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Human Resource UpdateAugust 2011
Greetings: 
 
 

 

  

Remembering September 11th

 

  

This September 11th is the tenth anniversary of the attack on the World Trade Center, the Pentagon and the end to Flight 93. Special ceremonies will be held to remember all those who lost their lives in these tragic events. More people than we realize have been affected by the attacks, the families, relatives and close friends of those lost in the actual attacks, and those who lost their lives or who were disabled by the circumstances surrounding the search, rescue and cleanup. The effects of the attacks will continue for some time and are events that we should never forget.

 

  

Please join us in flying the American flag from September 6th through the 16th. While September 11th falls on a Sunday, we suggest that all companies and organizations recognize the day on either Friday the 9th or Monday the 12th with a pause in activity for prayer and remembrance. 

 

 

 

  ______________________________  

 

 

 

 

If you find value in this newsletter please let us know. Feel free to call me with a comment and/or ask a question at any time (908-689-4200) or send me an email ([email protected]). We offer this timely information as another benefit of your relationship with our company. If you feel a friend or colleague would benefit from receiving our newsletter, please feel free to forward a copy.
    
 

Sincerely,
 
   
Michael F. Yates
President

 

 

PS: You can view all of our newsletters by clicking the 'newsletter archives' link at our company website (www.mfyco.com). 

 

 

 

______________________________ 

 

 

 

 

 

 

 

In This Issue
MFYCO Facebook
The Fix Is In: Common Plan Mistakes
Provisions Prohibited in Employment Ad Advertising
Back to School Tips for Parents
Retirement Plan Limits
New WV Child Support Law - Bonus Reporting
eLaws Quick Link
Plan Reporting Calendar
Track Government Spending
Fantasy Football - Turn A Potential Fumble Into A Touchdown
Terms of Use
 
Invitation to MFYCO Facebook
facebook 
Visit our page! 
 

The Fix Is In: Common Plan Mistakes

Periodically the Internal Revenue Service (IRS) publishes an article that it calls "The Fix Is In: Common Plan Mistakes" that present common mistakes that happen in retirement plans.  These articles describe a common problem, how it happened, how to fix it and how to lessen the probability of the problem happening again.  Over the course of the next several months, we will be reproducing some of those articles that we believe would be helpful to you in the day-to-day administration of your plan.

Correction for Exclusion of Employees for Elective Contributions or After-Tax Employee Contributions

The Issue

A plan must specify how an employee becomes a participant. In other words, what are the plan's eligibility conditions? IRC ��401(a)(3) and 410(a) establish minimum standards relating to age and service requirements for eligibility purposes. Failure to timely include all eligible employees in a qualified plan will cause the plan to lose its tax-qualified status.

The Problem

If an employee is improperly excluded from a profit-sharing plan, they miss out on any contributions made (with earnings) during the period of exclusion. Calculating the amount that the employee lost in this situation is simple. The allocations of any plan contributions during the exclusion years are recalculated by including the excluded participant and are adjusted for lost earnings. When a plan allows elective contributions or after-tax employee contributions in a 401(k)/(m) arrangement, the calculation of the loss suffered by the excluded employee becomes more complex. When an employee misses the chance to make a deferral or after-tax contribution, the dollars that would have been contributed are still in the possession of the employee. The affected employee has lost the opportunity to put a certain amount of money into a tax-favored account.

The Fix

Improperly excluding an employee from making elective contributions or after-tax employee contributions will cause a plan to become disqualified, resulting in adverse tax consequences to the employer and employees under the plan; however, employers may get relief from these adverse consequences through the Employee Plans Compliance Resolution System (EPCRS) by correcting the failures. The Voluntary Correction Program (VCP) and the Self-Correction Program (SCP) can be used to correct these mistakes.

