zimbo

At the ASPPA meeting, Jim Holland indicated that for 2009 it would probably be a reasonable interpretation to treat the "short funding" year created by a plan termination similar to a short plan year (as was done in pre-PPA minimum funding rules). That would allow pro rata reduction for shortfall amortization. In 2010, it is more problematic because the final regs which are effective in 2010 don't address it. Jim thought the IRS might address the issue in some sort of ruling. Left that very vague.

Now if only this shorter version was actually more comprehensible!!! Happy reading....

At the end of the Final regs, there is some mention of the publication date being October 15, 2009. I would wait until that day or after, and then GOOGLE for the Federal Register. Then check it out every day beginning October 15th. When you are in the daily Federal Register, scroll down to the IRS heading and you should find these regs. Whether it is on the 15th or some later date we cannot know for sure. In the Federal Register publication, the regs are in 3 column format and this will shave hundreds of pages off these regs. Of course, the print is small and arguably harder to read. But I prefer the fewer pages. Pick your poison I guess.

In the IRS proposed regs, 1.430(d)-1, it indicates that amendments adopted on or before the valuation date and effective during the plan year are considered in terms of minimum funding. Your amendment was adopted PRIOR to the val date even though the increase becomes effective AFTER the valuation date. Based upon that, I would say that your Funding Target and Target Normal Cost would use the benefits in effect during the plan year in which the valuation date falls. So, effectively, you would use the $11 per YOS benefit formula for purposes of determining minimum funding for that year.

This is not legitimate. There is no 1000 hour accrual requirement for making deferrals in a K plan, once an employee becomes a participant. In other words, once the initial eligiblity requirement is met, the participant remains in the K plan eligible to make deferrals as long as employed no matter whether their hours of service are reduced.

It could refer to a plan that is terminating and, but for the sale, would cash in the policy. Or, a plan that is eliminating life insurance as a benefit under the terms of the plan. Or, most commonly, a participant is terminating and, but for the sale, the policy would be discontinued.

I believe you could set your annuity starting date to be as late as the RBD of 3/31/2010. If the calculated benefit amounts as of the ASD are payable monthly, then a single monthly payment beginning before 4/1/2010 would be OK. If the amounts are payable annually, then the annual amount is due by that date. The benefit should be calculated as of the annuity starting date. The key is the annuity starting date and the payment intervals (monthly, annually etc...) but you do not need "make up" benefits going back to the participant's 70.5 birthday.

Unfortunately you are correct. You basically count ALL the employees of the employer to determine eligibility for the premium cap. In your case, the plan is NOT eligible.

But as I see it, the problem is that the 1099-R they receive in early 2010 shows as taxable in 2008 the lesser of (1) the actual corrective distribution with the gains or losses built in, or (2) the amount of the excess deferral. When there are losses, the amount on the 1099-R will be LESS than the excess deferral. How then could the IRS possibly check to see that the actual excess deferral in its entirety was taken as income in 2008. They could not possibly know this by looking at the 1099-R. It seems very illogical. What seems more logical is that the 1099-R would show the excess deferral (then the loss would be taken in the following year in the "usual" manner). But I concede that the IRS 1099-R instructions seem to support what you say.

It seems clear that when an excess deferral resulting from a 402g violation (deferral in excess of $15,500 for example) had investment losses, the participant must report the gross excess in the year deferred (2008) while the loss is taken on their personal tax return in 2009. However, how is the 1099-R done? In reading the IRS instructions, it appears that the amount reported on the 1099-R, taxable in 2008, is the actual distribution which has been reduced by the losses. If so, how and where does the participant report the the full excess deferral in 2008? Any thoughts would be appreciated?

Actually you reduce the assets ONLY by pre funding balances. You do NOT reduce the assets by carryover balances.

I have a 401K plan that does NOT include bonuses or commissions in the comp definition for purposes of deferrals or employer matches (The match is capped at 6% of comp using the comp definition above). There are no Profit Sharing contributions. When I ran the ADP/ACP Tests using a "safe harbor" definition of total comp under 1.414(s), the ADP failed (the ACP Passed) and the employer agreed to contribute QNECs calculated based on total comp at a level that would make the test pass. In this instance, is it also necessary to run a separate non discrimination test under 1.414(s)-1(d) or does the passing of the ADP/ACP tests using Total Comp. render the 414s test unnecessary?

So I now conclude that it is probably more cost effective and just downright easier to include the HCE in the QNEC and suffer a slightly larger ADP test failure than carving him out of the QNEC. The results are still far better treating all of the TH minimums as QNECS than treating none of the TH minimums as QNECS. Thanks for the insight.

So are you saying that even though one of the plans is a 401a4 safe harbor Target Benefit Plan and the other is a 401K Plan, I would be subject to the Gateway? I'm having trouble figuring out why. Is it because the 401K plan (ignoring the Target Plan since I do not aggregate these for coverage testing) ends up with an employer contribution, net of QNECs, of ONLY the 3% TH minimum and only for a single HCE? Of course, I am forced into that situation by 416, but maybe it really is a trap. So, if you believe that is the case, then I guess I would have to include the HCE non-key's 3% TH minimum as a QNEC to avoid that?

Does anyone think we still have the OPTION of including Gap Period earnings in our refunds? With the losses in most accounts in 2008 reducing the amount of the refunds, applying Gap Period losses would further reduce the taxable refund amounts.