Tom Poje

however, let's say you processed things in 2009, without coding each source (e.g. 90 days eligibility only) then the system will have entered the person for profit sharing purposes, but never given a contribution because they never had 1000 hours. now when the person has 1000 hours it gives the person a contribution, because it is doing the best it can - it doesn't realize the person shouldn't have entered yet for profit sharing. s o you would have to manually override and say the person is not eligible.

individual has his own 401k plan for his company. only employee. he is in a SEP, total unrelated company, no ownership. he receives the maximum in the plan (e.g. 51,000) as I recall, annual additions are separate for unrelated companies, so he could still put in a contribution for himself in the 401k, but my brain is on a freeze, so just want to verify.

this could depend on document language. the document might say "Forfeit the unvested portion" but the regs do permit 2 possibilities. I doubt many are aware of this, tripped across it years ago. ok, maybe I should say I might be one of a limited number that even knows this is in the regs. (But then I might miss the obvious but know the obscure) 1.401(m)-2(b)(5) example 7 1. the normal way (for lack of better term) distribute vested portion and then forfeit unvested portion 2. distribute 100%, but now you need to keep the nonvested portion in the plan and it has to vest as rapidly as it would normally. I think if the document had the normal vesting language you are cover whatever that silly language is p*(AB+(R*D))-(R*D) let's suppose the distribution was $1000 and the HCE was 80% vested. you could distribute 800 and forfeit 200 or distribute 1000, but now, at the moment he sort of has been paid out an extra $200. if his remaining match balance was 2000 then at 80% he would be entitled to 1600 less the 200 'extra' he just received. so he receives an odd participant statement. balance = 2000. 80% vested, but vested balance = 1400. but next year he earns a year of service, and is now 100% vested so the problem goes away. well, that is the best I can explain it. If Ricky Ricardo was around maybe he could 'splain it better.

we use to have the client return a signed EZ to us and we would mail certified so there was proof of the filing. now they sign the SF and return to us and we file electronically for them, so they don't even need computer savvy. and that isn't much different than what we have done in the past, except now we have immediate proof of filing. agree with Lou - the form becomes very abbreviated once you select one person plan. on FT William you can't even enter info even if you tried. just tried a search on the DOL website for an "EZ" filed as an SF and nothing is found, so it looks like even that is working.

I believe Relius brings them in as a warning you need to possibly investigate further, not to indicate "yes, you include them" if someone was on a leave of absence all year and performed no service I would not include them. I'm not suggesting anything about the Q and A other than what it says, which is include as 0% again, some folks at ASPPA asked for further/future discussion. but my point is, in the past at one Conference (maybe more?) they said don't include them, so now the question is which answer is correct (or perhaps, does the current opinion expressed carry more weight than the past, or, at least from my point of view, why does the prior opinion carry more weight than one expressed in the past)

I'm not 100% sure on the VCP issue. I had found the following a few years ago, and used it for an ASPPA presentation. •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. ................... Appendix A .06 of EPCRS indicates to make the distribution (plus earnings). there is no mention it has to be VCP .................... and when you say "Why didn't I catch this?" or rather, it is not really my fault, well I accompanied this particular issue with the following: It's not my job to run the train. The whistle I don't blow. It's not my job to say how far, the trains supposed to go. I'm not allowed to pull the brake, or even ring the bell. But let the damn thing leave the track, And see who catches hell!

At the ASPPA Conference 2008, the following was asked A 401(k) plan disregards commissions as compensation for plan purposes. One employee has only commissions, therefore could not defer. Assuming the compensation definition satisfies 414(s) testing, is this person included in the ADP test as a 0%, or would they be excluded from the test completely since they have no compensation for plan purposes? If the person is excludable, does the answer change if, for purposes of testing, the plan included all compensation (including the commissions) for ADP testing purposes? Answer: Refer to Treas. Reg. §1.401(k)-2(a)(3)(i), last sentence, which requires that you include all eligible employees in the testing. What is an eligible employee? Per Treas. Reg. §1.401(k)-6, it is someone who is directly or indirectly eligible to make a deferral for the year. Is this guy eligible? Yes, you must include him as 0%.. The ASPPA folks asked for more research on this. Recall, any comments from the IRS don't necessarily reflect an actual Treasury position. What I find interesting is that it seems everyone is willing to go by a response from years ago that said treat them as 0, but now when they say something different people 'grumble'. but anyway, if you go by the response at the Conference, was the person in question directly or indirectly eligible to defer? e.g. on January 31 he takes a draw. could he defer? I would say yes. The IRS would say yes, but make sure you have enough at the end of the year for any limitations. so he is at least indirectly eligible to defer. so if you feel comfortable to say: there are no guidelines. At ASPPA 2008 they said include the person. In a good faith effort, I included him. let's suppose the person took a draw and deferred $5000. you reach the end of the year and determine he has negative comp. is it possible to treat that $5000 as a catch up since he exceeded the 415 limit? good grief, we can get a lot worse than any 0/0 argument

