John Feldt ERPA CPC QPA

Ditto. I'll be happy when the last few offset plans we have are gone, or when the IRS provides really usable guidance to clears things up for these plans - I wonder which will be first...

Since you're submitting for a D letter you should be able to submit good language later when the IRS reviews the plan language, that's what we intend to do. I'm really not sure what else can be done at this time if the plan year end was December 31st.

Yes. The 2 limits do not offset each other, and yes, an independent contractor can participate if the document has language to allow that.

Okay, that's as described in 1.401(a)(4)-4(b)(1). So, suppose a DC plan has no hours or last day requirement for receiving an allocation, but the DB plan does have a 1000 hour requirement for receiving a benefit accrual (so the DB plan can be amended in the first few months of the year to reduce benefits if necessary), does that mean that the headcount of employees receiving the accrual in the DB plan must also pass the 70% test? I'm just trying to understand exactly why it has been recommended that the accrual conditions be mirrored. I've heard them even recommend that the 2 plans leave out all accrual/allocation requirements - no hours for the DB and no hours or last day in the DC. If the 70% test (described in the above paragraph) is the main reason, I'd rather keep the 1000 hours in at least for the DB plan. Am I missing something else?

I have heard several DB/DC combo speakers make comments that both DB and DC plans, if combined for nondiscrimination testing, should avoid benefits, rights, and features (BRF) testing by making sure the plans have the same/similar BRF provisions. From an grey book Q&A, a 3-year cliff and a 6-year graded schedule are considered comparable and thus not subject to BRF testing. I think BRF would include in-service distribution timing options? Suppose the DC plan has age 59.5 for an in-service option for all acoounts, but the DB has age 62. That appears to be a BRF, but how/what gets tested there? What about an accrual requirement - suppose the DB requires 1000 hours for accrual, but the DC plan has no accrual requirement - is that a BRF that must be tested, and if so, how/what gets tested there, doesn't the 401(a)(4) test itself do exactly that?

IDP Cash Balance, single employer (not a controlled group either) plan was established in 2007, the effective date was 01/01/2007, signed 12/31/2007. Calendar year plan, calendar year corporate sponsor. The Empoyer EIN ends in 9. I thought that put them into cycle D. We submitted for a D letter in January 2008 because the end of cycle D was over 2 years away. The IRS Determination letter recently arrived (favorable) and it says that the letter expires 01/31/2013. January 31, 2013 is cycle B, not D. Did the IRS goof and simply give a new plan 5 years for their first D letter? Another employer (exact same scenario as above in every detail other than their plan name and name of the sponsor) - they got their D letter in Nov. 2008 and that letter says it expires January 31, 2010 (which we expected). Do we trust the 2013 date, or restate for cycle D and submit on cycle now?

A 401(k)/PS plan is still on a GUST document. They intend to terminate the plan in March 2010, so they have no intention to restate the document. If they restated to an EGTRRA document, they can submit their 5310 after April 30, 2010 and ask for a D letter on the termination - no problem. But, if they do not restate for EGTRRA (they adopt interim amendments only), and they want their Form 5310 accepted, must the 5310 be submitted by April 30, 2010?

Yep, that was it. In the 1.401-1(d)(4), where it says "only if it is a defined contribution plan that exists at any time during the period beginning on the date of plan termination and ending 12 months after distribution..." If a new plan is executed now (the execution date would be 12 months after the amounts were paid out of the prior plan), can it have it's effective date be retroactive, or does that make this new plan "exist" retroactively too, for purposes of the application of this regulation?

A client terminated and paid out all participants from their 401(k) plan in mid-December 2008. They now want to start up a PS only plan (no deferrals) with a January 1, 2009 effective date. For vesting purposes in the PS plan, they want to exclude years before this new plan is established. I think there are some problems with this, but haven't found the guidance. I don’t think a new PS plan with a January 1, 2009 effective date can exclude years before the plan starts if just a few days earlier in December 2008 the company had terminated another qualified plan. I also have this feeling that there's something else causing a problem here, but it eludes me (other than December 28 being an eleventh-hour time to finally decide to set up a plan for the year). Thoughts?

I do have Larry's illustrations (they're a bit old now), but it does show the calculation methodology - thanks!

We're working with a cautious client that needs to better understand how the HCE Rate (for getting the 5%, 6%, 7%, or 7.5% gateway) is determined in a DB/DC combo plan. We explained that it is the sum of the DB HCE Rate and the DC HCE rate using the testing assumptions. They understood the DC HCE Rate, no problem. But the DB is a cash balance plan, and, for example, for one HCE the hypothetical credit to the account is just over 24% of pay. Of course, the DB HCE Rate did not come out very close to 24%. This is causing their question. To calculate the HCE Rate, we explained that it is not the credit divided by the pay, but it's a conversion from the hypothetical credit by accumulating it to NRD at the current crediting interest rate, converted to an annuity under actuarial equivalence, with that annuity's present value calculated at the testing rate, divided by pay. Note: usually they just start nodding after the actuary says "conversion from the hypothetical" and then they can't remember what they even asked in the first place. But not this time. We could tell that this client was not convinced. They want to know if the regs or other official guidance can confirm that. I'm looking at 1.401(a)(4)-9(b)(2)(ii) and 1.401(a)(4)-9(b)(2)(v)(E). Is there somewhere else that would spell it out even better?

Milliman is another that does this. Used to be Milliman & Roberts, I think.

