Tom Poje

I think you could generate your own. famous last words. but assuming nothing else changed during the years, this should work. find the year you want in column B then copy the corresponding value in column D through the rest of column D. (This spreadsheet was for 2012.) covered comp at 110100.xls

loan issues are never ever ever ever correctable under SCP. (or at least that is how I read the rules) only VCP or Audit CAP. see EPCRS 6.07

see example 2 under 1.401(a)(4)-2(b)(vi)(F) similar scenario, example uses top-heavy rather than safe harbor, but concept is the same.

I'd agree with Dave's comments. (I'm not even sure why the company doesn't amend the filing) as a further note, here is a comment from an ASPPA Q and A, and recall that such comments don't necessarily represent an actual Treausry position. How does the IRS feel about plan sponsors who fail to fund required top heavy contributions or 401(k) safe harbor contributions? Why isn't the failure to fund these contributions addressed on the Form 5500 or related schedules similar to late submissions of pretax deferrals or failure to meet minimum funding requirements? They don't like them. They have no answer as to why it's not addressed on schedules. 2010 ASPPA Conference Q and A (Last question on page 9 of the handout also see Q #11 on the IRS Fix it Guide (no deadline date is given or suggested, clicking on 'more' provides a few examples and more complete description) http://www.irs.gov/Retirement-Plans/401(k)-Plan-Fix-It-Guide

any write up I have seen that mentions a deadline has said "12 months after plan year end" or "The same date as a match is due [which would be 12 months]" [or I guess for that matter a safe harbor contribution!] as for annual addition, would agree it applies in the year it applies. (otherwise it would be impossible to seld correct if you missed someone - e.g. ee made 10000 and is due 300 in top heavy. He quits Jan 2 the following year, so has no comp, it would be impossible to fix a year later if you were worried about the annual addition. I would think if the contribution is made after 12 months the self correction rules imply you make a gains adjustment.

as a side note, I would also add if the loan was for 5 years you have problems, because the 5 year rule starts the date the loan is issued not the date of the first payment.

so it boils down to: I want to be able to defer the max on day 1 (and take advantage of having an investment for the full year), and also get the max match, but I don't want to true up someone who started the year at 0, but deceide to defer later on - oh, and also get a free ride ride on the ADP test, and possibly top heavy. that smells bad, as 401king points out, the concept really only benefits HCEs, and is probably why the IRS frowns upon making changes. if the plan had been in existence for a few years I feel even less 'sympathy'. It is simply a known fact you lose out on the match if you hit the defer limit early in the year. it is simply the way things work. ultimately, the regs say you issue a notice once and only once. now you want to change things (from payroll (no true up) to annual, with a true up. unless they change the regs to say "and issue a new notice if changes are made" I'm not sure what you can do. (and please don't interpret such comments as to whether I agree or disagree with the way things work, but it is what the regs say at this time)

at the ASPPA Conferences the IRS has frowned upon making changes to safe harbor plans, though at the last conference they backed off a little from the 'absolutely not' concept. if a match is based on a payroll basis then it has to be deposited by the quarter following, so 'technically' you don't have to make a deposit until 12/31 once you hit the mid year point and if that is all you are trying to accomplish then it becaomes a moot point. However, a payroll match method generally does not involve true-ups at the end of the year (for someone who switches the deferral rate) so I would say you have a problem if you have no true up because when looked at over the whole year the rate of match could be different for some people if you try to switch mid year, and that clearly violates the sfae harbor rules. so if you are trying to switch entirley, you may have issues. By the way, there is nothing wrong with having an 'annual' match, but making monthly or even weekly deposits and truing up at the end of the year - at least not that I am aware of.

