John Feldt ERPA CPC QPA

The 402(g) excess is ignored for runnning ADP testing, but it should be considered when the refunds are determined due to the failed ADP. Agree? If so, then (assuming this is the only HCE) a full deferral into Stone was okay and a full refund from Glass is okay.

Yes, the plan allows the 402(g) excess refund to be made from the Glass plan.

The language in the plans allow a choice to be made regarding which plan refunds the 402(g) excess. However, to illustrate a point and purpose of the OP, let's suppose this is the first year for both plans, and the HCE is the only HCE in the plan. Deferral $15,500 to Glass plan - all is refunded (402(g) excess). Deferral $15,500 to Stone plan - none is refunded. So far okay, but: ADP fails for Glass plan. Is the Glass plan now required to do a QNEC to pass (since no more $$ are left to do a deferral refund for the HCE?) Or is the refund that has been done for 402(g) excess purposes also count toward making the failed ADP test's refund?

1/3 owner (Guy) of Glass Company. Defers max ($15,500) in Glass 401(k) Plan. No related other owners. Same guy: 100% owner of Stone Company. Defers max ($15,500) in Stone 401(k). Guy wants to pick which plan will return the 402(g) excess. Looks like Glass plan will fail ADP (breaks), but the Stone plan will pass (solidly). Can Guy have the 402(g) excess refunded entirely from the Glass Plan? If so, will any of that deferral count in Glass plan's ADP test?

You can stay at 6% - that is as high as you are required to go for automatic enrollment. The plan sponsor could adopt provisions to apply higher automatic amounts (above 6%), but only as long as these automatic amounts are not more than 10% of pay. We also have one client who either wants employees to really be sure to save enough, or the client wants to discourage deferrals (you pick) - they automatically enroll everyone at 10%.

This is the only amendment to the DB plan formula (so far). My concern is in the middle of 1.401(a)(4)-5(a)(3): "... the service credit (or benefit increase) is granted on a reasonably uniform basis to all employees, ..." -- if only an HCE has a benefit increased by the amendment, how does this satisfy "uniformity". Can a DB plan amendment be made that only increases a benefit to an HCE (assuming the plan has NHCEs)?

The amendment would be done in 2008 to take the 12/31/2006 accrued benefit and add on higher accrual formula using a fresh-start date of 12-31-2006. In effect, granting one year of past service for 2007 under the formula.

Even if the amendment were done a year ago, suppose it would have used no prior service at that time, and suppose it would have only increased accruals for one HCE. Any problem with that?

Suppose a plan amendment is done that provides a year of past service (prior to the effective date of the amendment). Also, suppose the amendment is written to only affect the benefit accrual (upward) for a one HCE - it does not change the benefits for any other participants. Overall, even with this higher benefit accrual, the general test under 401(a)(4) passes. Is the amendment deemed to be nondiscriminatory? The past service provided did not exceed 5 years and the accruals do not appear to fail under 401(a)(4) testing.

A church plan, as defined in ERISA Section 3(33) is not subject to Title I of ERISA. A church plan is a plan established/maintained by a church or a convention or association of churches (and it is exempt from tax under Code Section 501). A church plan definition includes some fairly specific requirements for identifying church employees and for identifying any employees under an unrelated business. Sometimes church-controlled organizations might be able to qualify for the church exemption. See ERISA sections 3(33) and 4(b)(2). If a church or convention or association of churches that maintains any church plan makes an election under Code Section 410(d), then various Code requirements, including participation, vesting, and funding requirements, would apply. Such an election, if made, is irrevocable. Church plans are generally exempt from ERISA unless an election is made to have ERISA apply. That election cannot be revoked. Now, would a church ever elect to have ERISA apply, and why? - that may be an interesting discussion.

No increase in the IRA limits (5,000 and 1,000) for 2009, confirmed?

You can make a 410(d) election and attach it with your 5500 - that would be an affirmative election (the coverage is not triggered by merely the 5500 filing, until we hear otherwise from the IRS/DOL). Another method would be to include such a 410(d) election with the plan's determination letter filing.

