david rigby

Are we assuming the sponsor's fiscal year is the same as the PY?

Does this help? GrayBook Q&A 2002-4. Funding: Treatment of 401(k) Plans under Combined Limit of 404(a)(7) In 2001 an employer adopts a defined benefit plan covering 5 of its 10 employees. A profit sharing plan is adopted covering the other 5 employees. Since there is no overlap of participants between the plans, 404(a)(7) does not apply. The employer would like to add a 401(k) feature to the profit sharing plan for 2002 and allow all 10 employees to make elective deferrals. The defined benefit plan participants would only be able to defer – they would not receive PS contributions or matching contributions. Are the defined benefit participants considered to be participating in the defined contribution plan such that 404(a)(7) now applies to the combination of the DB plan and the DC plan? Or does new 404(n) mean that elective deferrals are not counted for this purpose, eliminating any overlap of participants between the plans? RESPONSE 404(a)(7) applies to the combination of the DB and DC plans, since the DB plan participants are allowed to make elective deferrals under the 401(k) plan. A technical correction has been proposed that would reverse this result and eliminate the 401(k) plan from consideration in this application of 404(a)(7). Copyright © 2002, Enrolled Actuaries Meeting All rights reserved by Enrolled Actuaries Meeting. Permission is granted to print or otherwise reproduce a limited number of copies of the material on the diskette for personal, internal, classroom, or other instructional use, on the condition that the foregoing copyright notice is used so as to give reasonable notice of the copyright of the Enrolled Actuaries Meeting. This consent for free limited copying without prior consent of the Enrolled Actuaries Meeting does not extend to making copies for general distribution, for advertising or promotional purposes, for inclusion in new collective works, or for sale or resale.

Good advice to contact an attorney experienced with ERISA. If you contact the PWBA, remember the name of that agency is now the Employee Benefits Security Administration. http://www.dol.gov/ebsa/ You will certainly need a copy of the plan document, especially to confirm it has a last-day rule. I am not an attorney, but I thought that a resignation letter did not require the employer to retain your services as long as you desire, but as long as the employer desires.

You can also remember that Jim Holland is giving the "IRS position". That does not mean it is the sensible one. Many examples where this issue is ignored.

I don't know if this is common, but it has a bad "smell" to me. Might there be a concern for a discrimination issue?

I see no theoretical problem having a different salary scale assumption for every participant, but certainly a practical one.

To the best of my knowledge, the IRS has been consistent in this area. However, the reporting is not really common sense. Does not fit the concept of "termination of services" for which the reporting was created.

My hunch is that the IRS would view this as part of the method. I'm unsure if I agree with that. How about significance? Since the amortization would be similar, perhaps the magnitude of the issue might help make the decision.

c) a mistake ?

Please don't answer. IMHO, an important characteristic of this venue is to avoid any taint of price fixing.

"American Association of Normal Retirees" ? "American Association of Never Retired" ? "American Association of Nerd Retirees" ?

We may have discussed that before. But here is GrayBook Q&A 2002-14: Method Change: Automatic Approval for Plan in Effect for Fewer than Five Years Section 6.02(3) of Rev. Proc. 2000-40 denies automatic approval for any of the funding method changes listed in Section 3 of the Rev. Proc. if a change to the same aspect of the funding method occurred during any of the prior four plan years. May a plan that has been in effect for fewer than five years change funding methods pursuant to Section 3 of Rev. Proc. 2000-40? RESPONSE In general, yes. The initial adoption of a funding method upon the establishment of a plan does not count as a funding method change. However, if the plan is a continuation of another plan that was created as a result of a non-de minimis spin-off, you must consider the funding method history of the predecessor plan in determining whether or not the four-year rule is satisfied. A plan that is created as a result of a de minimis spin-off is considered a newly established plan. See section 3.03 of Rev. Proc. 2000-41. Copyright © 2002, Enrolled Actuaries Meeting All rights reserved by Enrolled Actuaries Meeting. Permission is granted to print or otherwise reproduce a limited number of copies of the material on the diskette for personal, internal, classroom, or other instructional use, on the condition that the foregoing copyright notice is used so as to give reasonable notice of the copyright of the Enrolled Actuaries Meeting. This consent for free limited copying without prior consent of the Enrolled Actuaries Meeting does not extend to making copies for general distribution, for advertising or promotional purposes, for inclusion in new collective works, or for sale or resale.

