John Feldt ERPA CPC QPA

If the participant has met the plan's requirements to be eligible for an in-service distribution (e.g. is age 62 and the plan allows in-service at 62), then it may be very wise to pay it now before the participant gets older (the lump sum value of the 415 limit can and does decrease from age 62 to age 65). Any remaining assets can be handled through the usual plan termination steps. You may want to include language with the plan's resolution to terminate that explains the plan sponsor's intent with regard to the handling of plan assets and make sure any existing plan language is amended to allow that to happen (many DB plans state that any excess asstes revert to the employer). If the excess assets are transferred as soon as administratively feasible after the date of plan termination, then you should be okay. Don't move the money out until the official date of plan termination has occurred! edit: typo

Tom, What if the safe harbor covers only the over age 21/1 group and you want to amend the portion of the plan that affects only the under age 21/1 group? Would your document provider really not allow that? Seems okay.

Does the plan have a last day requirement for accruing a benefit? If not, then they should receive allocations that meet the current allocation formula. What is the current allocation formula? Pro-rata? Integrated?

"he may be able to take a $50,000 salary and allocate $50,000 in a profit sharing plan to himself and be done. No deductible problem as it is not deductible anyway and no 415 problem as up to 100% of salary can be allocated." Agree. Compensation must be reasonable, of course.

Some say this is a questionable amendment. Others would ask more questions, such as "Have the participants satisfied the allocation conditions for the plan year already?

Okay. Some plan documents require the plan sponsor to gather proof that all resources have been depleted before the hardship distribution can occur. Those plans do not need to require a suspension of deferrals. Other plan documents require less effort by the sponsor regarding the "proof" needed before a hardship distribution can occur, but those documents also require a 6-month suspension of deferrals. Many volume submitter plan documents allow an employer to elect one or the other. Some employers want one way, some the other way. That is how it is. Hopefully most consultants at least think the plan's operation must match it's written terms. So let's hope that issue is now covered. Back to the OP. What does the employer want to do? (I think that's partly what was suggested by Tom's post). They certainly cannot say the automatic deferral only applies to new entrants only.

Based on the regulations that came out this morning, it looks like a fixed interest crediting rate of 6% is allowed under the regulations for a hybrid plan. What I would like to know is when this is effective. The regulations are generally effective January 1, 2016, but it also states "The rules in these final regulations that merely clarify provisions that were included in the 2010 final regulations apply to plan years that begin on or after January 1, 2011, in accordance with the general effective/applicability date of the 2010 final regulations). In addition, these regulations amend §1.411(b)(5)-1 to provide that §1.411(b)(5)-1(d)(1)(iii), (d)(1)(vi) and (d)(6)(i) (which provide that the regulations set forth the list of interest crediting rates and combinations of interest crediting rates that satisfy the market rate of return requirement under section 411(b)(5)) apply to plan years that begin on or after January 1, 2016. footnote 9" footnote 9 says: "The 2010 final regulations provide that these particular provisions apply to plan years that begin on or after January 1, 2012. The intention to delay the effective/applicability date of these provisions was announced in Notice 2011-85 and Notice 2012-61. Notice 2012-61 announced that these provisions would not be effective for plan years beginning before January 1, 2014. So, can the use of a 6% fixed rate be relied upon in 2014 or 2015?

I agree with Sall (the EOB). Standing on January 1 and looking around at the data on that very day, you can't see the future to know if they will actually enter, thus they are not really participants in the plan yet on January 1. They become participants only AFTER they meet the eligibility requirement. The retroactive nature of their entry date is only operational for plan provision purposes, but not for the beginning of year participant count on Form 5500.

Okay. Please post their view on this after they respond - thanks!

You're saying the plan includes compensation prior to date of entry (includes compensation while NOT a participant), right? So allocations in the plan are determined based on full plan year compensation, even if the participant becomes eligible on, say, October 1, 2014. Since the plan overall is effective as of 1-1-2014, but safe harbor is only effective starting 10-1-2014, it seems to me the participant is eligible for the plan, but is not eligible for safe harbor (they did not meet the safe harbor entry date - they also could not defer). If they were still around on October 1, then they are eligible for safe harbor (and deferrals) and the safe harbor then would be allocated using full plan year compensation, including wages prior to 10-1-2014. What does your plan document provider say?

The way I read that provision, yes, they enter. The age requirement is waived for everyone hired on or before a certain date. Similarly, if the plan had only waived the service requirement, but maintained an age 21 requirement: If your age 17 example employee was only working 600 hours per year, they would enter at age 21 (4 years later) even though they never completed a year of service.

