My 2 cents

So, it seems that for all practical purposes- if the plan is not underfunded- new would be entrants are treated and included in ND tests as any other nonstatutory excluded class, right? I was fairly sure... it sounded too good for the plan sponsor. I think that the comment meant was that for purposes of participation and other compliance testing, the people who would otherwise have become participants (but for the soft freeze) are treated for the various non-discrimination tests like any other group excluded from the plan who don't fall into the group excludable for testing purposes (such as non-resident aliens with no US income or people covered by bargaining agreements, etc.).

Soft frozen plans have to pass compliance testing. People who are not excludable in accordance with the law and regulations (i.e., non-resident aliens with no US income, people covered by collective bargaining agreements, etc.) have to be factored into the compliance testing whether they can participate in this or any other plan of the sponsor's controlled group. Hard frozen plans get a pass on coverage and generally also non-discrimination because no HCEs are benefitting, but that is not necessarily true in a soft freeze. Important distinction: Testing is based on regulatory definitions of excludable and not (in general) on who the plan(s) in question will allow to participate and those who cannot. Sometimes I wonder if that distinction is understood. Excludable in the testing context does not equate to excluded from this plan.

My question has to do with the participation testing. Is it not the case that just because someone is excluded from being a participant under the terms of a plan, that does not make them excludable for compliance testing purposes? With the possible exception of exclusions due to age or service or coverage under a CBA, wouldn't the denominator of the participation test fraction under 401(a)(26) be entirely independent of the provisions of the plan to be tested?

Who would want to work for such an employer??? What, forfeiture of otherwise vested accounts for embezzlement and even termination for cause isn't enough? Loss of client as a result of actions or inactions that would not rise to a level that could justify termination for cause? How could anyone derive any sense of financial security in such an environment, and without that, what is the purpose between offering any plan at all?

How is this different from a situation where the participant dies and the beneficiary is the participant's estate (either by default or by virtue of the participant having explicitly designated his or her estate as beneficiary)? In that case, after the death of the participant and before the money is paid out (may take some time if the beneficiary is the estate!), wouldn't the plan be holding money belonging to a non-natural person (trusts and estates are persons, but not natural persons)? I am sure that there are more than a couple plans out there with accounts whose beneficiary is either the participant's alma mater or a church or other non-profit institution. There cannot be an issue with the plan holding assets owed to such an institution pending completion of arrangements to make the payment, could there?

Are you saying that because it is not an ERISA plan? Because, as I understand it, (unless the embezzlement was from the plan itself by a plan official) benefits under an ERISA plan can never be denied to an embezzling employee who met the vesting requirements.

Not a practitioner in that area, just putting in my non-expert thoughts. Are the owners willing to testify, under oath, that at the time the plan was created it was their intention to maintain the plan indefinitely? The reason I ask this is that if the IRS comes to the conclusion that the plan was not intended to be permanent, they could disqualify it retroactive to inception. In that case, the validity of the rollovers could be called into question, resulting in the amounts rolled over being treated as ordinary income, interest, penalties etc., making it pretty unpalatable to the owners, perhaps to the extent that they would want to challenge the ruling in the tax court. Not to impute any bad motives here, but was the primary reason to establish a 401(k) due to 401(k) assets having better protection under bankruptcy proceedings than IRA money? So, out of curiosity, what changed from last year?

This looks like more of a partnership expense issue than anything directly related to pension funding. If they spent a like amount on some other extraordinary expenditure (whether subject to depreciation or not), how would the expense be allocated under partnership rules? Is this something addressed in the legal partnership documents? As for taxation, assuming that the contribution needed to bring the plan to sufficiency was fully deductible in general, wouldn't the tax treatment just pass along that deductibility based on the allocation of the necessary contribution?

There are probably insurers out there perfectly happy to sell annuities deferred to 2035, with appropriate margins to cover the pension plan's early/late retirement provisions and optional forms (with the plan's conversion factors). Unless there are others desiring annuities, you may need to buy an individual annuity. What is being done with retirees (if the plan has any)? The only reason an insurer might prefer an immediate annuity is because its commencement date and payment form are fixed (assuming, of course, that you know the participant's marital status and, if married, the spouse's sex and date of birth).

