John Feldt ERPA CPC QPA

I'm surprised not everyone added that language. Fair enough. If your document allows you to amend on your clients' behalf, then I'm suggesting vol sub for all of your EGTRRA restatements.

I see no advantage to using a prototype plan for EGTRRA restatements, when compared to a volume submitter EGTRRA document. The prototype appears to be more restrictive.

That is a fine line, and certainly should be considered during the decision making process. I am not sure, just from those cites alone, that such an amendment to vest eligible participants only would be discriminatory.

What efficiency exists in a prototype now under EGTRRA (vs. a volume submitter)?

Can you get a D letter, specifically requesting the offset issues to be reviewed for 401(a)(26)? I have heard that some IRS auditors in some regions have no problem with the idea presented above in this thread. Other IRS auditors take you to audit cap. Not a personal experience on my part, but I'm sure another reader can attest to that.

Good question. There were no non-vested terminations prior to this time (the plan's only 2 years old). -Thanks!

Glass half empty person says = bummer for the most recent hire. Glass half full person says = you two helped get our company started, here's a small reward. Both good points, which stem from individual attitude and/or perspective in general. But I'm really looking for "you can't do this because <insert cite here>". I haven't seen anything like that here or in our own research yet.

Well, according to IRS officials at a conference (fall 2006), they want to keep the integrity of the EPCRS program in tact. They stated that the only time they would ever turn over a closed unresolved VCP case to their auditors would be for an egregious case. They also stated that (as of the date of that conference) they only had a few (less than a dozen?) cases that were closed as unresolved, and none of those were turned over to their auditors.

§1.401(a)(26)-5. Employees who benefit under a plan (a) Employees benefiting under a plan (1) In general. --Except as provided in paragraph (a)(2) of this section, an employee is treated as benefiting under a plan for a plan year if and only if, for that plan year, the employee would be treated as benefiting under the provisions of §1.410(b)-3(a), without regard to §1.410(b)-3(a)(iv). (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. ... etc. ... (iii) Concurrent benefit offset arrangements (A) General rule. --An offset or reduction of benefits under a defined benefit plan satisfies the requirements of this paragraph (a)(2)(iii) if the benefit formula provides a benefit that is offset or reduced by contributions or benefits under another plan that is maintained by the same employer and the following additional requirements are met: (1) The contributions or benefits under a plan that are used to offset or reduce the benefits under the positive portion of the formula being tested accrued under such other plan; (2) The employees who benefit under the formula being tested also benefit under the other plan on a reasonable and uniform basis; and (3) The contributions or benefits under the plan that are used to offset or reduce the benefits under the formula being tested are not used to offset or reduce that employee's benefits under any other plan or any other formula. Be sure to meet all of the conditions in (a)(2)(ii) or (a)(2)(iii).

I'm not sure. I don't think so, I find no requirement to include them for testing the amendment for discrimination.

1 NHCE would enter 7-1-2008.

A plan has 4 participants, 2 HCEs, 2 NHCEs, as of 1-1-2008. They want to amend by June 30, 2008 to provide full vesting for all participants in the plan 1-1-2008. New entrants July 1, 2008 and thereafter are subject to the graded 20% schedule. Any problems doing this?

Okay, that we already know is true. Suppose those rate groups all pass just fine. The question is, what is the minimum gateway (5%, 6%, 7% or 7.5%). To find out which applies, we have to calculate the "HCE Rate". Are only employer nonelectives included in the numerator for the HCEs? For the DB portion of this HCE rate, we'll use 8.5% UP84 for the PVAB (to see if that gets us below one of the 5% bands points).

DB/DC combined for 401(a)(4). Top Heavy 5% provided in the DC plan. Under 1.401(a)(4)-9(b)(2)(v)(D)(1), the Gateway is 5% of compensation, provided the "HCE rate" does not exceed 25% of compensation. The "HCE Rate" appears to be defined in that same paragraph as "the aggregate normal allocation rate of the HCE with the highest such rate". Then (E) tells us the aggregate normal allocation rate is determined in (b)(2)(ii) without permitted disparity. In (b)(2)(ii), the aggregate normal allocation rates are determined for DC in 2©(2) and for DB in 8©(2), and then added together. In 2©(2), the DC portion appears to include all employer contributions and forfeitures, divided by compensation (or average compensation if using that for this test?). Does this amount then exclude employee deferrals, but include match? I assume that is the case. Match was included in the average benefits test, but not in the rate group tests - so I just want to verify this one.

An employer wants to have the plan assets pay for a portion of the TPA's plan administration costs (about 40% of it). Any problem with paying this from the plan as an asset management fee (a small percentage of the assets, 0.03% or 0.0003) across all plan assets, including Davis Bacon (prevailing wage contract) accounts?

The participants won't have a claim under ERISA title IV, but perhaps they might be able to sue under state laws for lost benefits.

When you run the January 1, 2008 actuarial valuation, you project a DB contribution for 2008. However, you look back at calendar year 2007 for the testing for both plans - for the 401(a)(4) testing, coverage testing, 401(a)(26), top heavy, etc.

That's what I thought - thanks!

We are making sure all of our SPDs are updated (the 5-year SPD update rule). Down to the last few, and just want to make sure it is possible for a DB plan to be subject to Title I but not Title IV solely due to the different definitions used within ERISA regarding ownership. In the PBGC regulations (4022) it defines the term "substantial owner'' means an individual who-- (i) owns the entire interest in an unincorporated trade or business, (ii) in the case of a partnership, is a partner who owns, directly or indirectly, more than 10 percent of either the capital interest or the profits interest in such partnership, or (iii) in the case of a corporation, owns, directly or indirectly, more than 10 percent in value of either the voting stock of that corporation or all the stock of that corporation. We have some plans like this, where the owner and his brother-in-law each own 50% of a corporation. No other employees. I was thinking the Title I exemption applies to 100% owners and their spouses. So it looks to me that they are covered by ERISA Title I, but not subject to the PBGC. Thus we need to update their SPD due to ERISA 104(b)(1). Any thoughts?

I do not think the actual signed copy is required, as long as you provide a copy of the amendment with language that states something like "Except with respect to any elections made by the Employer herein, the prototype sponsor, on behalf of all adopting employers, hereby adopts this Amendment on MM/DD/YYYY" and "The prototype sponsor's signature is on file with prototype sponsor" and "The Employer only needs to execute this amendment if alternative elections have been made to this amendment in whatever section those options are available" - you get the idea. edit: typo

This thread is somewhat related too: http://benefitslink.com/boards/index.php?s...656&hl=5310

I think so. Also, a somewhat related thread regarding standard termination. Those kids can't forego receipt, but the 50% owner father can. http://benefitslink.com/boards/index.php?s...=majority+owner

Look at the language in the plan regarding withdrawal of an employer, or termination of a participating employer. It will probably tell you a notice is required and that the Employers must agree on the withdrawal procedure. The document might allow an option instead of a spinoff - to pay out the account balances of the employees of the terminated employer, unless the employee also is employed by another Participating Employer and it might spell out vesting. It may require the employers to agree on such a procedure. Or, the document might spell out only an option for the money to stay where it is, or for the withdrawing employer to establish a plan to accept the accounts (spin-off) from the old plan.

And don't forget to look at ERISA section 3(33)

Just for the record, since I found this. Double proration is prohibited in ERISA plans under 411, so it does not apply.