John A

Dave, Then you are saying that IRS Reg. 1.411(a)-5(B)(1)(iii), shown in my first post above, does not apply? And yes, I should have written that the document is written to disregard all service prior to age 18.

If I have the date correct, the definition of 415 compensation changed after 12/31/97. For DB plans that are determining the high 3-year average after 12/31/97, does the new definition apply to 1997 and earlier years? Or is the 3-year average based on the old definition for 1997 and earlier years and the new definition for years after 12/31/97?

A plan provides that, for vesting purposes, plan years prior to age 18 will be excluded. The plan year is the calendar year. An employee has a birthdate of November 1, 1979 (so 18th birthday is November 1, 1997) and a hire date of January 1, 1996. The employee has worked 1000 hours in each calendar year which satisfies the plan’s hours requirement for vesting. Which of the years 1996, 1997 and 1998 are counted for vesting? Would the answer change if the 18th birthday was February 1, 1997? Would the answer change if the 18th birthday was July 1, 1997 and the employee worked 1000 hours both before and after July 1 in 1977? Clearly 1996 is not counted. Clearly 1998 is counted. Is 1997 counted? There is disagreement on our staff on this. IRS Reg. 1.411(a)-5(b)(1) says: 1.411(a)-5 Service included in determination of nonforfeitable percentage. (a) In general. Under section 411(a)(4), for purposes of determining the nonforfeitable percentage of an employee's right to his employer-derived accrued benefit under section 411(a)(2) and § 1.411(a)-3, all of an employee's years of service with an employer or employers maintaining the plan shall be taken into account except that years of service described in paragraph (b) of this section may be disregarded. (b) Certain service. For purposes of paragraph (a) of this section, the following years of service may be disregarded: (1) Service before age 22. (i) In the case of a plan which satisfies the requirements of section 411(a)(2) (A) or (b) (relating to 10-year vesting and 5-15-year vesting, respectively), a year of service completed by an employee before he attains age 22. (ii) In the case of a plan which does not satisfy the requirements of section 411(a)(2) (A) or (b), a year of service completed by an employee before he attains age 22 if the employee is not a participant (for purposes of section 410) in the plan at any time during such year. (iii) For purposes of this subparagraph in the case of a plan utilizing computation periods, service during a computation period described in section 411(a)(5)(A) within which the employee attains age 22 may not be disregarded. In the case of a plan utilizing the elapsed time method described in § 1.410(a)-7, service on or after the date on which the employee attains age 22 may not be disregarded. While the reg has clearly not been updated from age 22 to age 18, can it still be relied on to say that, in the example above, 1997 must be counted if the 18th birthday occurs any time during 1997? Or is it possible to disregard 1997 in some circumstances (more up-to-date guidance?)?

