy 1 year? zippo. how many benefit who have less than 1 year? only HCES. you fail. note: for purposes of ADP test you can get by because of a special rule. but you are not talking ADP testing, you are talking about coverage, and there is no special rule for coverage like that.

while true, you might raise the anger of animal rights groups who would pity the poor animal having to read that stuff.

All I can say is "Bad job, Walt. Bad job!"

these are the notes that I have (which were written for DC plans and I think self correcting but not through VCP): of course with DC plans it was a little easier because you are playing with an account balance not a benefit. You can’t ask for the penalty to be waived until you have actually taken the distribution. This is proof you are trying to fix the situation as soon as possible. Fill out form 5329. Write letter begging for mercy, explaining the reason you didn’t receive the minimum distribution was the incompetence of the investment house or something similar. Years ago, it was required to send in the 50% penalty and hope the IRS would have leniency and waive the penalty and return the money. Now simply send in the letter with the Form 5329, and if they don’t accept your lame excuse they will bill you. so when you ask how does the participant prove the IRS waived the tax, it sounds like a vicious circle. I thought the idea of VCP was you were asking if your suggested method was ok, so you wouldn't know at that point if the excise fee was waived or not.

if no one is in excess of the deferral limit (it was been 17,500 in 2013 and 2014) then you run your ADP test. (top down by %, the 'old rules') then you calculate the refund by beginning with whomever deferred the most, so there really isn't any room for different interpretations 1.401(k)-2(b)(2)(iii)(A) the contributions of the HCE with the highest dollar amount of contributions taken into account under this section are reduced by the amount required to cause the HCEs contributions to equal the dollar amount of the contributions taken into account under this section for the HCE with the next highest dollar amount.... then catch up rules kick in probably example 4 of 1.401(v)-1(h) example 4 is the best which basically says ADP test fails, you run the test (using highest % of course) to determine the $ amount of refund. Then after leveling off by $ amount (in this example) all hces are reduced to 12,500. that is the new 'limit'. if someone is catch up eligible then anything above this amount is a catch up. But if you have an HCE that deferred more than 12,500 and is not catch up eligible, he is out of luck. there is no "I can borrow from an HCE who didn't use his full catch up and therefore reduce what I might have to refund to non catch up eligible ees"

a few days late, but April 20 was the 19th anniversary for Benefits Link. at least, according to the coffee mug I received a few years ago. Thanks to all who have shared info. I certainly have learned a lot, not just from the answers, but from the questions themselves. Many force me to use that thing that is rusting away between my ears. I especially appreciate a numbers of friends, even if distant, who I have made through the site. by coincidence, my 5500th posting. That seems rather appropriate. Thanks again Dave!

quite a big jump from last month (Feb) to this month (Mar) released figure, from 234.781 to 236.293. If that figure holds through Sept then everything jumps to the next level (including catch up contributions)

the IRS has said you can use corrective amendments with safe harbor plans, because if a plan fails you have to be able to fix. (I think at the 2013 ASPPA Q and A but I don't have my notes handy) I would think a DB plan could contain gateway language. I wouldn't think that would be much different than having top heavy language - that seems pretty 'individual participant' to me. (except of course top heavy language is required)

ok, so you 'maybe' don't want to aggregate for coverage. the example I cited clearly says "because you didn't aggregate for coverage, you can't aggregate for nondiscrim"

