Tom Poje

hopefull in an attempt to sum things up quickly I haven't left anything out. assume all employees have met 1 year wait/age 21 and entry date. for coverage 401(k) - all show up in denominator. 401(m) - all show in denominator unless terminated and less than 500 hours and did not benefit. if they were not a particpant (e.g. excluded from the plan) then they show in the denominator nonelective - same as 401(m) for nondiscrim testing 401(k) - only those employees actually eligible to particpate show up in the ADP test. Doesn't matter whether you defer or not. but if you were excluded from the plan you don't show on the ADP test (but are includable and not benefitting for coverage above) 401(m) - only those actually eligible to participate show up on the ACP test. If there is a last day rule (or hours requirement) and someone failed this then they don't show on the ACP test. nonelective - no such rule exists as for ADP/ACP testing. if you are an employee who has met the initial eligibility you show up, with a big fat zero if you are excluded from the plan being tested. terminees less than 500 hours may be excluded, though again, must be an actually participant. if you are excluded from the plan you are not a participant, so you can't excluded those people (unless you have more than 1 plan and aggregate the plans) but if you aggregate the plans, you must aggregate the plans for coverage testing as well. whether you aggregate or not, all ees are in the avg ben pct test.

actually look at 1.401(a)(4)-7(b)(4)(iii)(B)(2) annual disparity factor after 35 years of course, using .75 in your example makes little sense as there are other adjustments. .75 is used for someone who has SSRA = 65, so for most people the factor is .65 at NRA = 65. I suppose you could have someone born in 1938. they would be age 73, but then there is an adjustment for being past NRA (as I recall) plus to reach 35 years implies a plan has been in existence since 1976. I think I worked on one plan in my life that is that old.

using VCP under the self correction program (Section 6.07) .07 Rules relating to reporting plan loan failures. (1) General rule for loans. Unless correction is made in accordance with this section 6.07(2) or (3), a deemed distribution under § 72(p)(1) in connection with a failure relating to a loan to a participant made from a plan must be reported on Form 1099-R with respect to the affected participant and any applicable income tax withholding amount that was required to be paid in connection with the failure (see § 1.72(p)-1, Q&A-15) must be paid by the employer. As part of VCP, the deemed distribution may be reported on Form 1099-R with respect to the affected participant for the year of correction (instead of the year of the failure. The relief from reporting the participant’s loan as a deemed distribution on Form 1099-R in the year of correction, as described in the preceding sentence, applies only if the Plan Sponsor specifically requests such relief.

was this a discretionary match, and are you talking about changing things mid year? a few years ago there was a posting on the links as follows: Is it permissible to modify a discretionary formula that is made during the year? Caution is advised if the match formula is discretionary and the match is being made during the year (e.g. each payroll period or on a quarterly basis). Some IRS agents have indicated that "discretionary" match cannot be changed during the plan year. The reason is because changing a discretionary match violates Treasury Regulation 1.401-1(b)(1)(ii) that states a profit sharing plan must provide a definite "predetermined" formula for allocating the contributions made to the plan. Thus, a "discretionary" match must be the same percentage for the whole plan year. They made it very clear that if the employer intends to change his matching percentage during a plan year, the matching formulas MUST be stated in the plan and the plan amended each time the formula is changed. (Based on comments by IRS agents, see http://benefitslink.com/boards/lofiversion...php/t4889.html)

hurray. according to ASPPA looks like we might not need a signature on these extensions! On June 11, 2012, several members of GAC met with individuals from the Treasury Department and the IRS. At the meeting, ASPPA was notified that regulations will be issued that will allow the Form 5558 to be filed to extend the due date for filing Form 8955‐SSA without a signature. ASPPA was also informed that regulations are expected to be issued before the end of July 2012.

if someone chooses not to defer, they show up on the ADP as 0% for coverage they are treated as includable and benefiting. if someone 'elects out' from day one, then they are not simply not eligibile to defer, the only people who show on the ADP test are those who could defer, so such a person wouldn't even appear on the ADP test. however, once they have met the eligibility requirements, they would be treated as includable and not benefiting for coverage purposes sonce they can't get anything.

1. an irrevocable waiver is suppossed to be signed when someone first becomes eligible to participate. it sounds like that date has passed. 2. even if they could sign such a waiver, you would then have an NHCE who is includable and not benefiting for 401k purposes and would fail coverage.