As I recall, anyone who has met the age and service requirements and who has not terminated employment would have to be taken into account in non-discrimination testing. So if someone worked 1,000 hours in 2009 and not since, that person is not considered excludable for testing purposes. One is supposed to have trouble passing coverage and non-discrimination if one has lots of people not earning any benefits currently. Think of a large company that had the brilliant idea to save tons of money by making everyone work part-time so they would earn no retirement benefits or be entitled to health coverage (management of course would continue to work full-time and get all of those goodies). Should their plans pass?

Maybe I am misunderstanding the comment here. Why would her benefit be $8/month? Remember, she gets the full accrued benefit. If the lump sum would have been $6,000 and it costs $10,000 to buy an annuity for the same periodic benefit that the lump sum is based on, the plan must spend $10,000. You cannot pass any of the costs or expenses on to the participant in a defined benefit plan. If the participant is young, the plan may be required to offer an immediate annuity to validate the potential choice to waive the QJSA to take a lump sum, but if no election is made, you will be buying an annuity deferred to normal retirement age, not an immediate annuity. So the participant would be given an option to take an immediate lump sum, have an immediate QJSA purchased, or have a deferred benefit purchased (options to be determined at commencement age). Pick one or we purchase a deferred annuity.

It was my understanding that the Trustees have fiduciary obligations to the participants covered by the multi-employer plan and none to the sponsoring employers. In fact, is that not the case for all retirement plans? All trustee decisions are supposed to be made with the best interests of the participants in mind, even if contrary to the best interests of the plan sponsor(s). If a single employer defined benefit plan's trustees, exercising prudent investment analysis and judgment, choose investments that lead to higher required employer contributions, nobody would think twice as to whether a claim by the sponsor that the higher required financial commitment represented any kind of actionable fiduciary violation, so why would a similar claim with respect to actions taken by the multi-employer plan trustees deserve anything other than quick dismissal? As for multi-employer plans, is it not generally the case that an employer participates in a multi-employer plan because they must, not because they want to? If the employer's workforce is covered by a CBA calling for it, they participate in the multi-employer plan, otherwise they don't.

Not someone who deals with IRAs, so I may be totally off base on this, but if a person has an IRA holding stock in a company partially or fully owned by that person, is the IRA (which is not an employer plan by definition) restricted in any way by the PT rules from buying more of that stock or selling that stock? Sure, there would be issues if the plan were sponsored by the company but as it is an IRA, do the PT rules get in the way? Wouldn't the IRA and the company be unrelated?

I suppose it is possible that the maximum deductible contribution could be the minimum but I am having a lot of trouble coming up with numbers that would produce that result. Note that if one is in that situation and the contribution was for the 2014 plan year, there is no electing to defer recognition. How can 150% of a non-MAP funding target be less than the ongoing shortfall amortizations on a MAP/HATFA basis, especially for a plan whose assets are less than the MAP/HATFA funding target? But then, the title of this thread is "Moot Point", so perhaps there is not a real-life situation where this is a problem.

If the 2014 MRC is $0, then, while the plan may be required to make quarterly contributions in 2014 (because the 2013 FTAP was not at least 100%), the amount of each required quarterly contribution is $0. Send a thank-you note to your representative in the House and your senators, because as of the enactment of HATFA, there was no failure to make required quarterly contributions this year. No overdue quarterlies, no reportable event failure, nothing. All is copacetic. Isn't that what Congress meant to do? How could anyone (regulator or practitioner) come to a different conclusion?

Did you check off that this was the first filing/return for the plan?

