david rigby

I have not encountered this. My observation is that the reverted assets should not be attached but might be used in determining future costs, at least for the next year. Any "excess assets" might be entirely from higher than expected asset yield, rather than excessive contributions. Therefore, it seems to me perfectly reasonable for the hospital to take the full amount as a reversion. It may also be reasonable to take that into account next year in determining the financial status of the hospital, if that is relevant in determining Medicare/Medicaid payments. (Of course, "reasonable" may not be relevant in any case. Just my opinion.) I would be interested in hearing more. [This message has been edited by pax (edited 06-19-2000).]

I agree with the comment by Kirk.

Interesting follow-up to this issue: http://www.benefitslink.com/cgi-bin/qa.cgi...qa_plan_defects

Ouch! A top-heavy 401(k). Yep, that's a problem. The T-H minimum still applies, unless there is another plan in an aggregation group that may help.

Rev. Proc 2000-16 begins on page 56 of Internal Revenue Bulletin 2000-6. (Requires Adobe Acrobat) http://www.irs.gov/bus_info/bullet.html

Right. In most situations it will not matter because the projected benefit is more than 20% of FAC.

Depends. Usually the plan will remain in the same status, but if you know that a Key EE lump sum is "dropping off" next year, then the T-H percentage may change significantly. However, for most plans I see, it is not significant: the *projected* benefit (which is used to determining funding) is more under the regular benefit formula than under the top heavy minimum. [This message has been edited by pax (edited 06-08-2000).]

No. It is not "five years of service". I think of NRA as the age at which an EE gets 100% vesting without regard to service. Notice that "65 and fifth anniversary definition" requires only that the participant enter the Plan, not the earning of any particular number of years of service.

Anybody know what is the purpose of IRS Reg. 1.411(d)-2((a)(2)? In the context of a DB plan? In the context of a DC plan?

Generally, a plan does not have to define partial termination. I'm not sure that I agree with PJK's comment that the 20% rule of thumb looks only at the "non-fully vested participants". I believe the reference should be to "participants". Of course, the result is only to affect the vesting status of "affected participants". BTW, a plan could award full vesting by amendment where a partial termination may be suspected, thus possibly avoiding any debate about whether there was a partial termination.

I disagree with the last sentence from Brian4. A freeze is NOT a partial termination and does not require full vesting. I'm not sure what a "partial freeze" is. When you freeze a DB plan, be sure to freeze participation as well as benefit accruals. Also, note that certain benefits are not protected by 411(d)(6) so that you might want to consider eliminating them at the time of the freeze, such as subsidized disability benefits.

I agree with Keith. Not so sure about KJohnson's recommendation with regard to the accrued benefit. My understanding is that 415 limits the amount a plan can *pay*, not what it can accrue. Why is this important? I think that if your accrued benefit exceeds the 415 limit, and the plan includes appropriate language, then the amount actually paid can increase as the 415 limit is increased. Have I stated that correctly? [This message has been edited by pax (edited 06-01-2000).]

Pardon my ignorance. Is this a new proposed law or something that has been around a while? Is it federal or state?

The SS wage base has never gone down. I believe the wage base in 1999 was 72,600 and the wage base for 2000 is 76,200.

With respect to Jon's comment on super top-heavy: The presence of 4 25% owners will certainly create 4 5% owners, thus all employees are Key Employees. Clearly that creates a top heavy ratio of 100%. But whether that creates a problem anywhere would depend on whether there is any other plan, or whether there are any other employees in the future, and whether the affected plans have repealed the IRC 415(e) provisions.

First questions I would ask: "Is the plan safe harbor? Is the plan integrated with social security?" If both are Yes, then I think you can retain the safe harbor status by making sure that you do not waive the ER reduction for the "excess" portion of the benefit. Other possible uses of the excess funds: 1. offer an early retirement window. Of course, discrimination issues also apply. 2. Increase benefits to all and/or redesign the benefit formula to use up some excess assets.

No expert I, but isn't there another resolution to failing the ADP test? That is, could the test be passed by giving NHCE's more?

I agree with MoJo that the general ERISA preemption is not relevant to this issue, although I cannot point to any reg specifically. I believe the burden of withholding is on the trustee, not the plan itself. Also, you might want to review this link for state information. http://www.cigna.com/retirement/sponsor/y2ksw_w.html

There are many issues involved. I suggest you do a search on the Message Boards first. Most of the windows I have seen have been an increase in the pension benefit, such as a waiver of the usual early retirment reduction and an award of addtional years of service in the benefit computation. These are usually funded through the DB plan, usually for 2 reasons: 1. the plan has sufficient excess assets at that time to absorb the entire cost of the increased benefits. 2. including the benefit in a bonafide employee benefit plan will typically avoid the issue of age discrimination (ADEA). However, the window itself must not be considered discriminatory under related pension regualations. There are also issues relating to FAS 88 accounting. Please feel free to post additional Qs.

ERISA Section 104(B)(3). Note cross reference to sec 103(B)(3).

Is it defined in the document? Has it been used in the past, thus defining it in practice? Is there collective bargaining involved? If none of the above, you may want to remove the provision by amendment, but get legal opinion about 411(d)(6).

quote: Originally posted by PJK: There is no exception for unintentional distributions or distributions due to a mistake in fact or a mistake in computation. ... ... unless the excess portion is treated as wages and reported on a W-2, which seems anomolous since its a distribution from a qualified plan on termination of employment. Pardon my pickiness. 1. It seems silly to say that because the 1099R instructions don't address a mistake, then the entire payment should be treated as a distribution from the plan. 2. It does seem appropriate to report the entire amount (assuming excess not repaid) but that should not mean that it is all eligible for a rollover. Seems to me that if the sponsor has determined that a portion is not eligible, then the sponsor has the obligation to report it correctly, even if that means filing amended 1099. Seems that the IRS would want the sponsor to get it right, even if correction is required. Am I beating a dead horse?

I have reread the original item in quotes and believe that it is not funding method at all. More specifically, I would categorize it as a condition under which the method would be changed from FIL to Aggregate. It also appears that the goal may be to utilize Aggregate without formally acknowledging the change, thus enabling the use of FIL in a subsequent year without having to get IRS approval for that subsequent change.

Ouch. One of the worst plans possible is a T-H 401(k) plan. It may be possible that some of the associates are Key EEs and can be excluded from the T-H 3% contribution, but it looks like the law firm will have to include some T-H contribution somewhere.

That is my understanding of that phrase. Don't forget that the auditor's report is included in the definition of "related schedules", if applicable. Even though the sponsor can charge a "copying cost" for this, certain parts must be provided without charge, that is the asset pages of the 5500.