John Feldt ERPA CPC QPA

Two things: 1) a "plan document" isn't technically required by the final regulations, but a "written plan" is (yes, that may just be mincing words FWIW). Only the preamble to the Final 403(b) regulations uses the word "document". The written plan could just be a collection of the contracts, agreements, etc. as long as they cover/include all of the necessary items to satisfy the Final regulations. 2) I don't remember reading a section where a frozen 403(b) plan would not be required to comply starting in 2009 (but another commentator may help us there). Another option would be to adopt the Final Regulations now which allows you to terminate the 403(b) plan. Wow, they still have a money purchase plan! Not many of those left around! The broker might be saying the money purchase plan could be merged into a 401(k) profit sharing plan, which isn't a bad idea, if it's really necessary for the employer to do that. We have a 457 forum here, you can ask specific question there. I'm guessing the employer in your case is a non-profit? A 457(b) plan for a nonprofit can only cover primarily upper management and highly compensated employees (top hat plan). One reason for that may be that the money "deferred" is not protected by a trust, it is still subject to creditors. Now, why spend the money on a money purchase merge/restatement, instead of just adopting the Final 403(b) regulations for the 403(b) plan? If you go to a 401(k) plan, then you have to test average deferrals (ADP test, unless you adopt Safe Harbor provisions); whereas you have no ADP test on a 403(b) plan. Please find someone (other than the broker) who can give the employer the advice they need to have the best overall plan(s) for their specific circumstance.

I'd like to see that case law, we'll take the ones that don't want to work with SoCalActuary.

You're probably talking about a DC plan anyway, but for a DB plan the 401(a)(9) amendment isn't due until they restate for EGTRRA or if earlier, they terminate the plan. Also, if it's a DB plan that does not have lump sum cashout provisions, then I don't think a mandatory rollover amendment is required. added on edit: Ah, yes - I now see the orginal post is also under the 401(k) section. My message here can be disregarded.

Angela, mjb has it. To recap that post: Employee contribution maximums (assuming ee is age 50 and the school is a government employer): 1. 457(b) plan: $15,500 + greater of: $5,000 catchup, or the special catch-up = $20,500 max (if no special catchup) 2. 403(b) plan: $15,500 + $5,000 catch-up = $20,500 max Total maximum employee deferral (contribution) for both plans combined = $41,000. (This assumes the special catch-up is not used, and that both plans allow the $5,000 catch-up) Employer contribution maximums A. 457(b) plan: the amount in #1 above is the max, so if the ee maxes out, no further 457(b) contribution is allowed B. 403(b) plan: $45,000 reduced by employee deferrals (but not reduced by catch-up deferrals) So if the employee defers the maximum in #2 above, the maximum employer contribution is $29,500 as follows: $45,000 - $15,500 = $29,500 Overall maximum for both plans = $41,000 + $29,500 = $70,500 (if no special catchup) That being said, your employer's plans might not contribute any employer dollars, perhaps it only provides for deferrals. Or perhaps the employer has the discretion to contribute if they have funds available to do so, a discretionary employer contribution. In any case, these things would be spelled out in some type of plan summary, perhaps they have even done a full summary plan description for their employees to explain these items. I hope this helps. Let me know if you're curious about the special catch-up. We've only shown the $5,000 age 50 catch-up here.

Thank you Mike, John, QDROphile, mjb, and blbvip. Much appreciated.

Yes, I'm the buddy - nice try! - I did also say that they can go up to $31,000 (15,500 x 2) if they are eligible for the special last 3 years catch-up and they have enough unused prior limits to do so. Let's see what the commentators say!

Ah, yes, okay, and that should vary based on the age of payee as well. Does anyone have a link to the new table (for lump sum payouts after 2007)?

To get the free ACP test, look at 1.401(m)-3(d)(3)(i): "Matching contributions are not made with respect to elective deferrals or employee contributions that exceed 6% of the employee's safe harbor compensation." So instead of the formula you propose, if you are not concerned about the 100% vesting, you could provide 116.67% match on the first 6% deferred. Anyone deferring 6% will get a match of 7% of pay. That would get you a free ACP pass. There are a number of other ways to do that as well, you could combine the Basic SH match with a concurrent discretionary match or use a fixed match to get the desired results.

Wow - cool new posting features! ak2ary - are you talking about the recent drop by about 0.33% in the 30-year treasury rate? Are you saying that even with 20% of the corporate bond rate applied you're thinking that the PPA 80/20 rate will produce a larger amount due than the 100% GATT rate would have? Please elaborate, I haven't kept up on this issue as well as I should.

Thanks jpod, that is very helpful.

I don't think so. The plan was changed during the year (terminated), which affects employee deferrals (stops them) so the requirement under 1.401(k)-3(e) "unless plan provisions that satisfy the rules of this section are adopted before the first day of the plan year and remain in effect for an entire 12-month plan year" has not been satisfied.

See pages 20 and 21 http://www.pbgc.gov/docs/2007_Premium_Paym...nstructions.pdf if the full link didn't copy in, the last part of it is: 2007_Premium_Payment_Instructions.pdf

Ah, when I looked back to the original post, I realize that I failed to mention that the sponsor is a nonelecting church plan that wants to voluntarily adopt some sort of a QDRO policy. That leaves them some flexibility since they are not required to accept QDROs anyway. Must they adopt all of 414(p), or can they adopt a policy that might not include all the 414(p) provisions?

