Tom Poje

hadn't thought about that scenario. arguably, you pass current availability because the person could still take a loan if he had $ in a non Roth account. (I wouldn't think that is any different than a participant who has no balance (unless you want to argue minimum loan requirement) so maybe it would boil down to Effective availability and facts and circumstances. Up front, one should know you can't get a loan from Roth, so effectively a Roth choice is an investment that is known to be unavailable for loans. so probably would pass the smell test? e.g. If I had a deferral investment choice that guaranteed 6% return each year, but I couldn't touch it, I think I would forsake any possibility of a loan, but then what do I know?

this may be off the wall, but what if the 5500 is filed on a cash basis rather than an accrual basis?

I don't disagree. It is still our job (or at least my job) to warn the client that any changed may be problematic. the contribution issue is the very one I asked one of Corbel's folks about at the conference a few years ago, and he said don't even raise the issue -they were happy making some in-roads. I see the most recent ASPPA letter for guidance is dated 10/17/2013. I think roman numeral III is the main one we are all asking! http://www.asppa.org/Document-Vault/PDFs/GAC/2013/101713comm.aspx

Belgarath: I thought about the issue of letting in a class of NHCE previously excluded, and at the ASPPA Conference they seemed to give a nod that was ok. but what wasn't addressed was what happens if an employer was made. allocating $50,000 amongst a group of employees that now includes employees who weren't previously eligible (especially if this included a discretionary match used to satisfy safe harbor) is really opening a can of worms. I realize there is no problem changing eligibility in a 'regular' plan, but the concept of the safe harbor was "we are giving you a free ride on ADP testing" and thus the ultimate reason (I think) for the IRS stance that things shouldn't change.

at the moment the only comments I have seen are "Is it worth taking the risk" or, as the following says, "if you do..." http://thebenefitblog.files.wordpress.com/2013/02/feb-11-2013-when-can-you-amend.pdf ............ again, I think most, if not everyone, disagrees with the silly thing. but does that give you 'permission' to act otherwise

if I recall (but the brain gears are getting plenty rusty) if this box is checked it tells the govt the person has received something in a retirement plan and therefore any IRS contribution might be limited. not sure what else the purpose of this box is.

dag nabbit. don't go throwing logic into it. next you will want number of participants with balances or it has been 100 for a large plan years and years ago. it should be 200 now.

yes, the only requirement is he take a 'minimal' amount by 4/1. he will have a 1099r for 2013 and then a 1099r for 2014 for the additional amount (plus the next min distribution by 12/31/2014) again, at least that is how I understand the rules.

At the 2010 ASPPA conference the following was asked (first question on page 5 of the handout) (a reminder that such responses do not necessarily reflect an actual Treasury position) Q. Have the 401(k) Treasury regulations been changed to allow a safe harbor 401(k) plan to be amended during the plan year to allow for provisions other than Roth and hardship withdrawals? What liability does the TPA have in the event the client and/or their advisor insist that the plan be amended even though they have been advised of the regulations? A. Regs have not been changed. The plan will fail the safe harbor requirement. ......................... I mention this because others take a more liberal stance and would say you 'can' or at least 'should' be able to make changes. I'm of the conservative nature and would exercise caution in the matter. do I think they will eventually change their stance? Yes, but that is neither here nor that at the moment. e.g. that the regs saying no changes can be made should be interpreted as "to the safe harbor formula". or "If you change something not pertaining to the safe harbor formula, then issue a new safe harbor notice". but we shall see.

this hinges on what many refer to as the 'stupid rule' in the regs 1.401(k)-3(e) which says ..."a [safe harbor] plan...will not satisfy the requirements ...if it is amended to change such provisions for the year" the IRS has taken a firm position that means pretty much changing anything, despite the absurdity of such a stance on certain items. I even discussed this with one of the lawyers at Corbel and he confirms that is indeed the IRS stance. ASPPA has been working hard to get that changed. This was in regards to some of the Q and A's at the ASPPA Conference a few years ago. He indicated they were happy to get the IRS to agree to a few items, taking what they could get so they could work on more. If you look at the recent notice 2013-74 on Roth Rollovers it said 'yes, you can add an in plan Roth provision, but only for a limited time. So if the IRS would say you can do that for only a limited time in regards to Roth rollovers why would they permit modifying to add a loan at any time? Q 5 (b) In accordance with § 1.401(k)-3(e)(1), this notice provides a temporary period during which sponsors of safe harbor plans are permitted to make a mid-year change to provide for in-plan Roth rollovers of otherwise nondistributable amounts. The period ends December 31, 2014. Thus, in the case of a § 401(k) safe harbor plan that has a calendar-year plan year, in order for the plan to permit an in-plan Roth rollover of an otherwise nondistributable amount during 2013 or 2014, a plan amendment providing for that option must be adopted by December 31, 2014. ................. I think one of the issues might be the safe harbor Notice. there is no provision in the regs for issuing a new notice for any changes. The notice is suppose to include distribution provisions, and a loan is indeed a type of distribution, so you would be changing something from the notice. Is the whole thing silly? well, that is not the point, and others on this site will claim the IRS doesn't really take the strict stance.

