John Feldt ERPA CPC QPA

That's funny. I am verifying with their actuary regarding the calculation of the prior lump sums to see if they indeed contained the value of the early retirement subsidy. Did you create a user named "Mr. T" just you you could say "jibber jabber"? You really should add "I pity the fool."

If the OP could clarify the intent, we could get a better picture. Do you mean "first employed", or do you mean "received wages" after 1-1-2001? Anyone with 1 hour of service with the employer on 1-1-2001 (or later) has a full lump sum option. The deferred vested participants pre 1-1-2001 only have annuity options, or if under $5000 PV, a cashout option. But to answer the original question, ERISA disclosure rules are the issue here. Was the relative value disclosure rule ignored, either on purpose or from ignorance? Ignorance - they unbundled too much - one provider does the document, another does the Sch B and actuarial valuation, another does the 5500, and another does the distribution forms and the investments (a trust company).

(1) If a terminating participant was eligible for for early retirement, did the lump sum include the e.r. subsidy? Yes (2) If so, how many of these were eligible to elect lump sum payment? about 50%, the other half had termed before 2001 Anyone active 1-1-2001 has an option for their entire AB to be paid as a lump sum.

1.401(a)(4)-9(b)(2)(v)(D)(1) to (3)

After a discussion with a prospect, we find that their defined benefit plan was frozen since August of 2003. The plan offers a subsidized early retirement option (2% per year reduction from age 65 to age 55). The plan offers a handful of annuity options, but only the participants employed January 1, 2001 or later are eligible for the lump sum option. They have not been providing relative value disclosures when they provide distribution options for participants. The plan sponsor is a for-profit corporation. Are there exemptions or exceptions that could apply here to the relative value disclosure rules? If this plan has been violating this requirement, what could be the remedy for this?

Sometimes having the failsafe language ends up being more expensive (in benefit accrual costs) than the cost of an amendment to make the plan pass as allowed under 1.401(a)(4)-11(g). However, the document can't have both, it's either an automatic accrual under the failsafe language, of it's a crafted accrual under the terms of an amendment under -11(g). When drafting the amendment, if you only need the NHCE accruals for the prior year, make sure that the terms of the amendment are clear on that, especially the eligible employee definition and the accrual formula definition.

Generally, a safe harbor plan year must be at least 3 months long, unless the business itself was just created and the plan was established as soon as possible after the business started. If no NHCEs would be statutorily eligible by the end of the year, you don't have an issue with ADP. If the husband/wife have higher pay, you may be able to benefit from the first year rule allowed for ADP testing which, using the prior year method, states that the NHCEs are considered to have a prior year deferral average of 3%, thus allowing your HCEs to average 5%. Thus, if one spouse makes a lot in wages, have them defer the most deferral (perhaps the maximum), then if any room is left, have the other defer so the average HCE deferral is 5% of pay. Also, there's a few other design items that could be looked at if the owners are over age 50.

http://www.irs.gov/pub/irs-pdf/f8554ep.pdf If you go to www.pay.gov, you can register, fill out the form online and pay the $30 online to renew. The online form and online payment was the part that was delayed (I think). The manual form (at the link above) looks like it has been available since March. If you look at how the credits are pro-rated for your first year when you get your ERPA designation, it looks to me that the cycles are calendar years. For EINs ending in 4, 5, or 6, you have until June 30, 2011 to fill out and submit the 8554-EP for the calendar years 2010 and 2009. For the Form 8554-EP, I could not tell which year is considered year 1, year 2, or year 3 from the form or its instructions. If you have an opinion on that, let me know. Since I became an ERPA in 2009, an my 3-year cycle requires a filing now by this June 30, I assumed 2009 was year 2 and 2010 was year 3, but that's just a guess.

I thought the law/regs could allow the plan administrator to establish a uniform policy that dictated the frequency of deferral changes, including how often changes and revocations could be made, as long as these changes where available at least once per year. I did not look this up just now, that's just a vague recollection. You should definitely check the plan document.

