John Feldt ERPA CPC QPA

Beginning of year valuation method. Calendar year plan. New plan 1-1-2009 (small: 60 employees). Accruals are based on plan years with 1000 hours of service, but excludes any years of service earned before the plan year that includes the participant's date of entry. As of the 1-1-2009 actuarial valuation date, a half-dozen ineligible employees (all with 1000 hours in 2008) have not yet reached their plan entry dates. Since they were hired early in 2008, the entry dates would be in 2009, such as 2-1-09, 3-1-09, etc. The enrolled actuary would like to include that half-dozen group of employees in the 1-1-2009 valulation for plan contribution purposes, making this an ongoing actuarial assumption. Another enrolled actuary has stated that this is not allowable. Comments?

Yep - thanks for confirming. The 401(k) answer book has it wrong in question 18:54 (I have an on-line version). edited to add: However, question 9:18 has it right.

What about an excess deferral and the April 15 deadline. Taxed in which year and what about the gap period earnings?

http://benefitslink.com/boards/index.php?s...st&p=161125

My misunderstanding. De minimus is not defined, but many practitioners believe that 3% or less is de minimus. However, be careful about this. I'll post a link to another thread where that was discussed.

Also, I would not hold your breath waiting for the IRS 403(b) prototype program to open. It is unlikely that any IRS-approved prototype documents will exist before the end of this year (2009). The IRS spent two years reviewing the EGTRRA DC plans that were submitted before issuing final approvals. That's blazing speed on a geologic time scale.

The W-2 definition for allocation of contributions is deemed to satisfy 414(s). You do not have a 414(s) failure if that is the plan's definition of pay for allocation purposes.

Exactly. If they are not using it now, and their testing is prior year, then the prior year match is 0%. So when they decide in some year to actually contribute a match, passing ACP can become a problem, especially if they do not want to switch to current year testing for some reason. Or if the year has ended already, and they say "Hey, let's make a discretionary match for last year, our document allows that." At that point it is too late to amend to use current year testing.

Does the plan document have a determination letter that covers that language? If so, well, . . . Otherwise, I do not think it is an allowable accrual requirement.

You are correct that a nonelecting church plan has zero D letter reliance unless the plan is submitted to the IRS, even if it uses some sort of a 'pre-approved' plan document. Although it is possible to run such a plan without a D letter, it is best to go get one. We have done an IDP 401(k) plan for an indian tribal government by starting with an IDP 401(k) document and stripping out all of the nonapplicable provisions. It takes some time and intense review, but if you use the merge and compare tools, it makes the review easier at least. If you even a little familiar with drafting documents and have access to IDP document software, you should be able to handle this. We also prepared an government thrift plan, which sounds more complicated, but Corbel had software that included the necessary thrift language, and it was actually a little less work. We have also done this with a nonelecting church DB plan by starting with an IDP DB document and stripping out all of the provisions that are not applicable to a nonelecting plan. The IRS took about 11 months to approved the DB. The tribal plan document is in review with the IRS. The gov. thrift decided to delay to cycle E to submit.

The 401(a)(17) limit applies to the 403(b) plan. 415 limits apply to the 403(b) plan. The 402(g) limit applies to the 403(b) plan. A separate 'annual deferral' limit applies to the 457(b) plan. Two catch-up limits may apply to the 403(b) plan, and a special catch-up may apply the 457(b) plan too, depending on the plan language. If this "business" is also in business with other related organizations, additional issues must be considered. Slight tangent here. Hopefully the plan documents will be kept up-to-date with each new law and regulation that could affect the plan. Also, if the entity is a non-profit company, a one-time filing (a letter) to the DOL regarding the 457(b) plan is recommended (so the plan won't have to file any 5500s). Sometimes plan sponsors think that once the document is done, that they can forget about keeping any engagement with the document drafter. However, each year there are new laws and new regulations that frequently change the language that is required by the IRS - necessary language that stops the IRS from making the plan assets becoming taxable.

I think they are considered a tardy amender forever, unless the amendment is submitted via schedule F under EPCRS, then they are given a pass for being tardy. I'm not sure what you're actually getting at.

That occurs each Nov. 6th, depending on who we've chosen.