Of course there are no guidelines, so one has to follow a good faith effort. I had always learned 0 comp = no opportunity to defer, therefore exclude from test. However, The preamble to the 401k regs contained the following comments. based on this comment, I'd hold the IRS says, yes, the person 'exists'. he can defer, even before knowing what the final comp will be, just that, when all is said and done, he can't exceed the 415 limit. well, with 0 comp you exceeded the 415 limit, and the regs (1.410(b)-3(a)(2)) says if someone who hits the 415 limit is still treated as benefiting. Of course, it is not specific if that refers to deferrals, but it does apply to defined contribution plans. 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.

you want to look at 1.410(b)-7 in the regs dealing with aggregation. for instance 1.410(b)-7(d) permissive aggregation and in particular (d)(5) plan must have same plan year as Jim pointed out you can't aggregate a safe harbor 401(k) with a non safe harbor 401(k) I suppose if by chance a key employee was in both plan you have to aggregate. but basically yes you can aggregate for the ADP test , this could cause plan A to fail or it might help B pass keep disaggregated as has been done. this is fine. but coverage testing has to be done the same way. thus, everyone from B is treated as includable and not benefiting when looking at Plan A

that sounds like an operational failure (failure to follow match formula). should be self correctable. generally any excess (plus earnings) are placed into suspense and used to reduce future contributions

probably better worded for allocation purposes you use you current plan's definition compensation.. but then you have to test for nondiscrimination. so for example, if you allocated 5%, the typical HCE with comp greater than the comp limit, will still appear to receive 5%. but an individual at 50,000 + 10,000 in commission will appear to receive 2500 / (60,000) = 4.167%. that would fail if testing is on an allocation basis.

for instance , some documents contain the following language Excess Elective Deferrals and Excess Contributions Not Required to Be Matched. Notwithstanding the above, to the extent Non-Safe Harbor Matching Contributions (including Qualified Matching Contributions) are contributed on an annual basis, no Non-Safe Harbor Matching Contribution (including Qualified Matching Contributions) will be required with respect to that portion of an Elective Deferral which for that Plan Year is determined to be either an Excess Elective Deferral (unless the Excess Elective Deferral is for a Non-Highly Compensated Employee) or an Excess Contribution. ........................ You did not say the ADP test failed, so it is also possible you could shift some deferrals to the ACP test. and lessen or eliminate the ACP failure

was playing Gilligan's Island Pinball on the computer just the other day. Almost every pinball is available, and those bring back a number of memories from the college days, though maybe the term 'pinball' and 'record' are unknown to some.

I think someone thought about that, and actually put it on paper just recently and the time-space continuum was disrupted accompanied with the collapse of the Vortex and a lot of other things (e.g. the current weather we are having) ......one of the requirement for entry dates is 410(a)(4) is first day of the plan year after the employee has satisfied the eligibility requirements, or 6 months after the date the requirements were satisfied. so unless one of your entry dates is the last day of the plan year you would probably run afoul of the Code requiring entry on the first day of the plan year

416(g)(4)(H) is the part of the Code that says "Top Heavy Free" applies to a plan which solely consists of deferrals and safe harbor contributions. then the last sentence has been interpreted to mean (at least as far as I understand) "despite the fact the plan is top-heavy free, if it is a part of the aggregation group, you can apply those safe harbor contributions towards satisfying top heavy. (assuming your document says you can use match to satisfy top heavy - by the way the original rules indicated match couldn't be used for top heavy, but that was back before any match could be used towards top heavy) so now you have an eligible employee who is not deferring. again, as far as I understand it, if there are no other contributions to the safe harbor plan, no top heavy. but if this person is in the DB he still needs the top heavy in the DB. and if that hasn't been satisfied, and the plans indicate top heavy is made to the DC plan, then you have to make a contribution to the safe harbor and now you have lost the top heavy free. If the person is not in the DB, then no top heavy because he is in a top heavy free plan (and it would only be 3% anyway because it's 5% only if you are in both plans, or at least that is what I recall)

