John Feldt ERPA CPC QPA

How does one eligible for an in-plan Roth rollover in a qualifed plan become ineligible for an in-plan Roth rollover in a later year? Yes there are other risks other than market gain risk, of course market loss would be a benefit (from a taxation standpoint). Yes, other risks exist: rules could change (why ever do Roth then?), the particpant could die, unrecoverable calamity could strike the asset holder, the government could be overthrown. The participant will have to base their decision on the best information available.

"the IRS doesn't like if you name participants directly in their own group" What have they cited when they've reviewed plans with this - are they concerned about coverage, 410(b), or over testing of benefits, 401(a)(4) - or both?

I'd say the SPD was due within 210 days after the end of the plan year in which the change was adopted, unless all of your plans consist of only owner-only plans, government plans, non-ERISA 403(b) plans, non-ERISA church plans, etc. (since these non-ERISA plans aren't subject to these same SPD rules). ERISA Section 104. (b) Publication of Summary plan description and annual report to participants and beneficiaries of plan.—Publication of the summary plan descriptions and annual reports shall be made to participants and beneficiaries of the particular plan as follows: (1) The administrator shall furnish to each participant, and each beneficiary receiving benefits under the plan, a copy of the summary, plan description, and all modifications and changes referred to in section 102(a)— (A) within 90 days after he becomes a participant, or (in the case of a beneficiary) within 90 days after he first receives benefits, or (B) if later, within 120 days after the plan becomes subject to this part. The administrator shall furnish to each participant, and each beneficiary receiving benefits under the plan, every fifth year after the plan becomes subject to this part an updated summary plan description described in section 102 which integrates all plan amendments made within such five-year period, except that in a case where no amendments have been made to a plan during such five-year period this sentence shall not apply. Notwithstanding the foregoing, the administrator shall furnish to each participant, and to each beneficiary receiving benefits under the plan, the summary plan description described in section 102 every tenth year after the plan becomes subject to this part. If there is a modification or change described in section 102(a) (other than a material reduction in covered services or benefits provided in the case of a group health plan (as defined in section 733(a)(1)), a summary description of such modification or change shall be furnished not later than 210 days after the end of the plan year in which the change is adopted to each participant, and to each beneficiary who is receiving benefits under the plan. If there is a modification or change described in section 102(a) that is a material reduction in covered services or benefits provided under a group health plan (as defined in section 733(a)(1)), a summary description of such modification or change shall be furnished to participants and beneficiaries not later than 60 days after the date of the adoption of the modification or change. In the alternative, the plan sponsors may provide such description at regular intervals of not more than 90 days. The Secretary shall issue regulation within 180 days after the date of enactment of the Health Insurance Portability and Accountability Act of 1996, providing alternative mechanisms to delivery by mail through which group health plans (as so defined) may notify participants and beneficiaries of material reductions in covered services or benefits. (2) The administrator shall make copies of the latest updated summary plan description and the latest annual report and the bargaining agreement, trust agreement, contract, or other instruments under which the plan was established or is operated available for examination by any plan participant or beneficiary in the principal office of the administrator and in such other places as may be necessary to make available all pertinent information to all participants (including such places as the Secretary may prescribe by regulations). (3) Within 210 days after the close of the fiscal year of the plan, the administrator (other than an administrator of a defined benefit plan to which the requirements of section 101(f) applies) shall furnish to each participant, and to each beneficiary receiving benefits under the plan, a copy of the statements and schedules, for such fiscal year, described in subparagraphs (A) and (B) of section 103(b)(3) and such other material (including the percentage determined under section 103(d)(11)) as is necessary to fairly summarize the latest annual report. (4) The administrator shall, upon written request of any participant or beneficiary, furnish a copy of the latest updated summary plan description, and the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is established or operated. The administrator may make a reasonable charge to cover the cost of furnishing such complete copies. The Secretary may by regulation prescribe the maximum amount which will constitute a reasonable charge under the preceding sentence. (5) Identification and basic plan information and actuarial information included in the annual report for any plan year shall be filed with the Secretary in an electronic format which accommodates display on the Internet, in accordance with regulations which shall be prescribed by the Secretary. The Secretary shall provide for display of such information included in the annual report, within 90 days after the date of the filing of the annual report, on an Internet website maintained by the Secretary and other appropriate media. Such information shall also be displayed on any Intranet website maintained by the plan sponsor (or by the plan administrator on behalf of the plan sponsor) for the purpose of communicating with employees and not the public, in accordance with regulations which shall be prescribed by the Secretary.

