John Feldt ERPA CPC QPA

If you realize the plan failed 401a26 for the prior year, your amendment under -11(g) can pick and choose those who will be given additional benefits. If you begin doing this too often, the IRS may doubt that the plan has definitely determinable benefits. Because it's a DB plan, it has to have definitely determinable benefits in the first place, so the only way to pick and choose is by using the plan's written language.

SunGard (Corbel) has an EGTRRA DB prototype. It's worked well for those clients that don't need IDPs.

Assuming all other coverage, participation, and benefits testing requirements are met, you can prospectively exclude them. Be careful not to exclude them in a discriminatory manner, such as "all men over age 45 are excluded effective July 1, 2011" - you get the idea. These people with zeroes will still be counted in your denominators or in your people counts for 410(b) and 401(a)(26), so be sure that 410(b) and 401(a)(26) are satisfied.

Definitely better to exclude than to provide a $0 formula. If not excluded and if the plan is top heavy, they would be entitled to top heavy minimums, regardless of the zero formula right (assuming the plan is not frozen)?

Look at #2 on the list from the IRS link below and the explanation further down of how to fix it. The SIMPLE gets invalidated, as already stated, and this checklist makes an attempt to explain what happens to the SIMPLE, but it also leaves a lot of unanswered questions too. http://www.irs.gov/pub/irs-tege/simple__checklist.pdf

The HEART language is not required for the RAP that ended 4/30/2010 for plans on the 6-year cycle. The cumulative list for that RAP does not include HEART. A good-faith amendent for HEART was due 12/31/2010 and the RAP for making any minor fixes ends January 31, 2016. Did the document sponsor fail to adopt HEART on behalf of all employers using their prototype? Just out of curiosity, what example would you provide as an interim amendment failure? edit:typo

HEART was not required to be adopted by April 30, 2010, so such a failure cannot currently be considered as a non-amender failure. When a plan is restated for EGTRRA, it rolls up all of the past amendments into one nice restated plan and it also incorporates all required fixes to each of the good faith amendments that were adopted along the way. The amendments done in good-faith many times have some minor changes when the restatement occurs. A non-amender occurs when the that deadline is missed and so the plan cannot just make those minor fixes for those prior interim amendments in a retroactive fashion (without using VCP). Look at Appendix F, schedule 2. In part I it lists the possible language deadlines that could have been missed: ERISA TEFRA/DEFRA/REA TRA '86 GUST etc. Each had a remedial amendment period that has already ended. Any good-faith amendment language in place before the end of the RAP could have had minor fixes before the applicable RAP period ended. When 2008-50 was written, the EGTRRA RAP had not yet ended for plans in the six-year cycle, so you can see that EGTRRA is not on this list. Now look at Appendix F, schedule 1. Here you see a list of interim and optional law change language requirements. To follow my example regarding EGTRRA, you'll see that the EGTRRA interim amendment is on that list, because at the time 2008-50 was written, the EGTRRA language was a good-faith required amendment so far - the remedial amendment period was not over yet. Further down on the list is the more recent interim amendments - Final 401(k)/401(m) Regulations, FInal 415 regulations, etc. Items that were not around yet when 2008-50 was written should be added in the box, like the HEART language required under Notice 2010-15. Do you want the answer to be schedule 2? If so, you could certainly file schedule 2 and the IRS, upon review, would probably just make you fill out schedule 1 before they add their stamp of approval. Quick note added on edit: We are currently in another RAP period. Call it whatever you like, perhaps the PPA restatement period. It started 2-1-2011 and ends 1-31-2016 (or later depending on the deadline established by the IRS). This RAP period is applicable to HEART and it has not yet ended.

Schedule 2 is for a nonamender failure. Did the plan get restated for EGTRRA in time? That deadline was April 30, 2010. If it did not restate for EGTRRA by April 30, 2010, then it is a nonamender and must file schedule 2. As an example, a nonamender is like the recent plan our sales team handed over. They had not restated for TRA'86, they had not restated for GUST, and they did not restate for EGTRRA. They had missed 3 of the last RAPs. That is a nonamender. They will be submitted using appendix F, schedule 2. If the plan you describe has truly missed the HEART interim amendment deadline (which seems unlikely for a prototype plan, but possible), then Appendix F, schedule 1 will handle the issue.

It is my understanding that the EGTRRA RAP started in 2002. If this employer is using a 401(k)/PS/MP/Target prototype plan, the EGTRRA RAP ended on April 30, 2010.

Schedule 1 The remedial amendment period for the language required by HEART has not yet ended for your plan. Since your plan is on the 6-year cycle, then your RAP is no longer determined by your EIN. If the plan is on a prototype, the amendment should have been signed by the firm that sponsors the document. If that was done timely, then you do not have a failure.