I was just wondering how IRC Section 415 would affect a cash balance plan with so rich a pay credit. 1. Would the first year's pay credit be limited sufficiently so that it would not grow, by retirement age of 62, using the plan's interest credit rate, to more than the lump sum equivalent, using 5.5% interest, of 1/10th of this year's 415 dollar limit? 2. Would the account balance not be allowed to grow, over the years, to more than the lump sum equivalent, using 5.5% interest, of a straight life annuity at retirement age equal to the lesser of the 415 dollar limit or 100% of the highest three-year average compensation (with each year's compensation for that purpose limited by 401(a)(17))? I once took over a plan freshly spun off from a plan we did not provide services to, otherwise I would not understand how you could take over a plan in its first year. I presume, however, that you do not have to do such takeover things as match someone else's results.

To leave no stone unturned, and while it may turn out to do no good, an attempt should be made to check with the sponsor (of course, already done and, presumably, done at least a second time to make sure), the sponsor's attorney, the sponsor's accountant, the sponsor of the most recent pre-approved restatement, and as many of the prior service providers who can still be located. A friendly inquiring email would not take much effort. You never know, someone may be able to produce the GUST restatement. Without a copy of the GUST restatement, how was it even possible for the sponsor of the EGTRRA document to draft a proper EGTRRA restatement? Granted, the GUST restatement would have been adopted over 10 years ago, but until a much more recent date, it WAS the current document.

Is there a distinction between data and plan documents? Purging official (albeit superseded) plan documents after 7 years seems a bit riskier than purging individual account information after 7 years. Were there any restatements since the GUST document other than the EGTRRA? Did the EGTRRA restatement receive a favorable determination letter? Why are they reaching so far back?

Is it not the case that if at least 25% of the possible reversion is transferred to a qualified replacement plan, then that which is transferred is not a reversion and is not subject to any current taxation? How could the rules state that if you send too much over then you don't get to use a 20% rate on what you do receive as a reversion? The only approach that would make any sense (assuming that making sense is an appropriate part of the process) would be to establish a minimum transfer (i.e. 25% of the possible reversion) that meets certain conditions to be a transfer to a qualified replacement plan, and if you meet that requirement, then whatever else remains that is returned to the employer is subject only to the 20% excise tax rate. Perhaps I am just confused.

Isn't it true that, on audit, the overpayment as rolled over into the IRA could be challenged, resulting in adverse tax consequences to the participant? The amount in excess of what was due under the plan is not eligible for rollover. Has an attempt to send the participant (with or without a cc to the IRA Custodian) a certified letter alerting him or her to the overpayment and the potential problems that could arise if the overpayment is not returned?

If it is a terminated plan with an effective date of termination in 2010, wouldn't it have had to have paid out all of the benefits long before now? Are they still filing 5500s every year?

If there are neither HCEs nor key employees covered by a plan, unless the plan has to be aggregated with another plan that does have HCEs or key employees, isn't the plan essentially exempt from all testing, top heavy etc.? You cannot have discrimination in favor of HCEs if there aren't any.

By "propel", did you mean to say "people" before that rogue spellchecker got ahold of it?

IRS Notice 2014-48 (giving August 2014 interest rates) provides the following definite information: 1. When referring to the Highway bill, HATFA is the correct acronym. You need not clutter up the reference by including any references to 2014. 2. For all 2014 actuarial valuations under IRC Section 430 (other than those plans using the full yield curve), the applicable funding segment rates are 4.99%/6.32%/6.99%. 3. For all 2013 actuarial valuations under IRC Section 430 (in the absence of a formal election to defer recognition of HATFA until 2014 or for those plans using the full yield curve), the applicable segment rates are 5.23%/6.51%/7.16%. Further guidance is promised. One presumes that the further guidance will clarify the interaction of HATFA (and MAP-21?) with respect to IRC Section 436 as applicable to plans sponsored by companies in bankruptcy, any timing requirements for elections out of following HATFA for 2013 plan years, and escape routes for plans that had been operating under pre-HATFA AFTAP certifications and similar complications. It does not appear from the Notice that the IRS is entertaining any thoughts concerning allowing sponsors to elect to defer recognition of HATFA for funding and/or Section 436 purposes to 2015.