A few thoughts: - Not sure what is the question, or what needs to be "resolved". - Unless you have a credit balance, the min = max under Agg method anyway (except for possible unfunded current liability). - Is this a plan with only one participant? If so, I wonder if EAN is a reasonable method for a participant with only 10 years until NRA. - Having a range for flexibility is good, but there are other factors to consider, such as plan sponsor's funding policy, investment policy, demographics of entire group, ability to plan for regular cash contributions, etc.

Of course. The rollover $ is an increase in that pot of assets, but (surprise!) it also represents an increase in the liability of the plan.

Hmmm. No other documentation of the relationship?

Maybe. Probably important to review the plan amendment, and other plan provisions. For example, does the plan use "fractional rule"? Again, I have reservations about an amendment that changes PS to PS+1. However, what really is happening? Did the plan previously define credited svc from DOP (for example, DOH plus one year) and the amendment is to redefine credited service from DOH? If so, I suggest your original description of the amendment is misleading. If that is not what happened, but it could apply, then that definition will be much "cleaner". Consider it.

Not sure that this should alter the correct procedure. The amendment base is the change in Unfunded Accrued Liability. Not sure that increasing a benefit via this type of amendment is a good idea.

1. Probably not advisable to tell them to "liquidate and roll into IRA's." The participant will (generally) be the one who decides where it goes. The plan may already have some language that instructs on the process of plan termination. 2. I don't think the addition of rollovers should impact the amount of employer contribution. Using rollovers to fund employer contribution is an oxymoron.

In direct response to original question: No.

Funny, but really not appropriate for this venue.

WRT recordkeeping fees, be careful, as this discussion notes: http://benefitslink.com/boards/index.php?showtopic=24261

There have been a few discussion threads on this topic. For example, http://benefitslink.com/boards/index.php?showtopic=21669 You can use the Search feature to find others. Probably the Plan Administrator will discuss this with the Plan's counsel, who will then decide whether the claim has any merit, and may then inform the former spouse that the plan is not permitted to honor anything but a QDRO. Don't forget to review the plan provisions on claim procedures.

Sounds like a job for IRS Reg. 1.401(a)(4)-5. By the way, this is GrayBook Q&A 96-33: Nondiscrimination: Change in Vesting Schedule A defined benefit plan with 5 year cliff vesting is amended to provide for 3-year cliff vesting for all participants employed on the date of the amendment. The active participant group satisfies the coverage requirements under §410(b). §1.401(a)(4)-5 [amendments] requires a facts and circumstances review to prove the amendment isn't discriminatory. Specifically, it suggests looking to former employees and making sure that the timing of the amendment did not favor the highly compensated. §1.401(a)(4)-11© [vesting] does not require testing former employees with respect to vesting. To determine whether the amendment complies with §401(a)(4), must the effect on former employees be assessed (i.e., examining the relative number of HCEs and nonHCEs who had terminated during the years prior to the effective date of the amendment and would have benefited under the provisions of the amendment)? RESPONSE Yes. All amendments are subject to 1.401(a)(4)-5. Copyright © 1996, Enrolled Actuaries Meeting All rights reserved by Enrolled Actuaries Meeting. Permission is granted to print or otherwise reproduce a limited number of copies of the material on the diskette for personal, internal, classroom, or other instructional use, on the condition that the foregoing copyright notice is used so as to give reasonable notice of the copyright of the Enrolled Actuaries Meeting. This consent for free limited copying without prior consent of the Enrolled Actuaries Meeting does not extend to making copies for general distribution, for advertising or promotional purposes, for inclusion in new collective works, or for sale or resale.

If no HCE's in the affected group, probably no concern for BRF; just amend the plan.

Do those working less than 1000 hours all work over 500 hours?