Guest PensionNW Posted March 12, 2003 Posted March 12, 2003 This question was posted on the American Society of CLU bulletin board. This is certainly the first I have heard of anything like this and believe it to be, well, just wrong. I though others might find this interesting. ************************************************* Recently I received a call from an accountant wanting to know if I had ever heard of a 5 year moratorium on contributions being imposed on the top heavy group. Unfortunately I don't have all the details but it's a family owned business with 3 generations still involved. Apparently the plan is top heavy and all members of the group must amend their W-2's for 2002 and cannot contribute for 5 years including the 25 year old 3rd generation grandson. Does anybody have any idea why this moratorium would be imposed or can reference regulations that might provide insight? *************************************************
Guest Therese Posted March 12, 2003 Posted March 12, 2003 It would be interesting to know WHO imposed the moratorium. Could the business owner have decided to do this to try to change the status to non-top heavy? Can you provide a link to your source for this?
Mike Preston Posted March 12, 2003 Posted March 12, 2003 I agree. The most likely scenario is that the plan was amended to preclude deferrals from those who are key employees in an attempt to reduce the top-heavy percentage over time. If it was just a desired result, as opposed to a result brought about by formal amendment, I would have concerns about amending W-2's.
Guest PensionNW Posted March 12, 2003 Posted March 12, 2003 All I know is what I included in the original posting. It appears to me that the accountant believes that the moratorium was somehow imposed by rule or regulation. Which would be wrong.
Mike Preston Posted March 12, 2003 Posted March 12, 2003 Probably yes, maybe no. Sometimes plan documents indicate that HCE's can be restricted to a uniform percent of pay by action of the plan administrator without the need for formal documentation to the plan. If that language exists and if the Plan Administrator issued such an edict, it is possible that the impact would be the same. Worth taking a look.
Guest PensionNW Posted March 12, 2003 Posted March 12, 2003 Except in this case (and we are all running a a full tank of conjecture here) this looks like a small plan of a family run business and in my experience for a plan of this type, the administrator is usually the employer. It seems odd that the owner would retroactively impose a limit on deferrals that would cause the reissuance of W-2's and not know about it. I think that this is a case of bad advice, of which there is plenty out there.
Mike Preston Posted March 12, 2003 Posted March 12, 2003 I agree with you. "A full tank of conjecture". I like it. Sounds vaguely actuarial.
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now