jlf: I went back through this thread to review your points. You do make some valid points and I at least partially agree that Chester owes you an apology for implying that you assumed 20% investment returns. But you also have so far not (refused to?) answered many questions posed, have refused to acknowledge that your viewpoint is an opinion, and have so far not admitted to being flat out wrong about a death benefit in DB plans never being funded from the invested assets of the plan. Going back to your post of 10-20: the greater portability of most DC plans compared to most DB plans, the comparison of death benefits provided by the 2 types of plans, the different funding patterns by age of the typical plan in each type, and the "cold storage" vesting of most DB plans, are all valid points to discuss. Saying that each of these areas favors the employer is an opinion - these areas may or may not favor the employer depending on the employer's decisions about the plan. Your 10-20 post also mentions that in a DC plan the employer will be adding to compensation each month. I'm sure there are many employers who contribute monthly, but many do not. Also, keep in mind that you are either assuming a money purchase pension plan or you are assuming an employer that will fund the DC plan every year no matter what the employer's experience has been. You have never specified, and never been asked, whether the investments in the DC plan you are assuming are participant-directed or employer-directed. Given your preference for empowering the employee, is your preference for daily-valued employee-directed investments? In my 10-29 post, I posed the question to you: If you were trying to convince an employer about what type of qualified plan they should adopt, what argument would you use to convince the employer to sponsor a DC plan, given that you believe a DB plan favors the employer? Please answer that question. You also did not respond to whether or not you had considered the 3 situations I posed in my 10-29 post. Have you considered those situations? I do appreciate your answers relating to the DC plan being a level % of salary plan and an explanation as to why you believe a DB plan is a wealth builder for the plan sponsor. In this post,you stress NON-PARTICIPATION IN THE "EXCESS EARNINGS," but you mention nothing about non-participation in any shortfall. If the DB plan provides a lump sum option at retirement (many, but not all, do provide a lump sum option), would that make a difference to your opinion? Note that how great the lump sum will be depends on the level of interest rates at the time of retirement, so to the extent that an employee takes a lump sum option, the employee is to some extent participating in the market's investment experience, if not the investment experience of the particular employer. Who should own the "excess assets" inside a DB plan when it terminates has been the subject of much debate. The government's current answer when a plan terminates is to give the employer a choice: 1) give it all to the plan participants, 2) give some of it to plan participants, some of it to us, and keep some for yourself, or 3) give none to participants, give a very, very large chunk of it to us, and then you can keep some. With the exception of a sole proprietor, if an employer's primary objective was building wealth for the employer, I doubt if the employer would choose a DB plan as the best wealth-building vehicle. My personal experience has been that the majority of plan sponsors that have terminated their DB plans have chosen to distribute all excess assets to participants. It would be unfair of me to extrapolate my personal experience to all plans, so I would be curious if anyone else has statistics on what percent of DB plans terminating in the last few years have chosen to give the entire excess to participants. Does anyone know? Oh, and in every case where there has been a shortfall, the shortfall was either made up or the owner of the employer decreased his own benefit by the amount of the shortfall. jlf, you have not responded to pax's 10-31 post about what is your suggestion for improvement for a DB plan, unless I have missed it. What is your suggestion for improving a DB plan? jlf, you have not responded to KJohnson's questions about multiemployer DB plans as the "champion" of the working man. What are your thoughts on his post? jlf, you have not responded to my 11-1 post about which you would prefer between a $100,000 lump sum and a life annuity valued at $200,000. Perhaps I should have given you a third choice of an increasing annuity valued at $200,000. Please respond to this question. Which would you prefer? No one has responded to your 11-1 post about the solution being to provide a CHOICE of plans. (Actually, Keith N did respond - my apologies Keith). Let me try, although others would better be able to answer this question. First, the answer depends somewhat on how the choice is provided. If employees are given a one-time choice that they must live with forever, the answer may be different than if they are allowed to choose each and every year. Depending on how the choice is given, the problem can be adverse selection. The older employee will choose the DB plan while the younger employee will choose the DC plan. As I said in an earlier post, I believe the best solution is to have both types of plans. Unfortunately, most employers cannot afford to sponsor both types of plans. You mention that the DC plan is a wealth builder for the employee and I agree, but you also say that the DC plan is an income provider. In what sense does the DC plan provide income? In your second post of 11-1, you mention that DB plans can only be defended when they share, in a meaningful way, their excess earnings with their former employees. While most plan sponsors that have increased the plan benefits have increased the benefits only for current employees, some have used the excess earnings to fund increased benefits for former employees (and I believe have displeased current employees by doing so). Does anyone else have experience or know statistics in this area? You have not given any reaction to richard's 11-2 post. What is your reaction to his points? jlf, in your 11-3 post, you state, "The death benefit DOES NOT come from the DEFINED BENEFIT PLAN'S INVESTED ASSETS." Would you please acknowledge that this is an incorrect statement when applied to all DB plans? Would you please acknowledge that some DB plans do indeed fund the death benefit through the DB plan's invested assets? In your 11-4 post, you shift the subject by asking a question rather than acknowledging that you were wrong. Before I forget, one other point from your 10-20 post, you say, "Under a typical DB plan the younger employee's own contributions are more than enough to cover the full cost of the defined benefits earned at the younger ages ..." I believe statistics would show that in the typical DB plan, employees do not make contributions at all. Would you agree? One area that I do not believe has been discussed above is why so many DB plans have been terminated. jlf, you may find the reasons emloyers give interesting. Again, I do not have statistics to back me up, so the reasons I have seen are based purely on personal experience and I would like to know if anyone has statistics on this. The number one reason I have been told that employers were terminating the DB plan is that it was too expensive for the plan sponsor. This seems to fly in the face of the idea that the DB plan is a wealth-builder for the plan sponsor. jlf, how would you explain a plan sponsor terminating a DB plan and putting in a DC plan to lower the cost of the plan sponsor? The other primary reasons I have seen have been: increasing complexity of government regulations and lack of appreciation and understanding of DB plans among employees. To give some of my personal biases: the only plan my employer offers is a 401(k) plan. There is a match and my employer has us

