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wsp

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Mike Preston, what do you propose the "gateway" is to. It's a gateway into "cross-testing" when benefits aren't made on a broadly available basis or the benefits aren't primarily DB in Nature. The term "gateway" means gateway into cross-testing. You and I will agree to disagree on this one.

Here's another: (IRS Q&A's 2002 ASPA Annual Conference)

29. An employer maintains only a profit sharing plan. The contributions under the plan do not satisfy any of the gateways under the cross-testing regulations. The plan passes the average benefit percentage test on a benefits (cross-tested) basis, but not on a contributions basis. In applying the general test to the amount of contributions, may the rate groups be tested by comparing their ratio percentages to the mid-point of the safe and unsafe harbors?

Yes.

There is safe harbor and unsafe harbor. Anything above the safe harbor is fine in the avg. benefits test. Anything below the safe harbor is not fine. Anything in between is subject to facts and circumstances. Whenever you are rate group testing, you MUST use the midpoint between safe harbor and unsafe harbor. That does not say anything about being exempted from the gateway.

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Let's compare apples to apples. This exception to the gateway would be because the benefits provided are primarily DB in nature. Your example here includes the existence of a DB plan which makes a world of difference.

What exception are you talking about? I'm not talking about an exception. I'm saying that the gateway requirements do not apply. You don't need an exception when the gateway rules don't even apply. Remember, I'm not running my rate group testing on the basis of crosstesting. I'm just using plain contributions rate testing.

Are we learning yet?

I don't know, are we?

At this point, I'll not endeavor to educate you any further, as I believe the issues have been exposed for all to see and people can make their own judgments.

If others want to chime in, that is fine with me.

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Let's compare apples to apples. This exception to the gateway would be because the benefits provided are primarily DB in nature. Your example here includes the existence of a DB plan which makes a world of difference.

What exception are you talking about? I'm not talking about an exception. I'm saying that the gateway requirements do not apply. You don't need an exception when the gateway rules don't even apply. Remember, I'm not running my rate group testing on the basis of crosstesting. I'm just using plain contributions rate testing.

Are we learning yet?

I don't know, are we?

At this point, I'll not endeavor to educate you any further, as I believe the issues have been exposed for all to see and people can make their own judgments.

If others want to chime in, that is fine with me.

Apparently not. The key is not to attempt to read regs applying to one issue and gain a false interpretation of an entirely separate issue. It is easy to make that mistake. I even inadvertantly misapplied the corrective amendment duration period for Benefits, Rights, and Features to a corrective amendment for a failed test without thinking. It happens. But the point is it to be careful of what is being intended. The entire purpose of the gateway was eliminate abuse of easily passing tests without providing significant benefits to NHCE's. If you would simply run a average benefits test in order to avoid the gateway, then it would defeat the purpose of having a gateway requirement. Once you work through the complexity of how the regs are written, it will actually begin to make sense; thereby reducing the tendency to apply one answer to an entirely different set of circumstances.

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There is safe harbor and unsafe harbor. Anything above the safe harbor is fine in the avg. benefits test. Anything below the safe harbor is not fine. Anything in between is subject to facts and circumstances. Whenever you are rate group testing, you MUST use the midpoint between safe harbor and unsafe harbor. That does not say anything about being exempted from the gateway.

OK, I lied. I'm back. :lol: The above needs clarification, lest somebody stop by and actually believe it means something.

"There is safe harbor and unsafe harbor."

Uh....ok....I think I can get on board with that sentence.

"Anything above the safe harbor is fine in the avg. benefits test."

If that sentence is meant to convey meaning, it hasn't done its job very well. The average benefits test is a simple, straightforward comparison of the average, uh, benefits. If the average for the NHCE's is at least 70% of the average for the HCE's the avg. benefits test is satisfied. It is only once someone has satisfied the average benefits test that a ratio-percentage of less than 70% can be used in other tests that need to be done.

Consider it this way:

1) Do I pass the average benefits test? If no, when performing a 410(b) test I am stuck with 70%. If yes, I can use the safe-harbor percentage.

2) Do I pass the average benefits test (same one as above)? If no, when performing rate group testing under 401(a)(4) I am stuck with 70%. If yes, I can use the mid-point in my testing.

We aren't talking about (2). We are talking about having the "plan" satisfy 410(b). If it does, then there is absolutely no need to test under 401(a)(4) because the formula is a safe-harbor formula.

