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PPA 2006 - Combo DB DC Plan Deductions


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If a DB plan is covered by the PBGC, then the combined limit will not be applicable starting in 2008. It seems to me that the only people who would love to have a db and a dc would be self employed people, Doctors, etc. However they would not be covered by the PBGC.

Do you think that they could voluntarily submit premiums to the PBGC in order to fully fund both?

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himt4, sorry but I feel the need to repeat that you are misinterpreting the rule, IMHO. I cannot find any summary by anybody that supports your interpretation, including that ASPPA session outline that you are referencing And while I did not hear the tape your conclusion does not support the comment IMHO.

On the contrary, page 14 of Joan's ASPPA webcast outline has some bullets which include:

"If DC contributions exceed 6%, then IRC 404(a)(7) comes into play."

It does not say "....exceed 6% and the combined contribution exceeds 25%"

I assert that the act of contributing 6.0001% to a DC plan with an overlapped DB plan causes the deduction limit to be the greater of the DB minimum or 25% of pay, not 31% of pay.

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Again, I must preface that it is not my goal here to interpret this rule. We all know that this rule and so many others in our line of work are not clear and that we all have our different interpretations. What I have been looking into lately is how our “industry leaders” are interpreting this law. And I’ve presented my research here in this forum to share. I really really think I’ve gotten it right when I say that it is Joan’s interpretation (or at least it was at the time of the ASPPA webcast and ASPPA conference) that if more than 6% is contributed to a PS plan that the deduction limit is (DB% + (PS%-6%))= 25%, plus the “free” first 6% in the PS plan for a total 31% limit. Listen to ASSPA conference I previously posted. I am not alone in this. I’ve asked people who atteneded the ASPPA conferences and webcasts. They tell me that ASPPA’s interpretation is this 31% limit, and they have pointed me to the source material that I shared with you. (And yes, again, everyone explains that this issue is not clear and that we’re talking about interpretation).

I am glad that this thread was re-continued at this time, because, coincidentally, on Friday I listened to a taping of a 12/6/06 ASSPA webcast entitled “cash balance Plans Post PPA: Are they right for your client?” presented by Thomas J. Finnegan.

slide 41 discusses the DB/DC combo and it says that “Appears that if the DC contribution exceeds 6%, only the excess would count toward the limit” and then he provides the example “ Example: if the DC contribution was 8%, only 2% would count toward the 404(a)(7) limit”

Later in the webcast he does an example of a cash balance/ DC combo. On slide 90 he writes “in fact, since the DB contribution is less than 25% of pay, it appears that the DC contribution could be increased such that DB + (DC – 6%) = 25%”

Believe me, there is no way I am misinterpreting his interpretation of this rule.

AndyH. I know that you interpret this rule differently and your interpretation could very well end up to be the right one when further guidance is provided. However, I think your personal interpretation is clouding your ability to accept that not only can the rule be interpreted for a 21%DB/10%DC deduction, but that in fact many of the ASPPA industry leaders are interpreting it this way.

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Ok, thanks for the info. Your description of Tom's comments does seem clear. Tom is on these boards, so maybe he would chime in.

I did not reach the same conclusion that you had from your description of Joan's comments, however. There is more than one way to interpret those comments.

I would also welcome "published" interpretations; I had just not heard or read any that I thought support a 21%DB /10% DC situation.

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In my 8th post of this thread (himt4 Jan 18 2007, 12:26 PM) I first bring to everyone's attention a 9/14/2006 ASPPA asap. I was just looking at that asap again, and I now see that it was written by Thomas J. Finnegan. So, yes, if Tom is on these boards, perhaps he can provide some comments here.

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ok, Tom's keeping quiet-probably wants to preserve his "handle" and it is too hard to have a second one so maybe we should start a contest:

...could it be ........ _____________??

"ak2ary?"....

OK OK here's the deal. The ASPPA ASAP, The webcast I did, the webcast Joan did, Norman's presentation, Brain Graff's presentations, the interpretation of APPA GAC, the interpretation of staffers intimately involved in the debate before PPA was passed, the initial opinion proffered by the IRS after PPA all said the same thing...

The entire 31% is deductible..

Here's the rub... the IRS is not publicly giving that opinion anymore, but have not publicly disagreed with it either. Jim Holland at ASPPA annual said that he sees the 31% arguement and we have to wait to see how it comes out. I expect it will come out favorably toward 31%, since it was apparently congressional intent,

as was mentioned by a congressional staffer from the podium at ASPPA annual

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primarily adding a post here just to send this thread into the exclusive "1000 views club".

But since I'm here I'll add a comment.

Isnt this like "if a tree falls in the woods..."

I mean, If a law comes out with the intention to give combo plans a 31% deduction, but everyone is too scared to take advantage of it, then was there really a 31% deuction law for 2006?

The clients who send in their data now are the ones who want to get everything finished early. When you tell them that you can get them a 31% deduction but it contains some risk, they say they dont want to risk it and they dont want to wait for some possible future IRS statement. They say just take 25% and lets finish the 2006 year up.

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