as a side bar, from a few years ago...(so if the DOL was in a nasty mood...) the question was raised at the 2000 annual ASPPA meeting, in the general Q&A session. The questions at this session were answered by Joe Canary, Scott Albert, Lou Campagna and Mabel Capolongo of the Department of Labor: Question 5: A 401(k) plan has 150 participants. The plan must file a full 5500 and have an audit by an accounting firm. Due to the cost of the audit ($10,000 or $15,000), my suggestion to the client is to split the plan into two plans, each with 75 participants. For 2000 there will be an audit. The plans could be split into two plans on December 31, 2000. Therefore, on January 1, 2001, both plans have less than 100 participants and no audit required. For tax qualification testing, they can be permissively aggregated. In fact, my plan is to administer as if it was one plan and just separate for 5500 purposes. Is my conclusion correct? Answer: This question raises issues of avoidance and evasion. It is not certain that you really have two plans for purposes of Title I of ERISA in this instance--even if there may be two plans for Internal Revenue Code purposes. In Advisory Opinion 84-35A, the Department stated it would consider, among others, the following factors in determining whether there is a single plan or several plans in existence: who established and maintains the plans, the process and purposes of plan formation, the rights and privileges of plan participants and the presence of any risk pooling, i.e., whether the assets of one plan are available to pay benefits to participants of the other plan. This Advisory Opinion also notes that the Internal Revenue Service has cited the existence or absence of risk pooling between funds as relevant to the determination of single plan status. See §1.414(1)-1(b) 26 C.F.R. §1.414(1)-1(b). In DOL Advisory Opinion 96-16A, the Department stated its position that whether there is a single plan or multiple plans is an inherently factual question on which the Department ordinarily will not opine in the Advisory Opinion process. ............. that being said, it is apparent people have created 2 plans. I haven't heard of any cases of the DOL putting the above into practice, but that doesn't mean they haven't...

1.402(g)-1(e)(3) is entitled correction of excess deferrals during taxable year so, I guess you could correct before the year end but the question is whether you have excess deferrals or excess contributions due to a failed test. the two are different. the individual didn't defer over the excess if he only had total deferrals of 22,500. and you indicated a failed ADP test

Notice 2013-74 (In Plan Roth Rollover) this recently released Notice contains guidance on whether you can change a safe harbor mid year. Interesting, yes you can change the safe harbor mid year to add a Roth rollover but only if adopted by the end of 2014. I'd note, this really has nothing at all to do with the safe harbor itself, yet they are saying this is only temporary. normally you wouldn't be able to change a safe harbor mid year. just when I thought they might be taking a softer approach to mid year changes. Q 5 (b) In accordance with § 1.401(k)-3(e)(1), this notice provides a temporary period during which sponsors of safe harbor plans are permitted to make a mid-year change to provide for in-plan Roth rollovers of otherwise nondistributable amounts. The period ends December 31, 2014. Thus, in the case of a § 401(k) safe harbor plan that has a calendar-year plan year, in order for the plan to permit an in-plan Roth rollover of an otherwise nondistributable amount during 2013 or 2014, a plan amendment providing for that option must be adopted by December 31, 2014.

according to Q-8 of 1.401(a)(9)-5 (last sentence) ...However, the required minimum distribution for the subsequent distribution calendar year MUST be increased by the sum of the amounts not distributed in prior calendar years because the employee's vested benefit was less than the required minimum distribution. but then I'm a Grinch.

makes you wonder, "I had been deferring 4%, suddenly it stopped and I never noticed it on 4 years worth of W-2's" and if it was non Roth, I never noticed the change in my paycheck, nor again when I filed my taxes.

I guess if I eliminate O I as in "O, I understand" and say it 3 times I am left with ho ho ho!

well, under EPCRS Appendix A .05 (2)(d)(iii) that is what it says to do. (iii) In the case of a failure to make the required nonelective contribution for a plan year under a safe harbor § 401(k) plan that uses the nonelective contribution under § 401(k)(12)© to satisfy the safe harbor requirements of § 401(k)(12) or that uses the nonelective contribution under § 401(k)(13)(D)(i)(I) to satisfy the safe harbor requirements of § 401(k)(13), the nonelective contribution (which must be a QNEC in the case of a plan that uses § 401(k)(12) to satisfy ADP) required to be made on behalf of the employee is equal to 3% of the employee’s compensation during the period of the failure. For this purpose, the period of the failure for any plan year ends at the end of the plan year or, if earlier, the later of June 18, 2009 or the date 30 days after notice was provided to employees as required under applicable Treasury Regulations (see § 1.401(k)-3(g)(ii) of the proposed regulations, at 74 FR 23134). the 2011 contribution was due by 12/31/2012 so gains must be made included.

