Tom Poje

Age Compensation Contribution UP84 w/o disp 1983 IAF w/o disp UP 1984 8.5 % Total = (E-BAR + disparity) 1983 IAF 8.5% Total = (E-BAR + disparity) HCE 60 235,000 49,000 3.944 3.260 4.158% (3.944 + 0.214) 3.474% (3.260 + 0.214) NHCE 44 20,000 1,000 3.489 2.884 4.139% (3.489 + 0.650) 3.534% (2.884 + 0.650)

it depends. if it is a DB/DC combo plan, then those are probably the best assumptions. if DC alone and you do not impute disparity it is a moot point what table you use for everyone at age 65 will have the same APR. possibly some minor differences for people working past 65 or if plans NRA is 65/5, but the E-Bars on those folks are generally small enough it doesn't matter. If you impute disparity then 1983 IAF is better. years ago I worked out the following for the Coverage and Nondiscrimination Answer Book (Q 11-10) without disparity the plan would fail no matter which table was used. with disparity up84 would still fail but 1983 IAF would pass, because the NHCE would now have a larger E-BAR than the HCE. Age Compensation Contribution UP84 w/o disp 1983 IAF w/o disp UP 1984 8.5 % Total = (E-BAR + disparity) 1983 IAF 8.5% Total = (E-BAR + disparity) HCE 60 235,000 49,000 3.944 3.260 4.158% (3.944 + 0.214) 3.474% (3.260 + 0.214) NHCE 44 20,000 1,000 3.489 2.884 4.139% (3.489 + 0.650) 3.534% (2.884 + 0.650)

A plan could have a 1 year (1000 hour) wait. Therefore, if a person has entered the plan because the plan is more lenient in its eligibility requirements but could have been excluded if the plan had a 1 year wait, then that person is otherwise excludable (unless the person is an HCE and you choose to exercise that option for ADP testing)

you are correct, you could have a document that 'requires' something most I have seen simply say 'any definition that satisfies 414s sort of like cross testing, I think we have one document that specifies interest rate and mortlity table

if catch-ups were matched then no rate of match problem: (emphasis not mine except the italicized, I copied and pasted and couldn't change the font color) (4)Availability of catch-up contributions. An applicable employer plan does not violate § 1.401(a)(4)-4 merely because the group of employees for whom catch-up contributions are currently available (i.e., the catch-up eligible participants) is not a group of employees that would satisfy section 410(b) (without regard to § 1.410(b)-5). In addition, a catch-up eligible participant is not treated as having a right to a different rate of allocation of matching contributions merely because an otherwise nondiscriminatory schedule of matching rates is applied to elective deferrals that include catch-up contributions. The rules in this paragraph (d)(4) also apply for purposes of satisfying the requirements of section 403(b)(12).. [Treas. Reg. § 1.414(v)-1(d)(4)] so I think by inference if catch up are not matched you have to forfeit the related match, otherwise it makes little sense for this reg

since you are permitted to use any definition that would satisfy 414(s) then it would seem you could switch year to year. the only precaution is if using prior year testing you would have to rerun your prior year test to make sure your definition of comp for each year are the same

when the person files their taxes, the W-2s will indicate the overage. so they will pay taxes on those amounts. if they are not distributed by April 15 then they will get taxed again at distribution time, so it would penalize the participant to leave the $ in. yes, neither plan accepted deferrals greater than the limit so neither plan would be disqualified leaving the amounts in, but it isn't fair to the participant and the participant requested the refund

but rollovers don't count toward 415 limit, aren't used in any testing or anything else, so why would you count them as 'contributions' like other types of contributions?

Gilmore - of course it is possible now you have put a little big in FT William ear and they will modify the document language in the future to make it clearer.

the Code 416(g)(4)(H) indicates the term 'top-heavy' shall not include a plan that consists solely of a safe harbor arrangement since a portion of the plan (otherwise excludable) is not safe harbor the whole plan must satisfy top heavy. for top heavy you have 'one' plan even though for other purposes you split the plan into 2.

