Tom Poje

the regs, 1.401(m) speaks of 'eligible' employees. therefore if one can't receive a match they are not included. e.g. this will happen if there is an hours requirement or last day provision, such individuals are not included on the ACP test. (and Relius will handle as such) so therefore, it must be in the way of coding, and as much as I am familiar with the system, I've never had to code for such a situation.. I guess what you are supposed to do is under sources you could have coded match as having an excluded class 'other' and put those people in that group. without having to reset everything, rerun eligibility, etc., I suppose you could simply put them in a definition, and then when running the ACP test exclude that division (but I don't think you can run ADP / ACP separately. The other option is simply to go into census and manually code those people as excludable from the ACP test

here is the background music, but you have to change the extension from txt to mid but I had to fake things out to get the attachment to work (or I think it will work) SITTING ON THE DOCK OF THE BAY.txt

yes. oh, you expect details? it could occur in cases in which you have HCEs who are younger than an NHCE, and the HCE receives a smaller contribution. years ago I worked out the following example (using 1983 IAF). at 8.5% HCE2 would have no one in the group but at 8% he just gets an NHCE in the group. who age % at 8pct at 8.5pct HCE1 59 20% 3.325 3.393 HCE2 43 6% 3.421 3.755 NHE1 45 7% 3.422 3.721 NHE2 41 5% 3.3303 3.680 e-bar for the HCE at 8% is 3.421 and the NHCE is 3.422! that was from the 2007 ASPPA talk. Otis Redding put in a cameo appearance and sang "Sittin in a 401k" Sittin' in a lifestyle fund I'll be sittin' when retirement comes Automatic enrollment kicked in The default investment's a sin I'm sittin' in a 4-0-1 k watchin' the funds roll away Sittin' in a 4-0-1 k wastin' dimes. The fees they seem to gorge-ya Nothin' changed under P-P-A The returns are really poor Looks like nothin' gonna come my way I'm sittin' in a 4-0-1 k Watchin' the funds roll away Sittin' in a 4-0-1 k Wastin' dimes. Looks like nothin's gonna change Everything still remains the same I don't know just what the funds will do The amount always remains the same I'm sittin' here resting my bones There ain't enough to take any loans two thousand lies on the phone just to make this investment my home I'm just sittin' in a 4-0-1 k watchin' the funds roll away sittin' in a 4-0-1 k wasting dimes.

the easy way to remember 402(g) is that the govt has to have some way of determining that value. so the IRS adds up all the W-2s to see if the person went over the limit for the calendar year (I believe if you have a 457 plan, those deferrals are not combined) my understanding is if you work for different employers you have separate 415 limits for each employer

but when was it new? I thought the issue was that a brand new company that just started could indeed start a safe harbor, but I don't think the regs specified a time frame. If the LLC had been in existence since July then I doubt that would fly.

There once was a question from Cheryl Wasn't sure, as if stuck in a barrel But don't look around The answer's been found So now go sing a Christmas Carol see the Code, section 416(g)(2)(I)(II) Required aggregation - each other plan of the employer which enables the plan to meet the qualification of section 401(a)(4) or 410

for the sake of the argument, let's suppose the LLC had an additional employee. I wouldn't think you could adopt the safe harbor because the plan year for the group would be less than 3 months. (I don't see where you said it was a brand new LLC). so now it turns out I don't have an additional employee. I don't see how that would make a difference, just because the one person is already in the safe harbor plan. (But then, after all, I am a Grinch)

to start with, under rev proc 2013-12 (EPCRS) 4.01 and 4.02 self correction under EPCRS is only available for operational failures. Demographic failures would be corrected under VCP demographic failures 5.01(2)© defines Demographic failures as those failing to satisfy 401(a)(4), 401(a)(26) or 410(b) which sounds like your situation. so, basically you come up with a possible 'fix' and then submit and see if the IRS approves.

sorry, I'm not the document wizard. I thought with documents being on different cycles the rule of thumb was that you didn't have to amend immediately, but eventually had to put it in the document at restatement time, but you could follow it in practice. This particular description on how to handle someone who switched groups is as close as I could find to anything ever listed on the subject.