Situation: an employee meets the hours and age requirement for eligibility but terminates employment prior to an entry date. The employee then has a break-in-service under the plan's break-in-service rules. When this employee is rehired, may the prior year of service be disregarded entirely, or only until the employee completes a year of service after rehire date? Would the entry date be the date of rehire, the first entry date after date of rehire, or the first entry date treating the employee as if the employee was a new hire on the date of rehire? I am confused by the seeming difference between IRS Regs 1.410(a)-4(b) and 1.410(a)-5. 1.410(a)-4(b)says: (b) Time of participation: (1) General rule. A plan is not a qualified plan (and a trust forming a part of such plan is not a qualified trust) unless under the plan any employee who has satisfied the applicable minimum age and service requirements specified in § 1.410(a)-3, and who is otherwise entitled to participate in the plan, commences participation in the plan no later than the earlier of: (i) The first day of the first plan year beginning after the date on which such employee first satisfied such requirements, or (ii) The date 6 months after the date on which he first satisfied such requirements, unless such employee was separated from service and has not returned before the date referred to in subdivision (i) or (ii), whichever is applicable. If such separated employee returns to service after either of such dates without incurring a 1-year break in service, the employee must commence participation immediately upon his return. In the case of a plan using the elapsed time method described in § 1.410(a)-7, such an employee who has a period of absence commencing before the date referred to in subdivision (i) or (ii) (whichever is applicable) must commence participation as of such applicable date no later than the date such absence ended. However, if an employee's prior service is disregarded on account of the plan's break-in-service rules then, for purposes of this subparagraph, such service is also disregarded for purposes of determining the date on which such employee first satisfied the minimum age and service requirements. In the situation presented by Sara H, it would appear that whether or not the 10/1/96 to 9/30/97 period of employment is used in determinining participation depends on the plan's break-in-service rules. If the plan does not have break-in-service rules, I would believe the employee would enter immediately upon rehire. On the other hand, if the plan's break-in-service rules allow for disregarding service prior to a break-in-service, the employee would be treated as a new employee. Does anyone disagree with this? Can anyone else add anything helpful for determining entry dates for rehires that had met the plan's eligibility requirements but terminated employment prior to an entry date? 1.410(a)-5 says: IRS Reg 1.410(a)-5 says the following: 1.410(a)-5 Year of service; break in service. (a) Year of service. For the rules relating to years of service under subparagraphs (A), ©, and (D) of section 410(a)(3), see regulations prescribed by the Secretary of Labor under 29 CFR Part 2530, relating to minimum standards for employee pension benefit plans. ... © Breaks in service: (1) General rule. This paragraph provides rules with respect to breaks in service under section 410(a)(5). Except as provided in subparagraphs (2), (3), (4), and (5) of this paragraph, all of an employee's years of service with the employer or employers maintaining a plan are taken into account in computing his period of service under the plan for purposes of section 410(a)(1) and § 1.410(a)-3. ... (3) One-year break in service: (i) In general. In computing the period of service of an employee who has incurred a 1-year break in service, for purposes of section 410(a)(1) and § 1.410(a)-3, a plan may disregard the employee's service before the break until the employee completes a year of service after such break in service. (ii) Examples. The rules provided by this subparagraph are illustrated by the following examples. Example (1). Employee A completes a year of service under a plan computing service by the actual counting of hours for the 12-month period ending December 31, 1980, and incurs a 1-year break in service for the 12-month period ending December 31, 1981. The plan does not contain the provisions permitted by section 410(a)(5)(b) (relating to 3-year 100 percent vesting) and section 410(a)(5)(D) (relating to nonvested participants). Thereafter, he does not complete a year of service. As of January 1, 1982, in computing his period of service under the plan his service prior to December 31, 1981, is not required to be taken into account for purposes of section 410(a)(1) and § 1.410 (a)-3. Example (2). The employee in example (1) completes a year of service for the 12-month period ending December 31, 1982. Prior to December 31, 1982, in computing the employee's period of service as of any date occurring in 1982, the employee's service before December 31, 1981, is not required to be taken into account for purposes of section 410(a)(1) and § 11.410(a)-3. Because the employee completed a year of service for the 12-month period ending December 31, 1982, however, his period of service is redetermined as of January 1, 1982. Upon completion of a year of service for 1982, the employee's period of service, determined as of any date occurring in 1982, includes service prior to December 31, 1981. Would someone better than I am at interpreting the regs (or who has heard this issue addressed and answered) clear this up for me? Thanks!