1.401(k)-1(d)(4) ...ending 12 months after distribution of all assets from the terminated plan.

someone asked a similar question in regards to matching contributions at the ASPPA Conference 2009 Q and A#33 (And a reminder that such comments are opinions only, but they at least provide some guidelines) Q A plan provides for a discretionary match which is computed on an annual basis. All participants share in the match. To avoid a large contribution at the end of the year, the employer contributes (for example) a 100% match on deferrals not exceeding 4% of compensation on a payroll basis throughout the year. Is there a violation of the timing of contribution regulations if the employer computes and funds the match this way, and then deposits any possible match true-up at plan year-end? A Under the final 401(m) regulations, you cannot prefund matches before they are earned. Therefore, we will assume for purposes of this question that no requirements apply in regard matching contributions. On that basis, we are concerned that the allocation violates the terms of the plan, which provides for an annual allocation. ...................... if they view the nonelectives in a similar vein, then you certainly have problems if there are alloaction conditions. and as they indicated, you really have to be careful with how the document is worded if that is the intent.

probably better to say that testing must be done on a definition of comp that satisfies 414(s), no matter what definition of comp is used for allocation purposes. see 1.401(k)-6 definitions : Compensation many documents are general enough to simply state "use any comp for testing that satisfies 414(s)" rather than being specific, locked into one definition of compensation (like it sounds in your situation)

this question started out with a Datair theme, but (for better or worse) some direct references to coding on Relius, so if you are a newbie to Datair I would ignore such comments peratining to Relius coding

well, its a moot point if you can apply the QNEC toward the gateway, beacuse you have to test without it, so far all itents and purposes no a QNEC can't count toward the gateway. it can only do double duty - top heavy and ADP/ACP help. A SHNEC can do extra duty, but you said it wasn't safe harbor so that doesn't pertain to this topic.

Yes, A QNEC can serve double duty help the ADP test and satisfy top heavy. If, however, other nonelective contributions are made, then the plan must staisfy a(4) testing with and without the QNEC. (e.g. if the plan is cross tested, you have to test with and without the QNEC)

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1.401(k)-2(a) refers to 'eligible employees' and 1.401(k)-(6) defines eligibile employee as someone who directly or indirectly is eligible to defer. so if you are excluded from the plan, but hae met the eligibility require,emt you get tretaed as includable and not benefiting for coverage, and don't show up on the ADP test. (A similar situation exists for the ACP test (including those who maight fail last day or hours requirement) This is also true if you have more than one plan - if you chose to test coverage separetly then you wouldn't include the folks in the other plan in you ADP test.

how is this a "major" shift? the last 3 years this question has been asked at the ASPPA Conferences and the response has been consistent the only changes were Roth and hardship. Note :2011 indicated it would be discussed from the podium, so perhaps that is available. It is very common to want to restate a safe harbor takeover plan to our document mid-year. We are currently telling clients we cannot make any changes to a SH plan other than adding Roth and expanding hardships, until the beginning of the next plan year. If the change does not affect the CODA portion of the plan (i.e.. the 401(k) deferrals and the safe harbor contribution) or if it is more generous, is it permissible to make the change mid year?. Examples: • add a profit sharing feature • change allocation conditions for the profit sharing formula to eliminate last day requirement • eliminate permitted disparity from a plan with a last day requirement • eliminate all distribution forms except for lump sum? • liberalize eligibility requirements or entry dates? IRS Announcement 2007-59 provides guidance only for mid-year changes to add a Roth deferral feature or hardship withdrawals. Comment was requested on whether additional guidance was needed with respect to other mid-year changes. To date, no further guidance has been issued. #8 2009 Q and A 401(k) plan relies on 401(k)(12) safe harbor by providing the 3% nonelective contribution. It also provides a match that is not a safe harbor match under section 401(k)(12), but does meet the requirements for the ACP safe harbor under section 401(m)(11). The employer wants to suspend the match, but not the 3% nonelective contribution. Issue: Does the suspension of the match cause the plan to have to be amended to be subject to the ACP test for that year, or does it cause the plan to lose BOTH the ADP and ACP safe harbors. Cannot make a mid-year change to any safe harbor except the ADP match or the safe harbor QNEC, because of notice rules. Of course, a discretionary match may be modified. #5 2010 Q and A My client wants to change to a more liberal eligibility period under a safe harbor plan, where the safe harbor contribution is a nonelective contribution. The employer doesn't want to wait until the beginning of the next plan year. Would it be permissible to make the amendment effective during the year, since it doesn't affect elective deferral decisions by currently eligible employees? Would the answer be different if the safe harbor contribution were a matching contribution? ASPPA answer. We did not provide an answer. IRS response. Presently the only exceptions for changes during the year are those identified in Announcement 2007- 59. The IRS will discuss this issue further from the podium. #39 2011 Q and A