there is one and only one Average benefits % test. it includes everyone and pretty much all contributions (not catch ups ) you can't avoid gateway by splitting into groups. this might not be the best attempt at an explanation, but here goes. let's pretend you have 2 plans in a controlled group. you are going to disaggregate the testing. you would run one avg ben pct test for the group as a whole. now you test each plan separately using whatever to pass testing. using component plan testing is almost the same thing except you are deciding who is in each component plan. Plus, since you started with one plan, that plan as a whole has to pass 410b.

oops. I attached the wrong one. try this one lrm.pdf

according to the IRS, see page 131 (of the pdf file not actual page number) of the enclosed file LRM is listing required modification. the file is date 10/2011 so that would seem recent enough to probably pay attention to..... edited: my bad, see post below for correct version. lrm 94.pdf

since it's the ADP test (and not coverage) there is an option to treat all HCEs as having met the requirements. Relius calls it carve out when you 'carve out' just the NHCEs who don't meet the requirements. It's Friday, John probably forgot about that testing option.

I think you may have a volume submitter document that is DC only, hence only the DC gateway language. I would suspect that whichever document provider it is also has a volume submitter with db/dc language. that being said, does the document have to contain the language? I'm not sure it does. as I recall from a Sungard memo years ago if the document doesn't contain language you have to use a corrective amendment to fix the problem.

with respect to your other question, I would expect the basic plan document (if it's a volume submitter) to answer some questions. for instance, here is language from Accudraft Participation By Employees Whose Status Changes. If an Employee who is not an Eligible Employee with respect to a particular type of contribution (or a component of the Plan) becomes an Eligible Employee for such contribution (or component), then the Employee will participate in the Plan immediately with respect to that type of contribution (or component), so long as (1) the Employee has satisfied the minimum age and service requirements for that type of contribution (or component) and (2) the Employee would have previously become a Participant with respect to that type of contribution (or component) had the Employee always been an Eligible Employee for that type of contribution (or component). The participation of a Participant who is no longer an Eligible Employee with respect to a particular type of contribution (or component) will be suspended and such Participant will be entitled to an allocation of that type of contribution (and any applicable Forfeitures) for the Allocation Period only to the extent of any applicable Hours of Service or Periods of Service completed while an Eligible Employee for that type of contribution (or component). In addition to satisfying any other conditions, the Sponsoring Employer may elect in the Adoption Agreement that the Employee must be an Eligible Employee on the last day of the Allocation Period in which such participation is suspended. Upon again becoming an Eligible Employee with respect to that type of contribution (or component), a suspended Participant will immediately resume eligibility with respect to that type of contribution. Years of Service or Periods of Service while an Employee is not an Eligible Employee will be recognized for purposes of determining the Vested Interest of such Employee with respect to a particular type of contribution (or component) in accordance with Section 4.6.

if this helps, hopefully solves one of your questions, direct from http://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-403(b)-Tax-Sheltered-Annuity-Plans May an employer sponsoring a 403(b) plan exclude any employee from contributing in the plan? Generally, yes. A 403(b) plan must generally allow all employees to make elective deferrals to the plan. Under the universal availability rule, if an employer permits one employee to defer salary by contributing it to a 403(b) plan, the employer must extend this offer to all employees of the organization with the following exceptions: employees who will contribute $200 or less annually; employees who participate in a 401(k) or 457(b) plan or in another 403(b) plan of the employer; nonresident aliens; employees who normally work less than 20 hours per week; and students performing services described in Code Section 3121(b)(10).

*hack * hack * dusting off the old paperwork at the 2002 ASPPA Conference, Q 14 (of course, any comments do not necessarily reflect the actual position of the IRS) Plan excludes commissions from definition of compensation. Also can it limit the safe harbor match to a specific dollar amount only for HCE? Yes. ............................ Based on the regs, you would think it is possible, because they only require that all NHCEs receive a certain amount. I hadn't thought about it, but I'd say the same applies to the nonelective. It's okay as long as all NHCEs receive at least 3% SHNEC. So could I give the HCEs a 1% SHNEC? or put another way, lets say I give everyone a 1% SHNEC and then bump the NHCEs up to 3%. why wouldn't that pass the safe harbor rules. so I would lean toward thinking you are limited by the terms of the document. I've never seen a volume submitter provide such options, but is that because it is not permitted or simply because no one thought of providing that option (e.g. why would an HCE write a document so he gets less than the NHCEs)

the hardest part for me was to fit the blurb on my notice and keep it to 2 pages (1 page in duplex) (Years ago I created a crystal report to pull the info from Relius (different options appear depending on how I have the plan user fields coded). we were producing pdfs to send, so it's not bad. yes, it would have been nice if they had released this regulation a few weeks ago, but it sure is nice to have.