Correct. For the DC plan, to test the contributions as benefits, the rules require that you convert these DC contributions to a uniform testing age (or you convert the balances if testing accrued-to-date) by using an interest rate not less than 7.5% and not greater than 8.5%. For example, if you have a contribution in a DC plan today with a 35 year-old and you are testing at age 65, then you project that contribution's future value by accumulating it with interest for 30 years at 8.5%, then you convert it to an annuity also at 8.5%. However, for the cash balance plan, the benefit is already defined by the terms of the plan document. So in this same example, the hypothetical contribution "credit" must be accumulated with interest for 30 years at the plan's defined crediting rate, which might be 5%, then converted to an annuity using the plan's actuarial equivalence definition (which might be 5.5%). Of these two projections, which benefit will be bigger? The benefit that was accumulated for 30 years at 8.5%, of course. Many times, a combination plan design places the large benefits for the targeted HCEs in the DB plan (e.g. a cash balance plan), and if necessary, limits the contributions to the HCEs in the DC plan. There's a lot of other issues/reasons that are involved here, such as 404(a)(7) limits, etc. And there are some things to ponder (such as a DB limit is a one-time accrual vs. a DC limit can be maxed out every year, so it may be a waste for an HCE to use (accrue) their DB 415 limits at a young age and not get to use up their DC limits each year at those young ages). Hope this helps.

Do you have to do separate accounting for the participant to determine the account balance used in each TH test? Yes. How is this handled? Each employer is considered as having their own plan for top heavy determination purposes. You run 3 top heavy tests, one for each employer. The allocations made using compensation from company X is allocated to the "plan" for company X, the allocations made using compensation from company Y is allocated to the "plan" for company Y, etc. You have all of the account balances and prior distributions for company X to use for its top heavy determination, Y for its determination, etc. If any employee happens to work for both X and Y, you can ignore the contributions made to company Y when doing the top heavy calculation for company X. Likewise, you can ignore the contributions made to company X when doing the top heavy calculation for company Y.

Assuming the 70% ratio test failed, did also test by running an average benefits percentage test for coverage?

If a deferral election was on file for the owner and the amounts did not get sent timely, then the DOL will consider it as a PT (late deferral deposit). Did the owner truly have a deferral election in place for the deferral amounts that were believed to have been late?

So if the plan sponsor/fiduciary decides to allow an investment option in the plan knowing that the outside vendor only allows it for participant balances over $300,000, are you saying that perhaps the decision by the sponsor/fiduciary is not discriminatory, as long as the 300k requirement is a vendor requirement, not a requirement in the plan's written requirements?

Find out who really wants to do this and perhaps those folks are already eligible for an in-service distribution and they should exercise that option to move their money out of the plan. No problem there. Otherwise, if the HCE that wants this is willing to pay a modest extra TPA fee, then set up a new trustee-directed plan that only covers that HCE and that HCE is named as the trustee of that new plan. Everyone else stays in the existing plan which is participant-directed. Combine them for coverage testing. No problem with the right to direct investments, because the only one not allowed to self-direct is the HCE (their account is trustee-directed). Downside is 2 plans, but upside is no BRF issues.

Question 17i of the Form 5310 asks if any issue is pending with the IRS. I would answer "yes" and attach an explanation that the D letter (Form 5300) request is still in process and refer them to and provide a copy of the acknowledgement letter that the 5300 application received.

The Normal Retirement Age is merely for 100% vesting purposes then, since you say no in-service provisions are currently tied to it. If the early retirement date also applies 100% vesting, then I see no issues.

ASPPA wrote a letter to Monika Templeman on May 31 asking for mercy on the due date for the SSA. http://www.asppa.org/Document-Vault/pdfs/G...11-comment.aspx

