Lynn Campbell

The match cannot be used to meet top heavy. The non-elective contribution will meet top heavy. Per IRS Notice 98-52, VIII.C.

I agree. The 2 1/2 month period is the deadline for certain retroactive amendments but a change to a 401(k) would need adoption during the Plan Year.

When was your Plan originally effective?

What do I do if a potential new client decides 4/1/99 to set up a new 401(k) plan and wants to use safe harbor provisions? Does the fact that notice was not given by 3/1/99 preclude the possibility of such a plan for the calendar year 99?

I have a cross tested Profit sharing plan covering 2 corporations and 1 sole proprietorship. Each entity will decide how much to contribute to the plan. When determining 415 limits, is the limit computed per entity for each participant, or is the 415 limit determined by counting all compensation from all 3 entities? Thanks for input...

First of all, my employer did deposit using the trust ID and coupon for the Plan, not the Employer. Second, how did your Employer use a check payable to the IRS when the deposit was made at the Bank? Thanks for input.

This is a client who had all assets at one brokerage firm - no trust checking account. I agree this is not the ideal tactic - to transfer funds to the Employer - but seems justifiable in light of the need to meet withholding rules, and can easily be explained.

I have asked the brokerage firm to make the check payable to the Employer, who then deposits the check and issues one payable to the Bank. This seems to be the only way to get the Bank to accept the check.

How does ADP testing work when a 401(k) Plan in which all EEs are HCEs has 2 NHCEs join the Plan as of 4/1/99? This is a calendar year plan. Is 1999 automatically OK due to no NHCEs in 1998? and then 2000 depends on NHCEs deferrals in 1999? Thanks for input.

I have a copy of Pension and Benefits Week dated 5/19/97 in which this is discussed on page 5, related to a meeting of IRS and DOL. Reference is made to ERISA Op Letter No 94-32, and a conclusion seems to be drawn that it is not OK to charge a fee directly to the individual for whom you are processing a payoff distribution.

With a small DB/MP combination, my plans provided that the MP contrib will be reduced, if necessary, to meet the 25% combination limit. How is the reduced contribution to the MP allocated? do all EEs in the MP share in the reduction or just those who are in both the DB and MP Plans? My MP formula is integrated. Thanks for help.

Small DB Plan terminated with PBGC and all EEs paid off. Sole Shareholder was paid balance of Plan Trust after all other EEs paid off. Now one of the NHCE's checks has bounced and Trustee realizes that sole shareholder recd too much $, due to a miscalculation of the "balance in the trust" (because one check had not been cashed). All funds have been rolled to IRA's and there are no remaining funds in Plan and we owe the PVAB of $7,000 to 1 EE. Does anyone have experience in solving this - how to approach IRA custodian (insurance co) and how to approach overpaid HCE? Must they relinquish the excess funds by law?

The children (no matter what age) of the owner of 50 percent or more of the Employer are included as a "party in interest" under ERISA and a "disqualified person" under IRC 4975 - check these out and see what you think. It appears quite likely this is a prohibited transaction.

Regarding the deadline set by 412©(10), this section does not apply to a profit sharing plan, but to a pension plan which is covered by minimum funding standards. Therefore, this PS Plan could make a deductible deposit after 9/15/98 if the employer's tax return was on extension beyond that date.

I think both L. Carusi and Kathy agree, but it depends if the EE has ever joined the Plan. If the EE has actually joined the Plan at some point, then we have to count them for 410(B) if still employed at end of year regardless of hours. However, if they have never joined the Plan, they are not considered.

I have seen proposals showing an ER with a 10% MP Plan and a safe harbor 401(k) Plan in which the only contrib is the HCE Deferrals of $10,000/year. Assume plans top-heavy, and there are only 3 EEs total. Is it OK to have NO contrib to the safe harbor plan for NHCEs due to the 10% Money Purchase contrib for all EES - is the safe harbor match covered by the Money Purchase contribution? Thanks very much for input.

Is there a plan design which will enable contributions to favor the younger ER whose employees are all older than the ER? Is there a "reverse" cross tested technique that I am overlooking? Thanks for any ideas.

Did this client file IRS Form 5500-EZ each year? If so maybe he can request copies from IRS and they would tell you some info about the Plan - type of Plan - whether MP or PS, also serial number and date of Determination Letter from the document assuming it was a standardized prototype...Good Luck!

Plan amended in 1995 for TRA 86 etc. Prior to the 1995 amendment, all terminated EEs were paid after a year had elapsed following termination. No language in the Plan to this effect, the Plan allowed employer discretion, and a pattern was established. The 1995 amendment(inadvertently) liberalized timing to specify that a terminated EE would be paid "as soon as administratively feasible" after the end of the Plan Year following termination. No one has terminated since 1989. Now an HCE has terminated abruptly just before the end of the Plan Year, and the owner wants to pay him in 1 year. (terminee is owner's son). Is there any legitimate way to do this?

Law firm with 2 partners wants to set up a cross tested plan with 1 classification group for each partner, so that one partner can get a larger contribution (incomes are equal) with all other EEs in the 3rd classification group. Partners are the only HCEs. Would this work or are we in a problem area where the IRS might say this is a 401(k) Plan?

Corp. owned by 2 brothers 50/50. Their brother works for the business, is not an officer, owns no stock, earns about $50,000. Is the brother an HCE?

How are you explaining this Plan to Employees in the SPD - as far as the Classification Groups and the way the contribution is allocated? Since these Plans are in general not favorable to the NHCEs I wonder how to explain it without antagonizing the NHCEs. (Assuming they actually read the SPD)...

http://www.benefitslink.com/articles/terml...mlanguage.shtml (click) this is from a message from Dave Baker 8/31/98 with topic GUST Amendments

If the Plan permits loans, and this is a C-Corp. then she should be able to borrow, even though she is a party-in-interest, I think. If it were an S-Corp then no.

Re message from Larry M. Have you submitted a Plan this way/has the IRS responded? I assume you use Form 5307 with some sort of explanation? Any details you can provide will be very helpful. Thanks.