SunGard (Corbel) has done some cash balance plan seminars where they specifically state that a cash balance plan cannot have a last day requirement for receiving a benefit accrual. Perhaps the provision being used is not completely understood by the document drafter?

Actually, the 401(a)(17) compensation limit also applies. . .

This could result in a contribution that isn't big enough to cover the lump sum value. The gap between the lump sum values and the actual amount you can contribute should narrow until 2012 when this 417(e) phase-out gets rid of the 30-year treasury.

If it's a governmental plan, then the employer contributions are not subject to the Federal statutory eligiblity requirements that apply to qualified plans and the employer contributions are not subject to nondiscrimination testing.

In order for the plan to maintain its tax-qualified status, the IRS requires the document restatement. Why would that restatement fee be considered a settlor function, and not just a normal ongoing required plan expense to maintain the plan?

For a calendar year plan, my understanding is that an employee is treated as a 5-percent owner for purposes of section 401(a)(9) only if the employee is a 5-percent owner during the calendar year in which such owner attains age 70-1/2. In that case, the RMDs won't stop even if they end their ownership later. Also, if they are not an owner in that year, but later become an owner, the RMDs do not start if they are still working. I may be wrong, but that's how I see this issue.

Take a really close look at the document. I'll bet the DB (CB) document language actually says that for those employees who are participants in both plans, the top heavy is provided in the DC. Thus, as mwyatt has explained, anyone who is only eligible for the DB plan must receive at least the normal DB top heavy minimum, which is a 2% per year times 5-yr avg pay as a life annuity (max 10 years) payable at NRD. Perhaps a more interesting question might be (to me anyway): if a participant is in the DC and the DB plan, and terminates before the last day of the plan year, but after getting 1000 hours for the plan year, where is the top heavy provided? Say the DC plan requires a last day to get the allocation. No TH allocation in the DC plan. But a DB plan can't have a last day requirement, instead, it could impose a 1000 hour requirement (which has been met). They are a participant in both plans, so the document language would indicate that the top heavy is provided in the DC, but the DC top heavy is zero since the last day rule was not met, so is zero okay as a TH minimum even though the ppt had 1000 hours and was in a DB plan during that same time?

http://benefitslink.com/articles/guests/ASPPA-9-14-2007.html http://www.asppa.org/pdf_files/Solomon_Ran...onltr091307.pdf http://www.asppa.org/pdf_files/Solomon_McC...nltr_091307.pdf http://www.asppa.org/pdf_files/Solomon_Bau...nltr_091307.pdf http://www.asppa.org/pdf_files/Solomon_Gra...onltr091307.pdf

okey day. Go ahead and deduct the full 73,152 in the DB since the DC contribution is only 6% (13,800) of compensation. The letter says that 404(a)(7) does not apply if the DC plan has employer contributions that are 6% or less.

If only 6% is an employer contribution in the DC, then why can't the full $73,152 be deducted in the DB? I thought the IRS letter on September 13, 2007 explained it that way...

In order to get the lump sum (over $5000), the participant must waive an annuity. Remember, the waiver is only valid for 180 days (that used to be 90 days, right?). Thus, the annuity start date must be within that 180 day period for the waiver to be valid. You cannot waive an annuity that is payable later than 180 days from the date of the annuity notice is provided, it would not constitute a valid waiver. Thus, an annuity payable at NRD can only be waived (in favor of a lump sum payment instead) during the 180 days preceding NRD, unless an annuity is payable earlier than NRD.

Seems like a stretch, but I'll concede that it is remotely possible. If everyone has at least 5 years of service in your example, the are no years left for the "projection" at 8.5%, so it's merely a conversion at 8.5%.

Until the IRS (someday) comes out with the "fixed rate" guidance for cash balance plans, the 8.5% is not usable as you describe. I doubt the eventual guidance would allow it either.