John Feldt ERPA CPC QPA

You do not have to restate the plan, but if you wanted to obtain an IRS Determination Letter, the IRS generally requires a restated document (basically putting all of the amendments into a single document based on the applicable cumulative list). Your deadline to restate and submit the application to the IRS for their determination was January 31, 2011 (using the one-time cycle E filing option). The normal filing cycle is C for government plans, which comes up again starting February 1, 2013 with a January 31, 2014 deadline. By filing for a Determination Letter, the IRS reviews the plan language and if anything is found, you generally have the ability to retroactively fix the problem. If you choose not to get a Determination Letter, you generally do not have the ability to fix the plan in a retroactive manner, and the plan's language is open for scrutiny if the IRS examines (audits) the plan. Some would say that is a risk not worth taking advising that a Determination Letter request is a "must", but the advice on this varies widely for governmental plans. Regardless of whether or not you ask for a Determination Letter, you are required to keep the plan up-to-date with amendments required for law changes and any other applicable regulations and/or guidance as it applies to your plan. The deadline for each of those items vary based on the law and/or guidance. For example, I think a government plan is required to adopt provisions to comply with the HEART Act by the end of their 2012 plan year. For another example, if the plan had timely adopted EGTRRA language with an amendment, and that language has no mistakes, then that plan language is compliant even if you did not restate the plan document for EGTRRA. I hope that the above is accurate and that it helps!

Perhaps the problem is that "retiree" is not a job classification, and so a simple change by reduction in hours does not and cannot undo their eligibility for the plan?

Thanks. The plan has a short eligibility requirement now, so I think the contracted people will be alright as excluded during that time, especially since the employer just indicated that they let them enter if they kept them empliyed after 1 year. But, excluding someone who semi-retires, but who has been eligible still concerns me. They change to part-time in order to semi-retire - isn't that an age disrimination issue since it would only affect older employees?

A plan sponsor wants to write the plan to exclude employees that continue to work part-time less than 20 hours per week after retirement. Is this a potential age discrimination violation? They also want to exclude a class of employees who are hired for a contracted defined period of time of less than 1 year. Problems with that?

Sounds like a DB plan perhaps? Did you talk to the EA to see what they say?

The payout options are defined in the plan document, which could include, for example a lump sum or payments over a certain period as elected by the participant, or by a default option if no election is made. Payments to the participant are reported on the W-2. A direct transfer from a non-profit 457(b) to another non-profit 457(b) is possible if both documents have appropriate language.

You can pay the missed premiums, submit the Form 500 (and Form 501) to the PBGC, and explain what happened. They will do a PBGC audit of the plan termination, and then tell you that no additional action is needed (this may be over a year later), unless something else got messed up too.

Suppose that you are designing the plan to accrue the full 415 limit on the first day of the plan. How will the plan satisfy the 133 1/3 accrual rule? $1625 on 1-1-2011 (all past service accrual) $1625 on 12-31-2011 (no accrual during the 2011 plan year) $3250 on 12-31-2012, the 2012 accrual = $1625 which exceeds 133 1/3 of the previous accrual (which was zero) Must a cash balance plan satisfy the 133 1/3 accrual rule? Can the past service accrual be counted as part of the first year's accrual to avoid this problem?

A prospect has a calendar year PS/401(k) plan that has no last day and no hours requirement. The formula is integrated at the TWB. Because of 411 protections, for 2011 we are stuck with the plan as it reads right now, I presume. Or, could the current plan be amended to remove nonelectives, then they adopt a 2nd plan, a profit sharing only plan, that allocates nonelectives in a more favorable fashion for their goals. After 12/31/2011, they merge the 2 plans. Is there a problem with that, or can it be accomplished in a less cumbersome way?

Cite the section of the document that described the ADP test. Probably there's a paragraph that defines the actual deferral ratio as the ratio of deferral to the compensation, with no reference to any 100% being the maximum ratio. If they insist the ratio cannot exceed 1, perhaps ask for the cite that prohibits that from occurring, since the IRS-reviewed plan document does not contain such a limitation?

I don't exactly see that language in this plan's document. It has text stating "The employer's election in its adoption agreement relating to pre-entry compensation is nondiscriminatory." But I see no general statement in this document saying the pre-entry compensation can be operationally elected for 414(s) purposes; and I have not found that option listed in 414(s) or 1.414(s). Since the document allows the election in the adoption agreement, does it stand to reason that it could also be operationally elected for testing purposes?

