John Feldt ERPA CPC QPA

And the plan document probably provides for the Plan Administrator (PA) to make interpretations regarding the terms of the document. So if the word "calendar" is not connected to the word "month", then it seems to follow that the PA has the authority to interpret the plan month to start on the 7th, just like the "plan year" does.

I know of no official reliance for that. Could a plan submit for a D letter which also asks for the IRS to rule on the 401(a)(26) testing methodology?

I think Mr. Deutsch calls it an "Indexed Benefit" plan.

I think we have a plan that was set up with 5%. Otherwise, all of our other plans use one of the variable rates that are automatically considered okay. For 401(a)(26), we project the credit (excluding the interest credit) that is being made to the account for the year to the retirement age by accumulating it at the interest crediting rate. That projected credit is converted to an annuity, then divided by compensation to see if it exceeds 0.50% of pay. If so, then it's meaningful to Paul Schultz and his memo from June 6, 2002.

Usually these government plans have extended deadlines for adopting plan language that complies with any new law changes. So until the plan restates, they need to comply with the adoption of any required language (interim amendments) based on such deadlines as they apply to government employer plan sponsors. Then for the restatement, you have to adopt whatever is required from the cycle E cumulative list in order to submit in cycle E, but that probably can exclude any items that are not yet required to be adopted for a government plan sponsor.

What was this, the Bret Favre version of a TPA? If you resign and you get another request to do work, send another copy of your resignation letter!

Yes, of course, change the age of participant! So, forever only lasts until the participant's age reaches 59 1/2.

They are now forever tainted as far I can tell.

A plan with many Life and CC options (some are Life and below 10 years CC and some are Life and over 10 years CC) would like to simplify things. They want to eliminate as many options as possible, without running afoul of 411(d)(6). The plan also has a lump sum option (which almost all particpants take when there's no restriction otherwise stopping them). Under 1.411(d)(3)©(4), all of the Life and 10 or less is grouped separately from Life and more than 10 forms. Does this mean the plan must keep at least two Life and CC options, such as Life&10 and Life&15?

So, as long as the -11(g) deadline has not passed, you may make changes to a safe harbor plan and use -11(g) as your basis for doing so. Does -11(g) require that a failure exist in order to utilize it?

And making this change would not violate the safe harbor requirement that the provisions must be in place before the beginning of the plan year?

"The 414(s) failure causes the safe harbor 401(k) plan to not satisfy ADP/ACP, which is the sole means of satisfying 401(a)(4). That should make it eligible for correction via an -11(g) amendment." Sorry, I'm not seeing how ADP/ACP testing can be part of this. The ADP/ACP test is not applicable to a safe harbor contribution portion of a 401(k) plan. The plan gave a SH 3% notice or some kind of a SH match notice. The provisions adopted by the plan provide for safe harbor allocations that are not dependent upon ADP or ACP testing. So I am not seeing any ADP/ACP failure to fix because ADP/ACP testing is not applicable for a safe harbor plan. Do I misunderstand?

That's the thing, maybe I am wrong about -11(g), but I don't see that a 414(s) compensation failure for a safe harbor plan can be allowed to fall under that section. If it was not a safe harbor plan, I see no problem of doing a -11(g) amendment (if it's even needed) when 414(s) fails. The allocations must adhere to the terms of the plan. Safe Harbor provisions must be in place and remain unchanged for the plan year. Wouldn't a -11(g) amendment (as a fix) be making a change to the safe harbor allocations after the plan year started, and thus not allowable for a safe harbor plan?

It can be dangerous to have these kinds of exclusions in a safe harbor 401(k) plan unless additional language in the document exists to automatically limit the HCE compensation. Because 414(s) has failed, the plan is now disqualified and no correction with reliance exists (that I know of) outside of a VCP application under EPCRS (Rev Proc 2008-50). I would recommend filing a VCP application. For new and takeover plans, I recommend to try pointing these issues out during the design process so either language can be included to automatically limit the compensation for the HCEs such that a 414(s) failure could never occur, or just leave out the exclusion entirely.

Does the plan document have any specific language that addresses this? I've seen a few that favor the written election as long as it was within the 180-day election period that ends on the annuity starting date, even though the death occurred before the actual annuity starting date.

