John Feldt ERPA CPC QPA

However, just to be clear, you will not need to project the cash balance account at the hypothetical rate, convert to an annuity, and then discount back at the 417(e) rates in order to determine the lump-sum value of the hypothetical account (as long as the PPA conditions are met).

If the cash balance plan meets the requirements of PPA and subsequent guidance to be eligible for 417(e) avoidance, then the cash balance portion of the plan is not subject to 417(e) - no more whipsaw issues there, the lump-sum benefit payable is equal to the hypothetical account. However, if the plan is top heavy and if the top heavy minimum is earned in that plan, then the top heavy minimum benefit is subject to 417(e) and its lump-sum value will gyrate up and down with changes in interest rates like a traditional DB plan. The lump-sum value of the TH minimum is compared to the account balance at the time payout occurs. Also, if a portion of the plan contains a traditional formula, either as an old preserved benefit or as an ongoing formula, and if that benefit is subject to 417, then that portion of the overall plan benefit would need to be calculated using 417(e) rates.

No, they are not considered as counting toward the 415 limit in the 401(a) plan.

So where do folks roll over their Roth 401(k) balances after they leave an employer . . . would it be reasonable to think that it rolls to a Roth IRA? If so, let's re-word it: Maybe it goes something like this: Misleading Headline #1 (10 years from now): Corporate Executives Find Loophole to Withdraw Six-Figures from IRA While Avoiding Taxes. Misleading Headline #2 (15 years from now): Wealthiest Americans Not Paying Taxes on Six-Figure Payouts from IRA Accounts. Misleading Headline #3 (20 years from now): Rich Americans Get Richer by Withdrawing MILLIONS from IRA, Refusing to Pay Taxes. Congressional action expected. No?

and miles to go before I sleep

We've got about 100 or so small plans on Expertplan, and it's worked very well.

Maybe it goes something like this: Misleading Headline #1 (10 years from now): Corporate Executives Find Loophole to Withdraw Six-Figures from 401(k) While Avoiding Taxes. Misleading Headline #2 (15 years from now): Wealthiest Americans Not Paying Taxes on Six-Figure Payouts from 401(k) Plans. Misleading Headline #3 (20 years from now): Rich Americans Get Richer by Withdrawing MILLIONS from 401(k), Refusing to Pay Taxes. Congressional action expected. Maybe the timeline will be longer/shorter than above and the villains will differ. Perhaps the first congressional action will only pertain to those whose Roth balances exceed $150,000. Maybe none of this will ever happen... but history has shown how these things can and do happen.

If you also do administration with a back-office actuary, make sure the actuary understands how that works too. We had one send us back a valuation that provided additional cash balance credits so that the cash balance accrual would cover the value of the top heavy minimum. We had to explain that was not how the document was written.

It appears that 430 (old 412) does not apply to a nonelecting church plan. I think it follows that the benefit restrictions, Code Section 436, would also not apply. Agree? Disagree?

Take a look in the plan document regarding the cash balance formula and the top heavy minimum. It is unlikely that you will find language that indicates that a non-key employee will receive a cash balance credit equal to the greater of 1) the present value of the top heavy minimum or 2) the hypothetical cash balance credit of 8% of pay. If you do find that, please reply back to this board.

Interest to terminees - annual is ok - probably best for the very small plan. But if the plan is truly to attract high level number crunching employees, like say, international investment bankers, or rocket engineers, etc. then don't try annual - go with monthly or at least quarterly there - your call center reps will not know to thank you enough, but they'll feel the pain if the credit is annual. Until PPA, I think the preference was the 30-year treasury. The new funding rules have made some re-think that especially for new plans - trying to get a normal cost that is reasonably close to the hypothetical pay (or service) credits. It sure is/was nice to have the AE match the crediting rate. Then the end of 2008 came along and the drop in the 30-year treasury (from 4.50% in August to 2.87% in December) made passing 401(a)(26) a worry. Perhaps a different rate would retain more stability for 401(a)(26) purposes? Of course a fixed rate would help us there, but how do you know if the fixed rate exceeds market - if the 30-year treasury was 2.87%, was a fixed rate of 5% okay? How about 4%? 3? Sure, every cash balance plan needs to get their D letter (full scope would be best). Yes, a potential problem could occur, but size matters - so is it a tiny little problem, or bigger? In a plan that uses this extreme definition, the owners' cash balance credits are the majority of all liabilities in the plan (90% and up - we've seen 99%). The NHCEs would generally be receiving a flat amount per year, such as a $500 flat amount. Over 10 years (that's a long life for these plans) that $500 per year credit for the NHCE (if they satyed that long) has become maybe $6,500 ? or thereabouts - that's probably not enough to truly worry about the selection of an annuity. There was a time that we have seen an annuity selected - the participant could not obtain spousal consent. $53 per month J&S 50% starting at age 45 - yeehaw. Hopefully the "reserved" section will be written soon and we'll get fixed rate guidance. If the guidance is not too burdensome, then we think a fixed rate is likely the place we oughta be. Hopefully we'll be allowed to switch.

Must be a private school - how do we get into that school anyway? It's true that the cashout rules do not require you to look back at the prior years' payouts to determine if the amount can be cashed out, right? (they used to, but not any more)... Hmmm - seems kinda risky, I don't think I'd do it.

I think Richard Gephart already proposed that a few years back, but it died.

