Treatment of deferrals after amendment excluding cammisioned employees

[Guest Alex Calin]

Existing profit sharing excluded employees paid by commission only. In 1997 profit sharing amended to add 401(k)/401(m)provisions effective 1/1/98. Plan topheavy, therefore TPA inorms employer that commissioned people must get top heavy minimum even though excluded from profit sharing. Employer gives top heavy minimum. In December 1998 plan is amended to exclude commissioned people from both Profit Sharing and 401(k) effective 1/1/99. However, inadvertently, employer continues to make salary deferral contributions on behalf of these employees for January and April.

How can the employees get back these deferrals? Must the employer make a 3% TH minimum contribution?, etc.

Thanks.

[Tom Poje]

the suggested method I have been given previously has been:

Give deferral $ earnings back to participant.

2 ways to handle:

1. direct distribution and 1099 r

or

2. cheat. use the amounts to offset ongoing contributions and have employer reimburse employee (run it through payroll as negative deferral so toatl deferral for year = 0) hey, there are some creative suggestions I have run across through the years.

of course, step 1 is to check the document and see if it offers a solution. Depending on the document, you might be able to call them for support as well.

these employees are treated as includable and not benefitting for 410(B), so don't forget that test.