austin3515

OK, it's settled. There is such a thing as a Money Purchase 403b plan, so says Derrin Watson. He indicated that the reason they existed was that pre-EGTRRA there were benefits to a MP Plan with respect to that awful maximum exclusion allowance thingamabobber. So to the extent that there was a 403b MP plan out there, if that plan were merged, J&S would apply to those balances (hence my reference to the 205 above in Corbel's 403b Basic plan document). He also mentioned that he has never actually seen one in practice . Finally, he mentioned that in the IRS's plan termination guidelines for 403b plans, they do make reference to "403b Money Purchase Plans." This was all according to a voicemail he left me so I did not get a chance to pepper him with all of the logistics. But that was not necessary because his affirmation of these things was enough for me. No offense intended to the rest of y'all.

The question is "can a 403b be designated as a MP plan" with the same implications as it has in a 401a plan - that is, subjecting it to minimum funding rules, j&s requirements, etc.? I haven't seen the basis for that yet. I have not seen the plan document, I only know if it's existence. But that is ok because it is a conceptual question anyway.

But it's not a designation "in name only" as you suggest. It determines requirements such as J&S and minimum funding. A plan is either statutorily subject to minimum funding rules or it is not. Just because it quacks like a duck, as is the case it here, does not make it a duck. A mandatory contribution does not make a plan subject to the minimum funding rules. At least I don't see how that is possible.

This is brand new to me, I have never heard of this before. I went to look at my basic plan doc from Corbel. It says J&S applies except that it does not apply to exempt participants. Exempt participants is defined as everyone, except for someone who has had a transfer from an ERISA 205 plan. 205(b) says: (b) Applicable plans (1) This section shall apply to— (A) any defined benefit plan, NOT US (B) any individual account plan which is subject to the funding standards of section 1082 of this title, and IS THIS A 403B PLAN? © any participant under any other individual account plan unless— WOULD THIS NOT COVER A 403B PLAN? (i) such plan provides that the participant’s nonforfeitable accrued benefit (reduced by any security interest held by the plan by reason of a loan outstanding to such participant) is payable in full, on the death of the participant, to the participant’s surviving spouse (or, if there is no surviving spouse or the surviving spouse consents in the manner required under subsection ©(2) of this section, to a designated beneficiary), (ii) such participant does not elect the payment of benefits in the form of a life annuity, and (iii) with respect to such participant, such plan is not a direct or indirect transferee (in a transfer after December 31, 1984) of a plan which is described in subparagraph (A) or (B) or to which this clause applied with respect to the participant. Clause (iii) of subparagraph © shall apply only with respect to the transferred assets (and income therefrom) if the plan separately accounts for such assets and any income therefrom. So I guess, a big question is, if you are saying a 403b with mandatory contribtions is really a money purchase plan, then what precisely pulls it into the minimum funding requirements? I went to 1082 (there was a link!) and it refers to defined benefit plans and to "money purchase plans". So I'm chasing my tail here a little bit - how exactly did the 403b plan get pulled into the money purchase world?

That's all well and good, but my cite clarifies how a 401a plan is considered a money purchase plan. How does a 403b plan obtain that distinction?

From 401(a) (underlined/italics added by me): (27) Determinations as to profit-sharing plans.— (A) Contributions need not be based on profits.— The determination of whether the plan under which any contributions are made is a profit-sharing plan shall be made without regard to current or accumulated profits of the employer and without regard to whether the employer is a tax-exempt organization. (B) Plan must designate type.— In the case of a plan which is intended to be a money purchase pension plan or a profit-sharing plan, a trust forming part of such plan shall not constitute a qualified trust under this subsection unless the plan designates such intent at such time and in such manner as the Secretary may prescribe. So if you are either a MP or a profit sharing plan with the sole distinction being made by disclosure, then clearly a 403b plan could not be considered a money purchase plan. What would the legal basis be for allowing a 403b Money Purchase? jpod, I am surprised to hear you say that there is no adequate definition of a profit sharing plan. 401a goes into great detail about what it is and it reads quite a bit different than 403(b). The logical purpose of the above paragraph (which I believe is what you're suggesting is from TRA 86) was so that anyone could look at that plan and know it was drafted correctly. Is there some other section of code providing some other means for a plan to be considered a money purchase plan?

So you're saying that a 403b plan can include a money purchase provision, and therefore be subject to j&s and all the other restrictions?

But for example you cannot merge the "403b Money Purchase" into the 403b plan because of course the Plan is not at all a 403b plan - it is a 401a plan. Horrible name for a document, full of potential misinterpretations. Case in point, I am reviewing a 5500 for a plan using both code 2L and 2C, which I think we all agree is ridiculous. I have not seen the plan documents but it is TIAA - I strongly suspect someone unwary thought their "403b Money Purchase Plan" was a 403b plan and combined them. But we shall see! Now, with respect to the ERISA/Non-ERISA issue, the DOL came out and said that in fact the 403b plan IS subject to ERISA if the deferrals in that 403b plan are matched in a different plan. Just google DOL advisory opinions on the topic and you should find it if you are interested.

I was presented with the same question today...

Yup, another allocation. I have had this predicament before and considered doing an amendment that basically says it's a once in a lifetime waiver. But unless you say it's once in a lifetime, it's every year. Another approach is, "is this person really terminated"? For example when they leave in January, is it known that they are coming back for the next holiday season? If so, there might be a case that the person is active.

