John Feldt ERPA CPC QPA

And, if I understand Tom correctly, you can test one rate group on a contributions basis, and another rate group can be tested on a benefit accrual basis.

Did any guidance change the GAP period income issue for excess deferrals? Under Final 1.402(g)-1 regulations for 1.402(g)-1 paragraph (e)(5)(i) and it states as follows: (5) Income allocable to excess deferrals (i) General rule. – The income allocable to excess deferrals for a taxable year that begins on or after January 1, 2007 is equal to the sum of the allocable gain or loss for the taxable year of the individual and, to the extent the excess deferrals are or will be credited with gain or loss for the period after the close of the taxable year and prior to the distribution (the gap period) if the total account were to be distributed, the allocable gain or loss during the period. The income allocable to excess deferrals for a taxable year that begins before 2007 is determined using the 1.402(g)-1(e)(5) (as it appeared in the April 1, 2006 edition of 26 CFR Part 1) - So it looks to me like gap period income will apply for excess deferrals beginning with 2007 tax years, but PPA said something related - that must have only applied to ADP/ACP refunds, not for excess (over the 402(g) limit) refunds?

If you are talking about the 'new' safe harbor plan type that uses the automatic escalation from 3% to 4% to 5% etc. (a QACA plan), then yes, you need to have that be effective at the beginning of the plan year. Be sure to give the proper notices timely. If you simply want to be an ACA, not a QACA (ack!), then no, you can adopt the automatic enrollment features and/or the default enrollment escalation features at any time. Be sure to give the proper notices timely. I'm not sure if that answers the question, but I hope that helps!

I think you can apply for a D letter now, off-cycle, and you will not be rejected, but only because the next cycle (2011) is more than 2 years away. I recently read something that indicated this, I think it was in an IRS EP newsletter. If I find it, I'll come back and add the link. edited to add this link: http://www.irs.gov/retirement/article/0,,id=146910,00.html go to the heading near the bottom entitled "Off-Cycle Filing" and read the second bullet point

Okay, technical point granted to QDROphile. Many small plans define the Plan Administrator to be the same as the Employer, who is also the plan sponsor. But yes, you're right. Even when the plan language is that way, the Employer needs to remove their Employer hat and put on their Plan Administrator hat to do the distribution. Mine is a green hat.

Since this is a church plan which has not elected to be subject to ERISA, is double proration therefore allowable? ERISA §2530.204-2(d) Prohibited double proration (1) In the case of a defined benefit plan that (i) defines benefits on a basis which has the effect of prorating benefits to reflect less than full-time employment or less than maximum compensation and (ii) does not adjust less-than-full-time service to reflect the equivalent of full-time hours or compensation (as the case may be), the plan may not further prorate benefit accrual under section 204(b)(3)(B) of the Act and section 411(b)(3)(B) of the Code by crediting less than full years of participation, as would otherwise be permitted under paragraph © of this section. These plans must credit, except when service may be disregarded under section 204(b)(3)© of the Act and section 411(b)(3)© of the Code (relating to less than 1000 hours of service), less-than-full-time employees with a full year of participation for the purpose of accrual of benefits. 1.401(a)(4)-12 under Section 414(s) compensation (4) Double proration of service and compensation. If a defined benefit plan prorates benefit accruals as permitted under section 411(b)(4)(B) by crediting less than full years of participation, then compensation for a plan year, 12-month period, or other specified period that is used to determine the amount of an employee's benefits under the plan will not fail to be section 414(s) compensation, merely because the amount of compensation for that period is adjusted to reflect the equivalent of full-time compensation to the extent necessary to satisfy the requirements of 29 CFR 2530.204-2(d) (regarding double proration of service and compensation). This adjustment is disregarded in determining whether the underlying definition of compensation used satisfies the requirements of section 414(s). Thus, for example, if the underlying definition of compensation is an alternative definition that must satisfy the nondiscrimination requirement of §1.414(s)-1(d)(3), in determining whether that requirement is satisfied with regard to the underlying definition, the compensation included for any employee is determined without any adjustment to reflect the equivalent of full-time compensation required by 29 CFR 2530.204-2(d).

When a participant terminates with a balance under $1000 and over $200, and they do not respond to the paperwork it is my understanding that we are to force out their benefit in a cash payment. Correct, assuming your plan has force out (or cashout) provisions. If the benefit is over $1000 we are to force out their benefit using a direct rollover into an IRA Correct, assuming the overall cashout threshold was not lowered to $1000 when the plan adopted the 401(a)(31)(B) mandatory distribution amendment in 2005 or shortly thereafter. Of course, we can only do this if we have sent out the proper paperwork notifying them of this. If the plan requires involuntary cashouts, then the plan sponsor is required to send out the paperwork and is then required to force the payment. It is not a plan provision that can sometimes be followed, that would be an operational error (albeit a minor one). It is not clear to me what to do with amounts over $200 and under $1000...can't rollover...so what??? Force out? Yes, force out. Establish an administrative policy where, after a certain amount of time expires following the date when the initial paperwork is sent, a check is cut and sent out (be sure to withhold properly). In the participant's initial paperowrk you could explain the procedure a little to avoid participant surprise. Make sure the check gets cashed. If you need, make a procedure for handling uncashed checks that go stale.

Statements.

