david rigby

This is a pretty subtle point. See Q&A T-24. BTW, don't forget Q&A T-28. An earlier discussion might be useful: http://benefitslink.com/boards/index.php?showtopic=7605

Amen. My experience is that govt. employers are glad to "lean on" ERISA requirements as guidance for employee communications. The SPD is a good example; however, don't include the "ERISA rights" section since it does not apply.

Or here: http://www.federalreserve.gov/releases/h15/

I have no idea, but as a taxpayer, I would strongly object to this giveaway, with no return to the employer/taxbase.

Well, I'm sorta "on the fence" here. I don't think you should apply different standards to DB and DC plans, but the DC plan definition of when forfeiture occurs might be relevant. I looked at the 1.416 T-H regs, especially Q&A T-24, T-28 and T-30. The language there talks about "the account balance". The only adjustments are for accrued contributions (in certain cases) or for "distributions". I doubt a forfeiture would be considered a distribution. My conclusion is that, unless the plan has some definitions to the contrary, I would use the account balance after applying the graded vesting. But read all associated definitions carefully. I'll muddy this up a bit more with another point found in T-24, first sentence: "...the account balance as of the most recent valuation date occurring within a 12-month period ending on the determination date..." It might be possible that the employee is active on that valuation date (hence no forfeiture) but is terminated (with partial vesting) on the determination date. Any other opinions?

Not sure if I understand the question, but here goes. Are you asking how to treat partially vested participants, whether active or terminated? If so, good question. I think the general rule is that vesting is not relevant to a T-H test, so you use the entire accrued benefit for a partially vested active employee. For a partially vested terminated employee, I think the accrued benefit is the vested portion. That is, any benefit is determined at some event date (death, disability, termination) so that the amount of the accrued and the vesting percent are both determined at that event. If the employee terminated partially vested, I would use the vested portion. However, there could be a couple of other points to remember: 1. If the terminated vested employee does not have at least one hour of service in the last five years (or whatever the lookback period might be), then that participant should be excluded from the test. 2. If the partially vested terminated employee is rehired, then there might be a "restoration" of the previously forfeited amount. Anyone want to shoot holes in my reasoning?

Sorry, perhaps my question was not clear. I was focusing on the waiver of the 100% excise tax, not the waiver of the contribution itself.

Plan year is 10/1 thru 9/30. On 6/15/2000, plan sponsor failed to make accrued contribution, resulting in a funding deficiency retroactive to 9/30/99. Sponsor paid the 10% excise tax (under IRC 4971). I think the IRS has stated they do not have authority to waive that tax. Assume the deficiency is 100K. The contribution for the 1999/2000 plan year is due 6/15/2001. Assume that contrbution is 300K, including the prior funding deficiency. 1. If the sponsor cannot make the 300K by 6/15/2001, but does make 100K (plus interest), then does that correct the prior funding deficiency? 2. If less than 100K plus interest is contributed by 6/15/2001, then clearly the prior funding deficiency is not corrected. Section 4971(B) imposes a second excise tax of 100%. My understanding of 4971(d) is that the IRS might waive this second excise tax. Does the sponsor have to apply for such waiver in advance? If the sponsor knows it will not make the 6/15/2001 contribution, any other action necessary in advance?

Several prior discussions on this topic, although they may not deal with Puerto Rico. You might try a search using "missing participants".

Uncle. If RCK has it "set up right and run right", I can't argue with that. Thanks for the real world situation.

I agree with Paul Dugan. I would not want to do a valuation and/or Schedule B where a DB plan assets are commingled with a DC plan. In a DB plan, all assets are available to pay any benefit that is due; that is, no dollars are "allocated". If you have a mixture of plan assets, then the amount of assets for each plan can be "muddy" (that is the technical term). Even if it is OK to have commingled assets, but why take the risk of confusion.

Yeah, and that $10,000 bonus is not too shabby. http://www.cognex.com/hr/recognition_rewards.asp

And don't forget that more states are jumping on the withholding bandwagon. This is a pretty good summary: http://www.cigna.com/professional/pdf/CPA_iidw0201.PDF But it may be out of date. For example, now NC and VA both have 4% withholding.

My suggestion would be to find a competent and experienced ERISA attorney.

I wonder if the 1997 contribution was deductible.

We have considered it before, but if the limit is exceeded before the end of the year, perhaps a negative deduction can be applied in the next paycheck. Not sure if this is valid, but it sure is nice from a mechanical perspective.

Hmmm, I wonder if the plan *could* take it back, plan provisions and/or admininstrative practice being the guide, but is there anything that would prohibit that? (It seems unlikely that the plan would want to tackle this if we have crossed over December 31.) A different wrinkle might be if the EE has been rehired, perhaps somewhere in the controlled group, could the plan have provisions that permitted the dsitribution to be reversed? especially if the rehire actually occurred before the date of the check?

Right, which is why a T-H 401(k) is the least desirable plan. The exception would be if there is another plan that already does the T-H contribution.

Well, if a top-heavy test is very close to 60%, you might consider whether a closer inspection is in order, especially with respect to the 5-year lookback. Remember that a T-H percent rarely changes much from one year to the next. If it is not close, you don't have to spend much effort with fine-tuning. But detail can be important if your test is close, to make sure you caught all applicable payments in the past five years. Also, if you have former EEs who have been gone for 5 years and have NOT been paid out, then the account balance should not be included in the T-H test.

This might be a start to getting some more information from the DOL. http://www.dol.gov/dol/pwba/public/pension.htm

Cool! Let us know if this works.

Well........ I think the lump sum will depend on the date of payment. The amount of the benefit is determined at the date of termination of employment. Also, the reference to "prior plan monthly pension benefit" leaves me skeptical about whether the entire accrued benefit is subject to a lump sum optional form, or perhaps just part of it.

Prior discussions might be helpful: http://www.benefitslink.com/boards/index.php?showtopic=7164

At the risk of saying something stupid, the 415 issue might need another perspective. If the correction of such a small percent (with imputed earnings) causes a 415 problem, there must also be another plan. What do the two (or more) plans say about co-ordinating with each other with respect to the 415 limit? (I'm not sure this is even relevant; any comments?)

I agree with last two comments by R. and Hans. Of course, the plans in question must be within the controlled group.