plan number is not important (though by possible inference that might imply there was a prior DB or money purchase) you can never eliminate an annuity option from 'tainted $) 1.411(d)-4 has the following and at least an example! Q-2: To what extent may section 411(d)(6) protected benefits under a plan be reduced or eliminated? A-2:….. (e) Permitted plan amendments affecting alternative forms of payment under defined contribution plans— (1) General rule. A defined contribution plan does not violate the requirements of section 411(d)(6) merely because the plan is amended to eliminate or restrict the ability of a participant to receive payment of accrued benefits under a particular optional form of benefit for distributions with annuity starting dates after the date the amendment is adopted if, after the plan amendment is effective with respect to the participant, the alternative forms of payment available to the participant include payment in a single-sum distribution form that is otherwise identical to the optional form of benefit that is being eliminated or restricted. (2) Otherwise identical single-sum distribution. For purposes of this paragraph (e), a single-sum distribution form is otherwise identical to an optional form of benefit that is eliminated or restricted pursuant to paragraph (e)(1) of this Q&A-2 only if the single-sum distribution form is identical in all respects to the eliminated or restricted optional form of benefit (or would be identical except that it provides greater rights to the participant) except with respect to the timing of payments after commencement. For example, a single-sum distribution form is not otherwise identical to a specified installment form of benefit if the single-sum distribution form is not available for distribution on the date on which the installment form would have been available for commencement, is not available in the same medium of distribution as the installment form, or imposes any condition of eligibility that did not apply to the installment form. However, an otherwise identical distribution form need not retain rights or features of the optional form of benefit that is eliminated or restricted to the extent that those rights or features would not be protected from elimination or restriction under section 411(d)(6) or this section. (3) Example. The following example illustrates the application of this paragraph (e): Example. (i) P is a participant in Plan M, a qualified profit-sharing plan with a calendar plan year that is invested in mutual funds. The distribution forms available to P under Plan M include a distribution of P's vested account balance under Plan M in the form of distribution of various annuity contract forms (including a single life annuity and a joint and survivor annuity). The annuity payments under the annuity contract forms begin as of the first day of the month following P's severance from employment (or as of the first day of any subsequent month, subject to the requirements of section 401(a)(9)). P has not previously elected payment of benefits in the form of a life annuity, and Plan M is not a direct or indirect transferee of any plan that is a defined benefit plan or a defined contribution plan that is subject to section 412. Distributions on the death of a participant are made in accordance with plan provisions that comply with section 401(a)(11)(B)(iii)(I). On September 2, 2005, Plan M is amended so that, effective for payments that begin on or after November 1, 2005, P is no longer entitled to any distribution in the form of the distribution of an annuity contract. However, after the amendment is effective, P is entitled to receive a single-sum cash distribution of P's vested account balance under Plan M payable as of the first day of the month following P's severance from employment (or as of the first day of any subsequent month, subject to the requirements of section 401(a)(9)). (ii) Plan M does not violate the requirements of section 411(d)(6) (or section 401(a)(11)) merely because, as of November 1, 2005, the plan amendment has eliminated P's option to receive a distribution in any of the various annuity contract forms previously available.

the person is not catch up eligible, so 3000 is excess deferral. everything else is 415 violation. shouldn't matter what source you take it from. but depending on how the document reads, it could well be the person has 17000 in deferral and 33000 in ps as that should have been capped to avoid not following the document properly. (e.g. document may have restrictions) see the following write up http://www.relius.net/News/TechnicalUpdates.aspx?ID=657

as Gollum would say "ssssss. Not fair, sssss not a fair question my precioussssssssssss" Because I wrote a 'precious' report I can pull the data from Relius and import to FT William for the SSsssssssssssA

Q and A #1 at the 2008 ASPPA Conference 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? IRS Response 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%.. ASPPA Counter Response Request was made for further discussion on the issue. Some at ASPPA feel an ee with no comp should not be in the test at all, rather than as a 0. (And a reminder, any IRS response does not necessarily reflect an actual Treasury position)

see 1.401(l)-b(2) historically in 1987 the rate was 5.7% in 1988 it went up to 6.05%, and at that time, the regulations tied directly to that rate, and so, for one year, in a DC plan you could integrate at 6.05%! in 1989 the medicare rate remained at 6.05%, but the regs were changed back to 5.7% then the Commissioner would publish a new rate (I guess as he deems fit...) in 1990 the rate went to 6.2% and has been there since. The Commissioner has made no changes.

