John Feldt ERPA CPC QPA

Even still, even with employer contributions and a document, they can still be considered a non-ERISA church plan, right?

DC plan I assume. If the date of termination is today or earlier, then they only need to adopt all current law to update the plan to terminate. Restating from GUST to EGTRRA, if using a pre-approved document, would provide IRS reliance for the EGTRA, post EGTRRA, 401(a)(9), 401(a)(31)(B), and Final 401(k)/401(m) regulations amendments. Meaning, the IRS can't pick those apart for review if you restated for EGTRRA. That would only leave the Final 415 Regs amendment, the PPA amendment, the WRERA Amendment, the HEART amendment, and Notice 2010-15 amendment that they can pick apart upon review (if they audit the plan).

I know of a very old large plan with 17,000+ participants that used 95% for all Joint and 50% conversions and 90% for all joint and 100% conversions. These are subsidies and the actuary took that into account in the funding assumptions.

You asked "What type of document are you using for Governmental plans where Employees make the salary reduction contributions through a 457 Plan and the Employer makes contributions through a 401(a) plan; Profit Sharing, Match or both?" As for the 457(b) document, there is no D letter program so it is not filed and it's an IDP document. For the 401(a) plans we are using IDP documents updated for the cycle E LRMs and we plan to file for D letters by January 31, 2011 (or maybe a couple weeks before that). You also asked "If using a Volume Submitter are you relying on the Opinion Letter or filing for LOD by 04/30/2010?" I thought a government plan sponsor could not rely on the opinion letter issued to the Volume Submitter document and therefore had no reliance without submitting for an individual D letter. Are government plan sponsors eligible for the 6-year cycle?

You have entered a maze of twisty passages. The Form 8905 does not apply to plans in cycle E - see Rev. Proc. 2005-66, Section 17.04 which states "If the employer’s five-year remedial amendment cycle ends with or after the applicable six-year remedial amendment cycle, the employer must adopt the current pre-approved plan rather than execute Form 8905." Now look at the improved version of 2005-66, which is 2007-44, section 17.04: However, if the employer’s five-year remedial amendment cycle ends during or after the announced adoption period described in section 16.03 and 16.04 associated with the applicable six-year cycle, rather than execute Form 8905, the employer should instead adopt the newly approved version of a pre-approved plan (and will be treated as a new adopter under section 17.03). Section 17.03(3) confuses me: An employer may only adopt an interim or an existing pre-approved plan that is not the newly approved version of the plan if the employer adopts such plan before the beginning of the adoption period described in section 16.03 and 16.04 during the applicable six-year cycle. Such an employer must re-adopt either the newly approved version of the same plan or a newly approved version of a different pre-approved plan during the adoption period. Any employer whose five-year cycle has not ended may adopt a plan during or after the adoption period, but such employer must adopt the newly approved version of a preapproved plan. And sections 16.03 and 16.04: .03 When the review of a cycle for pre-approved plans has neared completion (after approximately a two-year review process), the Service will publish an announcement providing the date by which adopting employers must adopt the newly approved plans. This will be a uniform date that will apply to all adopting employers. Depending upon the length of the review process, it is expected that this date will give virtually all employers approximately a two-year window to adopt their updated plans. For purposes of this revenue procedure, an adopting employer means an employer who satisfies the requirements described under section 17 of this revenue procedure. .04 An adopting employer that adopts the approved M&P or VS plan by the announced deadline will have adopted the plan within the employer’s six-year remedial amendment cycle. The announced deadline will be the end of the plan’s remedial amendment cycle with respect to all disqualifying provisions for which the remedial amendment period would otherwise end during the cycle. I think April 30, 2010 is your deadline because that's when the RAP ends for these pre-approved plans. I could be wrong, in haste we might have entered a twisty maze of passages instead of a maze of twisty passages, reaching a twisted conclusion.

The amendment must be executed by the end of the plan year for which the amendment applies, as long as it does not create a cutback of benefits that might have been earned prior to the amendment.

Thanks, I think the argument Sal poses is sound. TAG would only cite official guidance. Excerpts from the 2009 ERISA Outline Book (EOB), Chapter 11, Part I, 2.b.2): Timing of the amendment to change the plan year. At the 2005 ASPPA Annual Conference, a representative from the Treasury indicated that the amendment in the prior example would have to occur before the short plan year begins (i.e., by July 1, 2006, in that example, if the short year is to end December 31, 2006). Why? The argument raised was that, as of July 1, 2006, employees have an expectation that their matching contribution for the plan year (i.e., July 1, 2006, through June 30, 2007) would be matched on the basis of the entire year’s compensation. Consider the following example. Suppose an employee’s compensation for the period July 1, 2006, through June 30, 2007, is $60,000, with $30,000 earned in the first six months and $30,000 in the second six months. Further assume the employee defers at a rate of 10% and the plan uses the basic matching formula under IRC §401(k)(12)(B). If the short year is created as of January 1, 2007, then the matching contribution formula would yield a match of 5% of compensation under the basic formula, for a match of 5% x $30,000, or $1,500. Had the plan year gone the full 12 months, the match would have been 5% x $60,000, or $3,000. The Treasury official was suggesting that this could be a violation of the safe harbor rules because the safe harbor notice given for the plan year beginning July 1, 2006, would have suggested that the match for that year would be based on compensation for a 12-month period ending June 30, 2007. This argument fails to consider that this type of amendment is allowed only if the plan remains a safe harbor 401(k) plan for the 12-month period following the close of the short plan year. Thus, the safe harbor formula will apply for the 6-month period running through June 30, 2007, it’s just that the 6-month period is now part of the first half of the calendar plan year starting January 1, 2007, rather than the second half of the plan year that started on July 1, 2006. It also could be argued, if the plan’s matching formula is determined on a payroll period basis, rather than a plan year basis, that the change in the plan year period is irrelevant anyway to the expectation of safe harbor contributions. If the IRS actually would raise an issue here (remember, the comments of the official at the ASPPA conference do not necessarily represent the official position of the agency), it seems to create an unfortunate trap for the unwary. It is the exception to the rule that a change in a plan year would be planned ahead in sufficient time to adopt an amendment to the plan year (or at least provide a safe harbor notice that would alert employees to the pending change) before the beginning of what will become the short plan year. To take a position like this would render meaningless the option to amend a safe harbor 401(k) plan to a different plan year period.