all that is clear as mud. further research from (and other sources) http://welcomentsaa.org/how-does-the-20-hour-rule-work-for-403b-plans For example: Jane was hired by the Big Diehl School District on Sept. 1, 2012 as a substitute teacher. The employer determines that Jane will not work more than 1,000 hours during her first year of employment. On Dec. 1, 2012, Jane took a permanent substitute position to fill in for a teacher who goes on maternity leave. During her first year of employment (9-1-2012 to 8-31-2013) she works more than 1,000 hours. Jane is hired as a full-time teacher on Sept. 1, 2013. Since she did in fact work more than 1,000 hours in the previous year, she is eligible immediately to defer from her salary into the 403(b). As long as Jane works for the Big Diehl School District she will be eligible to defer from her salary regardless of how many hours she works in the future. Practice Pointer: Remember, this is not necessarily the case for employer contributions. There can be an ongoing eligibility requirement for employer contributions. Read the plan document to determine how eligibility works with respect to employer contributions. Even though IRS speakers have weighed in on this question over the last few years, be prepared for sample IRS language to explain this as we get closer to preparing prototype documents, which we hope will provide more guidance in this area.

but that is what the regs say. at the moment, there is no guideline for a late notice, though the IRS has indicated if it is the 3%, then possibly simply issue the notice ASAP. one such article can be found here: http://www.firstalliedretirement.com/assets/images/content/newsletters/The%20Big%20Five%20on%20IRS%20Radar,%20Part%203.pdf If no employees are impacted, and the failure is purely administrative in nature: If the failure to provide notice did not prevent employees from making an informed timely election to change (or maintain) their elective contribution to the plan, no corrective contribution is required. The plan, however, needs to implement procedures to ensure that participants receive notices timely in the future. Document the changes to the procedures in writing. This is particularly important if the correction does not involve a corrective contribution. Equally as important is to document why the failure to provide notice did not affect employees. If the plan contains a non‐elective safe harbor provision, i.e. employees are not likely to be affected in their salary deferral decisions since their deferrals do not affect the amount of employer contributions: The IRS does not provide specific guidance in this area. On a few occasions, however, IRS officials have stated that this type of a failure could be corrected simply by providing the notice late (even if after the beginning of the plan year) and correcting the administrative procedures to prevent further failures (see above). Bear in mind that, if at the same time there was a failure to inform participants of their right to make salary deferrals, it is necessary to correct the missed deferral opportunity failure as described above. ......................... note: if the plan was a safe harbor match, then probably a make up contribution is due. but I would agree, the notice in the case of the 3% seems somewhat silly. as it shouldn't really effect a person's decision to defer. recall the way the regs were written, they had language how to stop a match but not the 3% (until a few weeks ago), so it was almost as if they were originally written with just the safe harbor match in mind. On the other hand, I have seen plans with the 3% in which only the owner defers, and my request was that they should have deferral forms signed by NHCEs indicating a choice to defer 0, just as a precautionary measure.

the regs say the notice must be given so the participant can make a 'reasonable decision' 30 days is considered to be reasonable. (in other words, if you do 30 days you are certainly safe) could it be less? yes, as far as I can tell, but then it becomes a facts and circumstances...

but a match would be included in the avg ben pct test. however, you would not impute on any match. think of it this way: you can have a profit sharing plan that is integrated. therefore you have 'permission' to impute disparity on the nonelective (whether or not your formula actually is integrated or not. however, the regs are clear you can't use the safe harbor towards integration, therefore you can't impute disparity on the SHNEC. if you can find somewhere , a match formula 50% of the first 3% deferred plus 5.7% deferral above the Taxable Wage base, then I guess you could impute disparity on the match. hope you are keeping warm up in Michigan! and thanks to the Spartans for beating the evil empire!!!!!

The ERISA outline book 9-X-A3b says at the 1999 ASPPA conference the IRS indicated a one participant plan who is the Trustee could be aggregated with other plans and not be considered discriminatory for BRF (of course such IRS comments do not necessarily reflect an actual Treasury position. 9-X-B2e3 says if a plan had 8 investments, one of which is a brokerage account with a minimum investment of 50,000 then anyone with less than 50,000 would not have the BRF available to them

in other words Looking at the HCE only plan. how many NHCEs benefit? none, zippo, zilch because they are excluded from the plan. but assuming they have worked 1 year of svc they are included and not benefiting for testing.

under 'source', for match/source override did you check 'other'

assuming the person was eligible in the past, then you do have issues. If the person had a break in service the prior year then it's possible they would be excluded under the break in svc rules, but that doesn't sound like the case. in addition, it also sounds like you failed coverage. both could have been corrected using a corrective amendment, but that should have been done within 9 1/2 months, otherwise it is a demographic failure correctible under VCP (if things are properly done)