the only time you have to provide a gateway is if, to pass nondiscrim testing, you test on an accrual basis. lets suppose for example you have 10 NHCEs and 1 HCE. you allocate 50,000 on an integrated basis. 3 of the NHCE receive top heavy only. That means for coverage 100% benefit. so far so good. however, since you have one group of employees receiving at an integrated rate and another at 3%. so you have to nondiscrim test. if you were to take the trouble and test on an allocation basis, and impute disparity you will pass rate group testing at 70%, simply because that is the way the numbers work. however, that is not necessary because hidden in the regs in a spot no one is permitted to look (though I will take a risk and even copy and paste it here. shhhhh. don't tell anyone ) is example 2 at 1.401(a)(4)-2(b)(4)(vi)(F) Example 2. Under Plan B, each employee's allocation equals the greater of the allocations determined under two formulas. The first formula provides an allocation of seven percent of plan year compensation and is available to all employees who complete at least 1,000 hours of service during the plan year and who have not separated from service as of the last day of the plan year. The second formula is a top-heavy formula that provides an allocation of three percent of plan year compensation and that is available to all employees described in §1.416-1 , Q&A M-10. Plan B does not satisfy the general rule in paragraph (b)(4)(vi)(D)(1) of this section because the two formulas are not available on the same terms to all employees (i.e., an employee is required to complete 1,000 hours of service during the plan year to receive an allocation under the first formula, but not under the second formula). Nonetheless, because the second formula is a top-heavy formula, the special availability rules for top-heavy formulas in paragraph (b)(4)(vi)(D)(3) of this section apply. Thus, the second formula does not fail to be available on the same terms as the first formula merely because the second formula is available to all employees described in § 1.416-1 , Q&A M-10, as long as the plan would satisfy section 410(b) if all employees who are benefiting under the plan solely as a result of receiving allocations under the top-heavy formula were treated as not currently benefiting under the plan. This is true even if the plan conditions the availability of the second formula on the plan's being top-heavy for the plan year.

Jim hit it on the head, basically, it depends on what the corrective amendment said. or at least a good implication that a corrective amendment should be pretty specific. a good one would probably have said something like In order to pass coverage testing, for the plan year ending 2010 only, Mr X will be treated as a member of the elibile class of employees and receive a contribution of $xxx. if all the corrective amendment said was in order to pass coverage, Mr. X would be a member of the eligible class of employees and receive a contribution in 2010, then I'd hold he continues to be a member of the eligible class of employees because there is nothing in that statement indicating he would cease to be a continuing participant. ....................... as a side note, this situation looks like a loophole, for a corrective amendment should be provided to a nondiscriminatory group. so, for example, in this case, suppose I have 10 possible ineligble ees to provide a contribution to pass coverage. this ee made 150,000 and was given a contribution to pass coverage. Now the following year he is an HCE, a fact I knew beforehand, but at the time he was an NHCE. That doesn't smell quite right. but then, that is the way my brain works.

as 12AX7 pointed out, the imprtance distinction is 'key' and not 'HCE' taking this one step further, let's suppose the person in question was non-key and then became key. then what? At the 2011 ASPPA Conference the IRS personal answered this in the foollowing way: Margaret became a participant in a 401(k) plan in the 2010 plan year, which ends December 31, 2010. For 2010, Margaret did not satisfy any of the key employee tests. The plan is top heavy for 2011 because the top heavy ratio exceeds 60%. The top heavy ratio is computed as of 12/31/2010, which is the determination date for the 2011 plan year. For that calculation, Margaret's account balance as of 12/31/2010 is treated as a non-key employee account balance. During the 2011 plan year, Margaret marries the majority owner of the company. This makes her a more-than-5% owner of the company by attribution. Does Margaret receive a top heavy minimum contribution for the 2011 plan year? Should she have received a top heavy contribution for the 2010 plan year even though the employer didn't fund the contribution until 2011 after Margaret already had married the owner? IRS response. There is no guidance directly on point, but the most reasonable interpretation is that Margaret receives a top-heavy minimum contribution for 2011. For top-heavy purposes, a single determination date is prescribed by IRC § 416(g)(4) for determining both whether the plan is top-heavy and whether an employee is a key or non-key employee. While it would be intuitive to adjust this determination based on events occurring within the year after the determination date, this interpolates a condition that is not in the statute. Note that the House Report (H.R. Rep. No. 107-51) and Conference Committee Report (H.R. Conf. Rep. No. 107-84) accompanying EGTRRA § 613 both provide that the determination date is used for identifying who is a key employee in the following year. 2011 ASPPA Conference #47

lets suppose I have plan A 7 NHCE 1 HCE, company B 3 NHCE. controlled group. only plan A exists For the sake of the argument lets suppose no hours/last day for either match or profit sharing. For coverage I have 3 tests 401k 401m 401(a) all pass at 70%. for nondiscrim I have 3 tests ADP - only include those eligible to defer, so yes at that point it is like company B doesn't exist ACP - same as for ADP 401(a) - profit sharing - you still include company B employees as 0. but if I gave everyone 5%, then 70% of the NHCEs received 5%, so the plan passes nondiscrim ratio %, and yes indeed it is the same as for coverage. If the profit sharing formula is different (larger % for the HCE) then you still need to pass somehow, and the folks from B counting as 0 don't help, you can not have, for example, a formula that provides 10% to the HCE and 5 NHCEs and say 5 of the 7 NHCEs in company A are in the rate group, that is 5/7 or 71.4% so I pass. You would still only have 5/10 and would fail unless you also pass avg ben % testing.

