Tom Poje

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

I haven't used their shift report. every time I try I get a message saying I can't use it because the ADP test failed, but at the ASPPA Conference a few years ago they indicated you could shit after corrections were made (as long as plan passed after corrections were made and plan passed ADP after shifting. of course) I have seen that message, and since nothing was changed on my prior year plans you surmise might be correct, the system is somehow looking at the prior year results after shifting. I simply added a line to the report to show what happens reducing the HCE ADP to 4%, the NHCE to 2% and shifting the difference to the ACP test and showing the results. (Of course I do an eyeball verification that it would be possible - e.g. you can't shift deferrals for someone if they were not eligible to receive a match because of hours or last day rule)

2012 ASPPA Conference #24 A participant makes $16,500 of elective deferrals for the 2011 calendar plan year. The plan has a 50% match formula, so the matching contribution is $8,250. A nonelective contribution of $32,000 is allocated as well. If all of these amounts are treated as annual additions, the $49,000 limit for 2011 is violated (i.e., $16,500 + $8,250 + $32,000 = $56,750). The plan allows for catch-up contributions, but the plan also states that catch-up contributions are not matched. How should the §415 violation be corrected? Proposed answer The §415 limit is $49,000, but up to $54,500 is acceptable to the extent the additional $5,500 is attributable to catch-up contributions. Normally, $5,500 of elective deferrals would be recharacterized as catch-up contributions, leaving an excess of $2,250, which would be forfeited as an excess annual additional. However, since the plan does not match catch-up contributions, if $5,500 is recharacterized as catch-up contributions, the participant would lose $2,750 of match. The better approach is to treat the amount needed to correct the violation of §415 as consisting proportionately of deferrals and match (2:1 ratio with a 50% matching formula). This results in $5,166.67 of deferrals being recharacterized, and the corresponding match of $2,583.33 is forfeited. When the dust settles, the annual addition limit of $49,000 is satisfied (i.e., $32,000 nonelective contributions, $5,666.67 of match and $11,333.33 of deferrals subject to the match) plus $5,166.67 of catch-up contributions. IRS Response The correction looks appropriate, since it maximizes employer and total contributions, while complying with IRC §415, match, elective deferral, and catch up requirements, and also follows plan terms with respect to matching contributions. ................................ of course, this does not address possible issues of document language, but as I recall, it does follow the guidelines set forth in EPCRS. it is also true such response do not necessarily reflect an actual Treasury position, but the questions are presented to the IRS personal beforehand and I suppose they could have changed it if they felt differently.

but what year are you talking about? you said found to be top-heavy at 12-31-2013, so you are talking about a 2014 top heavy? (or a brand new plan in 2013?)

this is the spreadsheet that 'calculates' pi using random numbers of course the more attempts the closer the result should be. this spreadsheet is currently set to run over 6000 attempts. type a character in any empty cell and it will recalculate a new set pi random number .xlsx

of course, we still have (from the IRS) in which they clearly state they understand employers are concerned about making changes, and so the announcement says adding a Roth was ok, but then they added the line that comments are requested for additional guidance for mid year changes other than the specific ones mentioned. While I may disagree with the logic between not allowing changes, I'm not sure how you can get around this announcement. Announcement 2007-59 The Internal Revenue Service has learned that some employers have concerns about adding provisions during a plan year to their § 401(k) safe harbor plans (described in § 401(k)(12) of the Internal Revenue Code) in order to take advantage of recently effective changes to the rules for § 401(k) plans, such as a qualified Roth contribution program (as defined in § 402A) or hardship withdrawals described in part III of Notice 2007-7, 2007-5 I.R.B. 395, when the pre-year safe harbor notice required by § 401(k)(12)(D) does not include information about the added provisions. This announcement provides that a plan will not fail to satisfy the requirements to be a § 401(k) safe harbor plan merely because of mid-year changes to implement a qualified Roth contribution program (as defined in § 402A) or the hardship withdrawals described in part III of Notice 2007-7. Comments are requested as to whether additional guidance is needed with respect to mid-year changes to a § 401(k) safe harbor plan (other than changes described in this announcement or in § 1.401(k)-3(f) of the Income Tax Regulations (relating to mid-year amendments to become a safe harbor plan using nonelective contributions) and § 1.401(k)-3(g) (relating to mid-year amendments to suspend or reduce safe harbor matching contributions)). Written comments should be submitted by September 17, 2007. Send submissions to CC:PA:LPD:DRU (Announcement 2007-59), Room 5203, Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, D.C. 20044. Comments may be hand delivered to CC:PA:LPD:DRU (Announcement 2007-59), Room 5203, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, DC. Alternatively, comments may be submitted via the Internet at notice.comments@irscounsel.treas.gov (Announcement 2007-59). All comments will be available for public inspection.