Prior to the issuance of Revenue Procedure 2006-27, the correction for excluding an otherwise eligible employee from making deferrals or after-tax employee contributions into a 401(k)/(m) plan was for the employer to contribute both:

1.      A Qualified Non-Elective Contribution (QNEC) equal to the average deferral percentage (ADP) for the class of the excluded employee (either Highly Compensated Employee (HCE) or Nonhighly Compensated Employee (NHCE)) times the employee's compensation during the period of the failure, and

2.      An additional QNEC equal to the average contribution percentage (ACP) for the class of the excluded employee (NHCE or HCE) times the employee's compensation during the period of the failure.

The above amounts would be adjusted for earnings. The average deferral percentage, or ADP, is determined by averaging the deferral percentages separately calculated for the eligible employees in the �401(k) arrangement. A QNEC is a contribution made by an employer that meets certain vesting, distribution and nondiscrimination requirements.

It can be argued that this correction creates something of a "windfall" for affected employees because under the ADP portion of the correction the employee receives both the corrective contribution and the cash compensation upon which the QNEC is made.

Revenue Procedure 2006-27 introduced a new optional correction method based on the principle that the employer should contribute to the plan on behalf of the excluded employee an amount that measures the value of the "lost opportunity" to the employee to have a portion of his or her compensation contributed to the plan. This correction principle applies solely to this limited circumstance. It does not, for example, extend to the correction of:

         A failure to satisfy a nondiscrimination test, e.g., the ADP test pursuant to �401(k)(3) and the ACP test pursuant to �401(m)(2).

         �414(v) catch-up contributions or Roth contributions.

The method of correction cannot be used until after the correction of other qualification failures. Thus, for example, if in addition to the failure of excluding an eligible employee, the plan also failed the ADP or ACP test, the correction method described cannot be used until after correction of the ADP or ACP test failures.

The new correction for a failure to include an eligible employee in a 401(k) plan is based on the "lost opportunity cost" to make deferrals. For salary deferrals, the required make-up payment is 50 percent of the pre-tax deferrals the employee would have made had the employee been timely included in the plan. This is based on the employee's compensation times the ADP of the employee's class (NHCE or HCE). The matching contribution for the excluded employee equals the matching contribution that would have been received had the employee made pre-tax deferrals. However, the corrective matching contribution is based on the full amount of deferrals (ADP) and not the 50 percent lost opportunity cost applicable to employee deferrals.  Similar correction rules apply to safe harbor 401(k) plans. However, in calculating the correction amount the plan must apply its safe harbor formula rather than the ADP amounts for the applicable class of employees.

Example:  A NHCE has compensation of $40,000 and is incorrectly excluded for a full year from a plan that provides a match equal to 100 percent of the first 3 percent of compensation.  The plan has a NHCE ADP equal to 5 percent. The QNEC for lost opportunity cost to make deferrals is $1,000 ($40,000 x 5% x 50%).  The QNEC for the matching contribution is $1,200 ($40,000 x 3%).

The correction for after-tax contributions is based on a different "lost opportunity cost" - namely, 40 percent of the after-tax contributions the employee would have made had the employee been timely included in the plan. This amount is based on the employee's compensation times the ACP for the employee's class (NHCE or HCE). The applicable ACP in this calculation may be limited to the portion of the ACP that is attributable to after-tax employee contributions (excluding matching contributions).

Making Sure It Doesn't Happen Again

Employers need to have a system in place to ensure that employees are allowed entry into the plan according to the terms of the written plan. Employers should work with plan administrators to ensure that the administrators have sufficient employee data to calculate the proper entry date and rate of deferrals desired by the employee.

However, keep in mind that, despite all of your good efforts, mistakes can happen. In that case, the IRS can help you correct the problem and retain the benefits of your qualified plan.

 

Page Last Reviewed or Updated (by the IRS): August 08, 2011

 

 


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Provisions Prohibited in Employment Ad Advertising*

 

In last month's opening letter we addressed the increasing use of "must be currently employed" in employment ads, and we mentioned that New Jersey had passed a law prohibiting the use of that phrase. In response to requests for additional information about the NJ law we are providing more detail below.