IRS Reg 1.410(a)-5 says the following: 1.410(a)-5 Year of service; break in service. (a) Year of service. For the rules relating to years of service under subparagraphs (A), ©, and (D) of section 410(a)(3), see regulations prescribed by the Secretary of Labor under 29 CFR Part 2530, relating to minimum standards for employee pension benefit plans. ... © Breaks in service: (1) General rule. This paragraph provides rules with respect to breaks in service under section 410(a)(5). Except as provided in subparagraphs (2), (3), (4), and (5) of this paragraph, all of an employee's years of service with the employer or employers maintaining a plan are taken into account in computing his period of service under the plan for purposes of section 410(a)(1) and § 1.410(a)-3. ... (3) One-year break in service: (i) In general. In computing the period of service of an employee who has incurred a 1-year break in service, for purposes of section 410(a)(1) and § 1.410(a)-3, a plan may disregard the employee's service before the break until the employee completes a year of service after such break in service. (ii) Examples. The rules provided by this subparagraph are illustrated by the following examples. Example (1). Employee A completes a year of service under a plan computing service by the actual counting of hours for the 12-month period ending December 31, 1980, and incurs a 1-year break in service for the 12-month period ending December 31, 1981. The plan does not contain the provisions permitted by section 410(a)(5)(B) (relating to 3-year 100 percent vesting) and section 410(a)(5)(D) (relating to nonvested participants). Thereafter, he does not complete a year of service. As of January 1, 1982, in computing his period of service under the plan his service prior to December 31, 1981, is not required to be taken into account for purposes of section 410(a)(1) and § 1.410 (a)-3. Example (2). The employee in example (1) completes a year of service for the 12-month period ending December 31, 1982. Prior to December 31, 1982, in computing the employee's period of service as of any date occurring in 1982, the employee's service before December 31, 1981, is not required to be taken into account for purposes of section 410(a)(1) and § 11.410(a)-3. Because the employee completed a year of service for the 12-month period ending December 31, 1982, however, his period of service is redetermined as of January 1, 1982. Upon completion of a year of service for 1982, the employee's period of service, determined as of any date occurring in 1982, includes service prior to December 31, 1981. Does this mean that in the situation presented by Sara H, the 10/1/96 to 9/30/97 period of employment would not have to be considered immediately upon rehire, but would have to be considered as soon as the employee completed the year of service starting on her 1999 rehire date, at which time she would retroactively participate? If Sara H's plan is a 401(k) plan, this would of course not be feasible, so does this mean that the employee would participate immediately if Sara H's plan is a 401(k) plan, even if the prior period of service would be excluded under the plan's break-in-service rules?

My experience has been closer to M R Bernardin - plan documents are often vague on this issue - when an employee separated from service after meeting the eligibility requirements but before becoming a participant and is subsequently rehired. IRS Reg. 1.410(a)-4(b)says: (B) Time of participation: (1) General rule. A plan is not a qualified plan (and a trust forming a part of such plan is not a qualified trust) unless under the plan any employee who has satisfied the applicable minimum age and service requirements specified in § 1.410(a)-3, and who is otherwise entitled to participate in the plan, commences participation in the plan no later than the earlier of: (i) The first day of the first plan year beginning after the date on which such employee first satisfied such requirements, or (ii) The date 6 months after the date on which he first satisfied such requirements, unless such employee was separated from service and has not returned before the date referred to in subdivision (i) or (ii), whichever is applicable. If such separated employee returns to service after either of such dates without incurring a 1-year break in service, the employee must commence participation immediately upon his return. In the case of a plan using the elapsed time method described in § 1.410(a)-7, such an employee who has a period of absence commencing before the date referred to in subdivision (i) or (ii) (whichever is applicable) must commence participation as of such applicable date no later than the date such absence ended. However, if an employee's prior service is disregarded on account of the plan's break-in-service rules then, for purposes of this subparagraph, such service is also disregarded for purposes of determining the date on which such employee first satisfied the minimum age and service requirements. In the situation presented by Sara H, it would appear that whether or not the 10/1/96 to 9/30/97 period of employment is used in determinining participation depends on the plan's break-in-service rules. If the plan does not have break-in-service rules, I would believe the employee would enter immediately upon rehire. On the other hand, if the plan's break-in-service rules allow for disregarding service prior to a break-in-service, the employee would be treated as a new employee. Does anyone disagree with this? Can anyone else add anything helpful for determining entry dates for rehires that had met the plan's eligibility requirements but terminated employment prior to an entry date?