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There is safe harbor and unsafe harbor. Anything above the safe harbor is fine in the avg. benefits test. Anything below the safe harbor is not fine. Anything in between is subject to facts and circumstances. Whenever you are rate group testing, you MUST use the midpoint between safe harbor and unsafe harbor. That does not say anything about being exempted from the gateway.

OK, I lied. I'm back. :lol: The above needs clarification, lest somebody stop by and actually believe it means something.

"There is safe harbor and unsafe harbor."

Uh....ok....I think I can get on board with that sentence.

"Anything above the safe harbor is fine in the avg. benefits test."

If that sentence is meant to convey meaning, it hasn't done its job very well. The average benefits test is a simple, straightforward comparison of the average, uh, benefits. If the average for the NHCE's is at least 70% of the average for the HCE's the avg. benefits test is satisfied. It is only once someone has satisfied the average benefits test that a ratio-percentage of less than 70% can be used in other tests that need to be done.

Consider it this way:

1) Do I pass the average benefits test? If no, when performing a 410(b) test I am stuck with 70%. If yes, I can use the safe-harbor percentage.

2) Do I pass the average benefits test (same one as above)? If no, when performing rate group testing under 401(a)(4) I am stuck with 70%. If yes, I can use the mid-point in my testing.

We aren't talking about (2). We are talking about having the "plan" satisfy 410(b). If it does, then there is absolutely no need to test under 401(a)(4) because the formula is a safe-harbor formula.

My point was merely to explain the fact that the Midpoint between the Safe and Unsafe Harbor is used when there is rate group testing. That's all. You know, We've all read the rules and many of us have applied to rules more than others. I will not run back to seek statute on anything I say because I am speaking from my experience in the industry. I, too, sometimes jump the gun and missapply some provisions. But when you bring a rate group question into play as your argument that the mere use of an average benefit test exempts you from the gateway requirement, then you may need more actually testing experience.

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Apparently not. The key is not to attempt to read regs applying to one issue and gain a false interpretation of an entirely separate issue. It is easy to make that mistake. I even inadvertantly misapplied the corrective amendment duration period for Benefits, Rights, and Features to a corrective amendment for a failed test without thinking. It happens. But the point is it to be careful of what is being intended. The entire purpose of the gateway was eliminate abuse of easily passing tests without providing significant benefits to NHCE's. If you would simply run a average benefits test in order to avoid the gateway, then it would defeat the purpose of having a gateway requirement. Once you work through the complexity of how the regs are written, it will actually begin to make sense; thereby reducing the tendency to apply one answer to an entirely different set of circumstances.

You and I have a fundamental disagreement. I believe the regulations mean what they say and you believe in the Chinese way of government (see your section above which I added the bold to). That is, you believe that it is not necessary to be precise because then, if you want, you can change what you meant not by re-issuing the rules with clarifications, but instead by just declaring that what you meant was different from what you wrote.

Sorry, it doesn't work that way in the US. At least, not yet.

Look, I'm sure you are a fine, upstanding citizen in some respects. So I will credit you with actually believing the drivel you are spouting about "intent".

I think you need to look at Q&A 29 again and tell us why you think it is different from the case at hand.

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My point was merely to explain the fact that the Midpoint between the Safe and Unsafe Harbor is used when there is rate group testing. That's all. You know, We've all read the rules and many of us have applied to rules more than others. I will not run back to seek statute on anything I say because I am speaking from my experience in the industry. I, too, sometimes jump the gun and missapply some provisions. But when you bring a rate group question into play as your argument that the mere use of an average benefit test exempts you from the gateway requirement, then you may need more actually testing experience.

Darn, I should have recognized that at the beginning. That *MUST* be it. :lol:

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Funny. 3 pages of post debating a simple issue. It is very easy to sit up and attempt to cherrypick statements. I find that type of activity to add confusion to those that are actually trying to make sense of processes that seem somewhat complicated.

I find most of these processes simple and not worthy of debate. So I trying to explain in layman's terms and eventually misquote topics. When I do, there's always someone (obviously inexperienced) coming along with their book of regs and posting different sections. I've been there and done that. Now, to me, it is a process of operating a plan to meet the qualification requirements. This is my passion and I decide to share it.

You remind me a little of myself when I first started out in the industry 15 years ago. Everything had to be antagonized and supported by regs. The problem with that, again, is that you sometime apply a certain reg to the wrong set of circumstances. This is a reflection of your weakness, not mine.

Being experienced in the industry, I have corrected ERISA Attorneys, and have been corrected by ERISA attorneys; the latter more often than the former. But as you gain more experience, you realize it is not being right or wrong, but providing newbies with lesser experience explanations of processes that may otherwise not jive. This is clearly not your intent.

