JBones

Restructuring is prohibited in ADP testing, but if a controlled group exists and there are 2 separate plans within the controlled group, can each plan be tested separately assuming each passes 410(b), or are both required to be aggregated for ADP purposes?

Got it. That's what I thought. In this case, one plan fails coverage, so I'm going to have to look at ABPT or end up aggregating them for coverage and ADP. I appreciate the help.

Thanks Tom. Just to confirm, if I am not permissively aggregating, is each plan required to include all employees of the employer in the denominator of the ratio % test or can I run that test only taking into account the employees of each plan?

I have read the regs and several posts on this board, but I seem to be just confusing myself more, so, at the risk of asking a stupid question, I thought I'd ask a stupid question: If an employer has 2 401(k) plans and there is no overlap of employees between the plans, can they automatically test each plan separately, or does each plan need to pass 410(b) coverage testing on its own (considering all employees of the employer in the test) in order to test each plan on its own? I would think that each plan needs to pass 410(b) on its own, but these posts make me think otherwise: http://benefitslink.com/boards/index.php?/topic/55126-brain-cramp-controlled-group-mandatory-aggregation/?hl=disaggregate#entry240106 http://benefitslink.com/boards/index.php?/topic/54601-adpcoverage-testing-for-control-group/?hl=disaggregate

A cash balance plan has made in-service distributions to participants in the past. They are now amending actuarial equivalence. In addition, they are amending the plan's hypothetical contribution credits to bring certain participants to their maximum benefits under 415. When considering the distributions previously made, are we allowed to revalue the benefit based on the new actuarial equivalence? Also, when adjusting the payment from the age that it was paid to the present, should the adjustment be made using the interest crediting rate or the post retirement interest rate?

How is the following situation corrected: A controlled group between 2 companies. 2013 is the first year after the transition period and both companies need to be considered together. Company A has a safe harbor 3% nonelective plan with with SH going to all employees (not just NHCEs). Company B has a 401(k) only plan subject to ADP testing with no employer contributions. The plan's do not pass 410(b) separately. Since they don't pass 410(b), I can't split them into 1 safe harbor group and 1 group that is tested. How is this corrected? Am I stuck providing the 3% SH contribution to all employees of Company A but still being subject to ADP testing?

So, Mr. Jbones, if you agree with ScottR, then wouldn't you include this contribution when conducting your $250,000 condition assessment of whether or not a form should be filed? I suppose that if you agree that it must be included, then the assets exceed $250,000 and you're forced to file, if you don't agree, then the assets are below $250,000 and next year would be the first filing.

I know this is a 5500 question and I asked it on that board, but need an answer quickly and haven't gotten it there. Assuming all the other requirements are met, when determining whether or not a plan has to file a Form 5500EZ due to having assets under $250,000, is that number based on the actual assets at 12/31/2010 or does it include accrued contributions for the year. Example, plan has $225,000 in assets at 12/31/2010 and contributes $30,000 during 2011 for the 2010 plan year. EOY cash basis assets = $225,000, EOY accrual basis assets = $255,000. Is this plan required to file?

Assuming all the other requirements are met, when determining whether or not a plan has to file a Form 5500EZ due to having assets under $250,000, is that number based on the actual assets at 12/31/2010 or does it include accrued contributions for the year. Example, plan has $225,000 in assets at 12/31/2010 and contributes $30,000 during 2011 for the 2010 plan year. EOY cash basis assets = $225,000, EOY accrual basis assets = $255,000. Is this plan required to file?

I'm curious how others approach this issue in their own practice. What do others require their clients to provide in order to certify and does it depend on who the client is, i.e. actuaries doing third party work for other adminstrators vs. working directly with the plan sponsor. Am I correct that the Joint Board or the Actuarial Standards Board do not have a standard for this?

I have requested from the client, but they have always been very nonresponsive. I don't plan to sign a thing until the client provides the information. What I want is to be able to show the advisor that I'm not just being picky, but that there is in fact a standard to be followed, but it sounds from the conversation string that there is no specific standard. In any event, I've made it clear that I won't sign until the client provides the info.

An advisor that I work with has provided an email listing the date and amount of contributions for a client. He's not the investment advisor, but more of a business advisor. I asked him for either a signed confirmation from the client listing the dates and amounts, or a copy of the checks or bank statements. He is arguing that what he has provided should be good enough to certify the SB. Is there something that I can point him to that states what documentation an actuary should require in order to certify an SB and AFTAP (it's a 1/31 year end so AFTAP isn't late yet)? Thanks.

Makes sense to me. Thanks.

Thanks. I thought that would be the case. Just to play devil's advocate, what if the reason that the plan didn't pass 401(a)(26) is because a group was excluded, but that entire group consisted of HCE's and the only way to pass would be to add HCE's to the plan?

A CB/PS combo plan that uses a carveout is not passing 401(a)(26) due to a number of terminations during the year (all above 500 hours). I am preparing a corrective amendment adding 3 particpants for the plan year to bring DB participation up to 40% of nonexcludables. The 3 participants that the sponsor wants to include are all HCE's. After the amendment, the plan will pass 401(a)(26), 410(b) and 401(a)(26), but I am just leary about benefitting HCE's only in the corrective. Is this allowed?