In this case, would the excess amount of the loan be considered a deemed distribution? Would there be a prohibited transaction in the amount of the excess for which a 5330 would need to be filed?

What is the correction where it has just been discovered today, November 1, 1999, that a participant deferred $10,800 in 1998?

What is the correction in the following situation: Participant takes loan of $40,000. Participant had no outstanding loans. But participant's highest balance of a loan in 12-month period preceding the loan was $12,500. Can this be corrected under APRSC? Can this be corrected by having the participant repay $2,500 and reamortizing the remaining amount? What happens if the participant refuses to cooperate with the correction (repay the $2,500)?

I prefer to have a cite as well. When no cite exists, I like to have either informal guidance or good reasoning, which I thought I provided above. I am firmly convinced that there is no formal guidance. However, you may wish to look at Q&A 62 in the Benefits Link Correction of Plan Defects question. Since that Q&A, pertaining to correcting missing a top-heavy contribution, indicates that the "IRS Headquarters' officials have indicated that loast earnings must be calculated from (a) the date on which minimum contributions are 'deemed' to have been contributed", it would seem the IRS would have to give some guidance as to what the "deemed" date has to be.

Richard, for additional info., see Q&A 62 in the Benefits Link Correction of Plan Defects Q&A Column.

jlf, Thank you for your explanation. I am a little confused about the idea that the plan sponsor owns the plan assets since, upon plan termination, a very large portion or the excess assets must either go to the government or to both plan participants and the goverment. Just to clarify one thing about your perspective for me, which of the following would be your choice (I'm not saying the choice is realistic, I'd just like to understand your perspective)assuming the following represented your only source of retirement income (no other savings, etc.): Choice 1: $200,000 will be used to purchase a monthly life annuity for you from an insurance company. This obviously presents some problems: inflation will erode the value, there is no death benefit, there is a dependence on the insurance company to be able to pay, and you do not share in any investment performance above whatever the assumed interest rate was in determining the annuity. On the other hand, the money will continue to be paid no matter how long you live. Choice 2: You will be given $100,000 as a lump sum. This obviously presents some problems: Each year, you must decide how much of this you can withdraw to use for living expenses. You must decide how much liquidity you need, how much safety you need, how much risk you need to take to meet the threat of inflation. There is the possibility that the assets will run out while you are still living. On the other hand, your fate is under your own control. If you die with assets remaining, there is a death benefit. If you invest and do well, you may more than make up for inflation. So, jlf, for you personally (not what would be good for others), if you only had 1 source of retirement income, would you prefer a life annuity valued at $200,000, or a lump sum of $100,000?

Should the value of individual insurance policies held by a participant be included in the account balance for purposes of determining the maximum loan available? In this case, the participant had approximately a $100,000 balance, and $30,000 was the cash value of individual life insurance policies. Are they able to borrow $50,000 or $35,000?

I have heard that many practitioners make sure there is a small balance (like $100) in the trust for a newly established plan by the end of the first plan year. Is this a legislative requirement (if so, any cite?)? Or is it possible to establish the plan and either establish the trust with a zero value initially, or establish the trust at the time when the first contribution is made to the plan. Any help regarding the trust requirements when setting up a plan would be appreciated. Thanks.

