CharlesLeggette

OK, I did a little research and ran your idea by some other actuaries...here's one that reflects what they all said... "What you are talking about now, Charles, is referred to as "restructuring". When you restructure into separate testing groups, each testing group istreated as if it were the only plan. And, yes, each testing group can use adifferent method to pass 401(a)(4). A warning, though. Each restructured plan must independently pass 410(b). Most of the time we pick and choose who is in each plan for testingpurposes. Unless, magically, the folks we pick and choose constitute areasonable business grouping you will be precluded from using the ABPT.Hence, when testing whether the plan being tested passes 410(b) you almostalways use the 70% threshold (even if the plan satisfies the ABPT with roomto spare). "Here's what Jeff Wadle says [Jeff's a serios regulations guru]... "I do not think there is any way you can argue for using different methods for determining the accrual rate for different rate groups – the consistency rule should stop that. However, you could use the restructuring rule to divide the plan into different separately-tested component plans. And test one component plan using EBARs and the other just using allocation rates. Maybe this is what was really being suggested? Note that this is somewhat different than using different methods for different rate groups. If there was an NHCE with both the highest EBAR and the highest allocation rate, they would have to be a zero in one of the component plans. Restructuring usually works when you have a few younger HCEs like children of the owner who would have EBARs way too high to fit in a rate group. But have allocation rates below a number of NHCEs. A separate question is whether the rates used for the ABPT can be different than those used for rate group testing. My opinion is no, they cannot be, although others disagree. So, if I did restructuring into two component plans – one using benefits basis and EBARs and one using DC basis and allocation rates, I would calculate two different ABPTs for use with those component plans (if the rate groups did not pass at 70%). When I have restructured this way, often the EBAR component plan ABOPT works fine – but not the allocation rate component. So would then just make sure rate groups in allocation rate component pass at 70%. " So I assume you are "restructuring"????

Thanks John, but I can tell you that its very rare to find a rate group that passes at 70%...most pass at or above the midpoint because that's the fundamental purpose of the classification....are you saying all your rate groups pass at 70% or above???

John, take the case where the wife has pay of $18,000 and contributes $17,500 to a non-elective safeharbor plan....I have always felt that the Plan had to pass the Plan Level Average Benefits Test [including all ee+er contributions]...before it got to rate group testing....so in the above example under most circumstances, it would fail that test. Everything I read says it must pass BOTH average benefits and rate group. Any thoughts??

Since this is a benefits basis testing scenario, may I conclude from what you've[both of you] said that this Plan must pass both the averagebenfits test and rate group testing??

This is a takeover New-Comp Plan. We looked back at the 2012 and 2013 years and while the client made a gateway contribution, in each year, the rate-group test prepared by Relius showed a required contribution of around 9% of nHCE pay in each year. The CPA says that is OK because the pass the 410(b) Ratio Percentage test.My response was that the Plan is cross tested,hence it must pass BOTH the rate group tests and the average benefits test...he adamantly states "No way". I'd like a second opinion. Here's some background and a few questions. The Plan defines 2 Classifications [Rate groups] –Principals and all others. The Plan Document states the allocation method for non-elective contributions uses the “Participant Group Allocation Method”. There are 2 principals and 6 nHCEs, one of whom was hired 5/1/2013. The Plan permits deferrals for employees with 6 months of service[entry date is monthly]. A Safe Harbor NE contribution is required for all employees meeting that same requirement. Class based Non elective contributions are also allocated to the same employees. Each year the maximum 415 contribution is calculated for the Principal with the lowest compensation. That percentage is then applied to both Principals’ compensation. If a Principal with higher compensation receives a prospective allocation greater than the 415 limit, such Principal’s allocated contribution is capped at the 415 limit. A gateway contribution is then calculated for the nHCEs equal to the lesser of 5% of compensation or 1/3 the highest Principal’s allocation percentage. The Plan is a Non-elective Safe Harbor Plan so the 5% gateway is satisfied through the combination of 3% Safe Harbor + a 2% Non-elective contribution. The Plan is then subjected to Rate-group testing under 401(a)(4). Question 1 Must this Plan be tested under IRC 401(a)(4), The General Nondiscrimination Test? If so, must the General Nondiscrimination Test include “Rate Group testing”? Question 2 Are there any options available to pass general non-discrimination not using rate group testing? Question 3 What does it mean for an otherwise excludable employee to be “separately tested”? If the Plan required only 6 months of svc for a Safe Harbor Non-elective, would that same Otherwise Excludable Employee be entitled to a gateway contribution? Question 4 Is a Gateway contribution required for employees that have been employed less than one year/age 21 when the Plan requires a Safe Harbor Contribution for such employee? May those less than one year/age 21 employees be excluded from the 401(a)(4) General Test? Question 5 The General test shows that approximately 9% of payroll must be contributed for nHCEs in order to pass the rate group test. The employer , in 2013 and 2012 contributed less than the required 9%. The 2013 tax return has been filed. Can one make self corrective contributions for employees in 2014 to correct that error or must some other correction procedure be used.