Also, sorry about the egg that going to be on your face when you first realize that the gateway into cross-testing applies unless the benefits are primarily DB in nature or the allocations are made on a broadly available basis.

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Funny. 3 pages of post debating a simple issue. It is very easy to sit up and attempt to cherrypick statements. I find that type of activity to add confusion to those that are actually trying to make sense of processes that seem somewhat complicated.

I find most of these processes simple and not worthy of debate. So I trying to explain in layman's terms and eventually misquote topics. When I do, there's always someone (obviously inexperienced) coming along with their book of regs and posting different sections. I've been there and done that. Now, to me, it is a process of operating a plan to meet the qualification requirements. This is my passion and I decide to share it.

You remind me a little of myself when I first started out in the industry 15 years ago. Everything had to be antagonized and supported by regs. The problem with that, again, is that you sometime apply a certain reg to the wrong set of circumstances. This is a reflection of your weakness, not mine.

Being experienced in the industry, I have corrected ERISA Attorneys, and have been corrected by ERISA attorneys; the latter more often than the former. But as you gain more experience, you realize it is not being right or wrong, but providing newbies with lesser experience explanations of processes that may otherwise not jive. This is clearly not your intent.

Also, sorry about the egg that going to be on your face when you first realize that the gateway into cross-testing applies unless the benefits are primarily DB in nature or the allocations are made on a broadly available basis.

Well, I guess I'll have to wait on that a bit.

I think your posts speak for themselves. As do mine.

You and I have a fundamental disagreement about how the non-discrimination regulations are meant to be applied. Your position is irrational, in my view. I'm sure mine is just as irrational in your view.

You choose, at this point, to dismiss all argument as being essentially beside the point. I'll interpret that to mean that you have recognized the futility in disputing that which has been understood by everybody who actually practices in this area since 2002.

I hope you do bother, at some point, to confirm with the IRS that their position, as stated in Q&A 29 previously quoted, is still valid. At least for your clients' sake, if not for your own.

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Maybe there is some confusion? I believe Mike is speaking specifically about passing under 410(b). Now the plan still must pass 401(a)(4) testing which could lead down the road for all of the other things Nut is trying to explain.

Am I right Mike or am I missing something?

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So we are talking about character now?

http://benefitslink.com/boards/index.php?s...ndpost&p=131957

Mike, I'm sorry that you find yourself in such poor company as mine.

Happy to be there. Thanks for the reference. Now that I know he worked for the DOL I appreciate where he is coming from. He really does believe that there are general principles that apply, that there is really no need for specific rules, except to the extent necessary to confuse the court system into agreeing with whatever the government believes is appropriate at that point in time.

Keep in mind that he only has 15 years of experience, so he may need to inquire of others what the non-discrimination rules were before the regulations under 401(a)(4) were published and why the regulations were published in the form that they were.

With that additional information available to him, he seems intelligent enough to understand the ramifications.

But having worked for the government as a DOL investigator, he also most assuredly knows about the ability of the government to put the squeeze on plan sponsors to get what they want, notwithstanding any silly written rules that might exist to the contrary.

A very dangerous attitude, of course, but one that the private sector has had to deal with since time immemorial.

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Maybe there is some confusion? I believe Mike is speaking specifically about passing under 410(b). Now the plan still must pass 401(a)(4) testing which could lead down the road for all of the other things Nut is trying to explain.

Am I right Mike or am I missing something?

I don't think there is any confusion.

But since he is refusing to actually address any of the arguments head on, I can't be sure.

It is clear that ERISAnut believes that use of crosstesting in establishing a plan sponsor's satisfaction of the average benefits test is enough to taint all plans of that employer such that they are then subject to the gateway. I am of the belief that an employer's satisfaction of the average benefits test by use of crosstesting has zero impact on whether or not a plan (or plans) of the employer are subject to the gateway.

Initially, I think we are both talking about 410(b). At least we are insofar as use of the average benefits test being used to justify the use of a percentage less than 70% to satisfy said 410(b). I think he agrees with me that the lowered threshold, assuming satisfaction of the average benefits test, is the safe-harbor percentage for 410(b) purposes.

I think he agrees with me that, if the average benefits test is satisfied, that the plan would then satisfy 410(b). However, he feels that even if the plan satisfies 410(b), it would then be necessary for the plan to satisfy 401(a)(4). And, when testing under 401(a)(4), he feels that since the plan is subject to the gateway, it will fail 401(a)(4).