jlf, I'd like some clarifiaction of some of the things you've said above: You said "A DB plan, in contrast to a DC plan, is a wealth builder and income provider for the plan sponsor not the employee." How is a DB plan a wealth builder for the plan sponsor? The plan sponsor has no access to the plan assets without terminating the plan. You said "A DC plan is the hero of the employee!!" Did you mean any DC plan, including target plans, age-weighted profit sharing plans, 401(k) deferral only plans, etc.? Or did you mean only a level % of compensation money purchase plan? If you were trying to convince an employer about what type of qualified plan they should adopt, what argument would you use to convince the employer to sponsor a DC plan, given that you believe a DB plan favors the employer? If you are saying that DB plans have sometimes (often?) been used for the primary purpose of being tax-deduction vehicles for small business owners, I would agree. I'm sure most practitioners have dealt with small business owners who have asked, "How can I contribute as much as possible for myself while minimizing the contributions I have to make for other employees?" DC plans are also sometimes used for this purpose. And fortunately there are also many employers who sincerely want to provide meaningful benefits to their employees! Have you considered some of the following situations: 1) In a DC plan that allows participant direction of investments, 2 employees that start with the company at the same age and always earn the same salary get vastly different investment returns. When they reach retirement age, the poor investor cannot afford to retire while the good investor is wealthy. Would the poor investor have preferred a DB plan? 2) 2 identical job-hoppers, 1 always in DB plans and 1 always in DC plans, finally each settle in one company for the last 10 years of their employment. They have each spent every cent of any distribution received from earlier employer plans. What type of plan would these employees prefer for their last stretch of employment? 3)An employer decides it will spend $X every year on its qualified plans, no matter what the investment experience is. The goal is to provide a meaningful retirement to any employee that retires from this employer at a reasonable retirement age. Most employees are primarily concerned that they will have an adequate retirement income. What type of plan should this employer adopt? When a young employee leaves a level % of compensation DC plan after becoming fully vested, all of the money contributed for that employee leaves the plan and is unavailable to provide for the retirement of other employees. The same is true when a young employee dies after becoming fully vested. Since the money contributed for this same employee in a DB plan will generally be much less, there is more money available to apply to other employees who retire. In general, DB plans are designed to provide RETIREMENT benefits. DC plans are designed to provide SAVINGS benefits. Ideally, I'd love to see employers adopt 1 of each type of plan. Each type has advantages and disadvantages for both employers and employees. A DB plan guarantees a monthly benefit at retirement, insured by the PBGC. A DC plan makes no guarantee as to the account balance that will be available at retirement. In this way,the DB plan favors the employee. If the investment return is negative for a year, the sponsor of a DB plan must increase the contribution amount to make up for it. In a DC plan, the employees, even if it is the year prior to their retirement, take the loss, which could be devastating to someone who had counted on what the account balance was the year before. In this way, the DB plan favors the employee. In most DB plans, the participants are not asked to contribute to the plan. In many 401(k) plans, employees bear the cost of funding their own retirement, with a minimum of contributions from the employer. In this way, DB plans favor the employee. In many profit sharing plans, the spouse basically has no rights pertaining to payment from the plan. In DB plans, there are rules to protect the spouse. In this way, DB plans favor the spouse of the employee. jlf, I believe that in many cases, DC plans ARE the hero of the employee, especially if the employee is young, and a disciplined planner and saver, and if necessary, a good investor. I also believe a DB plan CAN BE the hero of the employee, if the plan has been written to provide a meaningful retirement benefit. The best plan for a particular employer should make BOTH the employer AND the employee happy to have the plan!

Is there any reason to consider terminating the money purchase plan rather than merging the 2 plans? If so, could the plan require direct transfer or direct rollover into the 401(k) plan as the only option? Would there be any problem with giving participants the option of a rollover into the 401(k) plan? If merging the plans is the better option, what are the issues involved? The only ones I could think of were issuing the 204(h), d sticking the 401(k) plan with J&S requirements, and filing a final 5500 for the money purchase. Are there other issues? Thanks!

1998 5500 instructions, page 17: "Lines 31 and 32 - Use either the cash, modified accrual, or accrual basis for recognition of transactions on lines 31 and 32, as long as you use one method consistently." Hope this helps.

Is there any reason an employer could not terminate its existing money purchase plan and allow participants to roll the money into its existing 401(k) profit sharing plan?