been awhile since I posted this one this report takes a summary of account and makes it look like a 5500SF since I use used defined fields to track suspense account there might be some data on this report that you wouldn't apply for your usage, but the basic report should work. you might have to modify distributions if some are corrective distributions and of course no guarantees on anything, but I haven't encountered many problems with it. maybe if forfeitures reduce contributions, but what the heck, if it helps... 5500 SF.rpt

on the old Kung Fu TV show I think the response would have been Good question, grasshopper! ........................................ No matter how many plans you have, you still have only 1 employer. (same as controlled group) so all bodies (that have met eligibility) count in the denominator. for match and profit sharing you could exclude 'participants' who terminated < 500 hours if they didn't benefit. note, the regs use the term 'participant' so when looking at plan A, you can exclude plan A terminees < 500 hours if they didn't benefit, but not plan B, because those people weren't participants.

under the permissive aggregation rules, it is optional if you want to aggregate. hence the name 'permissive' aggregation. 1.410(b)-7(d) says: (d) Permissive aggregation for ratio percentage and nondiscriminatory classification tests— (1) In general. Except as provided in paragraphs (d)(2) and (d)(3) of this section, for purposes of applying the ratio percentage test of § 1.410(b)-2(b)(2) or the nondiscriminatory classification test of § 1.410(b)-4, an employer may designate two or more separate plans (determined after application of paragraph (b) of this section) as a single plan. If an employer treats two or more separate plans as a single plan under this paragraph, the plans must be treated as a single plan for all purposes under sections 401(a)(4) and 410(b). If you had 2 plans but only one asset pool, then I think the IRS could view that as 1 plan and thus you would have to aggregate, but I could be wrong about that particular situation

at the 2009 ASPPA Conference, IRS Q and A the IRS comment was that you could indeed shift even if you treated some deferrals as catch-up, but of course you couldn't use those deferrals as part of the shift. and they added, well, my translation, since you have to pass ADP before and after the shift this would only work if you ACP test for the NHCE was less than 2 and you could take advantage of the 2 * multiplier see Q 15 and 16

in the same "related match of excess contributions for a failed ADP test may be forfeited" guess that means you don't have to if you don't want to. rather it means, even those these contributions (at least for most HCEs) are already 100% vested, and even though you normally don't forfeit 100% vested $, in this case, you may do it.

on page 16 of this pdf file (page 14 of the document) describing what is suppose to be in the document, it says forfeitures can not be used as QNECs... but then maybe Vulcans have another way of reading or interpreting that.! coda_lrm1011.pdf

without knowing your software it is hard to say. certainly $100 is not de minimus. but let's say my NHCE avg is 2.05 that means my HCE avg would be 4.05, or for that matter, since you round to the nearest 100th it could be 4.054 and that might be enough to eliminate the $1. I've had situations in which I have been able to adjust things enough to reduce the refund slightly. another possibility is to test using comp - all deferrals or if you had someone enter midyear who deferred to use comp from date of entry. if your ADP test passes, that implies you may have some deferrals you could shift to the ACP test in order to make the test pass.

I did finally find it in the ERISA Outline book 7.294 of the 2012 edition withholding party (plan administrator or payor) is liable for the collection of the withholding tax. if not withheld, the IRS may recover the withholding tax (and any possible penalties) from the withholding party. this is known as the "trust find recover" under IRC 6672 The penalty is usually abated if the tax is paid by the participant, which of course is what would normally happen. then there is a blurb if you relied on reasonable info for a rollover the administrator is off the hook...