if you aggregate for coverage you have to aggregate for nondiscrim, and the reverse would also be true, maybe not quite as obvious in the regs (though certainly even if not word for word, the logic is there for consistency) but perhaps, looking at the option for testing 2 401(k) plans will help. the example actually uses 1 plan, but illustrates otherwise excludable employees. 1.401(k)-1(b)(4) (iii) Aggregation of plans— (A) In general. For purposes of this section and §§ 1.401(k)-2 through 1.401(k)-6, the term plan means a plan within the meaning of § 1.410(b)-7(a) and (b), after application of the mandatory disaggregation rules of § 1.410(b)-7©, and the permissive aggregation rules of § 1.410(b)-7(d), as modified by paragraph (b)(4)(v) of this section. Thus, for example, two plans (within the meaning of § 1.410(b)-7(b)) that are treated as a single plan pursuant to the permissive aggregation rules of § 1.410(b)-7(d) are treated as a single plan for purposes of sections 401(k) and (m). Example 2. (i) Employer B maintains Plan W, a profit-sharing plan that includes a cash or deferred arrangement in which all of the employees of Employer B are eligible to participate. For purposes of applying section 410(b), the plan treats the cash or deferred arrangement as two separate plans, one for the employees who have completed the minimum age and service eligibility conditions under section 410(a)(1) and the other for employees who have not completed the conditions. The plan provides that it will satisfy the section 401(k) safe harbor requirement of § 1.401(k)-3 with respect to the employees who have met the minimum age and service conditions and that it will meet the ADP test requirements of § 1.401(k)-2 with respect to the employees who have not met the minimum age and service conditions. (ii) Under these facts, the cash or deferred arrangement must be disaggregated on a consistent basis with the disaggregation of Plan W. Thus, the requirements of § 1.401(k)-2 must be applied by comparing the ADP for eligible HCEs who have not completed the minimum age and service conditions with the ADP for eligible NHCEs for the applicable year who have not completed the minimum age and service conditions in other words, if you don't aggregate for coverage, you can't aggregate for nondiscrim.

if my understanding of the 'logic' [ha ha ha ha ha] behind this is the 'new' people never received a notice. you are now making them eligible so they receive a notice. this is different than 'amending' the plan that changes something else that would have been in the notice. And there is noting in the regs about issuing a new notice if you 'changed' something that was in the notice. or at least that is the best I can figure behind the logic. I just wish they would say , ok, you can change stuff, and if you do so, update the safe harbor notice if needed. ................. and for those out there, have a blessed Easter (or a wonderful Passover if that is your background) have gotten my special Resurrection cookies made (Springerle - chocolate version) and home made Potica Bread (walnut filled bread) well, I'm not sure how to paste images any more, this is a link to the cookie design - makes a good 7 1/2 inch cookie. http://houseonthehill.net/images/products/preview/m2061.jpg

well, when the person files his income taxes, the IRS, since they do everything so brilliantly will add the W-2s and notice the overage in deferrals, and so, whether the person claimed it or not, will tax the person anyway (well, ok, maybe that won't happen, but that is what should happen) and yes, since we are past the April 15 deadline, the person gets taxed in the year of distribution as well. these are the notes I have: If excess deferrals are not distributed by the April 15 deadline, the excess is taxed twice, once in the year deferred and once in the year the excess is distributed. Only one 1099-R is issued—for the actual year of distribution—but the individual still needs to report the deferral on the tax form in the year the excess occurred. In addition, excess deferrals that are not distributed timely (before April 15) are subject to the Section 72(t) 10 percent premature distribution tax. ....... again I think it's 1 1099 because the govt has caught the fact the person had excess and adjusted the taxes appropriately.

Q and A 37 at the 2012 ASPPA conference 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)? ASPPA 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.

