ak2ary

That should be fine. Remeber that each Doc can review the plan doc and so each will know what the other is getting. I assume that won't be a problem. The only prohibition against naming names is with respect to eligibility to participate in a plan that uses the Avg Benefits Test to meet 410(b) for the plan as a whole. Here your eligible group is all doctors which is a reasonable business classification IMHO. It is not a problem to use names to delineate participant benefits. Only caution would be if one of the "groups of names" has such a low pay credit that they are deemed to not benefit. The arguement would then be that the class determination is an eligibility determination. Benefiting here would be under 410(b) which doesn't have a meaningful benefit requirement. That having been said, if the pay credit was zero for a group that would be a problem and maybe if the pay credit was $0.25, it would also be a problem. In that case you most likely wouldn't cover a reasonable classification of employees and would need to use the Ratio Pct Test as the plan's main 410(b) pass.

While I agree with your analysis of the the language and sentence structure, this memo is directed to field agents and DL reviewers and I do not believe that any of them will read this as saying, this is not meant to imply that a plan that applies the offset by only taking into account a uniform portion of the underlying DC plan will fail the concurrent offset rules. The Service has been grappling with different interpretations of the the concurrent offset rules for years and the IRS interpretations differed in different regions. This is the national office guidance to the field on this topic and it seems to me that, since this issue has been raised time and again, this was their opportunity to finalize their opinion on the "uniform portion" offset and they did not OK it

Reissued 7/17/2007 MEMORANDUM FOR MANAGER, EMPLOYEE PLANS DETERMINATIONS AND MANAGER, EMPLOYEE PLANS DETERMINATIONS QUALITY ASSURANCE FROM: Director, Employee Plans Rulings & Agreements SUBJECT: Section 401(a)(26) as applied to offset plans ... (2) If the plan provides a meaningful gross benefit that is offset by a benefit under another plan under which the employees benefit on a reasonable and uniform basis we will treat the plan as satisfying section 401(a)(26). Of course, in order to satisfy the requirements of section 1.401(a)(26)-2 of the regulations, the requirements under 1.401(a)(26)-5(a)(2)(ii) or (iii) must be satisfied (relating to sequential or concurrent offset arrangements). Note that these rules generally will not be satisfied if the offset applies for some participants (usually non-highly compensated employees) but not all participants. These rules generally will be satisfied if the benefits under the offsetting plan are either a level percentage of pay, or a flat dollar amount, or an amount necessary to provide a uniform benefit (either flat dollar or level percentage of pay) in the plan being offset. It seems to me that this is saying that the uniform allocation cannot be a new comp allocation (other than an age-based). Prior to seeing this the other day, it was my understanding that the IRS had backed off this position and was allowing the underlying DC plan to be a cross tested plan as long as the allocation used for the offset was uniform. Now...I am not so sure

You use whatever rate the plan says to use to determine the benefit. If the plan is silent, I would use the pre-retirement rate for the pre-NRA discount period. You would use the lesser result of the plan's rates or the applicable mortality table with 5%

You should be really clear on one point....ABC's opinion on the reasonableness of the plan expense may not be material. It is the Trustee's responsibility to determine whether the expense is reasonable. If ABC has retained no rights as trustee and has appointed a true (as opposed to directed) trustee, then the trustee will have to review the expenses submitted by ABC.

Actuarial fees can be paid from the trust

IMHO, good faith compliance does not require an offset to the 415 limit in this case. If you look at David's BERF=WERF approach or ASPPA's approach which is detailed in their MASD comment letter (available on their website), both approaches take into acount the prior distributions and both approaches would provide that the full benefit can be converted to a lump sum without an offset. Just my opinion FWIW edit was to correct a spelling error

I have to agree with David The IRS is looking for a good faith standard. I have recently done 415 sessions with both Jim and Marty and they really are looking to a good-faith standard. I would be careful not to read more into the final reg than is there. I don't believe the IRS believes that there is any kind of a procedure in there

But the SH matching contribution does not trigger the gateway. Only the profit sharing contribution will trigger the gateway. So, not all Hotel B employees will be required to receive a gateway contribution since they do not benefit under the profit sharing plan. Only the one Hotel B staff person receiving the 3% TH contribution under the PS will be forced to increase to 3.67% to satisfy the gateway