I think Rollover Solutions might do something like this, but I think they rely on you to provide the initial sets of accurate payout forms when it gets set up. After that, they use those forms until you send modified forms to them. I'm gueesing from memory of a conversation we had with one of their folks.

I have an example where it was not a coverage failure, but it was an inability to contribute a top heavy minimum issue. The plan sponsor was bankrupt, not the kind where they are reorganizing, but the kind where they will no longer do business anymore. There were no plan sponsor assets available to fund the top heavy minimum for the prior year nor for the current year (up to the date of plan termination). The owner had deferrals in both years, so top heavy minimums applied. Under a Form 5310 filing, the IRS was told tha the top heavy contribution was to be funded by having the HCE-owner forfeit a portion of their account. This is also what the bankruptcy court had suggested (actually it was a court order). That forfeited amount then was allocated to the NHCEs for their top heavy contribution allocations. We had some doubts going in, and we certainly wouldn't have suggested that the client try it without submitting to the IRS. Bankruptcy must move your application to the top. Only 19 days after the application was sent certified mail, the IRS replied with a request for additional information. The D letter was issued only 70 days after the application was submitted to the IRS.

And as always, the plan document should spell out what must happen. If the plan document provides actuarial increases, then that must occur. If the plan document has the employer providing suspension of benefits notice, then that must occur instead.

A prospect wants to their SPD for their cash balance formula to state something like the text below (instead of naming the individuals or the specific officer titles with their specific accrual formulas like the plan document does): "Group A will consist of senior executive officers. For each Participant of Group A, the cash balance credit will vary by officer. For details, see your Plan Administrator if this affects you." We're thinking that this may not satisfy the disclosure requirements for a summary plan description. Could the SPD be this vague and be alright? If not, what methods are others out there using to disclose accrual formulas in a not-so-revealing fashion?

We recently proposed this for a prospect to save them the audit fee. The increased cost for having 2 plans was minimal compared to the increased cost for having to do an audit. The prospect has about half of the employees in a 'home office' and everyone else works at varying other locations. All other features of the plan would be the same.

You may want to look at Derrin Watson's book "Who's the Employer". Chapters 2 and 3 talk about self-employed individuals and common law employees, including how and why it matters for plan purposes. Chapter 4 covers uncommon employees.

Yes. It's probably in section 5.1(b)(2), the second-to-last sentence, and it probably says something like "a participant will be credited with a pro-rata interest credit up to the date distributions commence" or something like that.

1.403(b)-6©: Distributions from custodial accounts that are not attributable to section 403(b) elective deferrals. --Except as provided in §1.403(b)-4(f) (relating to correction of excess deferrals) or §1.403(b)-10(a) (relating to plan termination), distributions from a custodial account, as defined in §1.403(b)-8(d)(2), may not be paid to a participant before the participant has a severance from employment, dies, becomes disabled (within the meaning of section 72(m)(7)), or attains age 591/2. Any amounts transferred out of a custodial account to an annuity contract or retirement income account, including earnings thereon, continue to be subject to this paragraph ©. This paragraph © does not apply to distributions that are attributable to section 403(b) elective deferrals.

See Treasury Regulation §§1.403(b)-8(d)(2)(ii) and/or 1.403(b)-6©.

1. Not have the current doc language? The system language for plans established last year (and later) now gives a pro-rata interest credit to the date of payment. That does not mean your language is not current, it might mean the IRS has required that in some of the plans that submitted D letter applications. 2. Ignore the doc and credit interest to the distribution date? If that document has a favorable determination letter, then ignoring the document loses your reliance on that D letter and you end up operating against the terms of the plan. The document likely allows for the Plan Administrator to interpret provisions of the plan, so anything that needs to be interpreted should be handled by the Plan Administrator. Since they have no idea what this is about, your assistance would be needed. 3. Apply the document and apply interest only to the preceding 12/31. You will need to adopt an amendment for any recent laws or regulations or other guidance through August 1, such as Notice 2010-15. A suggestion could be made that when this final amendment is drafted, perhaps the amendment could include provisions to clearly handle this situation. 4. Credit interest to the pay data because this is a plan termination and different rules apply (and that is kind of what is right anyways)? Same as number 3 above. As always, please practice safe docs and wear a D Letter (file Form 5310).