 

Starting on June 1, 2011, NJ prohibited the use of "currently employed" or any variation or implication thereof in advertisements for job vacancies. Under the new law an employer, employer's agent, representative or designee cannot purposefully publish, in print or on the Internet, an advertisement for any job vacancy in the State that contains one or more of the following:

 

a.       Any provision stating that the qualifications for a job include current employment;

 

b.      Any provision stating that the employer or employer's agent, representative, or designee will not consider or review an application for employment submitted by any job applicant currently unemployed; or

 

c.       Any provision stating that the employer or employer's agent, representative, or designee will only consider or review applications for employment submitted by job applicants who are currently employed.

 

Penalty:

 

The civil penalty to employers who are in violation of the act is $1,000 for the first violation, $5,000 for the second violation and $10,000 for each subsequent violation.

 

*Title 34. Chapter 8B. (New) Employment Advertisements. ��1 - 2 - C.34:8B-1 to 34:8B-2 �3 - Note

 

Back to School Tips for Parents

Please see below for ten simple tips that can help make going back to school easier for the parents.

Check-ups and immunizations -It's a good idea to take your child in for a physical and eye exam before school starts. Also, make sure your child has all the required immunizations.

Re-establish routines - Plan to re-establish the bedtime and mealtime routines at least one week before school starts.

Turn off the TV - Encourage your child to play quiet games, do puzzles, flash cards, color, or read as early morning activities instead of watching television. This will help ease your child into the learning process and school routine.

Stock up on school supplies - Check the school website or call for a list of required supplies. If your child has outgrown their book bag from last year, purchase a new one.

 

Be Organized - Help your child to lay out his/her clothes and pack his/her backpack the night before. Also, make healthy school lunches the night before. Keep this routine throughout the entire school year.

Review all of the information - Review the material sent by the school as soon as it arrives. These packets include important information about your child's entire year at school.

Mark your calendar - Make a note of important dates throughout the year, especially back-to-school nights. Having a calendar designated just for school is a great tool to keep organized.

Learn about the school - Find out whether the teacher prefers to communicate by phone, e-mail, or written note. Also, read the school handbook and make sure your child understands the rules.

 

Show them the way - If your child is new to the school show them their classroom, what entrance and exit to use and where the bathroom is located.

Prepare the teacher - Let your child's teacher know about any specifics about behavior or health problems your child might have.

  

Call: 908-689-4200 to contact a
MFYCO professional consulting associate.
happypeople

 Retirement Plan Limits

 

 

2011

2010

2009

Maximum Annual Defined Benefit

$195,000

$195,000

$195,000

Maximum DC Annual Addition ($$)

$49,000

$49,000

$49,000

Maximum 401(k) Deferrals    

$16,500

$16,500

$16,500

Older EE Catch-Up Contribution

$5,500

$5,500

$5,500

Maximum Plan Compensation

$245,000

$245,000

$245,000

Highly Compensated Threshold

$110,000

$110,000

$110,000

Key Employee in a Top-Heavy Plan

$160,000

$160,000

$160,000

SSA Social Security Wage Base

$106,800

$106,800

$106,800

PBGC Maximum Monthly Guarantee

$4,500

$4,500

$4,500

PBGC Maximum Annual Guarantee

$54,000

$54,000

$54,000

Maximum DC Annual Addition (%)

100%

100%

100%

Social Security Tax  - Employee

Social Security Tax  - Employer

4.2%

6.2%

6.2%

6.2%

6.2%

6.2%

Medicare Tax

1.45%

1.45%

1.45%

DC Plan Deduction Limit*

25%

25%

25%

Definition of Compensation for DC   Plan Deduction Limit

Includes Deferrals

Includes Deferrals

Includes Deferrals

 

* Money purchase plans will be treated as profit-sharing plans for purposes of the IRC �404 deduction limit and

will be subject to the 25% limit. 



 What would you like to see in a future issue?

Contact our office with your suggestions.