Interesting question. a little research shows Prior to 2009 (when e-fast 2 kicked in) the EZ instructions read (and definitely said you couldn't if a controlled group): Who May File Form 5500-EZ You may file Form 5500-EZ instead of Form 5500 if you meet all of the following conditions: 1. The plan is a one-participant plan. This means either: a. The plan only covers you (or you and your spouse) and you (or you and your spouse) own the entire business. (The business may be incorporated or unincorporated); or b. The plan only covers one or more partners (or partner(s) and spouse(s)) in a business partnership. 2. The plan meets the minimum coverage requirements of section 410(b) without being combined with any other plan you may have that covers other employees of your business. See the instructions for line 14c for more information. 3. The plan does not provide benefits for anyone except you, or you and your spouse, or one or more partners and their spouses. 4. The plan does not cover a business that is a member of: a. An affiliated service group, b. A controlled group of corporations, or c. A group of businesses under common control. 5. The plan does not cover individuals of a business that uses leased employees. For an explanation of the technical terms above, see Definitions on page 3. ………………………….. now the instructions (this is from the SF instruction on one participant plans) Conditions for Filing. One-participant plan filers that meet the following conditions are eligible to file a Form 5500-SF. 1. The plan is a “one-participant plan.” This means either: a. The plan only covers you (or you and your spouse) and you (or you and your spouse) own the entire business (which may be incorporated or unincorporated) or b. The plan only covers one or more partners (or partner(s) and spouse(s)) in a business partnership. 2. The plan does not provide benefits for anyone except you, or you and your spouse, or one or more partners and their spouses. 3. The plan covered fewer than 100 participants at the beginning of the plan year. ....................... It looks like the requirement "is not a member of a controlled group" no longer applies. maybe the change being once e-fast2 kicked in the DOL no longer 'cares' if the guy is a member of a controlled group since you don't 'really file' an ez with the DOL (even if it is done on an SF)

you used the deadly word "short plan year" if you truly have a short plan year then under [Treas. Reg. § 1.410(b)-7(d)(5)] you can not aggregate the plans - they must have the same plan year. usually a plan is amended to have a short plan year, or all assets are paid out, thus when filing the 5500 you indicate a short plan year

somewhat along similar lines the follow from the 2007 ASPPA Conference Q19) [A previous non safe harbor plan] Safe Harbor 401(k): A notice is issued indicating a safe harbor contribution will be made for the upcoming year, but the plan was never amended to contain safe harbor language. Now that it is after plan year end, it is too late to amend to correct the problem. Is the plan on the hook for the contribution, and must also run all appropriate tests? A: Notwithstanding the notice provided, the plan terms do not provide for the safe harbor plan. Therefore, you should follow the plan terms and run the ADP test as needed. (Whether there is a Title I issue due to the notice is in the purview of the DOL.) emphasis mine. Basically agree with Kevin's response, there might be a nightmare between employee/employer, but the document still only says discretionary. the employer may fully have intended to provide a match at the start of the year. I would certainly doubt a motive "I can get the ADP test to pass if I trick the people into deferring by saying I will provide a match" in fact, based on the comments provided, the company has been able to provide a match in prior years. I suppose if the company had a real good year and they doubled the match they said they would provide at the start of the year one should complain as well.

well, if you only had 3 NHCEs and 1 doesn't receive the nonelective, then coverage would be at 2/3 or 67% and fail...so I suppose under certain circumstance you might have to provide a contribution.

but the language says "If you were a participant prior to the amendment (e.g. excluding a division) you will continue to be a participant" so I would lean towards saying unless the amendment specifically states anyone on that group is now excluded including those prior to the amendment date, you have to treat them as participants.

Agree, I would hate to see it if it was an actuary...

This should depend on the document. The ERISA Outline Book points out (Chapter 2, section VI, Part E, 3) [emphasis mine] Just because an employee qualifies as a participant in the plan does not guarantee the employee the right to participate in the plan for the rest of his employment with the employer. In Chapter 3B, Section X, we discuss issues relating to the protection of accrued benefits, including the prohibition against reducing an employee's accrued benefit by plan amendment (known as the anti-cutback rule). The anti-cutback rule under IRC §411(d)(6) only protects the employee's benefits that are already accrued. It does not guarantee the right to accrue additional benefits in the future. In Chapter 6, Section III, Part D, we discuss the requirement to protect optional forms of benefit in the plan. Again, this protection guarantees that the employee's payment options regarding accrued benefits are protected. The right to continue to participate in a plan is not a protected benefit. Accordingly, an employee's status as an active participant in the plan can be eliminated by modifying the eligibility requirements in a way that the employee is no longer satisfying the requirements for participation. When active participant status is eliminated, the participant's accrued benefit is protected (see 3. below), but the employee will not accrue additional benefits until he or she first re-establishes the right to participate in the plan under the modified eligibility requirements. here is language from one document that basically says, doesn't matter we amended to exclude people like you going forward...you are still in (a) Eligibility. Any Eligible Employee shall be eligible to participate hereunder on the date of such Employee's employment with the Employer. However, any Employee who was a Participant in the Plan prior to the effective date of this amendment and restatement shall continue to participate in the Plan