The IRS has not yet opened the restatement window for 403(b) plans, so a PPA restatement is not required, nor is it even available, generally speaking, loosely equating restatement to mean a requirement under a remedial amendment period to maintain a plan's relaince on its written plan language. 401(k)/PS/MP/Target plans are in the PPA restatement period now (ends 4/30/2016), but not the 403(b) plans. Restating a 401(k)/PS/MP/Target plan gives the plan reliance on the pre-approved PPA IRS opinion/advisory letter that they provide to the document sponsor. No 403(b) plans have opinion or advisory letters yet (nor can they get one yet). Any "restatement" by a 403(b) plan is just an amendment with no reliance. Maybe the IRS will open the 403(b) restatement window 3 years from now?

Okay - thanks!

Does anyone have a suggestion for an expert witness regarding a minimum distribution under 401(a)(9) from a DB plan? On party says 401(a)(9) would be violated if the amount argued by the other party is actually paid.

October 31 is not quite right, assuming it's a calendar year plan. -11(g) amendments must be executed within 9 1/2 months after the end of the plan year. So that's October 15, 2014 to make a correction for calendar year 2013.

Correct. It has to be an individual that would make the plan subject to PBGC coverage.

A multieemployer plan cannot use a pre-approved document. Explain the issue to the IRS in the 5310 application and see if they accept that as an urgent business need. The best you can do is tell it like it is and hope for the best results. The fastest D Letter I've ever seen is 3 months on a bankruptcy 5310 application. FYI.

Seems okay. Does the plan only allow lump sum? If he wants to take only a portion, you may want to look at the distribution options available in the plan to see if he can take only a portion. A lump sum is a payment of the entire balance to the credit of a participant paid within the participant's tax year. IRC 402(d) or (e) something. Are you concerned about the "one per year" rollover issue? That does not apply to direct trustee to trustee rollovers - so if the money is paid directly to the IRA, then that does not count against the one per year limit.

Maybe this has been addressed, but perhaps the sole proprietor might hire an employee and provide coverage for that employee in these plans. If the sole proprietor is a farmer (or insome other "field" that is not exempt automatically from PBGC coverage), then covering this employee now requires the DB plan to be covered by the PBGC and the IRC 404(a)(7) combined plan deduction limit is thus vanquished. Add slain dragon icon.

oil is a liquid.

The document is likely written to have employees who are participants in both plans receive the top heavy in the DC plan. Since this person is not in both plans, this language can't apply to them. Thus they get the DB top heavy minimum. Oops. 401(a)(26) counts all employees like the denominators used in 410(b). So, generally your 410(b) denominators for NHCEs and HCEs combined are used to determine your total "count". That total count is multiplied by 40% (minimum 2 if 2 EEs, maximum required 50). Yes, statutory exclusions apply in generally the same way that they apply under 410(b), like for CBA excludable employees.

No, that was not said. Only if using average compensation, like you said.

If it's a DB plan you still have to pass IRC 401(a)(26), assuming accruals are not all frozen.

It's just a reminder, not a disagreement. Many times participants enter on the first day of the plan year and the plan is written to ignore the service prior to that plan year of entry for benefit accrual purposes, in those cases the compensation prior to entry can be excluded (and sometimes that actually helps). The observation of this exclusion may lead some to think compensation prior to entry can be excluded, when really it's actually certain 12-month periods can be ignored for averaging compensation, which is perhaps why you were pointing it out. My post was only trying to lightly touch upon a small portion of the myriad of testing possibilities for Charles to think about. It appeared the percenption was that the plan required 9% for all NHCEs. From my experience, most plans have each participant in their own allocation rate class. Thus, giving all NHCE the same percent of pay is an employer decision and is only needed when the plan has very few NHCEs and all are needed to be in a certain HCE's rate group. This particular case perhaps has very few NHCEs? Also, one main question asked was about the average benefits test (for 401(a)(4) purposes). So we pointed out that test is not required when each HCE rate group meets the 70% threshold, and included a couple of ways to get a plan to that, one of which can include restructuring.

John, remember that the two can't be combined. If you are using testing compensation from date of entry you have to be using annual comp. If you are using average compensation then you can't use comp from date of entry. But you can exclude certain 12-month periods of compensation if, during such periods, the plan disregards the employee's compensation for determining benefits - see 1.401(a)(4)-3(e)(2)(ii)(A). See also 1.401(a)(4)-3(e)(2)(ii)© for allowing certain months of compensation to be excluded as well, but I've rarely had to apply that one. And, also, accrued-to-date testing must use average compensation. See 1.401(a)(4)-3(d)(1)(i) and 1.401(a)(4)-3(e)(2)(ii)(A), with exception for certain formulas.