I would guess some folks treat that rule as only applying to terminees and I imagine even the IRS wouldn't push it.... I suspect one reason for wanting to treat terminees is to get their last contribution in and get them paid out, if, for instance, safe harbor is paid once a year, then they would have the ridiculous small safe harbor contribution hanging around, but otherwise I can't imagine why you would want to use the first few weeks option. good luck

as I recall the big problem is that documents simply say "the first few weeks" and make no distinction between active and terminated ees (and the documents are based on whatever in the regs) so I think the IRS said if you include the last paycheck (paid in January) on one ee you do it for all. ugh ugh ugh ugh 50 gazillion times over! that is crazy but I could be wrong... ....... by the way, I have seen some say the person worked no hours in the new year so I don't have to consider the comp. this makes no sense. that is like saying "If you were fool enough the include the first few weeks then yes you have to consider the comp in the prior year. but if you don't then you never have to consider the comp. even the first point of the Q and A indicates an IRS opinion to that.

it sounds like you said 2 people were let in earlier than they should have been, if so this is correctable under EPCRS Appendix B 2(07)(3) (3) Early Inclusion of Otherwise Eligible Employee Failure. (a) Plan Amendment Correction Method. The Operational Failure of including an otherwise eligible employee in the plan who either (i) has not completed the plan’s minimum age or service requirements, or (ii) has completed the plan’s minimum age or service requirements but became a participant in the plan on a date earlier than the applicable plan entry date, may be corrected by using the plan amendment correction method set forth in this paragraph. The plan is amended retroactively to change the eligibility or entry date provisions to provide for the inclusion of the ineligible employee to reflect the plan’s actual operations. The amendment may change the eligibility or entry date provisions with respect to only those ineligible employees that were wrongly included, and only to those ineligible employees, provided (i) the amendment satisfies § 401(a) at the time it is adopted, (ii) the amendment would have satisfied § 401(a) had the amendment been adopted at the earlier time when it is effective, and (iii) the employees affected by the amendment are predominantly nonhighly compensated employees. .... at one time I think you were supposed to request a determination letter, but since the IRS has pretty much ended that requirement in most cases I doubt they care in the case of EPCRS correction

my point exactly, I didn't see the -11g issue either I'm going to guess you are probably ok (obviously no one knows the future. if you pick someone partially vested they could quit next year, while the new ee may work 20 years) certainly the IRS concern would be picking the lowest paid ee who is either terminated or never will work 1000 hours or something like that. The IRS did recently try to require plans with every person in their own group could only rely on the ratio % test, which would prevent situations like this from arising. I think they sum it up best, yes you can pass mathematically but is that a reasonable interpretation of the intent. of course the testing rules were put in place before the idea of 'each person in their own group' was imagined, so maybe someday things will catch up.

the only cautionary note is that a few years ago the IRS (just because the numbers work it might not be reasonable) it does not sound like you have a failure and are correcting under -11g irs comments on nondiscrimination.docx

I can't say as regards to FT William document. for instance, elsewhere the document says (b) Matching Contributions and Voluntary Contributions. In the event the nondiscrimination tests of Section 5.02(b) are not satisfied with respect to Matching Contributions and Voluntary Contributions for any Plan Year, excess Matching Contributions and Voluntary Contributions for the Plan Year determined as set forth in Paragraph (1) shall be corrected as set forth in Paragraph (2). (1) Determination of Excess Contributions. The Matching Contributions and Voluntary Contributions of the Highly Compensated Employee with the highest Actual Contribution Ratio shall be reduced until the nondiscrimination tests imposed by Section 5.02(b) would be satisfied, or until the Actual Contribution Ratio of the Highly Compensated Employee would equal the Actual Contribution Ratio of the Highly Compensated Employee with the next highest Actual Contribution Ratio (2) Correction of Excess Contributions. Excess Matching Contributions and Voluntary Contributions shall be allocated to the Highly Compensated Employees with the largest dollar amounts of contributions taken into account in calculating the Average Contribution Percentage test for the year in which the excess arose, beginning with the Highly Compensated Employee with the largest dollar amount of such contributions and continuing in descending order until all the excess contributions have been allocated. ............................................... so clearly they are referring to excess 'aggregate' contributions in these descriptions

