ak2ary

It doesn't matter for regular coverage testing, if you benefit under either date you benefit for the year. BUT...for matching contributions... It creates a tiered match which must be tested under Benefits Rights Features... Interestingly this would not be true of a PS contribution allocated twice a year...in that case if you benefitted under either date, you benefit for the year and the different amounts do not create BeRFs

If she is in an ineligible class in the DB plan, she is not entitled to a DB TH min; the only min she gets is the DC min...gateways aside

Mike, I agree with your interpretation of 2 years. It appears that the provision is simply to prevent small employers from dumping huge sums of money into a plan in good years unless they have 2 or 3 or 4 years of foresight into the timing of good years. My understanding is that the service is finalizing a package of deduction guidance and was led to understand that they will take a formal stand on "newplan = amendment" and from what I understand they are under pressure to reconsider their gray book stance

I heard today that the IRS is finishing what was described as "deduction guidance" to be released "soon"...those that can't wait have 25% those that can wait may have more...but yes..there is a limit to all clients' patience

#2 is absolutely correct

You don't need language in the plan doc to disaggregate the otherwise excludable group...

She needs the gateway

Why would it be discriminatory?

Sorry..to be clear...IMHO 21 + 10 should be ok and supposedly represents congressional intent IRS expects to issue guidance..is aware of the clamoring for same... who knows when?!?!

Let me play Devil's Advocate here Did the plan prevent the employee from making a contribution that is permitted under the terms of the plan? For instance, assume a plan defines "compensation" for all purposes as W-2 compensation plus deferrals. That Compensation includes things like imputed life coverage. It is impossible to defer "FROM" imputed life coverage since there is no money from which to defer. But if the plan does not have a limit on deferrals such as 6% of Compensation, all employees are permitted to defer as much as they wish...that is the fact that the deferral did not come directly from the paycheck onto which the compensation was imputed does not mean that the plan improperly limited deferrals or had any violation whatsoever. Assume in a calendar year the company gives bonuses in February. It does not take any deferrals from that paycheck..but if the plan does not have limit on deferrals, or if includes the amount of the bonus in the determination of the deferral limit, no participant is limited to a deferral less than that allowed by the plan. (with the possible exception of those who would have contributed more than their total pay less bonuses) Consider a plan that defines Comp as total comp but provides on its salary withholding form that deferrals will be withheld from regular paychecks only..again no participant is hurt if they are able to defer the full amount provided for in the plan. I have twice had plans where the solutions proposed above were suggested by another firm.(or worse, the ADP of the NHCE group was applied to the bonus and was to be contributed for all NHCEs ...even those who elected no deferrals) in situations where no one was harmed. One has to be careful to look at the impact of differences between the plans definition of pay and operation to see if anyone was harmed to determine if you have an operational defect. Obviously where the deferral is lomoted to a percentage of pay and that limit is based on the wrong pay, or the match is calculated on the wrong pay you have an operational defect...but not always with the deferral

That's the thought and, as of this weekend, people more knowlegeable than I thought it would, more likely than not, work out with the higher deductions. Having said that...I'd still wait and see

But, having said that, I don't let clients take deductions based on my suspicions and am suggesting to my firm's clients who might take advantage of this to "wait and see"

"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

In order to get the 2% accrual rate you have to use the accrued to date method...the annual method will result in a 20% accrual rate. If you use accrued to date, you must also use accrued to date in the DC plan (must have consistency in the measurement period)..this will spread the DC contribution over past service for all of the NHCEs and the HCE as well

The IRS is generally requiring an annual accrual of 1/2% of pay The so-called Paul Schultz memo requies that in order for an accrual to be meaningful under 401(a)(26), it must be at least .5% of pay , payable as a life annuity at NRA. In a cash balance plan, you would project the pay credit to NRA using the plan's interest credit rate. Convert the NRA to an annuity using te plan's definition of actuarial equivalence and express the annuity as a percentage of pay. If that % is greater than .5% its meaningful...if not ...it's not There is no safe harbor pay credit and the amount needed depends on your demographics, the plan's NRA, the plan's interest credit rate and the plan's definition of acvtuarial equivalence. The fact that the DB plan is aggregated with a PSP does not affect the requirement that the db meet 401(a)(26) alone

The concern should be that the IRS is all over the map in terms of the concurrent offset rules, especially the reasonable and uniform requirement. They see this area as ripe with abuse. Certain areas of the country have issued determination letters that are flat rejected in other regions. It is rumored that Kimlin and Holland and Pippins all answer the same questions on this topic differently and, I believe, for the last couple of years National Office personnel do not answer these question at all. I recommend caution and determination letters with full full full disclosure in the application

If you provide the same benefit at whatever age is chosen, it is an early retirement subsidy and, in your opinion, is a BRF subject to testing. Since it gives a different early retirement reduction than is applied to everyone else, it would fail that analysis. If it is available only at ERA, it is a window subject to tresting... If your analysis is correct, the only possible way to fix is via a gross up of the NRB

So, in essence, I agree that if they are separate BRFs they must be currently and effectively available to a nondiscriminatory classification of employees...I just don't see them as separate BRFs..I see them as a single BRF with different amounts

Excellent..I knew someone would take the other side... Especially since, as i read my post, I realized that it could be interpreted that I was treating the two sets of ERFs as separate BRFs....but I wasn't. I don't believe it to be a separate BRF from the other early retirement provision. The early retirement benefitis payable on exactly the same terms to all employees. It is payable in the same optional forms, those optional forms use the same actuarial assumptions for conversion from the normal form for this employee as for everyone else. The only difference is in the determination of the amount of benefit, which I believe is allowable under 1.401(a)(4)-4(e)(1)(ii)...whatcha think?

Sorry... I thought you had more coming

Thanks

true... is there a question or is this a fun fact for us to share with friends

No takers?

A plan provides for early retirement at age 55 for all employees The plan provides that early reduction factors are 1/15th for the first five years, 1/30th for the next five The plan further provides that the benefit for Employee A, an HCE, is unreduced at 55 Clearly, this will impact A's most valuable accrual rate and I am not concerned about that, the general test is readily passed One of the other actuaries in my office is arguing that the unreduced benefit is a Benefit Right or Feature subject to testing and automaticallyfails since only an HCE gets it I disagree and believe that 1.401(a)(4)-4 is clear that using more than one actuarial assumption set for converting to other forms of benefits creates separate optional forms, but the amount of the benefit payable in the Normal form and corresponding QJSA are tested in the general test and not as BeRF's Thoughts?

First and foremost, in order to be an ASG, one of the companies has to be a service organization...real estate sales and real estate development are not services. If neither company is a service organization, neither can be a First Service Organization in an A_Org or a B-Org determination If one company provides management services to the other, however.... Anyway you don't have near enough info