One actuary we work with has recommended an actuarial equivalence definition that includes a pre-retirement interest of 8.50% for all forms of benefits that are not subject to the minimum present value requirements of Code Section 417(e)(3); and, for all other forms: the Applicable Interest Rate. Then for the interest crediting rate on the hypothetical account: the rate of interest on long-term investment grade corporate bonds (as described in Code Section 412(b)(5)(B)(ii)(II), such code section as it existed prior to amendment by the Pension Protection Act of 2006) determined as of the first day of the Plan Year for which the Interest Credit shall be applied. That has been (or it was anyway) closer to the funding rate.

91 days? I thought it was only 90 - wow - an extra day!

As I understand it, EGTRRA restatement occurred some time ago. Perhaps in 2008? The EGTRRA Restatement window for pre-approved plans opened April 1, 2008 and closes April 30, 2010. For individually design plans, the restatement window is generally based on the last digit of the sponsor EIN (with several exceptions), with the first window opening February 1, 2006 and closing January 31, 2007 for 1 and 6 (Cycle A). Next was 2 and 7 from February 1, 2007 to January 31, 2008, etc. See IRS Notice 2007-44. My understanding is that all volume submitter DC plans must be restated for EGTRRA by 4/30/10? Only of you want to have determination letter reliance. That's sort of like saying, "only if you want to wear clothes to work." I also believe all DC plans have to include the PPA amendment by the end of the 2009 plan year? Yes. DB plans also. 457(b) plans may need one too. A few plans have a later deadline. So if a plan does not restate for EGTRRA do we agree that the plan could be disqualified? Same for PPA? No and Yes. If a plan is updated for all interim amendments on a timely basis, they do not have to restate. Please keep reading, this needs some explanation. If a plan stays updated for all new laws and regulations on a timely basis by simply piling up one amendment after another, they could remain qualified. But, if the IRS ever audits the plan, they will be allowed to scrutinize everything in the document for defects, even small things like "severance" instead of "separation" (true example). If the plan has a D letter, then the IRS has given the plan a 'stamp of approval' and they generally cannot scrutinize the whole plan document for language defects - instead they can only review amendments that the employer adopted later (those that do not yet have an IRS stamp of approval). In addition, if the plan ever has an operational error, certain fixes under EPCRS are only allowed if the plan has D letter reliance, see Rev. Proc. 2008-50. With the GUST documents, the IRS extended the prototype reliance and volume submitter reliance (normally given only to the Mass Submitter's document) to the adopting employer. Before then, each employer had to submit their plan individually to get their own personal D letter. Those GUST D letters only cover the plan until the end of the EGTRRA restatement period. So if you have a GUST document's D letter now, it will expire if the plan is not timely restated for EGTRRA. Pre-approved plans (prototypes and volume submitters) which are created by Mass Submitters, like SunGard Corbel, McKay Hochman, Accudraft, Datair, FT Williams, ASCi, many insurance companies, etc. have been submitted to the IRS for their approval (see the link for details). If your document provider has received approval for their documents, then you can use their documents with your clients and that D letter (reliance letter) becomes your clients' letter as well. But your client must execute (sign) such pre-approved plan before the EGTRRA restatement window closes in order to get that reliance. 6_Year_Cycle.pdf

A company has been shutting down its operations for the last few months and never provided a safe harbor notice regarding the July 1, 2009 plan year because they intend to close their doors soon. In a non-pension DC plan, a 401(k)/PS plan, the plan can be terminated without any required advance notice. However, for a safe harbor 401(k) plan to terminate mid-year, a 30-day advance notice is required. What about a termination of a safe harbor 401(k) plan on the last day of its plan year, not mid-year, when no safe harbor notice was provided for the next plan year? Is a 30-day advance notice required to terminate? So far, I only see the 30-day notice reference with regards to mid-year terminations.

If the document was executed and did not contain safe harbor provisions before the current plan year started, then the plan cannot adopt safe harbor mid-year for 2009. As far as I know, utilization is not a determining factor. An exception would be to: 1. adopt a short plan year now that ends July 31, 2009 2. provide the SH notice for the 8-1-2009 plan year 3. adopt the SH provisions by July 31, 2009, and 4. run that plan year for 12 months. You could change the plan year again later after that first 12-month SH plan year. You may want to consider how that affects deduction of other contributions (not just the deferrals) for 2009.

Befor amending, be sure to look at the effects of the amendment on any DB/DC combo plans - I would not just automatically add an unsubsidized early retirement based on the plan's prior NRA and I'd be careful to pick a new retirement age that still gets you the testing age needed to pass 401(a)(4). FWIW.

The owner of the S Corp is treated like an employee for plan purposes (assuming they are not a passive investor). The S Corp dividend (the K-1 amount) is not compensation for plan purposes. Use W-2. The deduction goes on the 1120 just like the employees.

Don't put the year in front. If your card # is 2009-000099-EP then on the 2848, you enter 000099-EP.

That's what I used to think, but that's only true when it is a parent-subsidiary controlled group - see the link above.

If A owned 60% of company B, then I think 415 is aggregated. But since you show that Joe is the owner, not the company, then it is a brother-sister controlled group (not a parent-subsidiary controlled group), so I think that works. I think there's another thread in here that mentions that. Belgarath has it here: http://benefitslink.com/boards/index.php?s...st&p=157643 I am not sure what happens if he becomes a 100% owner of both.

Joe owns 100% of A - Joe is in Plan A Joe owns 60% of B - Joe is in Plan B Has Joe accrued a separate 415 limit in both A and B?

I do not see where our document spells anything out that matches this situation, but FAB 2006-1 helps a lot. Thanks!