My take on it has always been that in the small plan universe, or in a plan that is designed to maximize the benefits of HCEs... if you need to use -3©(3) to pass 401(a)(4), you are not allowed to The safety valve exists primarily for large plans where a demographic anomoly causes a single HCE or a handful of HCEs to blow your test If your explanation of the circumstances for the facts and circumstances determination includes words like "Doctor" or "Lawyer" or "son of the owner"; I dont think you get far

The IRS is aware of all the issues related to the certification including the issue of receivable contributions, the need for large plans to be able to roll-forward data, the problems created for EOY vals and many, many more... They are very closed-mouthed about these issues in public meetings and in less public meeting, while they indicate some sympathy, give no clue as to where they are going.. Obviously, there are arguments on both sides of the receivable contributin and data issues...

No...both Jim and Marty have been very clear on this. The effective date for a calendar year plan is 1/01/08. They have both said that you get to continue to accrue through 12/31/07 on the basis of the 4/5/07 documenmt and that 12/31/2007 benefit is the grandfathered benefit In essence IRS reads "effective date" to be "effective date with respect to the plan". So "end of the limitation year that is immediately prior to the effective date of final regs under this section ..... " is end of the LY immediately prior to 1/1/2008...which is 12/31/2007

The regulations are effective 1/01/08 for a plan with a calendar year limitation year that was in existence on 4/5/2007. The benefit that is grandfathered is the 12/31/2007 benefit based on the plan as written 4/5/2007. So its the 2007 benefit thats grandfathered not the 2006. The IRS has been clear on this point in several conferences. The benefit that is grandfathered is the actual accrued benefit at 12/31/2007...not the 415 limit. Since he had not accrued the 10K benefit the grandfathered benefit will be 8K. I take from your post that the plan's assumptions are more generous than the 415 asumptions. I believe that as long as the greater lump sum was in accordance with the plan provisions and satisfied the pre-reg 415 limit, that optional form amount based on the 4/5/07 plan provision is also grandfathered, It will have to be monitored as time passes to make sure that actuarial increases post NRD and other plan level adjustments do not push the optional form to a greater amount than would have been payable under the 2007 415 limit, without regard to post 2007 COLAs and post 2007 pay

ASPPA filed a comment letter requesting that the DoL clarify that the PD disclosures only apply to DC plans. In addition, I thought I heard that one of the mutual fund companies had claimed to have received informal DoL guidance that the PD language only applied to DB plans. Having said all that, it's on my firm's DC statements and it's on there quarterly

This is not an uncommon provision, but I believe you are misinterpreting its meaning. However, without seeing the document, it is hard to say. A plan can clearly have an actuarial equivalence provision that has a different interest rate post NRA. If the plan provides that actuarial equivalence post NRA does not provide for a mortality increment, it should satisfy the 411(a) requirement that the benefit be at least the actuarial equivalent of the NR benefit and eliminate the need for suspension notices. All you are doing is removing the benefit of survivorship Standard actuarial equivalence (Benefit * Nx/Dx) * (Dx/Dx+1) * (Dx+1/Nx+1) = Benefit * (Nx/Nx+1) = Benefit at x+1 Removing benefit of survivorship (Benefit * Nx/Dx) * (1+i) * (Dx+1/Nx+1) = Benefit * (1+i) * (APRx/APRx+1) = Benefit at x+1 In a plan that provides no forfeiture upon death, the arguement is that this is not only reasonable, but the proper actuarial equivalent If however the plan provides that the actuarial equivalent adjustment going forward is simply Benefit * 1.06, it seems to me that could be deemed unreasonable at later ages .. but that would take some research

ok look...everything I said here... I was just kidding thanks mike, jpod et al...

1) There is no flaw. If each plan can pass 410(b) on its own (even via the ABT), they are safe harbors for 401(a)(4) 2) If you must aggregate for 410(b), then you do not have a uniform allocation and they are no longer safe harbors. Sometimes you can do things in two plans that you cant do in one