Take a look at this post that I started. I think you do have problems. Reality is I think a lot of SERP's have this problem, but very few realize it. http://benefitslink.com/boards/index.php?/topic/53313-definition-of-compensation/?hl=deferred+comp+compensation+serp

I agree with ESOP guy. Also, the only problem with restating is you need to watch out for anyone who has already retired and therefore accrued the right to an allocation. You could however make the new provision effective 1/1/2015 with no worries at all (assuming a calendar year plan).

So Tom, you're suggesting that Q&A supports including a zero comp participant who is still active in the ADP test? That just reminded me that Relius always brings in those zero comp people with no term dates. Perhaps that suggests Relius would agree? For example, people on a leave of absence. They are "indirectly eligible" because the only reason they can't is that they had no comp? [of course if we were talking about NHCE's don't be surprised if I use the 0/0 rationale for excluding them - I am such a two-face!]

But there is safey in numbers

Am I alone, that when there is an absence of guidance, and a reasonable interpretation exists (even though it may not be your BEST interpretation), that it would be worthwhile to take advantage of the flexibility? Imagine a plan for example where there is S/E individual and a non-owner HCE making $130K and who contributes 10% of pay. Imagine further that the NHCE's contribute 3% of pay, placing the limit at 5% of pay. Do you a) tell the non-owner that he gets back a refund of $6,500 because "there is no specific guidance and this is "probably" to aggressive; or do you say "there is no guidance and this is at least one interpretation that is reasonable, and therefore you can keep your money in the plan and will have a decent shot at retiring when you want." This is a very realistic set of circumstances. Another variation which is essentially the same is if it is the owners kids, or even the spouse. Why kick them when they're down? Does that serve the common good?? Am I alone here in the land of reason? (sounds like Tom might be with me, and Belgarath seems to think I'll have good company, which is a consolation)

So the EOB is pretty clear that where a W-2 employee has no comp, it is "probably" to aggressive to include as a zero in the ADP test (0 / 0 is either imaginary math or 100%, but probably not zero). It does not address a Schedule C though, which I think is a little bit different as the individual had no control over the outcome. Anyone have any thoughts about whether or not they would include as a zero in the ADP test?

Employee is excluded for half the year as a class exclusion. Plan is top-heavy. Does the participant get the THM for the full year compensation, or just compensation while not an excluded employee.

To me, it seems like the federal thrift plan with an infinite number of complications. Receiving contributions from thousands of employers (potentially)? There is a reason that recordkeepers base pricing on average account balance. It's a lot of work!!

I'm envisioning a recordkeeper style platform where the employer keys in peoples contributions. What happens when there is an over-deposit or the money gets into the wrong account? Is there good customer service? [note: please read the last question with the intended level sarcasm, dripping like an Eskimo in the Sahara dessert).

Here is the IRS's explanation: http://www.treasurydirect.gov/readysavegrow/start_saving/retirementaccountfactsheetenglish.pdf

I was trying to find my post where I wrote more about this, but if you just read what the regs say, thre is nothing to prevent such an amendment. The regs don't say "anything in the notice is off limits." In fact the IRS has said you can amend to add hardships which should have been in the notice. 1.401(k)-3(e) - Plan Year Requirement "1) General rule. Except as provided in this paragraph (e) or in paragraph (f) of this section, a plan will fail to satisfy the requirements of sections 401(k)(12), 401(k)(13), and this section unless plan provisions that satisfy the rules of this section are adopted before the first day of the plan year and remain in effect for an entire 12-month plan year. In addition, except as provided in paragraph (g) of this section, a plan which includes provisions that satisfy the rules of this section will not satisfy the requirements of § 1.401(k)-1(b) if it is amended to change such provisions for that plan year. " In no way, shape or form does the profit sharing allocation method satisfy the rules of 401k12 or 401k13 or this regulation. It just doesn't. All of the controversy regarding this matter is NOT BASED ON A REASONABLE INTERPRETATION OF THE REGS. It is based on comments made by the IRS (yes, including their published notices, which however do not supersede the regs and do NOT say what is impermissible - only what is permissible ). I'm so tired of this topic.

I would based on the fact that means of allocating profit sharing is not a plan provision related to the provisions of 401k whatever the safe harbor section is. I think it generally would negatively affect people even though it would not be a cutback. But in MY Safe Harbor notice, I took advantage of the regs offer to reference the SPD for certain other provisions, so the amendment does not change the content of my safe harbor notice (not that I think that would necessarily change my analysis). I don't like to handcuff my clients unless I am explicitly required to. But I'm sure that is one of the more controversial amendments.

The standard is: Though shalt not make an amendment to any provisions related to the satisfaction of the safe harbor requirements. Who is eligible for the safe harbor to me is clearly related to the safe harbor provisions. So, based on this, I should say "no loosening of eligibility restrictions", right? Once upon a time I may have said that based on my logic above, but now I saw OK. The EOB makes a good point which is that it would be "ridiculous not allow a plan to expand eligibility" because it so blatantly contradicts public policy. Sounds like the IRS applied that logic to their Q&A. I'm with Kevin C on this, I'll amend very many things in a safe harbor plan. There was an earlier thread where I gave a fairly exhaustive list of all the things I would be comfortable amending so I won't restate them here.

I will reserve judgment on whether or not this means competition until I find out what the max is. Presumably it will not be higher than an IRA contribution, in which case I would agree that maybe this won't be so bad. As a matter of policy, the same friend I referenced above who employs a lot of "low skill/low pay" employees has offered to hundred of employees over the past 3 years the opportunity to have payroll deduction IRA's and not one has taken the option. You can't get water out of a stone is an old adage that comes to mind...

Can I do $15K a month?