david rigby

I agree. Another point to note is that the zero might be the result of a termination of employment, followed by a rehire. In that case, it should be obvious that the intent of "high 5 out of last 10" refers to years in which the participant actually worked. Unless there is precedent to prevent it, seems likely that the purpose of the plan is to exclude the zero years. This probably means you go back further to identify the last 10. Probably not a problem to amend the plan to clarify.

I would read the plan. If it does not provide answer the question, I would look for precedent. For example, the plan might state (or imply) that the last 10 years are years in which the participant earned a "year of service". If so, then the zero years would (probably) be thrown out anyway. If not, then prior examples might help. If that does not work, then the plan sponsor could make an "administrative interpretation" or a plan amendment.

Careful review of plan provisions needed of course, but I agree with you: no additional benefit.

I agree. Waiver of funding must be applied for by 2-1/2 months after plan year end (March 15 for CY plans). No extension possible. You might get some consideration from the IRS to waive penalties. However, they have previously stated that they do not have authority to waive the 10% excise tax for a funding deficiency. BTW, it is due immediately. See IRS form 5330. Next problem is the current year. You can freeze the plan now, thus impacting your funding requirement for current PY.

I agree, except that I think Item 4 cannot be mandatory.

I suggest trying the DOL.

Well, sort of. Accountants/auditors are bound by their own code of practice to use generally accepted accounting principles. With respect to publicly-traded companies, the SEC has stated (I think that is the proper term) that GAAP includes procedures issued by the Financial Accounting Standards Board. Other than that, perhaps someone else can tell us if the AICPA has any rules/guidelines about this. I had an example a few years ago of a private company that did not use SFAS No. 87 accounting for its DB plan. This company was considering going public. As part of that, they were informed (by auditor, I think) that they needed to adopt SFAS No. 87. So, they did, with an effective date that was retroactive about 4 years, thus giving potential investors and/or lenders some current and historical information that was on par with other companies.

Yeah, I had the same thought. Probably would be advisable for the sponsor to make sure documentation is complete, and even to get auditor to review.

This link might be the items in Appleby's list, to link to tax websites of all states. http://www.kentis.com/siteseeker/taxusst.html

The question of vesting has been discussed on these Message Boards recently. I believe the conclusion is that 100% vesting is not required when a DC plan is merged into a DC plan.

Maybe I'm the only reader with this problem, but what are you talking about?

I agree with the above responses. The ending balance on a final return should be zero. I suspect that the situation posed in the original question is more common than we think.

PWBA Notice http://www.benefitslink.com/cgi-bin/show_a...tabase_id=24642

I certainly endorse the comment about this website. Don't forget the Operating a Pension Consulting Firm Message Board.

Another discussion: http://benefitslink.com/boards/index.php?showtopic=11579 I would like someone else to review my conclusion, and respond with correction or confirmation. Thanks.

BTW, it is also clear that such arrangements are covered by the accounting requirements of SFAS Nos. 87 and 106.

I have only skimmed the Notice http://www.irs.gov/news/n-01-61.pdf, but it appears to me that "affected taxpayers" do have relief. "(4) In addition the Internal Revenue Service has granted a 120 day postponement of time to the affected taxpayers to perform the other acts described in section 301.7508A-1©(1) of the regulations. The postponement applies to acts required to be performed within the period beginning on September 11, 2001, and ending on November 30, 2001." IRS Reg. 301.7508A-1©(1)(iii) reads, "(iii) Making contributions to a qualified retirement plan..." Note that only "affected taxpayers" get any relief. Whether I have interpreted this right or wrong, I hope someone will confirm and/or respond.

IRS Notice http://www.irs.gov/news/n-01-61.pdf

Not sure if I understand your facts. The issue of discrimination within a qualified plan is concerned only with comparison between NHCEs and HCEs. The plan can discriminate between HCEs or between NHCEs. Of course, this might lead to other HR problems, but it is not prohibited by the Internal Revenue Code.

For me, knowing that two prior actuaries valued it consistently is a help. But that is not what can affect the document itself. If the benefits actually communciated to participants, and especially the amounts actually paid to participants, used all service, then you have a claim that actions of the employer (not the actuary) have changed the substance of the plan.

Potential problem. But check to see how actual benefits have been done. If they use all service (consistently), you can probably argue that the plan has been de facto changed. Yes, this might be a stretch, but it might be worth it, especialy since the confusion will be resolved in favor of the participant.

Sounds vanilla to me.

I may get myself in trouble again by advocating for common sense. There is no precedent for this disaster. If your ability to make your contribution on time is legitimately affected by the disaster, perhaps it makes sense to do the best you can, document why and when. Then we'll see what the IRS says.

I think the rule is that it should be made by the due date. Weekend extensions normally do not apply to due dates for contributions, although they do apply to due dates for filings. Note that "making" a contribution does not mean that the trustee/custodian has to receive it by that date. Usually a postmark by that date is sufficient. However, since financial markets have been closed a few days, it is possible that the IRS may give some "disaster relief".

Maybe. See IRC 401(a)(1). Includes the phrase "...for the exclusive benefit of his employees or their beneficiaries..." IRS Reg. 1.401-1 http://www.access.gpo.gov/nara/cfr/cfrhtml...26cfrv5_00.html might include some flexibility. Subsection (a)(3)(ii) restates this "exclusive benefit characteristic". Subsection (B)(4) seems to acknowledge that former employees have a legitimate place in qualified plan. My hunch is to question the motivation of the employer for permitting this.