414(p)(3) A domestic relations order meets the requirements of this paragraph only if such order 414(p)(3)(A) does not require a plan to provide any type or form of benefit, or any option, not otherwise provided under the plan 414(p)(5) To the extent provided in any qualified domestic relations order 414(p)(5)(A) the former spouse of a participant shall be treated as a surviving spouse of such participant for purposes of sections 401(a)(11) and 417 (and any spouse of the participant shall not be treated as a spouse of the participant for such purposes), and 414(p)(5)(B) if married for at least 1 year, the surviving former spouse shall be treated as meeting the requirements of section 417(d). This means a DRO can require the plan to treat the Alternate Payee as a surviving spouse and thus assign a specific portion of that QPSA or QJSA to the alternate payee upon the death of the participant, do you agree? If so, must the plan allow a payment to be made earlier than 1) the date the participant dies and the QPSA or QJSA would be payable, or 2) the date the participant begins payments?

Tom, nice job on your letter in May, especially pointing out the conversation Grassley and Baucus had about this.

A large new DB plan is in the process of being established. The plan sponsor does not wish to offer lump sums, other than the $5,000 cashouts. In addition, because the company already provides life insurance outside the plan, the plan sponsor has decided to only provide the minimum spousal death benefit in the plan. Thus, an unmarried participant has no death benefit payable from the plan unless they have retired and elected an option that provides for payments after death, such as life with 10 years certain. The surviving spouse of a participant will only be eligible for the 50% survivor annuity payable no earlier than the date the participant would have reached their earliest retirement age (age 55). As part of this process, the sponsor wants to know if their QDRO policy could be written to allow "shared-payment" QDROs only (rejecting any separate interest QDROs). Can the plan adopt a QDRO policy that does not allow any payments to an alternate payee until the date payments begin to the participant? Thus, if the participant dies before retiring, the alternate payee gets nothing? This seems to be allowable, please comment.

The 90-day "oops, give me a refund" - issue is not an option until 2008, so the IRS might not give us guidance until sometime in 2008 for the tax reporting due 1/31/2009!

No, only the Safe Harbor Match must be 100% vested. Deferrals that exceeds 6% of pay cannot receive a match. The fixed match and the discretionary match can both be subject to a vesting schedule. The discretionary match cannot have any allocation conditions if you want to avoid the ACP test. The discretionary match amount cannot exceed 4% of pay if you want to avoid the ACP test. The fixed match can have allocation conditions, you'll just have the usual coverage testing to pass. The rate of match cannot increase as deferrals increase. This design avoids potential problems with the deemed CODA issue.

Do you think the IRS agree with that too? You could try a private letter ruling, but without that I don't see that this idea gets a qualified plan out if the QJSA requirements.

How do you determine each client's rebate? Based on average annual assets? Based on monthly or quarterly average assets (or daily?) Or is it based on a ratio of hard-dollar client fees paid vs actual time-spent by your staff (so the most profitable/easy clients get the most rebate and are kept the most happy)? What if the asset provider, in addition to a basis points type payment, also pays a one-time special bonus based on several criteria linked to your firm's new business added during the year, with one criteria linked to your overall book of business. Would you rebate that amount just against the new clients' bills (the new clients being the main reason for the bonus), or instead would you rebate that in a similar fashion as inquired about above? I think some have found simplicity in just charging the slightly lower fees to begin with (taking some risk in case if they don't meet the requirements), and disclosing the potential fee arrangements, and thus not jumping through too many hoops to determine how to offset the fees in a fair manner.

What would the penalty be if an updated SPD was required (due to amendments during the last 5 years since the last SPD was written), but an updated SPD wasn't done/distributed timely? Is it $110 per day per participant?

Check the plan's Final 401(k)/401(m) amendment to see what it requires you to do.

Merged, thus forcing the funds into the 401(k) plan? I don't think so, for exactly the reason you have found, but we'll see what other commentators say. The 457(b) plan can be terminated and distribution election forms can be provided which offer the usual options plus an option to roll over to the 401(k) plan (if the 401(k) accepts rollover contributions). I see that's not what you want though. But wait, what if an employee wants to use the money before age 59 1/2? 457(b) plans do not have a 10% early withdrawal penalty, but as soon as that money leaves the 457(b) plan, it loses that nice feature. Is there some reason they don't want the 457(b) plan anymore? Is it, perhaps, to lower the 401(k) asset fees by bringing the 401(k) asset level up to the next fee breakpoint? If so, see if the provider can bundle both plans' asset amounts together when determining the asset level for the fee breakpoint (assuming both plans' assets are with one asset gatherer).

Do all of the HCEs have enough ownership to be required to be an HCE? If not, maybe you want to adopt a top-paid group election and limit your HCEs to a smaller number - that may help your test for the next time around. As for last year, point number 4 by Tom Poje is truly the correct step for determining who gets money back, fair or unfair as it might seem.

Would it be possible to consider the amendment as a -11(g) amendment? I see no failure, but from other discussions I'm not sure the plan must fail to be eligible to adopt a -11(g) amendment.