Right. If you do not want reliance on an IRS letter to protect your plan language from scrutiny, then you do not need to restate. If you are on a GUST prototype or volume submitter now, then its current IRS opinion letter/reliance letter will expire. When that happens, any word in your document is open for attack, and will be attacked when the IRS audits the plan. Perhaps your hope is that the IRS auditor isn't very picky about anything, and that's a very positive way to look at this. Also, you can put all of your personal assets on green and roll. (or is that 'spin'?) edit: typo

I would agree. There is no requirement that an advanced degree must be obtained to run a typical storage facility and the nature of running a storage facility is not likely intellectual in nature.

Especially look at the plan's 415 amendment. Before that time, the 'first few weeks' rule was operational. Not anymore with the 415 amendment, so Kevin's right, it should be spelled out now in your plan language.

Of course they keep track of the Social Security portion of that tax revenue on pieces of paper (which I think of as non-marketable treasury IOUs). Perhaps they might put these notes in some kind a file cabinet in Virginia somewhere. I suppose one could call that file cabinet the "Social Security Trust Fund" if they wanted to be really reckless. Surely all Americans understand that the government spends all revenue taken in from all sources each year and since that's not enough, they sell treasury bills and treasury bonds so more can be spent than is actually received. Just look at the back pages of your Form 1040 (if you get a paper copy). Okay, I'm obviously kidding about the "All Americans" part.

I think there would be no employee deferrals that can be offered until 12 months after the distributions were all completed. So I think you could have a nonelective only (profit sharing) until then.

The 457(b) "annual deferral" limit (which is vested employer contributions plus employee contributions) has no bearing on the 402(g) limit which affects a 403(b) salary deferral.

This shows the 2009 limits and methodology: http://www.irs.gov/pub/irs-tege/2009_415_white_paper.pdf I see no 2010 "white paper" yet.

Catchup is 5,479 ? 402(g) is 16,437 ? 401a17 is 242,700 ? DC 415 is 48,540 ? DB 415 is 194,160 ? Key is 157,755 ? HCE is 109,664 ? Simple is 11,378 ? Maybe.

Defined benefit = $195,000 Defined contribution = $49,000 Section 402(g)(1) = $16,500 401(a)(17), 404(l), 408(k)(3)©, and 408(k)(6)(D)(ii) = $245,000 Section 416(i)(1)(A)(i) $160,000 Section 409(o)(1)©(ii) ESOP 5-year distribution period = $985,000 / $195,000 HCE, Section 414(q)(1)(B) = $110,000 Section 414(v)(2)(B)(i) for catch-up contributions = $5,500 Section 414(v)(2)(B)(ii) for catch-up contributions = $2,500 Gov Plan Compensation limitation = $360,000 Compensation amount under Section 408(k)(2)© (SEPs) = $550 Section 408(p)(2)(E) SIMPLE = $11,500 Section 457(e)(15) = $16,500

Yep. Section 415 of the Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement plans. Section 415(d) requires that the Commissioner annually adjust these limits for cost-of-living increases. Other limitations applicable to deferred compensation plans are also affected by these adjustments under Section 415. Under Section 415(d), the adjustments are to be made pursuant to adjustment procedures which are similar to those used to adjust benefit amounts under Section 215(i)(2)(A) of the Social Security Act. The limitations that are adjusted by reference to Section 415(d) will remain unchanged for 2010. This is because the cost-of-living index for the quarter ended September 30, 2009, is less than the cost-of-living index for the quarter ended September 30, 2008, and, following the procedures under the Social Security Act for adjusting benefit amounts, any decline in the applicable index cannot result in a reduced limitation. There you have it.

http://www.publicbroadcasting.net/wuky/new...nts.to.elderly# The amount people can contribute to 401 (k) accounts, Individual Retirement Accounts and defined benefits plans also are affected by negative inflation, the officials said. Some in the investment community have expressed concern that contribution limits might be reduced, they said. "The Treasury Department and the IRS (Internal Revenue Service) will be issuing a release later this week -- tomorrow or the next day -- that will indicate that our interpretation of the statutory cost of living adjustment formula is that there will be no decrease," said one official. "The Treasury interpretation will prevent any reduction in those pension, 401 (k), IRA dollar limits and thresholds for 2010," the official added. So it's possible we might not even see anything today. I guess I'll stop hitting refresh on my google search for "irs 2010 cola" within the last hour...

Here's a paragraph from an article from the united transportation union dated today: http://www.utu.org/worksite/detail_news.cfm?ArticleID=49322 "Obama also announced Wednesday that the IRS would soon issue tax guidance preventing reductions in contribution limits for certain retirement funds, including 401(k) plans and Individual Retirement Accounts. There has been concern among some in the financial industry that federal law could require the limits to be reduced because inflation will be negative this year." It that's true, then the IRS is re-writing the method on the colas?

Yeah, predicting isn't quite as straight-forward this year. In the Code, it supports the idea that it can go down by the definition used for the base period, as it states: 415(d) COST-OF-LIVING ADJUSTMENTS. -- IN GENERAL. --The Secretary shall adjust annually the $160,000 amount in subsection (b)(1)(A), in the case of a participant who separated from service, the amount taken into account under subsection (b)(1)(B), and the $40,000 amount in subsection ©(1)(A), for increases in the cost-of-living in accordance with regulations prescribed by the Secretary. 415(d)(2) METHOD. --The regulations prescribed under paragraph (1) shall provide for an adjustment with respect to any calendar year based on the increase in the applicable index for the calendar quarter ending September 30 of the preceding calendar year over such index for the base period, and adjustment procedures which are similar to the procedures used to adjust benefit amounts under section 215(i)(2)(A) of the Social Security Act. 415(d)(3) BASE PERIOD. --For purpose of paragraph (2) -- The base period taken into account for purposes of paragraph (1)(A) is the calendar quarter beginning July 1, 2001. But if that link regarding the White House statement is correct, saying it will stay flat, then we certainly have reason for pause here.