John Feldt ERPA CPC QPA

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.

I posted this in the ESOP section, but perhaps the question leans more toward cross-testing? http://benefitslink.com/boards/index.php?s...st&p=181920 An calendar year ESOP plan has 2 valuations per year, June 30 and December 31. The allocation condition is that you must be actively employed on the last day of the valuation period. An employee who is active on June 30 gets a June 30 allocation, but if they quit December 15, they do not get an additional allocation for the 6-month period ending December 31. The plan uses a definition of compensation that passes 414(s). The plan uses a pro-rata allocation method for each 6-month allocation period based on compensation paid during that 6-month period. Assume all 3 are true: some employees get no allocations for the June 30 period because they left before June 30, and some other employees get allocations only for their compensation paid through June 30th because they left before the end of the plan year but after June 30, and some other employees get allocations based on full year pay because they were active on December 31. Based on the assumptions listed, does this plan design require 401(a)(4) testing?

An calendar year ESOP plan has 2 valuations per year, June 30 and December 31. The allocation condition is that you must be actively employed on the last day of the valuation period. An employee who is active on June 30 gets a June 30 allocation, but if they quit December 15, they do not get an additional allocation for the 6-month period ending December 31. The plan uses a definition of compensation that passes 414(s). The plan uses a pro-rata allocation method for each 6-month allocation period based on compensation paid during that 6-month period. Assume all 3 are true: some employees get no allocations for the June 30 period because they left before June 30, and some other employees get allocations only for their compensation paid through June 30th because they left before the end of the plan year but after June 30, and some other employees get allocations based on full year pay because they were active on December 31. Based on the assumptions listed, does this plan design require 401(a)(4) testing?

Thanks very much. I agree that the temporary relief allows the plan to delay the effective date of this regulation to the first day of the first plan year starting after June 30, 2008. I will attempt to argue first that the regulation's effective date (under Notice 2007-69) is after the plan termination date and therefore does not affect the plan. If that fails, then we'll just do the amendment with a 1-1-2009 effective date.

A Form 5310 was filed for a DB plan with a plan termination date of Feb 29, 2008. Normal retirement Age is 58 (or 5 years if later). Plan Year end 12/31. The IRS reviewer asks: "Please demonstrate that the plan's definition of normal retirement age satisfies Regulation 1.401(a)-1(b)(2). Or, alternatively, amend the plan's definition of normal retirement age." We understand that under 1.401(a)-1(b)(2), the Normal retirement age must not be earlier than the earliest age that is reasonably representative of the typical retirement age for the industry. But, (iii) states that in the case of a normal retirement age that is not earlier than age 55 and is earlier than age 62, whether the age is not earlier than the earliest age that is reasonably representative of the typical retirement age for the industry is based on all of the relevant facts and circumstances. Does anyone have insight regarding what the IRS will consider in this "relevant facts and circumstances". The employer is a PC that does dermatology work. Alternatively, if we amend the plan now to have the NRA become 62 with an unreduced ERB at age 58, would that cause the IRS to invalidate any prior actuarial valuations that calculated the plan's contributions? Not sure what to do with this one - any comments appreciated.

Maybe the OP is just 401k-ing around... can we actually post that kind of language here?

"One partner decided to defer" Is the person truly a partner, as in a partnership or LLP? If so, then do we know what percentage of earned income that partner has at the time of the deferral, or do we find out at the end of the year when earned income is calculated? The question is perhaps: what is the "pay period" for a partner?

Thanks you. I knew the Treasury would not have let that happen.

Would the 10% penalty only apply to the earnings? 1. Roll from plan to Roth IRA at age 50. 2. Pay income tax, no the 10% penalty. 3. Distribute from Roth IRA to self at age 51. 4. Pay 10% penalty on the earnings only?

No it does not. But has this issue ever been in court in your state? It's still the employee's money, regardless of where it went. So I don't think any state enforcement branch would care to spend any time on the issue of auto-enroll, regardless of their stated law (I could be wrong though).

I'll check, but I think electronic filing authority was provided to the CPA to file the return. edited to add: yes, the CPA firm filed electronically without confirming if the accrued contributions had been made yet.

Thanks. I was under the impression that 404(a)(6) would not even allow an allocation for 2008. Are you saying that it simply does not allow a deduction for 2008? As for point #4, the client is happy with us. We have informed them each year that they need to file a corporate extension if they intend to make the contribution after the March 15 deadline (we are not a CPA firm, we don't prepare corporate tax returns).

An S-corp employer (calendar tax year) has a 401(k) plan (calendar year) that allows for a discretionary match. For 2008, they intend to make a matching contribution, funding it sometime this spring/summer. Their speedy tax return prep firm got everything done before March 15, 2009 and filed the corporation's tax return on time without filing an extension (the client has never had their returns completed by the March 15 deadline for any of the prior 10 years. The tax return included a deduction for the 2008 match ($80,000) to 50 employees, which has not yet been contributed. Under 404(a)(6), a taxpayer shall be deemed to have made a payment on the last day of the preceding taxable year if the payment is on account of such taxable year and is made not later than the time prescribed by law for filing the return for such taxable year (including extensions thereof). I think it is too late to contribute a discretionary match now for 2008 since the extension was not filed? Could they contribute and allocate for 2008 and then file under EPCRS to get the match allocated for 2008? Even if filing under EPCRS, no deduction for 2008 would be allowed anyway, or could EPCRS also allow that? No 415 limit issues and no 404 limitation issue would occur even if 2008 and 2009 both get deducted in the same year. To the client, this is mainly an employee relations issue, since the employees were verbally told that they can expect a match for 2008 based on their deferrals (the plan is clearly written as a discretionary employer amount).

In case anyone is curious, the rules changed for plan years after 2000 as described in the previous posts, such that plans that do not grant any past-service (thus having no benefit liability on the plan's effective date) will have a PBGC participant count of zero for the first year. This would also affect more than just the first year of the plan. A new participant entering on the first day of a future plan year, assuming they have no benefit liability (e.g. plan credits accruals based on participation), would also be excluded from the PBGC participant count for that year. edit: typo

But MRDs for DB plans were not suspended.

b7 and b9 do not differ in that regard. If the sponsor is truly a church, then a lot of things do not apply. One of the many things to note is found in Notice 2001-46, article I: "I. PURPOSE This notice provides relief from the application of the nondiscrimination requirements of the Internal Revenue Code for certain church and governmental plans. In particular, this notice extends the effective date of regulations under §§401(a)(4), 401(a)(5), 401(l), and 414(s) of the Internal Revenue Code for nonelecting church plans until further notice, but in no case earlier than the first plan year beginning on or after January 1, 2003." I have not seen "further notice" in this regard from the IRS yet.