 
 New WV Child Support Law - Bonus Reporting (H.B. 3134)

Effective June 1, 2011, all West Virginia employers will be required to notify the Bureau of Child Support Enforcement (BCSE) two weeks prior to issuing employee bonuses of $100 or more to any employee for whom an income withholding order is in effect. Employers must inform the BCSE of the employee's name, the last four digits of that employee's Social Security number, and the amount of the bonus. The information can be relayed to the BCSE electronically at www.dhhr.wv.gov/bcse/erc, faxed to 304-558-1487, or by telephone at 800-835-4683 (or 304-558-1134 in Kanawha County).

 

 

Additionally, employers with more than fifty employees will be required to use Electronic Funds Transfer (EFT) to transmit support payments electronically to the BCSE. For information on how to initiate this process, please contact an employer service representative at 800-835-4683 (or 304-558-1134 in Kanawha County) or email [email protected].

 

 

 


 
 
 
Plan Reporting Calendar
 



2011 FILING DUE DATES FOR
CALENDAR YEAR PLANS
 
This calendar is not intended to be an exhaustive listing of every due date under the Code or ERISA, but rather reflects some of the most common due dates.

View Calendar 


 
about MFYCO ...

  • Michael F. Yates & Company, Inc. can help you with a variety of services ranging from retirement plans to providing results-oriented survey instruments, training and development programs for your employees. Our products and services are intended to help you maximize the effectiveness of your Human Resources function.
     
  • These products and services incorporate our years of experience so that you receive rapid results and exceptional value. From onsite consulting, to strategic business integration, to Web enablement, we understand how Human Resources can be applied to solve your problems and achieve your goals. As a result, we can help you get the most out of your investment and turn your most precious resource into a competitive advantage.
     
  • We offer Consulting, Retirement Planning, Pension and 401(K) both qualified and non qualified Plans, Welfare Plans, Communications, Computer Systems, Executive Plans, Compensation, Mergers, Acquisitions, Divestitures and Other Services. 
     
    We offer a true and honest, Client Partnership.
     

Take the Michael F. Yates & Company, Inc. challenge!

Call us today ... 908-689-4200 



mh group
 How to Track Government Recovery Spending

 

"The Board shall establish and maintain...a user-friendly, public-facing website to foster greater accountability and transparency in the use of covered funds. The website...shall be a portal or gateway to key information relating to the Act and provide connections to other government websites with related information." 

 

 

Fantasy Football - Turn A Potential Fumble Into A Touchdown

 

It's that time of year again.  Employees are clamoring to get their teams formed and submitted before the September 8, kickoff of NFL Football.  Do your employees play?  Are you concerned about lost time? Surveys show that Fantasy Football promotes camaraderie and those in the game have good retention rates, so why not embrace it and keep work production up by establishing some guidelines to promote good time management for those involved in the sport rather than squelch the game.  Below are a few simple guidelines as to when and where the game can be played:

 

1.      Provide employees with a set of brief rules. Have those who play vote on and assign a contact person to interface with HR.  HR will then funnel all issues that arise to the contact person.  It would be up to that individual to resolve the issue and report back to HR with the end result by a specified date.

 

2.      Give the players a place to meet before or after work to establish teams and discuss strategies. Let them bring in sandwiches or breakfast and have fun with it.

 

3.      During the season book a place in the office, e.g. conference room or an area in the cafeteria each Tuesday at a specific time and for a specific time period, for those hard core players to discuss the weekend Football events.

 

4.      Track the teams' progress in your company newsletter and announce the winner at the end of season.

 

Let the fun begin! 

 

 

 
Michael F. Yates & Company, Inc.
_________________

 
101 Belvidere Avenue
P.O.Box 7
Washington, NJ 07882-0007 
 
908-689-4200

fax: 908-689-6300

 

 
Our staff and firm are proud
members
of the following professional organizations:

Society of Actuaries
 
American Society of Pension Professionals & Actuaries

Society for Human Resource Management
  
GAPS (Global Association Pension Services)

WorldatWork

 American Management Association

 

National Federation of Independent Business

Better Business Bureau

 

 


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