Kac1214

I had an auditor call and ask if taxable income for group term life benefits is included in the deferral calculation and if not, how is it excluded in the document? He was at a recent seminar and the presenter scared everyone with an example where someone was wronged by this and missed out on a very small match ($2.00ish) and it cost a fortune to resolve. For this plan, we use 3401 compensation, no exclusions. We do include the fringe amount for the life insurance in the PS allocation. The client does not include in the deferral calculation. Their logic is that GTL income is not compensation paid to the participant, it is just taxed and not compensation included in the deferral calculation. For example, one person makes $50,000 and $30 in GTL annually. 10% deferral is $5000 not $5003.00. Does this make sense and does 3401 without exclusions support this? Thanks for any input

I agree with ETA but for safety's sake,m you may want to confirm with the Company that received the $17,500 that the ADP Test passed for the year (or that it was SH).

These two points seem to contradict each other. The participant has the problem and I believe the resolution is that the money is simply taxed twice, I don't see it becoming a disqualification issue or really having an actionable solution now that 4/15 has passed. I guess I place more emphasis on the 2nd quote since the employer(s) both operated in good faith at limited their payroll in their plan and that these controls cannot be sabotaged by an inattentive employee.

I would also be interested in discussing. I sent you an email through the site with additional details. Thanks

Thank you for comments, I do appreciate them and they dovetail with my research as well. I think the SEP for 2018 is the proper solution.

I don't want a new plan to disallow the distributions from the prior plan. All those assets have been distributed due to plan termination.

They had a plan for the company with employees and terminated it as a result of the sale. Now, would like to sponsor a Solo K (or DB) for the consultancy. Thanks

Do control group rules affect successor plan rules? I have a person who owned two businesses, only one with employees. This Company with employees has been sold and all employees hired by the new company. The business owner/sales person is going to a 1099 consultant to the business. Can they establish a 401k plan under the other business they owned (or a new one they create)? Or should they just establish a SEP which I know is not a successor plan. Thanks

The document could also set a lower cap for the HCEs. Say $5,000 as an example and then allow $11,000 deferrals for those over age 50. This could be a way to help them get the most in deferrals based on test results.

Also, be sure no forfeitures are reallocated

=IF(+E1/D1>=0.07,1/3*(0.03*D1)+0.04*D1,IF(+E1/D1>0.04,1/3*(+E1/D1-0.04)*D1+0.04*D1,+E1)) Would also work, not quite as elegant but gets same results. Would probably add ROUND function to it as well

Thank you both for your responses. I couldn't find anything that clearly prevented it, appreciate the knowledge!

Is it permissible to use Safe Harbor money as a source for paying insurance premiums? Participant is under 59 1/2. If so, what are limitations? Thanks for any input or cites.

I know the people responding to this are ERISA attorneys and people who work on DROs much more than I do. There is broad consensus from all that this is permitted. However, I always thought, and been taught, that the DRO couldn't order a benefit that the participant wasn't entitled to; it had to be restricted to the vested balance. How is splitting non-vested money permitted? The participant/employee has no right (yet) to these funds and "distributing" from their account via a QDRO seems to distribute a benefit they aren't entitled to under the plan. Thanks for any clarification.

Mojo - Thank you for your comments and insight. I've explored the 3(16) issue numerous times, including the investment of time and money with an ERISA attorney to explore, develop a process and write a service agreement. However, we continue to conclude that charging more for a service that isn't elevated over and above the level at which we provide our non-3(16) ministerial services is too difficult to justify. Charging more for doing what we already do as a non-fiduciary seems to be a breach unto itself and you stated it more clearly than I've been able to. Thank you

My apologies for my poor reading comprehension, I inserted an "un" in Mike's comment. Sorry for that.

Why do you say it is highly unlikely that the associates plan would not have to receive TH minimums? I've seen plans set up this way and no TH was required. Thanks IGNORE THIS

It seems like a ton of hoops to jump though to allow access to K funds. I would review the current document and look at withdrawal provisions to see what options are, or can be, made available as in-service or hardship withdrawals. If those have been exhausted, how much more money can the person still have available that the headache/risk involved are worth it?