John Feldt ERPA CPC QPA

If that definition passes 414(s) and your document allows you to do so. Be sure to look in the plan document, which spells that out, probably something in the 401(k) /(m) section, something like Safe Harbor Compensation "the Employer must apply a nondiscriminatory definition of Compensation..." edit: typo

Perhaps if you had a document staff of 3 and you had 1000 DC plans to restate, then you may rush.

Ditto.

Yes master, now I see clearly.

Yep.

Of course, if you are talking about a 403(b) plan, and assuming you were only referring to the employer contributions, not the deferrals, then as Bob Architect (of the IRS) indicates, and I quote "... it is the belief that this plan could be a subject of a number of items either stapled together or held together by a big paperclip." So, just use a big binder clip, maybe add a sticker that says it is meant as a big paperclip (just in case) - and be sure to let us know how well received that is by the IRS folks.

I'll have to fix my audio, I can't hear anything.

I'm not sure hours worked is a good measure anyway. IMHO, their contribution toward the company's bottom line is the most critical metric. I've seen several firms where hours worked was a big deal to them, but the most efficient and most productive employees would rarely receive recognition/rewards, even though they added as much or more to the bottom line while spending less time to get there. If you need them to take on additional work, which could require additional hours, I still suggest that any additional compensation related to such extra work be based on the results, not how long it takes to get it done. I have also seen many procedures that were unnecessarily lengthy to support manual work because the people doing the work were unable to use excel or VB to speed things along. Be sure to measure quality as well as quantity.

Just to make sure, you are saying that a plan that utilizes the gradual age or service schedule under 1.401(a)(4)-8(b)(1)(iv) will NOT be required to provide the 5% gateway nor the 1/3 gateway, but the plan is still required to run (and pass) the general test. Is that correct?

Tom, In your session at the annual ASPPA conference, you had a few slides about this, and on one of them, I see the comment, "Remember, this is just to be able to satisfy the gateway - it doesn't guarantee passing nondiscrimination." Are you saying that if the plan uses this, suppose it's entirely based on service only, 1 year intervals, and the requirements are met: (regular intervals, starts at 1%, decreasing ratios, no ratio over 2.0, no jumping by more than 5%) must the plan also run a general test regarding the allocations? Is that what they mean in 1.401(a)(4)-8(b)(1)(viii), Example 1 part (iv), Example 2 part (v), Example 3 part (iv) when they say "if it satisfies paragraph (b)(1)(i)(A)"?

I know, I was failing to make the comment appear tongue-in-cheek, using WDIK's broker's use of the word ludicrous. I like the non-compete provision idea, that's good. edited to add: Lest there be any confusion to any reader here, the broker in WDIK's message was obviously incorrect about such a provision being illegal.

We will only take directions to draft a plan amendment with at least a verbal consent of the client, excluding the IRS required amendments of course. An even more ludicrous plan provision would be to not allow any participant distributions until normal retirement age (client wanted this in their plan to prevent any employee from taking their lump sum to set up a competing business).

If you are talking about the early withdrawal 10% excise tax (pre age 59.5, or pre age 55 lump sum, or pre-age 50 if public safety), then you will be pleased to know that the 10% penalty does not apply to 457(b) plans anyway. For instance, distribution code 1 on the 1099-R for a 457(b) distribution would only apply if a distribution from the plan included some non-457(b) rollover eligible money that had been rolled into the 457(b) account in the past, and it would only apply to that portion of the distribution. edit: grammar

February? Heck, we had about an inch of snow only a couple weeks ago. Then an earthquake in Illinois, making all the worms come out of the ground (or was that the rain?) - global worming. I've been to one of Larry's conferences a couple years ago. I hope to go to another as soon as the IRS issues guidance on a fixed rate for a cash balance plan (or a statutory hybrid something or another - whatever the IRS calls them now).

Your plan document could provide an interest rate and mortality in its definition that could provide higher lump sums (if you wanted) as long as they did not exceed the 415 limit. Otherwise, the true minimum is the phased-in kind: you are required to use the 80% of GATT and 20% of the new segmented rate structure for determining the minimum for 2008. Based on current interest rates, you would not satisfy 417(e) by paying a lump sum based 0% of the GATT rate and 100% of the new segmented rates, you'll have to wait until 2012 for that. That being said, you are required to fund using the segmented rates (100%). But lump sum amounts will be based on the 80% GATT / 20% segmented rates. Hmmm. That appears to support the underfunding of a new plan until 2012. Was that what they were hoping for under the new funding rules?

We started using the accrued-to-date method for testing under 401(a)(4) for a takeover DC plan that is about 10 years old - it's working great so far (a couple younger owners can now also max out). The client is about to add a DB plan. A couple of questions: 1. Can the entire combined benefits be divided by the largest number of years in either plan (aggressive I think), or should each plans' EBARs be determined separately and then added together (my preferred suggestion), where the total DB plan benefits accrued are divided by the number of years in the DB (ignoring any prior years before the DB was added as a plan). 2. If any rollover balances exist in the DC plan for some NHCEs, should they be ignored?

"My parents want me to do well in life" Be sure to keep your overall perspective as well. Although the world tends to view success by looking at wealth, fame, academic, or other achievements, a true measure of success does not depend upon any of those (IMHO, FWIW).

I agree. When looking at Treas. Reg. §1.403(b)-3(b)(3)(iii) it appears to exempt churches from a written plan (form) unless they use retirement income accounts. edit: typos edited later to add: I don't think it requires church 403(b) plans to only use retirement income accounts.

Many thanks!

Near the end of 1.401(a)(4)-9©(3)(ii), it states: "In addition, the minimum allocation gateway of §1.401(a)(4)-8(b)(1)(vi) and the minimum aggregate allocation gateway of paragraph (b)(2)(v)(D) of this section cannot be satisfied on the basis of component plans." Does that say the gateway would have to be provided for the overall plan, not just the component, or am I misunderstanding the intent of this? edit: typo

Yes, I agree with that.

Thanks Appleby!

I'm not so sure about using smoothly increasing rates in the DC plan as a means to say the design satisfies the DB/DC combo gateway requirements. Are you indicating that the existence of smoothly increasing rates takes care of the gateway requirement for a DB plan needs to use the DC plan to pass 401(a)(4)?

Suppose a calender year corporation wants to establish a DB plan that has a June 30 plan year end. They want a short first year to run 1-1-2008 to 6-30-2008. Thereafter, the plan year starts July 1. Beginning of year valuation. Since their fiscal year is calendar year, can they deduct the January 1, 2008 (half-year prorated) funding requirements AND their July 1, 2008 funding requirement on their 2008 tax return? (let's assume all contributions are made during 2008 to cover the funding requirements)

As long as they avoid double proration too.