c'mon Dave. this would only be true if each kid was the same size and shape, otherwise once you start the process... reminds me of the write up on the folks making a movie on Galileo dropping 2 different size balls off the Leaning Tower to prove the speed of gravity was constant vs 'heavier object fall faster'. no matter how often they tried it, the balls did not hit the ground at the same time. they contacted someone else who was able to achieve this asking how it was accomplished. The response was, we had to fake to it. Due to the different sizes of the balls it turns out friction caused enough of a difference. In Dava Sobel's book Galileo's Daughter she recounts that the balls did not land at the same time: The larger ball, being less susceptible to the effects of what Galileo recognized as air resistance, fell faster, to the great relief of the Pisan philosophy department. The fact that it fell only fractionally faster gave Galileo scant advantage. "Aristotle says that a hundred pound ball falling from a height of a hundred braccia [arm lengths] hits the ground before a one pound ball has fallen one braccio. I say that they arrive at the same time," Galileo resummarised the dispute in its aftermath. "You find, on making the test, that the larger ball beats the smaller one by two inches. Now, behind those two inches you want to hide Aristotle's ninety-nine braccia and, speaking only of my tiny error, remain silent about his enormous mistake." —Dava Sobel , Galileo's Daughter[6]

if using Relius it depends on how you fill out plan specs Plan Entry Requirements Waiting Period Exclusive Would only affect employees hired the day after an entry date. Example: 12 months wait, quarterly entry, 2002 calendar year plan. Employee hired 4/2/01. If the box is checked, employee enters 7/1/02. If not checked, employee would enter 4/1/02.

since both plans have the same safe harbor is there a reason why coverage is not done on a permissive aggregation basis? (Unless they have different plan years is about the only reason I can think you can't) by the way, plan A would have NHCE ratio 20/320 and HCE ratio 1/2 so the ratio would be 12.5%, though that would still fail. but I still don't see why you don't combine for testing coverage.

since the person deferred into both plans I doubt either plan is in violation, so neither plan would be disqualified. so it is up for the person to request one of the plans for a distribution. if one of the plans has specific language regarding excess deferrals if in more than one plan I would go with that plan. The language in the Corbel document (not sure if there is something is more recent) (f) Excess Deferrals. If a Participant has Excess Deferrals for a taxable year, the Participant may, not later than March 1st following the close of such taxable year, notify the Administrator in writing of such excess and request that the Participant's Elective Deferrals under this Plan be reduced by an amount specified by the Participant. In such event, the Administrator shall direct the distribution of such excess amount (and any "income" allocable to such excess amount) to the Participant not later than the first April 15th following the close of the Participant's taxable year. Any distribution of less than the entire amount of Excess Deferrals and "income" shall be treated as a pro rata distribution of Excess Deferrals and "income." The amount distributed shall not exceed the Participant's Elective Deferrals under the Plan for the taxable year. Any distribution on or before the last day of the Participant's taxable year must satisfy each of the following conditions: (1) the Participant shall designate the distribution as Excess Deferrals; (2) the distribution must be made after the date on which the Plan received the Excess Deferrals; and (3) the Plan must designate the distribution as a distribution of Excess Deferrals. Regardless of the preceding, if a Participant has Excess Deferrals solely from elective deferrals made under this Plan or any other plan maintained by the Employer, a Participant will be deemed to have notified the Administrator of such excess amount and the Administrator shall direct the distribution of such Excess Deferrals in a manner consistent with the provisions of this subsection. ............... I remember years ago looking into this issue and finding out that technically a plan might not even have language for permitting a distribution under this scenario, since the plan is not in violation. However, under EPCRS you can correct an excess deferral, so logically you can distribute anyway.

see #10 http://www.irs.gov/pub/irs-tege/5330_phoneforum_qas.pdf and there is a further link on #10