He is wrong about how the plan satisfies 401(a)(4), of course. For two reasons:

1) First, given that the plan satisfies 410(b), as it is currently drafted, it satisfies 401(a)(4) automatically because it is a safe-harbor design. He doesn't "like" the fact that a plan that satisfies the average benefits test via crosstesting does not give rise to a gateway requirement. Hence, he therefore says that it just can't be possible for this plan (a safe-harbor design) to satisfy 401(a)(4) as a safe-harbor just because it satisfies satisfies 410(b) (taking into account only those who benefit at the higher level provided by the integrated allocation). I find this logic to be indicative of a deep-seated misunderstanding of the rules. He admits to this, by waving his arms and saying that those of us that actually pay attention to the rules, rather than the overriding "principles" are naive. I beg to differ.

2) Let's assume, for argument's sake, that a plan that satisfies 410(b) by use of the average benefits test somehow disengages the plan's ability to be treated as a safe-harbor under 401(a)(4). Incredible as that may seem, let's roll with it. So, let's assume that we need to test the allocations under 401(a)(4). I'm going to submit that this plan will satisfy 401(a)(4) without using cross-testing. I'm going to submit that the group of people getting the integrated allocation (excluding all others) satisfies 401(a)(4). Certainly all of them are in the same rate group. The only question is whether that group satisfies the non-discriminatory classification test. For this purpose, we perform the same test that we used to determine whether the plan satisfied 410(b), only instead of using the safe-harbor percentage, we use the midpoint. Since we passed using the safe-harbor, we must pass using the midpoint, because the safe-harbor is always higher than the midpoint.

The only reason why the plan wouldn't satisfy 401(a)(4) in this case is if the testing of the rate groups *using allocation percentages, not EBAR's* is still subject to the gateway.

I think ERISAnut is on board with all of this other than the conclusion.

But then again, he may waive his arms and come to an entirely different conclusion if he doesn't like the result reached.

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We are talking about an employer that sponsors only one DC plan, so not need to further confuse the issue.

Also, we are distinguishing certain rules that should be communciated separately when speaking of testing a plan for non-discrimination.

1) Plan must pass coverage ratio test (this may be done either by allocation rate or cross-testing).

2) If plan fails coverage ratio test, then plan must pass both the average benefits test and the nondiscriminatory classification test. (these also may be done by allocation or cross testing)

3) We are still talking about only one plan that is a DC plan.

4) If you use cross-testing in any of these test (coverage ratio or average benefits) then you must satisfy the gateway into cross-testing provided that the allocation doesn't meet the broadly available exception.

5) Since we are talking about one DC plan, we know the benefits aren't primarily DB in Nature and we aren't testing a DB and DC plan under the average benefits test.

See how clearly I articulate rather complex issue in simple terms. There's no need for confusion for those who are trying to learn what this stuff is about. Anyone can reference as they wish to arrive at their conclusions. My contention is that when it does get reasearched, these rules will begin to make sense. We have just taken 3 pages to explain something where my initial attempt was, obviously, to break the question down and analyze the different concepts that work simulateously to keep the plan qualified. This, again, is done through experience, not by running and research every statement for a challenge. This leads people who are knowledgeable about certain topics to "not post" because of being antagonized by simple terms. We have already gotten off the original subject for someone who had trouble articulating and simple situation. In my first post in the topic, I re-articulated everything to ensure everyone understood the question being asked to we should share thoughts. This is the experience which makes my career more enjoyable.

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This is the experience which makes my career more enjoyable.

So, now we have determined that you, in some sense, get some sort of satisfaction out of confusing the issues and spouting untruths.

If that is what floats your boat, that's fine.

But don't expect those of us who actually know how the rules work and who actually know how the rules are supposed to work not to take you to task each and every time you spew your misinformation.

See how clearly and succinctly I articulated your malicious intent?

I have never, in all my years, heard anybody say (except you) that using the Code and regulations as sources should be subordinate to one person's understanding of what was actually "intended". In a world such as ours (the pension world) that is pretty close to a child putting his hands over his ears and screaming "la...la...la...la...la.." at the top of his lungs.

In case you haven't ever read them, the regulations which you so quickly dismiss are over 300 pages long. And, in case you didn't read the original version, the first version was over 600 pages long.

For you to say that the regulations and the Code mean nothing is so far beneath the standard of care for our industry that I'm embarrassed FOR you.

You want everything to be simple, but you can't even understand the simplest of concepts (crosstesting in the average benefits test under 410(b)(5) does not impact the gateway requirement of 401(a)(4) - see how simple that was?).