I rounded the numbers for simplicity, but in this case, the entire 2009 year contribution was $1,500 and none of it was made - so there were missed quarterlies for 2009. The 2009 contribution represented the shortfall amortization payment for the 2009 shortfall. For 2010, there was still a shortfall, but due to the small value of the missed contribution relative to the FT and the change in assumptions from the prior year valuation, the assets were more than 96% of the FT, so there was no new base, but the old base wasn't wiped out either. This leaves the 2010 minimum equal to the amortization of the 2009 shortfall again, thus the $1,500 MRC for both years. It seems that the $2,000, when discounted using the 2009 effective rate and the 5% interest penalty is enough to cover the unpaid MRC from 2009 and that leaves me with quarterlies due for 2010 based on (90% x 1,500)/4.

A plan has a funding deficiency for 2009 of $1,500 as of the val date 12/31/2009. Sponsor deposits $2,000 on 10/1/2010. The minimum required contribution for 2010 is $1,500 as of 1/1/2010 (without regard to the prior year unpaid). The plan is subject to quarterlies for 2009 & 2010. Valuation date changed from EOY 2009 to BOY 2010. Two things that I want to confirm: 1. Is the portion of the 10/1/2010 contribution that covers the 2009 unpaid minimum discounted based on the 2009 effective rate plus the 5% penalty? 2. When determining the 2010 required quarterly amount, does the 90% of current year MRC exlude the unpaid portion from the prior year?

I understand that I want to grant a particular benefit as a past service amount, I'm trying to come up with the wording for the plan document that correctly accomplishes that. Does my suggested benefit formula using a minimum benefit for participants employed on the effective date work? It seems that it would provide a funding target and also allow the benefit at the end of the first year to be the same as it would be if there were no minimum benefit or PSL.

Thanks for the reply. Sorry about the second zero, initially I wrote the example using 3 years rather than 2, but then formula a) and b) came to the same answer - when I made the change, I forgot to delete one of the zero's.

A potential client has an existing S-Corp that they claim they set up about 2 years ago, but have never run any business through and have never taken wages through. This year the S-Corp has commenced business operations and they Owner and wife are taking wages. Let's assume the S-Corp commenced 1-1-10 and the wages for 2011 will be $100,000. For 415 % of pay limit, should the 415 % of pay limit be: a) 2*10%*($0+$0+$100,000) = $6;667 or b) 1*10%*($100,000) = $10,000 The plan won't be recognizing any past service. I would think that the previous years of the S-Corp in which there were no wages would not be included in the determination of the high 3 average pay because there was no service.

If I recognize one year of past service, then they will have a beginning of year benefit and will also accrue a benefit during the first year of the plan. I basically want to accrue the first year's benefit on day one. If the benefits were at the 415 maximum, then recognizing the year of past service would work because they would have 1,625 at the beginning and end of the first year and accrue another 1,625 each year (assuming no increase in the statutory limit), but they are far below the 415 limit so that wouldn't work here. I had thought of recognizing 1 year of past service and having the accrual rate for the first 2 years be half the ongoing rate, but then I would not satisfy the accrual rules.

A client is adopting a new defined benefit plan, owner and spouse are the only employees. We don't necessarilly want to provide benefits for past service, but do want to create a funding target in the first year in order to provide a range of contributions rather than just having the target normal cost. What is the best way to draft the benefit formula to provide for this, but avoid potential issues? Specifically, we want to avoid having a benefit at the end of year 1 that is greater than it would be if we weren't trying to create a BOY FT, but also would like to avoid having a minimum benefit for future entrants if possible. Is there any issue with something like: "4.5% of High 3 AMC x Years of Participation. . . Notwithstanding the above, each Participant who was a Participant as of the Plan's Effective Date shall be provide with a monthly benefit not less than the following: Owner - $X, Spouse $Y"? In this case, X and Y represent what would be the end of year monthly benefits based on the benefit formula and comp history as of the end of the year. X and Y are less than the BOY 415 limits. Any other suggestions/better ways to accomplish this?

It isn't much trouble, I guess my only question is whether or not I am required to do so, especially if the valuation was prepared after 9/30/2010. If so, are there any issues with recertifying a 2010 AFTAP in August of 2011 after all distributions have occurred?

Sorry, the PT date was in 2010, so a 2010 valuation is required. Are you saying that I am required to recertify my AFTAP for 2010 based on the 1/1/10 valuation even though it has already been certified based on the 12/31/09 valuation?

A calendar plan terminates and is paid out during 2010. The valuation date changes from EOY 2009 to BOY 2010. The 2010 AFTAP was certified based on the 2009 EOY valuation and is in excess of 100%. There would not be a material change in the AFTAP if it were recertified based on the 1/1/2010 valuation and I can see no reason why an actuary would have been required to recertify for 2010. When filing the 2010 SB Is it correct to report the 2010 AFTAP on the Schedule SB based on the 12/31/2009 valuation? This would mean reporting the same AFTAP on 2 consecutive year's SB filings since that is the number that was reported last year. The instructions to SB seem to suggest that they want that number to be the AFTAP based on the current year valuation results (specifically stated for non-BOY vals), but the instructions don't shed any light on how to handle this in the year after a change in valuation date.