my report simply shows the allocation per participant along with a note at the bottom of the report The profits sharing contribution shall be allocated among the different classes as indicated above ________________________________ (plan administrator/date)

at the 2010 ASPPA Conference I asked the following cross tested plan - all NHCEs are in one group every year plan allocates owners to the 415 limit, then 5% gateway minimum. this year plan fails testing. does the plan have to increase contribution to all the NHCEs or can it put in a corrective amendment to selective individuals IRS response was either way was possible. of course such Q and As don't necessarily reflect an actual Treasury position. on the other hand, the question was submitted months before the Conference, and the IRS does meet with the ASPPA folks beforehand to go over questions, so it is not off the cuff either.

last sentence of 1.410(b)-7(d) if an employer treats 2 or more separate plans as a single plan under this paragraph, the plans MUST be treated at a single plan for ALL purposes under sections 401(a)(4) and 410(b). so it is optional, permissive aggregation, but if aggregated for coverage, then aggregated for ADP testing if not for coverage then then for ADP

if you implement the 'otherwise excludable option' then it is probably a moot point. if you don't go that route, then you use the least stringent eligibility, but I don't have the cite on the tip of my tongue

the last line of 1.410(b)-7(d) "Well, I'm back"..oh wait that's the last line of Lord of the Rings. um... If an employer treats two or more separate plans as a single plan under this paragraph, the plans MUST be treated as a single plan for all purposes under section 401(a)(4) and 410(b)

if you have other employees hired in 2013 I would be specific by name. (I haven't seen the rule applied to safe harbor plans so I am guessing you can say only include those that deferred befiore their time) the short plan year makes no difference for eligibility, so with a 1 year wait, then yes normally people hired after 1/1/2013 wouldn't be eligible. vesting may be an issue, as that is supposed to be a 12 month period so that would be 7/1/12 - 6/30/13 (but not for eligibility) see Labor Reg 2530-203-2©

well, the rate of match is greater at a higher rate, so even if there wasn't a 6% cap on deferrals you would have to test as this formula fails one of the ACP safe harbor requirements. (rate of match requirement) expecting that many NHCEs to defer over 7%? (or I suppose if you had 1 HCE at that rate and a bunch of HCEs who didn't, it would pass BRF)

yes, if the same HCE participates in more than 1 plan then you can still disaggregate the plans for coverage and testing (because of the 401k and 410b rules in regards to aggregation), and yes the deferrals (and matching contributions) are combined for testing (because of the 401k/m requirements) but there is no 401k/m requirement that says because you aggregate the deferrals and match you have to aggregate the plans as well.

as I understand it, you have 2 plans, so they can always be tested separately (and whatever method is used for coverage is used for nondiscrimination (ADP, ACP, etc) you are permitted to permissively aggregate the plans (same rules for coverage and any nondiscrim) but you are not required to follow the same method every year at least you only have brain cramps. my brain gears are getting old and rusty and don't spin like they used to. I believe for purposes of top-heavy, if you have a key ee in both plans you are required to aggregate for testing top heavy.

I don't run any auto-enrolls, but I am not so sure (I thought it was pretty much all or nothing) I certainly wouldn't think it's possible if it is a QACA because you could have NHCEs being treated differently from other NHCEs 1.414(w)… General rule. The notice requirement of this paragraph (b)(3) is satisfied for a plan year if each covered employee is given notice of the employee's rights and obligations under the arrangement. (3) Covered employee. Covered employee means an employee who is covered under the automatic contribution arrangement, determined under the terms of the plan 1.401(k)-3(j)(1) .................... one document checklist I have has the following choices, but I can't tell if (iii) would give you that option. the corresponding portion of the basic document describes eligible employee as any employee who has net the eligibility requirements. 7e. If C.7a is "Yes", 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 their Elective Deferral elections equal or are less than the automatic enrollment amount. iii. [ ] Other: __________ NOTE: If C.7e.iii is selected, the description must be objectively determinable and may not be specified in a manner that is subject to Company discretion. the govt notes at http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics---Automatic-Enrollment say all employees (iii) Exception to automatic enrollment for certain current employees. An automatic contribution arrangement will not fail to be a qualified automatic contribution arrangement merely because the default election provided under paragraph (j)(1)(i) of this section is not applied to an employee who was an eligible employee under the cash or deferred arrangement (or a predecessor arrangement) immediately prior to the effective date of the qualified automatic contribution arrangement and on that effective date had an affirmative election in effect (that remains in effect) to— (A) Have elective contributions made on his or her behalf (in a specified amount or percentage of compensation); or (B) Not have elective contributions made on his or her behalf.