Once you accept that a regulation under 401(a)(4), as clarified by the preamble to said regulation (I know, I know...you can't be bothered to actually read the regulations or the preambles because you know what they meant to say, whether or not they said it) does not in any way say that the use of crosstesting under another section of the code/regulations (410(b)(5)) impacts how the tests under 401(a)(4) are to be run, then things can get simple again.

Better than that, they can get back to providing accurate information.

You still have not answered why Q&A 29, which is dealing solely with a single PS plan (as the example we are discussing only deals with a single PS plan) was answered with a "Yes" by the IRS.

Think you could give that a go?

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The reason that I do not answer it is because I do not need to. Remember, this isn't about me. I do not feel inclined to run the the reg book prior to posting in the forum. I answer based on my understanding of the rules on items I previously research.

The one thing that I don't do is wait for someone to provide insight into a question and then antagonize. We can share thoughts and ideas, nor not, and it simply makes no difference to me. I simply provide my input and give those of you who are less experience something to consider. I some cases, I may be wrong. In this case; I am not. I can, at least, admit when I am mistaken or mixed up on something in the spirit of learning. At any rate, I am way beyond the point of running to the regs to show everyone I can find a stipulation, because answering these questions do not increase my salary.

With that said, I am glad to see you are still confused that the gateway is totally separate form of testing which must be passed in order to valid cross-testing. This is, of coarse, with the exception of benefits being primarily DB in nature or the broadly available requirement that I already mentioned many times before.

Since you're so proficient at running to the regs, you shouldn't have a problem finding this one.

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I actually took about 2 minutes to find somthing for you.

1.401(a)(4)-8(b)

Write this section of the regs on a napkin and use it to wipe the egg off your face.

How do I get to 1.401(a)(4)-8(b) if my plan satisfies 1.401(a)(4)-2(b)? That is, assuming the plan as designed is a safe-harbor plan, why would I ever have to look at the rules on cross-testing in 1.401(a)(4)-8?

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I actually took about 2 minutes to find somthing for you.

1.401(a)(4)-8(b)

Write this section of the regs on a napkin and use it to wipe the egg off your face.

How do I get to 1.401(a)(4)-8(b) if my plan satisfies 1.401(a)(4)-2(b)? That is, assuming the plan as designed is a safe-harbor plan, why would I ever have to look at the rules on cross-testing in 1.401(a)(4)-8?

Because in order to rely on cross-testing to satisfy any of the tests under 410(b), whether it be the coverage ratio test or the average benefits test, you must first satisfy the gateway. You do not, as you claimed, get an exemption from the gateway merely because you are using the average benefits test to pass 410(b).

Again, are we learning yet?

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The reason that I do not answer it is because I do not need to.

So, you are saying that the IRS is wrong on this one, right?

You don't have to cherry pick statements made. I wrote my response in the entire post. I am stating that I will not run to the regs to research every single item posted on the forum. I will provide an answer as I understand it. If an understanding is not precise, or a little unclear, a simple question or a correction would suffice. The idea of posting different sections of code (or regs) in an attempt to grandstand doesn't really help anyone who reads this thing; especially when the code or regs do not properly apply to the question at hand.

Take a look back at the original questions being asked. How did the become a debate about the gateway? The initial question was concerning how a plan is failing 410(b) because of the last day 1000 hour requirement and wanted an efficient way to correct the test. My suggestion was to bring additional participants into the plan formula that was already in place as opposed to creating a separate allocation group; because that may be aggressive and lead to other issues. Whether you agree or disagree is fine. It's not worth an argument or heated exchange of words. It's like I stated earlier, I have correct and have been corrected. Maybe corrected more often than I corrected. But I do not pretend to know something that I do not by tauting different sections of the regs on everything I write. It's not that serious to me.

I did make an exception with the rule on the gateway. Perhaps you familiarize yourself with it and consider yourself educated. Glad I could help.

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How do I get to 1.401(a)(4)-8(b) if my plan satisfies 1.401(a)(4)-2(b)? That is, assuming the plan as designed is a safe-harbor plan, why would I ever have to look at the rules on cross-testing in 1.401(a)(4)-8?

Because in order to rely on cross-testing to satisfy any of the tests under 410(b), whether it be the coverage ratio test or the average benefits test, you must first satisfy the gateway.

I sure can't find any provision in 410(b) that says that. And in light of the preamble in the regulation and the IRS responses at various conferences, I guess the IRS thinks you are wrong.

That is good enough for me.

So, unless you can find a cite, I guess we'll just have to agree that you are wrong.

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