First, cite the section of the plan document that states that Plan Administrator can operationally determine the Compensation definition for testing purposes provided that the definition chosen must satisfy Internal Revenue Code Section 414(s) and its corresponding regulations. Then, send them IRC 414(s) and the regulation 1.414(s). Edited to add: Have them look at 414(s)(2) in particular.

ADP/ACP tested plan. Allocations in the plan use full year pay, it does not exclude pay prior to entry. Testing comp says to use any definition that satisfied 414(s) and it's regulations. Does 414(s) allow exclusion of pay prior to date of entry (could we test using comp excluding pay before the entry date)?

Is it permissible for plan to require 1000 hours for HCEs to accrue a benefit during a plan year, but less than 1,000 hours for the NHCEs? We're looking at a prospect with high turnover, and 401(a)(26) could easily become an issue. A lower hours requirement would help, but they want to keep the large portion of the plan costs (the HCE accruals) at 1000 hours in case a formula change or a plan freeze is necessary.

Yes, a DB/DC gateway is needed as described in Treas. Reg. §1.401(a)(4)-9(b)(2)(v)(D).

Spot on. Thanks Querk!

DB plan covers 3 HCEs DC plan covers these same 3 HCEs plus 3 NHCEs. No other employees. 401(a)(26) passes (3/6 > 40%) 410(b) passes - combined plan coverage passed the ABPT. Assuming the ebars are over 35% for the HCEs, is the 7.5% DB/DC gateway allocation required for the NHCEs even though they are only in the DC plan?

Suppose the following: Participant is age 72 on 1-1-2012 and has over 10 years of service Participant has a consecutive 3-year comp history with each year over $500,000 New plan is established 1-1-2012 (has never had a DB plan) 415(b)(1)(B): 100% x 3-yr avg comp = $245,000 Assume: $195,000 limit x AE increase factor = $350,000 (for this example) What is his maximum accrued benefit for 2012 for 415 purposes? Is it 1) the lesser of: 415(b)(1)(A) $350,000 x 1/10 with the result limited to $245,000 or 415(b)(1)(B) $245,000 x 10/10 Or, is it 2) the lesser of 415(b)(1)(A) $245,000 x 1/10 or 415(b)(1)(B) $245,000 x 10/10 Or something else altogether? edited for typo

No they did not, I am guessing that was probably because of the bankruptcy.

For a client who went into bankruptcy (which involved closing their doors, not a restructuring bankruptcy), the bankruptcy trustee suggested that the participants' safe harbor contirbutions be funded by forfeiting a portion of the owners' accounts (the owners agreed to this as well). They filed a 5310 with a copy of the court order that suggested the SH be funded as such. The IRS replied in less than 3 months and approved the method. If your client is not bankrupt, it seems less favorable that the IRS would allow this, but you can certainly try. You will certainly need IRS approval.

Revenue Procedure 2008-50, section 4.09: Availability of correction of § 457 plans. Submissions relating to § 457(b) eligible governmental plans will be accepted by the Service on a provisional basis outside of EPCRS through standards that are similar to EPCRS. So, if you are a non-government entity, any EPCRS filing is futile. Since VCP is not available for the nonprofits' 457(b) plans, if you find an error like this, do you recommend that the refund be made right away anyway, plus earnings? Then document your files and change the procedures so this error can be prevented in the future? If you are audited later, could you explain that no correction option existed under EPCRS, so the plan sponsor did all they could to reasonably correct the error? Then hope the IRS shows mercy under audit cap because of your efforts to have already corrected the issue? I assume that if no correction is made, they will show little mercy when negotiating under audit cap. What do you think?

Yep, sorry - mostly exempt from ERISA - specific to the OP they are exempt from the bond requirements of ERISA.

No. They are exempt from ERISA.

A plan sponsor is making a significant change to their business operations. Because of this, they want to change their plan's vesting schedule prospectively, to apply only to new hires starting on the frist day of their next plan year. The current vesting schedule is 100% immediate. 10 participants (2 HCEs), 5 year old plan. They want to change to 6-year graded. This would only affect new entrants. They are not planning to hire anyone that would become an HCE. Under 1.401(a)(4)-1(b)(4), the timing of amendments must not have the effect of discriminating significantly in favor of HCEs. My thought is that this change does not discriminate significantly in favor of the HCEs - agree / disagree? Or is this fall into 1.401(a)(4)-1(b)(3) instead?

If the doctor adopted the kids, then they are certainly HCEs. Do they live in a community property state? If so, some have argued that the spouse therefeore is a direct 50% owner, and thus the kids are HCEs. Some also argue that community property state laws merely attribute the 50% ownership to the spouse, and another set of attribution to the kids would be double-attribution which is not allowed, and thus they are not HCEs.