John Feldt ERPA CPC QPA

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!

A 401(k)/PS plan just received an $8,000 check from a mutual fund company for their 401k plan as part of the SEC settlement with the mutual fund company to reimburse mutual fund holders for excessive trading costs, etc. for the period 2000 to 2003. Since the date that is being used to determine the $8,000 figure is what the mutual fund company shows as recorded on September 30, 2003, who gets the money and how is it to be allocated? Do we need to go back to September 30, 2003? Could it just go into the current plan to allocate to current participants or to offset current plan expenses? Many of the participants back in 2003 have retired or terminated. Do you think the IRS/DOL would accept a reasonable cost/benefit analysis to determine if it's really worthwhile to try to allocate an $8,000 check on balances that are almost 6 years old and to participants who are no longer in the plan?

Look further in Section 12 where it talks about the next 5-year cycle. I think it tells us that a cycle A plan's next RAP ends 01/31/2012 (see 12.02, the last column, and look at 12.03). Also look at section 5.03(1) which says: ".03 This section 5.03 extends the remedial amendment period for the disqualifying provisions described below as follows: (1) The remedial amendment period for any disqualifying provision described in § 1.401(b)-1(b)(1) that would otherwise apply under § 1.401(b)-1 is extended to the end of the applicable remedial amendment cycle described in section 6.01 that includes the date on which the remedial amendment period would otherwise end if the disqualifying provision was a provision of, or absence of a provision from, a new plan and the plan was intended, in good faith, to be qualified." and then read 1.03(1) which says: "(1) The EGTRRA remedial amendment period for individually designed plans extends to the end of the initial applicable five-year remedial amendment cycle as provided in the chart found in section 12.01. Therefore, plan sponsors may avoid unnecessarily filing two determination letter applications by waiting to file their EGTRRA determination letter applications until the twelve-month period preceding the end of the plan’s initial applicable five-year remedial amendment cycle." When you looked at section 7, you saw "The EGTRRA remedial amendment period is extended to the end of the initial five-year and six-year remedial amendment cycles, respectively." Well, the six-year cycle does not apply to an IDP plan, so this section is saying that the EGTRRA RAP is extended to the end of the initial 5-year remedial amendment cycle for the IDP plans. Section 9 tells you that the end of your remedial amendment cycle is determined by using the deadlines for a cycle A plan. Thus, the cycle A deadline for a new plan now, is 01/31/2012. At least that's how I see it anyway. It's as clear as mud, of course.

Okay, then you can forget January 31, 2013. Assuming you want a D letter, you could submit the original document now since 01/31/2012 (the next cycle A submission deadline) is more than 2 years away, and this filing would be considered on-cycle. You'll still have to restate and submit again before 01/31/2012, however (assuming you want another D letter to cover the next 5 years). Alternatively, you could do no submission now, but wait until the late 2011, restate into a document that has the cycle A LRMs at that time, and submit the original doc, amendments, and the 2011 document all by 01/31/2012, and I think you would still be okay for your RAP to make any changes upon IRS review, even back to the original effective date. I could be wrong there, but that's how I think 2007-44 reads. Now, if you don't want a D letter, then you never have to restate (and you're much more brave then me), but you will have to amend for each law/reg change on a timely basis.

I see no prohibition against that. Will the ADP/ACP test hurt them much? - They should consider that as a possible cost too. Doing this won't likely help their employee relationship, if that is a concern for them. Be sure the top heavy test gets extra scrutiny during review. Your extra time to do this should justify extra billing.

Is the DB plan considered to be an individually drafted plan (IDP), or a prototype / volume submitter? (Section 18 pertains to pre-approved plans (prototypes and volume submitters) - that's the 6-year cycle).

It's okay to have an offset, although I would not define the DB benefit as the actuarial value fo the PS, I would only define the offset as such. An offset arrangement can satisffy 401(a)(26) based on the amount prior to the offset, see §1.401(a)(26)-5(a)(2). Employees who benefit under a plan §1.401(a)(26)(a) Employees benefiting under a plan ... (2) Sequential or concurrent benefit offset arrangements (i) In general. --An employee is treated as accruing a benefit under a plan that includes an offset or reduction of benefits that satisfies either paragraph (a)(2)(ii) or (a)(2)(iii) of this section if either the employee accrues a benefit under the plan for the year, or the employee would have accrued a benefit if the offset or reduction portion of the benefit formula were disregarded. In addition, an employee is treated as accruing a meaningful benefit for purposes of prior benefit structure testing under §1.401(a)(26)-3 if the employee would have accrued a meaningful benefit if the offset or reduction portion of the benefit formula were disregarded. However, I would recommend obtaining a full scope D letter right from the start if setting up a DB plan using an offset. Edit: Aw, the Sieve beat me to it.

Effen - yes we had been debating the option to just leave the benefit as it stands. Since increasing the benefit by 0.09% is sucha small cost, we may just put the -11(g) amendment in place to benefit that employee now - why bother with the potential pain of an audit later (our meager cost-benefit analysis thinking). Has anyone had to convince an IRS auditor that the benefit accrual does not need to be 0.50% of average pay in order to be "meaningful"? I'd like to know how that worked out.

SunGard Relius had a short comment on this: http://www.relius.net/News/TechnicalUpdates.aspx?ID=433 2. If an employer eliminates a match (fixed or discretionary) in a traditional 401(k) plan must it provide a notice to the participants? No. The regulations only require safe harbor 401(k) plans to provide a notice to employees upon reducing or eliminating a match formula during the plan year. Nevertheless, the employer may want to provide a notice to alert the employees to the change so they can modify their deferral elections if they wish. Of course, the amendment will need to be reflected in a summary of material modifications (SMM). However, the SMM is not due until 210 days after the close of the plan year in which the employer makes the amendment.

Thank you!

6 nonexcludables for the plan year: calendar year 2008. Two have large benefit accruals exceeding 0.50% of pay. The other employees whose accruals also would have exceeded 0.50% of pay? Well, they all quit before their 1,000 hours for calendar year 2008. One NHCE has an accrual of 0.41% of pay. Can the plan be amended to increase an accrual for the NHCE (or all) under -11(g), or is 401(a)(26) outside the scope of a -11(g) amendment? edit:typo

I used the 6 digit number from AIRE on Form 23-EP and just received my official certificate and enrollment card today. So I don't think using the AIRE number will cause any trouble or significant delays.

Thus, you'll need to do what your document says for this year (the document either excludes them from the SH, includes them, or only includes/excludes specific HCEs). You can amend the next year (if necessary) effective on the first of next plan year - that amendment must be executed before that plan year starts and the SH notice should reflact those changes.

BG5150 - You are the OP.