John Feldt ERPA CPC QPA

When you call them, they should be able to tell you whether or not it is in the off-cycle waste basket. If it is considered off-cycle, then you should be able to explain the filing date was in cycle E (hopefully prove it was filed before 2/1) and they will remove it from the waste basket and put it up on the "to be assigned" shelf. 877-829-5500.

How much money is at stake? If you have corrected everything according to the manner described under VFCP, other than actually file the VFCP application, then you have generally satisfied the IRS regarding the issue (seems odd, right?), and the DOL is the only agency not yet fully satisfied. If the DOL investigates, they could require you to use a higher assumed rate of return than the rate you used for the correction, but that's usually about the extent of it. So if only a few pennies of missed earnings are involved between the rate you used and the potential rate the DOL could later force you to use, is it really worth the filing? Maybe, maybe not.

All our on-cycle E filings have received D letters, the most recent letter was dated January of 2012. All but one of our cycle A (second cycle A) plans have received D letters, the most recent was dated February of 2013. The one cycle A without a D letter yet is a nonelecting church plan, we have heard that the IRS has fewer people qualified to review these types of church plans (seems odd to me since less code requirements apply). Is your cycle E plan an ESOP? Or is it a governmental plan that elected to use cycle E? An ESOP would definitely be on a delay. From the link below, you can see that ESOPs in cycle E are not yet assigned. http://www.irs.gov/Retirement-Plans/Determination,-Opinion-and-Advisory-Letter-for-Retirement-Plans---Check-the-Status-of-Your-Letter

The plan document likely spells out the available options. I've seen MEPs that allow a participating employer to terminate and distribute. Is this a MEP, or a controlled group/ASG?

If the plan is written to allow the employee to enter on an entry date on/after working 500 hours of service within the first six months of employment, then the plan would also need to allow the employee to enter using some additional requirement that is not more stringent than 1 YOS with 1,000 hours. Thus, if the employee did not have 500 hours in their first six months, they do at least have to be able to enter once they have a 12 month eligibility computation period with 1000 or more hours.

I think this might be that reference? http://benefitslink.com/boards/index.php?/topic/46695-403b-eligiblity-period/#entry206201

If you intend to avoid the 1/3 gateway or the 5% gateway minimums by providing smoothly increasing allocation rates, my opinion is that the document must spell out the allocations rates and the years of service needed for each rate. I asked SunGard about having the document provide a discretionary profit sharing allocation, but to also spell out that these rates and allocation methods apply in the event that the employer, in its discretion, decides to make a contribution. SunGard thought it could work, but they hesitated a bit and suggested that the document should probably be submitted for an IRS Determination Letter to get reliance due to the formula having a discretionary nature to it. Of course, this is a rare employee demographic where this allocation formula works, especially since the plan must still pass the average benefits percentage test under 401(a)(a) when using this allocation. Has anyone ever tried writing this up as discretionary, but defining the allocations and rates in the event the employer does contribute? If so, did you submit for a D Letter?

In a recent SunGard webinar, S. Derrin Watson didn't think the IRS would go for that. I think that a Mass Submitter could certainly propose that in their 403(b) document submission for the IRS to review - there is no harm in making an attempt to do that. Just don't hold your breath thinking that they will give it a stamp of approval.

Does this relate to your question? http://benefitslink.com/modperl/qa.cgi?db=qa_who_is_employer&n=294 This does not appear to help with the "controlled group" issue.

"reputable recordkeeper" reputed for what?

Then, if he really does want the SH to become Roth, have the plan adopt the Roth Transfer option that was enacted by Congress and passed by the President earlier this year. Then it becomes Roth in nature and gets taxed like an individual Roth rollover. The contribution of the SH cannot go in as Roth, but I think this might get him closer to the place he thinks he wants to be. Does that help?

COVERED COMPENSATION 1982 Calendar Year of 65th Birthday Table I Table II 1982 10,800 11,004 1983 12,000 11,892 1984 12,600 12,708 1985 13,200 13,464 1986 14,400 14,172 1987 15,000 14,820 1988 15,600 15,420 1989 16,200 15,996 1990 16,800 16,524 1991 16,800 17,016 1992 17,400 17,484 1993 18,000 17,916 1994 18,600 18,336 1995 19,200 19,128 1996 19,800 19,908 1997 21,000 20,700 1998 21,600 21,492 1999 22,200 22,272 2000 22,800 23,064 2001 24,000 23,856 2002 24,600 24,588 2003 25,200 25,332 2004 25,800 26,028 2005 27,000 26,736 2006 27,600 27,432 2007 28,200 28,140 2008 28,800 28,812 2009 29,400 29,424 2010 30,000 29,976 2011 30,600 30,492 2012 31,200 30,984 2013 31,200 31,440 2014 31,800 31,860 2015 32,400 32,136 2016 32,400 32,316 2017+ 32,400 32,400

I agree with Effen. If the plan uses a variable rate, the value of the annuity at retirement age, when based on the current interest rate, is unnecessary and is more likely to be meaningless. Perhaps you could make a long-term interest rate assumption to use every year so the statements have more consistent values shown. Use that to project to retirement and to convert to the annuity, but be sure to pick the assumptions wisely to avoid disappointed participants. Be sure to disclose those assumptions in the statement, explaining that the actual results will vary. Or better yet, don't show the annuity with the projection.

