Administrative Challenge

[Gary]

I have a client that sponsors a profit sharing plan, a safe harbor 401k plan and an offset defined benefit plan.

The client has, I belileve, created sub accounts for each participant. One for the profit sharing plan account and one for the 401k plan account.

So determining the 401k account balance and profit sharing balance is not a problem.

The 401k plan is a 3% non elective contribution safe harbor plan.

So that means the participants' 401k accounts consist of 4012k deferrals and 401k non elective contributions.

Which means that some of the 401k account is employer provided.

Any suggetions as to a suggested way to determine how much is the employer portion and how much is the employee portion of the 401k account?

Of course if we created 3 sub accounts for each participant then that would work.

Or our firm can do record keeping of the 401k account to allocate the amount that is employer and the amount that is employee.

The employer portion is relevant in order to compute the accrued benefit under the defined benefit offset plan.

Curious to hear comments, techniques.

Thanks.

[K2retire]

If I'm reading this correctly, you're saying that up until now the plan sponsor has tracked funds by participant, but not by money type. Is that correct?

[BG5150]

Since both sources are 100% vested, I would think that a reasonable segregation could be done. Maybe just take 3% of the account and move it to a new source.

I just hope that they kept good records of the basis of the deferrals so proper hardship amounts could be calculated (if allowed).

The exact earnings in each accoutn may be wrong initially, but, again, since they are both 100% vested, I think if its reasonable, then it could be okay.

[JanetM]

If they aren't tracking the SHNEC by itself, how are they calculating the offset?

[Gary]

These are plans that are in their second year or so, so at thsi point the 401k account can be segrregatewd between 401k deferrals and 401k safe harbor amounts.

That is why I am raising the issue now, to determine what other practitioners do in such a situation.

It sounds like most practitioners are advising the client to make an additional sub account for the safe harbor amounts so it can be tracked.

The clients I typically work with want to do as little as possible, but my impression is that it is easiest in the long run if there are 3 sub accounts for each participant.

One for profit sharing account (with vesting)

one for the 401k deferrals

and one for the 401k safe hearbo contributions.

Does that sound right or are there are other recommended approaches?

Thank you.

[BG5150]

How hard is it to add another sub-account? Does the place where the money is held charge for the extra account? If so, I'd thinking about changing where the money is held.

[JanetM]

Gary, yes you sshould create 3rd source for future tracking. The Trustee doesn't care what money types/sources there are , it is your job to tracking the different sources. Adding another recordkeeping item should not affect trustee fees.