Schedule 1. First, if the plan is a prototype or a volume submitter with language that allows the document sponsor/practitioner to amend the plan on behalf of the employer, then you might not have any failure at all (assuming the document sponsor/practitioner adopted an amendment for their document). You are correct that the HEART amendment is an interim amendment. Interim amendments and optional law change amendments which are adopted late are handled in Revenue Procedure 2008-50, Appendix F, Schedule 1. The IRS filing fee for a plan that only has an interim amendment failure is $375, regardless of the plan size.

According to a conversation recently with an IRS agent, a plan that only has an opinion letter is not considered as having a determination letter for purposes of completing Form 5300/5307.

A QACA safe harbor contribution may be subjected to a 2-year cliff vesting schedule. Tom is saying that a QACA is not required to be immediately 100% vested and thus forfeitures of QACA safe harbor contributions could occur.

From my experience with prototypes and submissions to the IRS, I would not be too concerned about it. In the meantime, you sould be able to directly contact the prototype sponsor and ask them for their generic copy of the amendments that they adopted on behalf of plan sponsors using their prototype.

"appears to mean that as long as they are a reasonable view of the law they will be upheld" The regulation interprets the law. Does that mean a clear law can be overridden by a regulation (or by a preamble to a regulation)? Just wondering. The law states, IRC 412(d)(2): Certain retroactive plan amendments. For purposes of this section, any amendment applying to a plan year which 412(d)(2)(A) is adopted after the close of such plan year but no later than 2½ months after the close of the plan year (or, in the case of a multiemployer plan, no later than 2 years after the close of such plan year), 412(d)(2)(B) does not reduce the accrued benefit of any participant determined as of the beginning of the first plan year to which the amendment applies, and 412(d)(2)© does not reduce the accrued benefit of any participant determined as of the time of adoption except to the extent required by the circumstances, shall, at the election of the plan administrator, be deemed to have been made on the first day of such plan year. ...

A restricted top 25 HCE elected a lump sum form of payment at the end of 2008. Suppose the amount due then was $1,000,000. Suppose the unrestricted amount actually paid was $75,000 in 2008, $75,000 in 2009 and $75,000 in 2010. The plan's funded status has improved and the restriction is now lifted. They will now be paid the remaining portion of their elected lump sum benefit. Can the plan pay only $775,000 as the remaining benefit due? The document was not specific about adjusting restricted benefits for interest, but wouldn't there be an interest adjustment required (perhaps due to the definition of 'actuarial equivalence')?

§1.401-1(a)(2) A qualified pension, profit-sharing, or stock bonus plan is a definite written program and arrangement which is communicated to the employees and which is established and maintained by an employer.... In Rev. Rul. 72-509, it appears to say that a plan is not established until it has been communicated to employees. "A profit-sharing plan does not qualify under section 401(a) of the Code until communicated to the employees even though it was reduced to writing and approved by the employer in a prior year."

Did the PBGC cite the authority for their statement? If so, perhaps the EA can comment on that. It seems to me that the PBGC may prevail here. I think the switch to GATT might have been handled similarly by the PBGC for plan terminations done about 10 years ago.

What's the plan's allocation formula? Is everyone in their own rate group for providing allocations? If they are, then they are entitled to get whatever that rate group would have been allocated, so you have no problem. Well, as long as coverage and 401(a)(4) etc. all pass.

Yes.

Does the VCP application cover that? Perhaps that issue, as a problem, needs to be pointed out in the VCP application? What else could be suggested?

Unless perhaps the spouse is considered a direct owner of 50% of the owner's stock, in a community property state? Then that ownership can be attributed to the child. Some argue the state law attributes it to the spouse first, so it can't be attributed a second time. Others say both spouses are direct owners in a community property state.

I think it was more about "the plan". If the DC plan is 20 years old and a new DB is added and now tested together, years of service as defined in "the plan" means what? 20 for the DC and 1 for the DB? No, you combine both and divide by the number of years. Some agents would argue that you could not use 20 as your divisor when testing the combo accrued-to-date because the DB only had 1 year. Larry's point was that he did not care either way, he just wanted to know (officially) their stance so he could design plans either way, without having to worry about one IRS office disagreeing with another.

Correct. Sorry for throwing this off on a tangent. The discussion at the symposium seemed to agree with you that the regulations do not appear to prevent that, but what the regulations allow and what the IRS thinks should be allowed sometimes do not align (go figure), which I think may have been the reason for the information request.

On a design somewhat similar to this, according my memory of what Larry Deutsch said last month, the IRS declined to reply to some type of an information request (a request that Larry thought the IRS was actually required to provide a response). The request was to determine what can be used in the denominator for the number of years when testing a combo like this using the accrued-to-date method. My notes from Larry' symposium indicate that some firms have done this, applied for full-scope determination letters (showing how it was tested), and that some have received D letters. Larry indicated that the IRS field agents have been told that it is probably okay to do this (I think that means they were told it is okay to divide by a number that does not exceed the number of years in older of the two plan, even though the other plan is not as old). I have not seen a formal IRS response either way on this.