which is the problem when there is no clear guidelines. yes the IRS has 'suggested' not to count them because they couldn't defer. but... back in the old days, if you took a hardship you couldn't defer for 1 year. so if you took a hardship on 1/1, you would still count the person because the rules say ignore the suspension. If because you hit the 415 limit because of other contributions, the regs say include the body. arguably, someone who worked legitimate hours, but had no comp, can't defer because he hit the 415 limit - there would seem to be a legitimate reason for including such an individual.

MyRA plans would be subject to a $15,000 maximum balance, after which they will be converted without penalty into IRAs ............................. so then what, you convert and start again???

again, though, at least in the document language I looked at, it simply says the minimum amount that will be distributed each year there is nothing that says it can't be more. or it has to be this exact amount and nothing more. the IRS on its Q and A page has indicated it can be more (without any caveat that says "but only if the document permits it elsewhere") 1.401(9)-5 Q1 simply says the minimum amount required to be distributed... (there is nothing there that says it can't be more and this is followed by Q2 what happens if the amount distributed exceeds the minimum required... I see nothing in the context of that question that implies the individual takes the required distribution, plus an additional distribution if permitted under the plan

Congrats. guess I better start looking for a new job.

what does your document say? I would read the document I quoted to say once you hit that magic age, each year a distribution will be made, at a minimum of .... this would seem to correspond to the IRS statement which says yes you can take more. the IRS comment makes no mention of '"But only if the document allows for in service distributions" but then the IRS comment might not be all encompassing. but then, there are wiser document interpreters than I am!

I looked in the basic document for one of the plans, Amount of Required Minimum Distribution For Each Distribution Calendar Year. During the Participant's lifetime, the minimum amount that will be distributed for each distribution calendar year is the lesser of: and then of course the description of how it is calculated. but I see nothing in there that says I couldn't distribute more. perhaps your document is different. this document simply says the minimum amount that will be distributed. to me that certainly implies more could be distributed. (In addition, I suppose you could use a different table to calculate things which would result in a larger distribution) .............................. the IRS Q and A http://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-Required-Minimum-Distributions#10 #8 simply says YES to the question "Can you take more?" edit: I see Erisa Outline Book 7.275 (2012 edition) implies you have a possible withholding issue.

1.401(a)(9)-5 q/a#2 speaks of what happens if a participant receives more than the minimal amount, but only that it can't be used to reduce future minimum distributions. to me that would imply you could take more than just the minimum. The only thing the regs seem to say is once you reach 70 1/2 (or terminate) to satisfy the rules you have to take out at least $x, but I see nothing there that says you can't take out more. I think the issue would become: there is no 20% withholding on the minimal amount, but if you take more - then what? for instance, what if the person took the entire balance?

that's why we love this job The one book says it's 'reasonable' to do things one way Some of the IRS are 'inclined' to do it another way. if it is an assets sale, even if you credit prior service, you can still treat the person as terminated, and therefore they can get a distribution. so you do the best you can, and if someone questions it, you can point to whatever and say, absence guidance, we made a good faith effort based on....

The ERISA Outlook Book (under the definition of HCE, page 1A.3512012 edition) 1c in an asset purchase, if acquired company did not have a plan the acquired employees are treated as new employees 1e In some case employer may give credit for past service....since this is not mandatory... the voluntary crediting of service does not affect the analysis regarding HCE determination. therefore since not required it would be reasonable to disregard the acquired employees' compensation and ownership in making the HCE determination... if HCE determination is disregarded, if they are treated as new employees, it would seem logical (if logic can be applied to the regulations) then it would seem you would apply the otherwise excludable rules. (But again, there are no clear guidelines in the regs 1.401(k)-5 on mergers/acquisitions simply says "reserved") As I understand it, you have 2 years for coverage testing, but there is no such rule for nondiscrimination (e.g. ADP test)

well, without knowing other facts how many NHCEs are there? if he makes max comp and defers max he would have around 6.86% so to pass testing it is quite possible that a QNEC/QMAC could be made that is actually less than what a safe harbor would be.