Correct, I keep thinking of the usual employer desire to have a somewhat uniform PS allocation. I've seen the individual method used less often.

1. The cash balance credits themselves cannot directly be counted dollar for dollar as part of the gateway (they aren't actually contributions, they're just hypothetical notional accounts written on paper). However, see Treasury Regulation 1.401(a)(4)-9(b)(2)(v)(D)(3). This allows the average actuarial equivalent value of the benefit accruals in the cash balance plan for the NHCEs who benefit under both plans to be considered as satisfying a portion of the gateway. Caution: the actuarial value is not equal to value of the account balance credits. 2. The terms of the plan document must be followed, so if it requires prorata PS for a group, then you are correct. I agree that each participant should probably be placed into their own individual allocation group, assuming passing 410(b), coverage, is not an issue. That said, perhaps you could do this: Step #1. have the employer contribute and then allocate a pro-rata PS amount - an amount that you know is the minimum that any NHCE participant will receive as PS. Step #2: Run the combined plan 401(a)(4) test - uh oh, it fails. Step #3: Adopt a corrective amendment under 1.401(a)(4)-11(g) to correct the 2012 failure. Under the amendment, language will be needed that provides various additional PS to the various NHCEs as needed in order to pass testing. Step#4: Allocate the additional PS as specified according to that amendment. Just a thought.

I went with ERPA, CPC, QPA - but I've seen most folks go with CPC, QPA, ERPA.

No. Assuming they (combined) own 100% of the business. An owner-only plan like this is not subject to ERISA, and thus not subject to ERISA 204(h).

We have seen the OEE rule applied only a few times to avoid the gateway for that group, and it only worked when the over 21/1 group had enough younger folks to pass testing without those under 21/1. Sometimes the cost difference drives the decision: add more people from under 21/1 to pass, or just increase the PS allocation to those over 21/1. What's the net difference?

Right, good to clarify - Carol is listing the dates for obtaining opinion and advisory letters. The OP mentioned cycle C, which I assumed was regarding the application for obtaining a Determination Letter instead.

Upon termination of a cash balance plan, isn't the interest crediting rate required to become fixed (based on some prior year's rates)? If that's true, will the accrued benefit still fluctuate?

No. Average compensation may be used for nondiscrimination testing per 1.401(a)(4)-3(e)(2), but the minimum gateway requirement (assuming it applies) is based on current compensation. So, for example, if you are testing a DB plan and a DC plan together as a tested "plan", and the highest HCE rate is 31%, then your aggregate gateway under 1.401(a)(9)-(b)(2)(v)(D)(1) is 7% of compensation, not 7% of average compensation. This can be offset as described in 1.401(a)(9)-(b)(2)(v)(D)(1) by the average actuarial equivalent of all the NHCEs benefiting under the plan.

One audit we currently have (a plan they selected at random we're told) is only focused on one of an employer's two plans. Started some weeks ago. We expect they will soon look at the other plan once they realize it was combined for 410(b) and 401(a)(4). I can keep you posted. We don't expect there to be any problems, but we're also only going to provide what they ask for, so we'll see what they ask.

For EPCRS purposes, section 5.09 of Rev. Proc 2013-12 states that if one plan of an employer is aggregated with another plan of the employer for 410(b), 401(a)(4), 403(b)(12)(A)(i), or for 401(a)(26) - although I did not think it was possible to aggregate plans for 401(a)(26) - then that plan is also considered to be under exam. So, you may already be under exam. Otherwise, it just depends on the agent.

FWIW: If you really want to invest in this kind of stuff, consider the capital gains taxes (lower?) vs the regular income taxes (higher?). Is it truly best to invest within the plan like this? Perhaps use your pocket change (money outside the plan) to invest in this kind of stuff instead.

The exception for "retirement" is certainly defined in the document - maybe re-read its meaning again to confirm that the exception was truly met? Otherwise, I think you are stuck and may want to add a note for future documents: put each participant in their own allocation class, maybe even exclude HCEs from SH if not already the case. As I'm sure you know, the company funds the contribution, not the doctor personally. So he should not have individual control over this, regardless of how the business internally accounts for these plan costs. If he could decide this personally, then the amount would be an employee deferral and 402(g) could be a problem.