tymesup

April 1st is a nice date for certification. It gives you half a month from when you finished up ADP testing on March 15th.* It gives you half a month from when the corporations needed their tax deductions on March 15th.* And it leaves you half a month for the sole proprietors who want their tax deductions on April 15th. Plus, it's April Fool's Day. *Less if you go to the Enrolled Actuaries meeting

Client A - I don't have to pay that SOB a lump sum if you don't certify that the plan is well-funded? Take your time. Client B - I can pay my buddy a lump sum if you don't certify that the plan is in deep weeds? Take your time. Client C - Nobody accrues benefits until I give you the data? Call me again in November. Yeah, this is going to work well.

Suppose a plan had a tiered allocation in past years, but was uniform this year. Could the entire account balance be used as an offset this year? Or is this arrangement tainted forever? Thanks again for any help on the subject.

You might want to check whether the new client did the same thing in the past. Then again, you might not want to.

1.401(a)(4)-8(d)(1)(i) says "Under the floor-offset arrangement,... all or part of the employee's acount balance ..." - which anticipates partial offsets. Compare that to 1.401(a)(26)-5(a)(2)(iii)(A)(3) - "The contributions or benefits under the plan that are used to offset". This doesn't seem to anticipate an offset by part of a plan. The June 6, 2002 Memo refers to "the benefit provided under a profit sharing plan". This also doesn't seem to anticipate an offset by part of a plan. The 7/17/2007 Memo refers to offset a number of times: The first paragraph has "an offset by other plans". The third paragraph has "the benefit provided under a profit-sharing plan" - again, no mention of part of a plan. However, it then has "if the offset applies for some participants" which must anticipate splitting a plan into parts. The fourth paragraph then reverts to "the benefit provided under a profit-sharing plan" and "the benefit provided by another plan". Therefore, one could argue either way whether it is permissible to offset by part of a PS plan. *** If it is not permissible to offset by part of a PS plan, then (2)'s reference to "the benefits under the offsetting plan" means the same thing as the offset. However, if partial offsets are OK, then it appears that (2)'s reference ought to be interpreted to mean the offsetting benefits, rather than the benefits of the plan as a whole. This would be consistent with the earlier references to "the offset", "an offset" and "the benefit provided". *** While it seems prudent to get a determination letter, is this even possible with the staggered system now in place?

If the offset is large, participant direction could work. If there is no accrued benefit in the DB plan, then the participant is gambling with their own money. I had a prospect that was making a 15% SEP contribution for everyone. They wanted a new design including a DB plan for the partners that wouldn't hurt the staff. A floor offset would have worked well; everyone was an investment genius so they weren't going to take away participant direction. Most folks would never get anything under the DB plan. I wish I had thought of this design back then.

Agreed that a determination letter would be prudent. Agreed that separate accounts would be easier to administer. Thanks for the help.

Suppose a profit sharing plan contributes 5% to some participants and 8% to others. Since all participants are getting 5% or more, can the DB plan benefit be offset by a uniform 5% and be OK with respect to 401(a)(26)? Thanks in advance for the help.