for controlled group, you act as if there is only one employer. for purposes of coverage, anyone who has met the plan's eligibility is in cluded in coverage testing. If they aren't eligible for the plan(they are members of the 'other' company' then they are treated as includable and not benefiting. for purposes of 401k testing they 'vanish' they are not included because you only include those bodies that are eligbile to defer. same with ACP (only if you are able to receive a match, 0% deferral = 0% match, but if you have a last day rule or hours requirement you would not be inlcuded in the ACP test. for profit sharing you are included as a 0. but if the formula is the same % (or integrated) for everyone then it is also true if you pass coverage you would pass nondiscrim testing. should be the same %

arguably that may be true, but that is a fact and circumstance. If the business was suffering and the person was let go, I'd say yes. but if the person simply quit I'd have my reservation about that. again, I think what is being referred to as far as 'vesting' goes is found in 1.401(a)(4)-11(g)(1) ...prohibits a corrective amendment being taken into account to the extent that it does not have substance... but in this example, you are not putting in a corrective amendment for 2012. That was why I used the example of 2013 and assuming the person worked over 500 hours and terminated. Then coverage would fail and you would have to put in a corrective amendment, and at that point apply some type of vesting because otherwise there is no substance.

Interesting point, but even the ERISA Outline Book, Chapeter 15 part F has a table for key employees, and the table goes back to 1984. e.g. officer test 45,000 in 1984, so comp goes back to 1984. TEFRA 1982 is the document you cite, so maybe there was one year (1983?) in which there was no applicable comp limit? certainly what is included by 1984 for officer is "(a) an officer having comp greater than 50% of the amount in effect under 415(b)(1)(A) for any such plan year what mr Cline was referring to is the code section that said (B) At least 1 officer taken into account - if for any year no offcier of the employer is described in paragraph (1)(d), the highest paid officer of the emplyer for such year shall be treated as described in such paragraph. (and this was the old 414(q) which is dealing with HCEs. so Mr Cline was correct, there was a rule he was thinking of, his bulb wasn't dim, but he was on the wrong page, he searching 416 and it should have been 414

I don't think so. I don't believe knowing future 'facts' has anything to do with it. you look at the facts as of 12/31/2012. If you had a crystal ball and knew she would be rehired later in 2013 would that change your stance?

I don't think so. or at least I believe what you are thinking of is the following: Suppose NHCE worked 501 hours in 2013. Therefore, for coverage in 2013 you fail testing and a corrective amendment is needed. The amendment must contain 'substance'. (If not, I guess that would be substance abuse!) so to simply provide a contribution to a 0% vested terminee would not fly as a corrective amendment -you have to provide vesting as well to the corrective amendment. Interesting, haven't thought about it before. If the document contained failsafe language, then I would have to provide a contribution to the person. At that point it is not a corrective amendment, but simply following the terms of the document. I'm not sure vesting is required then.

rcline: Watt??????

I'd say the same reason as for safe harbor contributions - deferrals are 100 vested when made to the plan and forfeitures aren't. I guess my question is what situation arose that forfeitures needed to be substituted for deferrals? (Thanks for reminding me I even saved this LRM a year or so ago)

here is the LRM released in 2011 (Listing of Required Modifications) It describes the use of forfeitures quite plainly. (see page 16 and 38) (OK, I only highlighted the items, I guess I could have typed over the info to make it say something else, but I didn't) thus, despite having approved documents that say you could use forfeitures for this and that, these are changes that are required (or at least going to be required) (and thus would show up once you restate your document somewhere down the road). one of the reasons, at least in regards to safe harbor contributions, is the requirement that 'safe harbor contributions must be 100% vested when made to the plan' - well obviously forfeitures were not 100% vested when made to the plan. (The 100% vested exception of course would be discretionary match contributions) coda lrm.pdf