I lean toward recommending people to fill out a form at 0%, just as a safety protection. I think a few years ago someone noted a case of a small plan, with a safe harbor match. owner is the only who defers, so is the only who gets a match. no other contributions made, so owner got the monopoly "get out of top-heavy free" card. now, a few years after the fact the NHCEs go to the DOL and say they never even knew about the match, and they would have deferred had they known. who do you believe - the owner who said he gave out the info or the NHCEs?

if push came to shove...many years ago the DOL voiced the opinion below (in your case or in the case of controlled groups, etc, I think the DOL would have less of a problem than what is described below. The case described below it could boil down to a facts and circumstances (which should of course include costs of having an audit). whether they still hold that opinion is unclear, and of course, any opinion expressed at an ASPPA meeting doesn't necessarily reflect an 'official' position of the DOL. But, regardless of how one feels one way or another of the DOL statement, it is clear that the body count is only by each plan and not in the aggregate (aside from blatant avoidance and evasion), which is your concern. I have always understood the plan number is simply used to avoid confusion if more than one plan exists or ever existed. ......................................... 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.

I'm not a DB person, but I don't think that is correct. if the DB plan is truly frozen, then no one is accruing anything new. therefore, any contributions made to the plan are simply to fund prior benefits. (for all practical purposes, $ owed to the plan, but that is ok in the DB world because you fund things over time) and when you test, you are testing only current 'increases' in benefits or contributions.

according to the preamble that just came out The final regulations make two changes in response to these concerns about demonstrating compliance with the requirement that the employer incur a substantial business hardship (comparable to a substantial business hardship described in section 412©). First, the requirement has been modified by replacing the standard in the proposed regulations that the employer have a substantial business hardship (as described in section 412©) with a standard that the employer be operating at an economic loss as described in section 412©(2)(A). This new standard eliminates the requirement to determine the health of the industry (as described in section 412©(2)(B) and ©) or whether the reduction or suspension of safe harbor nonelective contributions is needed so that the plan will continue (as described in section 412©(2)(D)). Second, the final regulations permit an employer to reduce or suspend safe harbor nonelective contributions without regard to the financial condition of the employer if notice is provided to participants before the beginning of the plan year which discloses the possibility that the contributions might be reduced or suspended mid-year. The notice must also provide that a supplemental notice will be provided to plan participants if a reduction or suspension does occur and that the reduction or suspension will not apply until at least 30 days after the supplemental notice is provided. These regulations do not alter the existing ability of a safe harbor plan to use a contingent notice (as described in § 1.401(k)-3(f)(2)) before the beginning of the plan year where the contingent notice indicates that the plan may be amended during the plan year to include safe harbor nonelective contributions and that, if the plan is amended, a follow-up notice will be provided. so I guess I need to add a blurb to the safe harbor notices we are getting ready to send out.

agree, usually the document language should cover. for example, ignoring the cross testing feature. lets say the person was active and worked less than 1000 hours, but the plan was top heavy. if the document required 1000 hours for a contribution would you say he gets nothing or receives the top heavy? top heavy language overrides the allocation requirement. gateway language is usually worded something similar, if you have received a non elective then you have to receive the gateway

Had an investment manager tell me the following story Back in the 1960s he was up for possible draft to Vietnam. so he went to the bar to watch the 'lottery' birthdates scroll across the television screen. sure enough, there was his birthdate, and a draft number something like 8. so he figured, oh well and got good and drunk. next evening he looked at the newspaper just to confirm the bad news, oops, it was the old televisions with curved screens and he was off one day as the days and numbers scrolled by, his birthdate was something like 340, so wasn't going to get drafted. so he went back to the bar and got good and drunk again to celebrate. granted, I guess, that event must have been 40 years ago or so (last draft was held in 1973?), probably most folks here didn't have the Vietnam War to worry about, much less even remember the old black and white TVs, so maybe it is hard to picture exactly what took place. I would have been 18 in 1975, so never had to live through the lottery.

these are the IRS guidelines on eligibility and when one should particiapte. There is a whole section on elapsed time that might be helpful min partic standards publication 6388.pdf