John Feldt ERPA CPC QPA

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.

Unless they test the DB on a DC basis (as AndyH mentions), for testing, I would think the cash balance hypothetical accounts should be projected at the plan's interest crediting rate, then converted using the plan's definition of actuarial equivalence. I doubt the interest crediting rate is 8.5%, it is more likely based something from 96-8 or possibly the long-term corporate bond rates. The conversion of that projected balance at normal retirement age could be 8.5% if that's defined in the plan's definition of actuarial equivalance.

Which states?

Some small employers, in an effort to actually discourage employee deferrals, will have no in-service options, no payment options until retirement age (even if terminated), no loans, and only allow annual deferral changes (no revoke option, except one-time annually). Very rare, but allowable.

Full vesting as of what plan year?

By not an issue I mean the % will be about 10%. Top Heavy is not an issue that I need to worry about, is what I meant. Only the owner was in the plan, so how is the top heavy percentage only 10%? Is there another plan, or am I missing something?

Well, the Rabbi of course! (okay, clearly 409A/457(f) is not for me).

A sampling of 5 individually designed defined benefit plans: Submitted January 30, 2007, a restatement of an existing nonelecting church plan First IRS request on December 3, 2007: change "separation from service" to "severance from employment" Favorable letter received on January 18, 2008. 12 months Submitted January 30, 2007, a restatement of an existing cash balance plan First IRS request on August 15, 2008: change "separation from service" to "severance from employment" 20 months and still waiting Submitted January 22, 2008, a new cash balance plan executed 12/31/2007 No response (other than the acknowledgement letter). Submitted January 22, 2008, a new cash balance plan executed 12/31/2007 Favorable letter received on August 18, 2008, no questions asked. 7 months! Submitted January 25, 2008, a new cash balance plan executed 12/31/2007 No reply (other than the acknowledgement letter)

Yep, you got that right!

Jay, Something I read many months ago had made me believe that we couldn't be that aggressive until the technical corrections bill gets passed, but I can no longer find that reference. Perhaps it was a verbal comment from a conference.

Okay, let's post the cite: 404(o)(3)(A) IN GENERAL. The cushion amount for any plan year is the sum of (i) 50 percent of the funding target for the plan year, and (ii) the amount by which the funding target for the plan year would increase if the plan were to take into account (I) increases in compensation which are expected to occur in succeeding plan years, or (II) if the plan does not base benefits for service to date on compensation, increases in benefits which are expected to occur in succeeding plan years (determined on the basis of the average annual increase in benefits over the 6 immediately preceding plan years). 404(o)(3)(B) LIMITATIONS. (i) IN GENERAL. In making the computation under subparagraph (A)(ii), the plan's actuary shall assume that the limitations under subsection (l) and section 415(b) shall apply. (ii) EXPECTED INCREASES. --In the case of a plan year during which a plan is covered under section 4021 of the Employee Retirement Income Security Act of 1974, the plan's actuary may, notwithstanding subsection (l), take into account increases in the limitations which are expected to occur in succeeding plan years. subsection (l) is 404(l), the compensation limitation. Okay, so an accrual of 1/10 of the DB 415 dollar limit in year one could provide a first year party due to the contribution to be made, but only wake up with a hangover in year #2, right? Drive safe though (we don't want any death benefit problems). Thanks Andy and Jay - when looking this through, I would agree and although it seems rare it is certainly possible for the right client (one who is okay with the hangover and the death benefit issue).

As long as there was not a DB plan in place for at least 2 years prior, then a new plan is not considered an amendment. If the HCEs are accruing near the 415 limit, you are not able to go with a 50% cushion beyond their 415 limits (at least that's my opinion).

Depends on whether or not that person is an HCE or NHCE. If they are HCE, then including them is great! If NHCE, then bummer. Very conservative approach would include as a zero if NHCE and exclude from the test if HCE.

Find another broker who will find an annuity company that will do that type of annuity (expect a high cost and prepare the client who pays you also, for that cost)?