Announcement 2007-59 was the IRS 'blessing' on adding Roth and hardship mid-year to an existing safe harbor This announcement provides that a plan will not fail to satisfy the requirements to be a § 401(k) safe harbor plan merely because of mid-year changes to implement a qualified Roth contribution program (as defined in § 402A) or the hardship withdrawals described in part III of Notice 2007-7. Comments are requested as to whether additional guidance is needed with respect to mid-year changes to a § 401(k) safe harbor plan (other than changes described in this announcement or in § 1.401(k)-3(f) of the Income Tax Regulations (relating to mid-year amendments to become a safe harbor plan using nonelective contributions) and § 1.401(k)-3(g) (relating to mid-year amendments to suspend or reduce safe harbor matching contributions)).

it is important to keep in mind there are 2 basic tests - coverage and nondiscrimination these are broken down into 3 components 401(k) - deferrals 401(m) - match and after tax nonelective - profit sharing and forfeiture. you could have different eligibility for each of these e.g. immediate for deferral and 1 year for match and non elective thus a plan could have immediate deferral, but the safe harbor, being a nonelective or match could have a 1 year wait [but it tosses out the get out of top-heavy free option] so a person could show up on one of the compenents tests (e.g. 401(k), but not he other 2 if match/nonelective had 1 year wait, though for avg ben pct test anyone shows up who could have deferred) in addition, if a plan has eligibility less than 1 year/age 21 you could further break up the testing into statutory includable and otherwise excludable. that may be an oversimplified way of stating things and might not have covered every possibility, but about the best I can do

more importantly, is the plan top-heavy? if so, any nonkey ee who could defer and is active on the last day must receive the top heavy, no matter if there is a greater eligbility for non elective contributions. now, its also true that such an employee could be tested separately as an 'otherwise excludable', so I'm note sure why that would have a dramatic effect on testing.

so far at every ASPPA Conference the IRS folks have been pretty firm in voicing their opinion the only changes permitted to a safe harbor during the year are 1. adding a Roth election 2. adding funeral expenses for hardship

don't get me started on which gateway to use. the LRMs for Master/Prototype (Note to reviewer: There are other gateways that may be used in order for a defined contribution plan to cross-test using equivalent benefits under §1.401(a)(4)-8(b). The plan may provide for a different gateway other than the minimum allocation gateway (for instance, the broadly available allocation rate requirement of Regulations § 1.401(a)(4)-8(b)(1)(iii) or the gradual age or service based allocation rate requirement of § 1.401(a)(4)-8(b)(1)(iv)); however, sample language for other gateways is not provided herein. If a sponsor wishes to use other gateways, it is important to ensure that the benefits provided under the plan remain definitely determinable. In order for plan benefits to remain definitely determinable, the plan document should specify which gateway is used. The plan document could allow adopting employers to elect between different gateways, but in order to provide definitely determinable benefits it is not sufficient for the plan document merely to specify that one of the gateway requirements will be satisfied.) now, how a plan that is not master/prototype can be definitely determinable without specifying which gateway while it would be required in a master/prototype is beyond my understanding, but what the heck. so anyway I was asked to test a DB/DC combo by a TPA, and the document indicated using 'broadly available', which really has no chance passing (stopping short of large contributions to some NHCEs) with the extreme cash balance formula it had. oh, wait, the DC document description for broadly available references the regs for DC plans only. in fact, the minimum allocation gateway (if that had been selected) was for 5% or 1/3. I'm guessing they had a bad document (DC only rather than a combo plan document), but, well, let jut say this one had some issues that had to be resolved before I could do any testing

the brain gears are a bit rusty at this end, but I think for gateway purposes its 1/3 of allocation or 5% based on 415 comp, I'd have to dig into 'broadly available' and see if something special applies there.

assuming your document doesn't state a specific definition of comp to be used for testing, then you should be able to use any definition that satisfies 414(s) (unless something has changed that I am not aware) for example,this was language from a Corbel document (though this particular one is a bit dated) 1.41 "414(s) Compensation" means 415 Compensation or any other definition of compensation that satisfies the nondiscrimination requirements of Code Section 414(s) and the Regulations thereunder. The period for determining 414(s) Compensation must be either the Plan Year or the calendar year ending with or within the Plan Year. An Employer may further limit the period taken into account to that part of the Plan Year or calendar year in which an Employee was a Participant in the component of the Plan being tested. The period used to determine 414(s) Compensation must be applied uniformly to all Participants for the Plan Year. allocation comp and testing comp are not related, though they could be the same, and in fact, generally are.

the IRS publication for Minimum Vesting Standards (page 6) states Thus, in the case of a participant with a nonforfeitable interest at the time of separation, the length of the break in service is irrelevant with respect to counting pre-break service for the percent of vesting in post-break account balances upon reemployment emphasis mine

there is no reason I am aware of you can't make the first distribution by 12/21/2012. depending on the balance, this would be the difference between taking 2 distributions in one year or spreading that over 2 years, which can make a big difference on the taxes/