in 2009 at the ASPPA Conference (Q and A #s 48 - 53)the IRS response to a number of questions was: 1 of 6. An employee terminates in December 2009. A final payment of salary due for services is made in January 2010. The plan does not use the “first few weeks” rule in the IRC §415 regulations to treat the January payment as made in 2009. The plan year is the calendar year. The plan includes a section 401(k) arrangement that defines compensation eligible for deferral to be section 415 compensation. Is the individual included in the 2010 ADP test, even though he terminated employment in the 2009 plan year Yes. Since he could defer out of the compensation paid in January 2010, he is an eligible employee under the 401(k) arrangement for the 2010 plan year. The 401(k) regulations do not treat active and former employees differently 2 of 6. Suppose instead that the plan uses the “first few weeks” rule. Is the individual now excluded from the 2010 ADP test because he is not an eligible employee for the 2010 plan year? Yes. All of his compensation paid in 2010 relates to the 2009 plan year. When performing the 2009 ADP test, the deferral percentage will reflect any elective deferrals made by this individual from the 2010 compensation and the amount of the 2010 compensation. 3 of 6. Suppose instead that the plan is a safe harbor plan that provides the safe harbor nonelective contribution. Is this individual entitled to that contribution? Yes. Since, as discussed in Q-1, the individual is treated as an eligible employee for 2010, he is entitled to a safe harbor contribution. However, if this individual is an HCE, and the plan does not provide the safe harbor contribution to HCEs, then no safe harbor contribution is made on his behalf. The same answer would apply to a safe harbor match if the individual made elective deferrals out of the 2010 compensation 4 of 6. Suppose instead that the plan provides that an employee may not defer out of any compensation paid after severance from employment. How does this affect the answer? Now the individual is not treated as an eligible employee for the 2010 plan year, so is disregarded from the 2010 ADP test. The same is true if the plan provides that an employee may defer out of post-severance compensation only if it is paid in the same plan year in which the severance date falls 5 of 6. Would a plan described in #4 above be using a “reasonable definition” for defining compensation for deferral purposes? Yes. 6 of 6. Suppose in Q-3 that additional nonelective employer contributions are made to the plan, but this individual does not receive an allocation of such contributions for the 2010 plan year because the plan allocates such contributions only to employees who are employed by the employer as of the last day of the plan year. To use cross-testing to demonstrate the employer nonelective contributions are nondiscriminatory, would the individual described in Q-3 have to meet the gateway contribution test if he is a nonhighly compensated employee Yes.

we made it down to 35 in Jacksonville ............... by the way, if the Senate ever passes the Family Savings Act, and they iron things out with the House which passed the Bill in Sept it is possible there would be no minimum distributions if total balance is less than 50,000 anyway. so I guess they have until 9/2 or so. (c) Effective date The amendments made by this section shall apply to distributions required to be made in calendar years beginning more than 120 days after the date of the enactment of this Act.

The bard rolled over in his grave when I tried to ask him. I'm not sure if there is a consistency rule, I certainly wouldn't flip flop every year

maybe this

Forsooth Lady MacDuff Shakespeare himselfeth told me to look at 3b or not 3b 1.401(a)(9)-5 Q3 3(b)...for this purpose, contributions that are allocated to the account balance as of dates in the valuation calendar year, but that are not actually made during the valuation calendar year, are permitted to be excluded.

the FT William document has the following language under matching contributions (i) Correction Methods. The Plan may, pursuant to applicable Treasury Regulations, do any of the following to avoid or correct excess contributions and/or excess aggregate contributions: (1) provide for the use of any of the correction methods described herein; (2) limit contributions in a manner designed to prevent excess contributions from being made; or (3) use a combination of these methods. I read (2) to say I can limit the HCEs match I assume in this day and age most documents have similar language, unless perhaps you have one of the asset houses that provides bungled services that do everything including the document, shoot, they probably include spinning your swivel chair if you wanted. they can do so much for 1/2 the cost or something like that.

thanks for the clarification

I'm confused by the statement "you have to use TWB when you use the general test". there is no requirement you have to impute disparity when you test, if that is what is meant by the term. for instance if all the NHCEs received 3% safe harbor and the HCEs received 9% (which is fine for gateway) then if you impute disparity the NHCEs E-BARs stay the same since you can't impute disparity on safe harbor, but the HCERs e-bars get larger because you impute on the rest of contribution. I understand the post is not talking about a 3% / 9% situation, but..

oddly enough, 2 weeks ago looked up something similar in the ERISA Outline Book Chapter 8 Section VIII Part B 2f would granting of service with a prior employer preclude treatment as otherwise excludable? if prior service 'must' be credited under the predecessor employer rule of IRC 414(a)(1), then YES because the successor employer is really a continuation of the predecessor employer. if prior service is granted 'optionally' (under 414(a)(2) then probably YES, but if they wanted to use otherwise excludable it would be a better approach not to provide prior service and simply allow the plan to have a shorter eligibility period for these employees. But the IRS has never indicated on way or another. but the 'optional' position gets back to my point, the plan could have done things another way and therefore as such the people wouldn't have entered and so that is how I end up 'since they could have been excluded they are otherwise excludable' but I can accept someone taking either position. But my copy is 2012, so maybe the write up has been changed