http://benefitslink.com/boards/index.php?s...st&p=157856 Some excerpts, with revisions and to make it relevant for DB: During the life of a qualified plan, the plan has enjoyed the benefits of tax-free earnings and tax-deductible contributions. These have been allowed by complying with the qualification requirements imposed by the Internal Revenue Code, the treasury regulations, and other guidance. Thus, in order to keep the IRS happy, the plan has been required to maintain compliance both in operation and in form. That means two things: The plan must operate in accordance with the terms of its written plan document and under any requirements under the law and guidance, and The plan must have a written document which is qualified (meaning its language meets IRS approval). Of course, the above two items are only at risk if the plan is examined by the IRS. Item number 2 can have its risk eliminated by having the IRS approve the plan’s language. If the plan gets such approval and has also operated by that plan language, then the whole plan’s risk is virtually eliminated. That approval would be in the form of a favorable IRS Determination letter. So, how do plan documents get that favorable letter? Under a prototype, the IRS provides an opinion letter (or an advisory letter for a volume submitter) which approves the document's basic language. This is not exactly the same as a Determination Letter (even though the IRS sometimes says it is), but it provides assurance to the Employer that the basic portion of the document has IRS approval. If the DB plan has not been restated yet for EGTRRA, then the last time the IRS provided prototype document approval was generally in 2002 for the GUST prototype documents. Plan language changes have been required by law since that time, such as amendments for: EGTRRA (generaly due in 2002) Minimum Distributions (generally due when the plan terminates or is restated for EGTRRA) Mandatory Distributions (generally due with the company 2005 tax return deadline) Final 415 Regulations (generally due in 2007 / 2008) PPA of 2006 (generally due in 2009) Final 436 Regulations (generally due in 2009 / 2010) Pension Funding Equity Act Final Normal Retirement Age Regulations (generally due in 2009 / 2010) HEART Act (generally due in 2010) WRERA (generally due in 2011) And so on… Most of the above amendments are not IRS-approved model amendments (meaning the IRS did not issue model language). Therefore, the only sure method to guarantee that it meets the IRS's qualification requirements upon plan termination is to submit a favorable determination letter request using IRS Form 5310. If you elect not to request an IRS review of the plan’s language, you may need to agree to hold your document provider harmless from any errors or deficiencies that could have been corrected if the plan were to request and obtain a determination letter when the plan terminated. If the plan has been restated for EGTRRA, only a small portion of the language for the above amendments are included in the IRS-reviewed EGTRRA document - yes, the EGTRRA DB prototype documents already have a few tack-on interim amendments added. When the IRS reviews the Form 5310, the normal result is a favorable determination letter (an IRS stamp of approval for the plan’s language). Usually during the review they indicate where language changes are necessary, and this can vary by plan type and by IRS region. These required changes are allowed after the plan termination date only because the plan submitted under Form 5310. Plans terminating right now should have already have done the amendments for all of the amendments listed above. The language for a portion of this list is not in the EGTRRA restated document and is only under good faith compliance. That language will all be wrapped into the next prototype (or volume submitter) plan document (the PPA restatement?), thereby giving full approval by the IRS at that time. However, if the plan terminates now, before adopting a PPA restated document in 2016, then that language has no IRS approval. The only way to get approval is to file a Form 5310. It’s important to understand also that a lot of the guidance for the recent laws, including portions of PPA of 2006, have not been issued, so writing perfectly compliant amendments now may not be possible. But a plan that terminates now MUST be amended to add the required language for these laws - depending on the plan year and the actual plan termination date. Again, the only way to get an approval stamp on any of that language is to file a Form 5310. Any plan that terminates without filing a Form 5310 will be considered open game if they get audited. When the guidance is issued for each new law, will the IRS auditors look for language that complied with that guidance? If the plan obtained a favorable determination letter via form 5310, then the IRS cannot audit such language. So, a client that does not submit a form 5310 to the IRS upon termination risks having to negotiate a sanction with the IRS upon audit. That sanction will not be less than any fee the plan could have otherwise paid by submitting Form 5310 for ask for a Determination Letter or any fee that would have applied by submitting under EPCRS. Perhaps a terminating plan that does not file for a Determination letter is seen as potential revenue for the IRS (we hope that's not how they view these things). With the knowledge from the above explanation, why would a terminating plan not submit a Form 5310? Okay, suppose the client refuses to sign amendments timely and will not submit under EPCRS or they have some other clear violations that they refuse to fix. These things would stick out like red flags in the Form 5310 application. If that is the case, then it’s advisable to have them fix these things, but if they will not, then have them steer clear of the Form 5310 filing, assuming they have first been advised of the risk they are taking by not fixing their plan problems and the risk they are taking by not filing a Form 5310. Another reason may be cost, but really, that cost is a small price to pay for protection against the IRS. I hope you find this helpful. If you read the whole thing, my apologies for the length!

Exactly. Unless that is also one of the employer's objectives.

See Treasury Regulation 1.411(a)-5(b)(3)(v)(B). A Predecessor Plan is a qualified plan that the Employer terminated within the five-year period beginning before or after the Employer establishes this DB Plan. So, if the 401(k) plan is terminated within 5 years of the date the DB plan is established, then this DB plan is required to count service before its effective date for vesting. So if the DC plan terminates in 2014, then you go back and fix any partially vested participants in the DB plan who had vesting service excluded before the plan started. edit: typo

http://benefitslink.com/boards/index.php?s...l=buy++business

The SPD for a plan spells a distribution fee as a fixed amount (no mention that it is subject to change). The plan sponsor increased the distribution fee on April 1 of this year, but they are still in the process of updating that fee disclosure page for the SPD. A participant was recently paid out and the higher fee was charged to their account. Must the change of a participant fee be disclosed before the new fee can be in effect or does a reasonable time period exist, such as 210 days like the SPD, for disclosing such changes?

In order to properly exit the safe harbor mid-year, you are required to adopt current year testing for the year in which the safe harbor exit occurs - you cannot use prior-year for testing.

No, it is not required to apply a nondiscriminatory definition of compensation under 414(s) - unlike a qualified plan.