Facts ---------------------- A CB Plan effective 1/1/2011, failed to meet its 2012 funding due on 9/15/2013. The Plan was frozen early enough in 2013 that no accruals occurred in 2013. The client paid a penalty for the 9/15/2013 under funding. 95% of the cash balance contribution will go to the two owners. The would like to pay it to avoid any more penalties but intend to continue the freeze. They believe they can pay it over two years starting 1/1/2014.They understand that interest is due on the contribution. Questions --------------------- What options do they have in paying the underfunding? Is it due in its entirety by 9/15/2014. If not paid by then will another penalty accrue? Can they "pay it out" over a couple or three years without additional penalty.

Partners[who all get K-1's] want to amend Safe Harbor k-plan definition of w-2 to exclude bonuses. I was under the impression that a Safe Harbor plan had to use 415 comp definition.

This Cash Balance Plan missed its 9/15/2013 funding of its plan. Froze benefits in 3/13. Paid a $40k excise tax on 9/15/2013 for missed 2012 contribution. Is terminating today with 204h NOIT, so a 3/1/2014 term date. Owners have 95% of all balances, and will waive benefits to be sufficient. They will not pay 2012 funding 2013 funding, and will be a sufficient termination and do not want to fill w/IRS for a termination LOD. If the Plan goes away on 6/1/2014 and is distributed, there will be no plan to make funding for the missed 2012 and 2013 funding.....I'm nervous about the excise tax issues here for 2012 and 2013...any thoughts????????????

1. A 412 e plan is restated as a Cash Balance Plan. 1 person plan. Do they get a waiver of the 5300 $1,000 fee?? 2. A new Cash Balance Plan covers 1 person. Do they get a waiver of the 5300 $1,000 fee?? 3. New Plan startup tax credit -- does number 2 get the tax credit for starting a new plan???

BTW, they also want to chamge from pro-rata to New-comp ....same issues I assume???

A PSP [calendar year] wants to add here in 2013 an EOY employment requirement to Plan. Plan has a 1,000 requirement. Deep in the recesses of my brain a little bird said...whoa--not so fast....any thoughts on this...is it doable.

The annual limit to DC plans for 2013 is $51,000, can a Church[Non-electing] give different amounts to specific employee’s? I know they formerly could but have there been any changes?? Thanks in advance for your help

Non-electing Church plans are exempt from discrimination testing....preERISA rules generally apply. IRS Notice 2001-46 essentially is silent about K & M testing on 401(k) plans adopted by churches. I don't believe they are subject to K&M testing. Is there any IRS pronoucement that settles this issue? Since 403(b) church plans are clearly and uniquivocably exempt from any kind of contribution testing other than Deferral and 415 limits, it stands to reason that church plan 401k's would be treated similarly. Does anyone have any opinion on this.

I have a terminating PS Plan with a distribution of $200 and a few others a bit smaller. These participants never returned their paperwork but I know their addresses, emails,etc. On these small amounts must we produce a 1099r and should we withhold, and if so how much, 10 or 20%. I ask this question as the CPA said retirement plan distrbutions under $600 didn't need either. Thanks in advance.

Client needs a Fiduciary audit....Roland Criss is the only name I could find, but we need 4 names to submit to Board...any clues as to firms [not big 4] that do Fiduciary Audits [and are qualified].????

OK, so what if the docs deliver services to the patients of the hospital owned 100% by Corp B. Does this change anything.

Can you elaborate on why....while I agree with you, I am nervous that 5 or fewer entities own Corp B.

Neither corp delivers svcs to the other, so no ASG issues. Case 1: Corp A is owned as follows by 4 docs and a separate corp doc a 12% doc b 12% doc c 12% doc d 13% - total 49% corp b 51% Corp B is owned 100% by indiv x and y evenly docs own no part of Corp B Are A and B Bro-sister? Case 2: Corp A is owned as follows doc a 6% doc b 6% doc c 6% doc d 3% - total 21% corp b 79% Corp B is owned 100% by indiv x and y evenly docs own no part of Corp B Are A and B Bro-sister?