Small amounts of benefits to owners children have a way of messin stuff up

Interestingly....without a cite

The common solution in this situation is not to setup a plan for the Associates who are all HCE's, instead it is to make a top-paid group election the result of which is to make the vast majority of the Associates NHCE's. The deferral only associates plan easily passes 410(b) and usually ADP. The effect of the TPG election is to hurt, however, the rate group testing of the Partners plan, which then generally requires the use of the ABT for coverage testing, rate group testing or both. Your approach IMHO makes a very dangerous assumption that you can read 416 to say that if the partner's plan would pass alone, it does not have to be aggregated with the asociates plan for 416 purposes, even though it is aggregated with that plan for 410(b) purposes. The clearer reading, I believe is that, under 410(b) there is no Partner's Plan and there is no Associates plan there is a single, aggregated PARTNER/ASSOCIATE plan and that plan is top heavy and mins are owed to the non-keys. Your approach reads the word "enables" in 416 to be less restrictive than "plans that are aggregated for 410(b). I believe that the IRS reads it to be equal to or, perhaps, more restrictive than aggregation. Unless you have a specific letter on this issue relating to your plans or unless you can point to some IRS statement in a gray book at a conference or some other source, I believe this is very dangerous (and unnecessary) approach.

The "plan" for 410(b) purposes is the aggregation of the partners and associates plans. If that "plan" is top heavy, the whole she-bang is top heavy. The employer makes an election to aggrgate the two plans for coverage, once that election is made they rely on each other to meet 410(b)...there is no concept of a separate 410(b) test for the Partner's plan. You can't take the position that in the first scenario above, where the associates plan clearly allows the partners plan to meet 410(b), that there is no RAG because ABPT aggregation is not 410(B) aggregation and then say well, 410(b) aggregation isn't enough either, you have to look at which plan would pass 410(b) if they were disaggregated to determine the TH RAG but you dont have to actually disaggregate. I could be wrong, but the current version of 410(b) has been around for nearly 20 years and never have I seen in any gray book , or heard at any conference or in any discussion with any IRS representative that two plans that are aggregated for 410(b) can disaggregate for the TH determination to determine if the key plan is the plan that needs help or is the helper. Once aggregation is chosen, there is no separate 410(b) identity. Does anyone have any kind of cite for this?

AT the ASPPA Advanced Actuarial Conference last month in Boston, both Holland and Pippind indicated that the IRS would give great deference to retirement ages of 55 or greater. When asked why they didn't just make 55 a safe harbor, Pippins indicated that it was a safe harbor and that they didn't intend to pursue changes in plans with a NRA between 55 and 62. That having been said, the reg does not make it a safe harbor. The preamble to the reg says that great deference would be given to a 55 retirement age, but the preamble is not the reg and 10 years from now, will Holland or Pippins have any say over the actions of auditors?

It is NOT required to be aggregated?

Mike, I understand your point that required aggregation under the ABPT is not aggregation for 410(b) and that the IRS has said as much in gray books and the like when the question is posed as ".. and the only reason for the aggregation is that it is required under the rules of the ABPT" However, they have been asked if their answer would change in a situation where the ABPT would fail BUT FOR the deferrals to the associates plan and they have, on several occassions, declined to answer said question. As a result, my group tends to run a separate ABPT excluding the associates to ensure that the arguement is never raised by, oh, say a plaintiff's attorney. I also agree that actual 410(b) aggregation will, indeed, make the whole she-bang (excellent usage of the technical term BTW) a RAG, regardless of which plan would fail without the aggregation. Once aggregation is chosen, the combined plan is a single plan and is (or is not) top-heavy as a whole

Devils Advocate for a second.... Lets assume that the partners plan fails the Ratio Pct Test and must use the average benefits test Assume that the ABPT is passed when the the plans (including the associates plan) are aggregated, as is required Assume that the ABPT would fail if the rate for all associates is zero So, but for the deferrals in the associates plan, the partners plan would fail 410(b) T-6 of the 416 regs says: In addition, each other plan of the employer which, during this period, enables any plan in which a key employee participates to meet the requirements of section 401(a)(4) or 410 is part of the required aggregation group. So since the partners plan would fail 410(b) without the associates plan, there is a strong arguement that it enables the partners plan to meet the requirements of 410 and is part of a top heavy required aggregation group.. We have never gotten an answer from the IRS on this situation as to whether there is a required aggregation group. In fact, at one point at a national meeting Wick said "Believe me, you do not want guidance on this question" I would be concerned that, in court, this position of non-aggregation would not hold up (Of course, some of those associates will become partners. Some of those partners will be key. If the associate makes his way to key within 5 years of becoming a partner there is an argument that the associates plan benefited a ket employee in the last 5 years ...since we have never gotten guidance on what that means either)