A safe harbor 401(k) plan has a December 31 Plan Year end. A change is desired to have the plan year end to match the fiscal year end (September 30). They intend to keep the plan as a safe harbor 401(k) for future plan years. Can they: A) adopt an amendment now to make this plan year a short year, ending on September 30, 2010? or B) the earliest plan year end they can change is the next plan year, starting 1-1-2011, must be amended before 1-1-2011?

We project the account to NRA using the crediting rate and convert to an accrued benefit, and calculate the PVAB at the testing rate. Seems to go against reason to come up with a PVAB amount much lower than the cash balance credit, but that seems to be what is supposed to happen inside these regs for now, maybe they'll rewrite them sometime (that may not be a good thing though).

For a 457(b) plan sponsored by a government, excess deferrals must be distributed as soon as administratively practicable (isn't that a nice deadline?) For a 457(b) plan sponsored by a tax-exempt organization, excess deferrals must be distributed by April 15 of following year (today)

No. They were required to adopt (sign by 12/31/2009) written language that complied with the final 403(b) regulations with an effective date no later than January 1, 2009.

Is the partner merely an investor, thus investment income is on the K-1, or are they a working employee?

That's good. As you probably know, the IRS is asking for data to prove any normal retirement age less than 62 was typical for the industry. Having that amendment done eliminates that headache. If your NRA is under 65, then they are also asking if the plan coordinates the actuarial increase (for working past age 62) with the limits under section 415 (since the 415 limit generally does not get bigger after age 62). It seems like they're asking you to pick which one applies: the plan violates 411, or does it violate 415? So be prepared for that question too.

Yes. Just curious, was the plan's normal retirement age under 62, and if so was the plan amended before the termination date to increase the NRA to age 62?

I did not find much guidance on the pre-ERISA coverage rules, maybe another poster can help with that. As for the prototype, a nonelecting church plan document has no reliance unless it submits the plan to the IRS, thus the plan is individually drafted in that sense. However, the word "prototype" does not necessarily mean "a document with an IRS opinion letter". Some practitioners have created "prototype" documents for church plan use or for government plan use. Those "protoypes" try to make it convenient to select which provisions of the plan will apply or not apply, but none of those prototypes carry the reliance of the familiar IRS-approved prototypes that we see for many 401(k), profit sharing, and defined benefit plans.

You could ask the Treasury Secretary for an exception . . .

Are you using accrued-to-date testing? Are you using the same testing age in 09 that you used in 08?

Also called component plans. If a gateway is needed for one component plan's cross-testing, then the gateway applies to the entire plan (not just that component) - I think. Works nicely if each person is in their own class so you aren't hurt too much by a few demographic changes each year, just be sure to get 70% for each component and make sure you've been careful about exactly who can and cannot be excluded in your nonexcludable employee count. Imputing disparity in one group and cross-testing the other is fairly common for component plans (IMO).

Could you also argue that in a state where community property law exists, then the each spouse directly owns 50% of whatever the other spouse owns, thus an owner without attribution... - careful with those class definitions!

A plan sponsor (nonprofit) has one NHCE in their DB plan (subject to PBGC). They provide notice that the person has retired and asks for distribution paperwork. Plan allows full lump sum, plan has enough assets to pay out. Participant, age 60.5 near the end of last year, did not actually retire, but sponsor paid the lump sum ($200,000) anyway. The plan sponsor thought in-service was still allowed. The plan had allowed in-service until a few months ago, last fall, when an amendment to comply with the unusual (IMO) IRS definition of the word "deference" under the final NRA regs changed the NRA to 62 and removed the in-service option pre-62. At about the same time the participant was paid out, the plan adopted an amendment to terminate the plan and provided the proper plan term notices to the participant. The date of Plan Termination established was about 2 weeks after the participant was paid out. They are still employed now. 1. Plan paid when no distributable event occurred 2. Plan paid before the 60-day PBGC review period What do you think would be a reasonable fix that the IRS and PBGC would accept?

Thanks. Another plan in the same situation except the plan is small (under 100 participants) and less than 5 years old. Now I think the amendment should be okay?

Right, the ACOPA example is different in that the prior year AFTAP was not under 60%. Since the prior year was under 60%, we now either violate 436 or 401(a)(4) no matter what we do and the plan is disqualified. I agree that a VCP application may be the only safe way out of this. That ACOPA board sounds right up my alley, is access limited only to ACOPA members/actuaries?

A calendar year plan sponsor failed to provide data until after October 1, 2009 so the AFTAP is presumed under 60%, so all restrictions apply. The sponsor only has one plan, the DB plan. As far as I know, no amendments to increase benefits are allowed even if a contribution is made. When the actual data was provided, shortly after October 1, the AFTAP was found to be over 80% (and the sponsor is not in bankruptcy). However, an amendment is needed under 1.401(a)(4)-11(g) in order to pass testing for the year. Is a retroactive corrective amendment under 1.401(a)(4)-11(g) allowed? If not, (because of the restrictions caused by the AFTAP being presumed under 60%), can the plan be corrected for the failed nondiscrimination test?

Only if they terminated employment.

Even if they don't cover the same group, I would answer Yes.