I was also surprised by the comment, but that's what he was saying. http://benefitslink.com/boards/index.php?s...st&p=161125 A quote from Mr. Finnegan "in fact they are very clear that if you have a definition of pay that will consistently yield a lower inclusion percentage for NHCes, it likely fails, regardless of the differential."

If HCEs will not normally be receiving any commissions, then this could be a problem regardless of the size of the percentage. I recall Tom Finnegan (I think it was him) mentioning that if a plan excludes some type of compensation which on average is only a small percent of pay (maybe only 1 or 2 percent) BUT if only NHCEs ever receive that type of pay, the IRS would likely say it is discriminatory by its definition. I think the argument is that the IRS would say that a "de minimis exception" was meant as that: an exception, not as a standard for the plan. For example, suppose a plan exclude bonuses for allocation purposes, which was making the HCEs compensation average normally about 5% lower than total pay, and a year comes along where cash flow slows so no HCEs get bonuses, but a few NHCEs still received bonuses. In that case, assuming the average percentage is small, then the exception applies, but no bright line exists to say whether or not 3%, 5%, or otherwise is considered to be "de minimis". That's probably not the situation you have, but may be worth considering.

For 2010, yes. The debate continues regarding 2011 valuations, but I think most enrolled actuaries are leaning toward the "not automatic" after 2010.

A true match must be based upon employee deferrals according to some type of formula structure that ties the two together. Anything else is an employer nonelective contribution. Employer nonelective contributions cannot be tested under an ACP test, even if they have been called a "match". What is allocated to participants who only have 1 year of service? edit:typo

Thanks Andy, very much appreciated.

I am not an actuary, so I am unable to research the ACOPA cabana message board, but I'd bet there are some comparable discussions in there, perhaps revolving more around the change from asset averaging to market value (nowadays anyway), but the general applicablility of these Revenue Procedures would certainly be discussed in that forum. Perhaps an insider could enlighten this board as well.

You're saying that Revenue Procedure 2000-40 section 3.13 is still applicable as an automatic approval, that announcment 2010-3 does not change that section of Revenue Procedure 2000-40.

Suppose a DB plan is 3 years old now and has used end of year valuations each year. A new actuary is assigned and wants to change the 2011 valuation date to BOY, 1-1-2011. Is this allowable without seeking IRS approval, or do you have to file and pay the $4,000 user fee to get the change approved starting in 2011?

A cash balance plan provides a credit which is tested to find out if it's meaningful under 401(a)(26). I don't see a measurement date for this tied to anything specific in the plan document. Must the date for determining its "meaningfulness" be the 1st day of the plan year or can the last day of the plan year be used instead?

See http://www.irs.gov/pub/irs-tege/simple_fixit_guide.pdf Starts on page 12 and mentions the $250 filing fee. If the SIMPLE is so "simple" that only one overlapping year exists and suppose that year has only a few hundred dollars of contributions in that overlapping year, you may consider whether or not it makes any cost-benefit sense to actually pay the $250 for the filing. It may be more cost-effective in that case to just remove the small ineligible contributions from the IRAs, including earnings on those ineligible amounts, report on Form 1099-R, and pay the excise tax on those ineligible contributions on Form 5330.

In order to be offered a lump sum, the participant must waive an annuity form of payment (QJSA) that would commence sometime during the 180 days after a notice is given regarding their benefit election. Thus, if a lump sum benefit is an option, an annuity MUST also be an option. Otherwise, you cannot obtain the appropriate waiver of the QJSA needed to allow the lump sum in the first place. IMO.

Perhaps they can convert half of their eligible account in 2011 and convert the rest in 2012. Market gains would be the only issue, but it would spread the taxation.

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.