I checked with our document sponsor. It turns out that the document sponsor's volume submitter document from 2002 was approved by the IRS without the gateway language. The document sponsor was allowed to change their vol sub document in 2003 to include the gateway language, but only prospectively. Any use of gateway under that document for the 2002 year had to be adopted within 9.5 months after year-end. The other practitioner did not know about this (they used the same document sponsor as ourselves).

If the participant would be eligible for a lump sum amount today and the order itself is in effect today, then I see no problem with allowing the Alternate payee the same payment option available to the participant. Calculate the portion of that accrued benefit was earned as of the divorce date and divide according to the order, determine the lump sum based on the participant's age as of the payout date.

I think this is it, attached.

IMHO, saying "X% equities" and/or "Y% fixed income" does not satisfy the requirement to disclose "the value of each investment to which assets have been allocated". The word "each" is the stumbling block to me. Guidance is needed.

Notice 2007-69: http://www.irs.gov/irb/2007-35_IRB/ar16.html I don't see anywhere in the above notice that distiguishes a different application toward a traditional plan than for a cash balance plan. Have you looked into an early retirement option?

Thanks Tom. Then we'll 'probably' continue pay the greater of each until we have the PPA amendment adopted later (this spring), just to stay of the conservative side.

Which reminds me to ask, how many providers that have used prototypes in the past will now just switch (during the EGTRRA restatement) to use mostly volume submitter documents?

Yes. The plan document should spell out what is required in order to defer the date under which constructive receipt occurs. You may want to look at Treasury Regulation 1.457-7©.

I agree and I think it's fun to say "zimbo"

Thanks, Tom. That was exactly my concern when reading 2007-67. At every corner, it talked about an amendment to adopt the PPA rates. Since we are preparing to send out the Final 415 regs amendment with the PFEA amendment, I think we'll go ahead and include the PPA lump sum amendment as well.

http://benefitslink.com/boards/index.php?s...971&hl=GATT The above discussion ended before the year-end new plan document setup rush, so I am wondering if any new insight is out there...? Recap: Ongoing DB plan defines the plan's interest rate and mortality as the GATT applicable rate and mortality. Assume the plan is not restricted (it's not under the 80% threshold). The plan requires the Section 417 interest rates for the minimum and the applicable mortality (commissioner's standard table). The applicable interest rate is the 30-year Treasury securities as specified by the Commissioner. In the 2008 plan year, if the plan is not yet amended for the 417 change from PPA, must the plan compare the lump sum determined by using the old GATT mortality and full 30-year treasury interest rates (the existing terms of the plan), to the lump sum determined from the new required 417(e) blended rates and its new mortality? Or can we just switch immediately in the 2008 plan year to just use the new blended rates and mortality with any 411(d)(6) worry, even if no amendment is in place describing these new rates and mortality? I'd like to just start using the new stuff since the PPA required no amendment until 2009, but...

Our volume submitter cross-tested DC plans have a resolution and a Gateway amendment (signed as late as 10-14-2003). We have been placing that same language (it has been cut and pasted) at the end of the vol sub basic document ever since. We just talked to another practitioner who used the (same provider for their vol sub doc). They do not have any gateway amendments in place for plans that were setup before 2005 (and many of them are cross-tested plans). What's the story regarding these gateway amendments for these vol sub documents?

okay, thanks for the clarification.

Okay, for dummies like me: 404(o) DEDUCTION LIMIT FOR SINGLE-EMPLOYER PLANS. ... 404(o)(5) SPECIAL RULE FOR TERMINATING PLANS. --In the case of a plan which, subject to section 4041 of the Employee Retirement Income Security Act of 1974, terminates during the plan year, the amount determined under paragraph (2) shall in no event be less than the amount required to make the plan sufficient for benefit liabilities (within the meaning of section 4041(d) of such Act). 1. Does this mean a plan subject to the PBGC gets an immediate deduction of the amount that is contributed to make the plan sufficient? (not required to deducted over 10 years) 2. If the plan is not subject to the PBGC, then the normal required contribution under 412 (or 430) applies up until the last plan year (the one with a plan term date), and any additional contribution made can only be deducted as fast as 10 years? I've been thinking that 1 is Yes and 2 is Yes... When I read Mike's comment that made me think the plan loses any immediate full deduction options for its last plan year for any amount that is above the 412 minimum...

A profit sharing 401(k) plan has an option for participants to defer under 401(k) - based on all taxable W-2 wages. The plan also has a CODA option, which allows participants to take some or all of the company "profit sharing" as cash instead. I must have been working on DB plans and the why's and what's of a CODA plan slipped by me. What is the advantage of having a true CODA vs normal 401(k) deferrals - or are they considered to be the same thing? Are there any differences, like FICA taxation, what amounts count for testing, etc?

The plan pays a flat $375 fee in their submission under EPCRS. In the original version of Revenue Procedure 2006-27 it stated "for each year of the failure", but in the final published (and official) version, that clause was removed. Go to page 51 of the pdf file: http://www.irs.gov/pub/irs-drop/rp-06-27.pdf You'll see that the last sentence of 12.03 no longer has the clause "for each year of the failure". Hope that helps!

That's very good advice. The plan discloses in it's SPD that expenses for QDRO reviews will be charged directly to the affected participant's account.