A plan with a plan termination date applicable for IRS purposes, and a different plan termination date for PBGC purposes... I'm not buying. For a standard plan termination, I believe there is one date of plan termination, not two.

If Jim Holland had his way, you would have to sign it before the BEGINNING of the plan year. If some other IRS officials had their way, it would not be required in the document, but be an administrative election.

If the 5307 had said "Yes" to "if plans are combined for coverage purposes" then you would not likely have the agent making the statements that are being made. Is it allowable to answer "no" for combining plans for coverage and then still combining plans for non discrimination testing? That would seem to affect the outcome of the determination letter, and would not be recommended. You should be able to amend the question to Yes and that should settle the issue. If you applied for a full scope determination, then you'll need to do Demo 6.

We are going to make the disclosures similar to those described in the proposed regs. We believe the disclosure is a benefit to all parties involved and that it will benefit us to prepare now, giving us a faster turnaround later - to just make any minor modifications (you know, someday, when either the existing proposed regulations are finalized, or new legislation is imposed, or completely new regulations are passed).

Also, would there be a fiduciary issue if, for some reason, a participant clearly picks the less valuable plan - for instance, someone who is very close to the end of their career and yet they pick the enhanced 401(k) plan. Would the fiduciary be liable for having even allowed the participant to make such a decision?

You may be interested to read this: http://benefitslink.com/boards/index.php?s...st&p=161125

Okay, I think that may work. Thanks!

No, they did not have a signed 8905. Unfortunately, it looks like the JS100 was in place at the time they restated for GUST - it was not an amendment occurring after, so I don't think section 19.03 applies. Or do you think it is vague enough that perhaps it could be applicable? An employer who makes certain amendments to its M&P plan is entitled to remain in the six-year remedial amendment cycle only for the current remedial amendment cycle. This temporary eligibility for the six-year cycle applies if the employer amends an approved M&P plan, including its adoption agreement, to incorporate a type of plan not allowed in the M&P program.

We came a cross a GUST prototype DB plan (small plan, 5 people) where the normal form is a Joint and 100% survivor annuity (life only if not married). In order to do that, the document provider did not complete the Normal Form section of the adoption agreement, since Joint and Survivor was not an option there, but they wrote an extra appendix and added it to the end of the adoption agreement to define the normal form as Joint and 100%. I think this puts the plan in the 5-year cycle. Their EIN ends in 2. They are considering plan termination. Should they restate and submit to VCP since they are a late restater, or are they considered a 'prior adopter' and still eligible for the 6-year restatement cycle? We thought about amending the normal form to Life only and add a fully subsidized J&100, but the other optional forms are affected too. What do you recommend?

Read below, where "form" means the written language. The escape from the document requirement is in Treas. Reg. §1.403(b)-3(b)(3)(iii), and it only lets you out if you are not using retirement income accounts. §1.403(b)-3 Exclusion for contributions to purchase section 403(b) contracts... (b)(3) Plan in form and operation. (i) A contract does not satisfy paragraph (a) of this section unless it is maintained pursuant to a plan. ... "(iii) This paragraph (b)(3) applies to contributions to an annuity contract by a church only if the annuity is part of a retirement income account, as defined in §1.403(b)-9." Does that help?

Are you saying that the 5% allocation in the DC plan for year #1 of the DC plan is sufficient to satisfy Treasury Reg 1.416-1 M-4? The past service in the DB plan includes one year before year #1 of the DC plan. If so, that's the answer I wanted to hear, of course.

An Employer adopts 2 new plans. One is a 401(k) profit sharing plan and the other is a DB plan. Suppose the DB formula provides 0.50% of pay as an accrual (for the non-key EEs of course). In order to use the 50% cushion in the first year, the DB plan includes one year of past service. The plan documents are written in a coordinated fashion such that the top heavy minimum of 5% of pay is provided as an allocation in the DC plan for anyone who is in both plans. Under Treasury Reg 1.416-1 M-4, a year of service for top heavy minimum accrual purposes is to be credited in a manner that is consistent with the plan's definition of service for benefit accruals under the regular plan formula. How is that rule satisified? Must the DB plan provide a 2% minimum accrual for the past service portion of the plan?