As Keith noted above, the funding deadline to meet minimum funding standards is a 8 1/2 months after the close of the plan year, no extension required. For a contribution to be deductible on a tax filing, it has to be made prior to the filing. Assuming the tax year and the plan year are the same and that it is desired to make the contribution 8 1/2 months after the close of a certain plan year and deduct the contribution for the fiscal year that is ths same as that plan year, it would be necessary for the employer to file for a tax-filing extension. For example: fiscal year and plan year are 1998. Contribution for minimum funding must be made by September 15, 1999. If taxes are filed on March 15, 1999, then the contribution would have to be made on or before March 15 to be deducted on the 1998 filing. If the company files for a tax-filing extension to September 15, 1999, then a contribution that is made on or before September 15, 1999 for the 1998 plan year may be deducted on the 1998 return. It is possible for a contribution to be credited to one plan year for minimum funding purposes and to be deducted for a different fiscal year. In the example above, if the company filed the 1998 taxes on March 15, 1999 but did not make the contribution for the 1998 plan year until September 15, 1999, then the contribution would satisfy the minimum funding requirement for 1998 but would not be deductible on the 1998 return - but would be deductible in later fiscal years. AS stated by Keith above, the minimum funding rules are in IRC Section 412. The deductibility rules are in IRC Section 404. And remember, as Keith pointed out, deductions depend on the fiscal year end, the plan year end, and past deduction practices.

Yes, I believe there is a distinction to be made. You cannot use the remedial amendment period for non-required amendments. You must instead look to the amendment timing rules that are in place without regard to a remedial amendment period. I believe it is fairly clear that you could adopt a benefit enhancement amendment up to 2 1/2 months after the end of the plan year. Any amendment that is not an enhancement should be checked to be sure it is not taking away something the participant has already earned (be careful with eligibility changes).

mwyatt, now I am back close to my original question. Are you saying that, pre-GATT, a plan could NOT use old PBGC adjusted UP84 mortality to calculate actuarial equivalent lump sums unless it was the mortality table specified in the document for actuarial equivalence? If the mortality table specified in the definition of actuarial equivalence was 83IAM, did the plan have to use 83IAM to calculate lump sums, or did it have to use the PBGC UP84 adjusted table, or could it use either 83IAM or the PBGC UP84 adjusted table, provided whatever was used was used consistently? If your answer is that 83 IAM was required, do you have a cite? Thanks for your help.

Since 401(k) contributions are not subject to the minimum funding rules of Section 412, I believe you would exclude any 401(k) contributions actually made after the determination date.

Thanks, ptpnthr, you answered the question I was trying to ask, but I assume you meant 1/15/00 for C. and D.? Tom, are you saying that 'inclusive' logic would result in the answers: B. 7/15/99 (12 months is up 7/14) and C. 1/15/00 (12 months is up 7/15) and 'exclusive' logic would result in the answers: B. 1/15/00 (12 months is up 7/15) and C. 1/15/00 (12 months is up 7/16)? Do you normally use 'inclusive' or 'exclusive' logic? I guess my example question was trying to get at the questions: 1. On what date is "the date on which he completes 1 year of service" considered to have occurred? 2. What is "the date 6 months after the date on which he satisfied such requirements"? 3. On what date is an employee considered to have "satisfied such (the eligibility) requirements"? 4. While many plan documents read "on or after", is it acceptable for a document to read "after"? The questions actually arose from a plan with a 6-month entry requirement that only provided the first day of the plan year as an entry date. The plan provides that "An Employee must have completed 6 months of Service with the Employer prior to an Entry Date". The employee was hired 1/15/99 and 7/15/99 was the first day of the plan year (and only Entry date). We are trying to determine if this employee has to enter on 7/15/99 or can't enter until 7/15/00. I was trying to get at an answer partially by trying to determine if the latest this employee could enter under 410(a)(4) was 7/14/00 or 7/15/00. Any thoughts? pax, I appreciate the input, but as you thought, the 2-year eligibility was not what I had in mind. BTW, I did find it interesting in doing my own research that a 12-month eligibility computation period could be a 52 or 53 week period such as "the 52 or 53 week period starting on the first day after the last Friday in August and ending on the last Friday of the following August" without violating the eligibility requirements. Any additional thoughts on this would be appreciated. Thanks.

Can a 401(k) profit sharing plan be terminated retroactively? If so, are there any limitations on when termination amendment must be adopted (such as by 2 1/2 months after end of plan year)?