AndyH

Revenue Procedure 93-42 contains the rules governing snapshot dates. I believe that the requirement is as I described. I see nothing that prohibits a specific day from being available. My view is it would be ok if the last day would be reasonably representative, which does not seem to be true. Please be aware that dropping below 70% does not mean that you failed coverage. It means that you failed the ratio/percentage test. You can still use the ABPT, and if you have a 401(k) plan covering most of these people, you will most likely pass the ABPT easily by testing the plans on a whole on a benefits basis.

Before your second to last sentence, everything sounded fine. Since you have no accrual requirement, terminated participants are still benefiting. But the snapshot day, if I recall correctly, needs to be reasonably representative of the year. Sounds to me like that is where they are going wrong. What is the passing margin? If the issue is 95% versus 90%, I wouldn't worry about it. If it is close to 70%, or close to the safe harbor percentage if the ABPT is used, then I would raise the issue.

Outstanding analysis! I stand corrected. Quite logical, by the way. Hmmmmmm.

You got the wrong (used to think he was good until the last visit to Foxwoods) blackjack player.

Wasn't Mr. Spock the first actuary? Anybody know his birthday?

I think that makes sense if the reduction for early retirement is less than the 1/15, 1/30 rule would yield, but I don't think the assumptions that you noted do. I have seen documents for integrated plans explicitly stipulate that the integrated reduction is limited to not more than the 1/15, 1/30 reduction would yield, regardless of what actuarial equivalency is defined as for other purposes. And the assumptions could make an integrated plan a non-safe harbor if the normal form is other than a SLA if the conversion from the normal form to a SLA would violate the permitted disparity limit.

Why do you think yes to 1? The reduction is greater than 1/15, 1/30th, is it not? I have no idea what 2 accomplishes.

KAR, could you elaborate on the surrender charge issue? Are you saying there is typically no surrender charge for a "lump sum" withdrawal, or are you limiting the discussion to an annuity conversion? I can understand no explicit "charge" or "penalty" for an annuity conversion (it is built in), but would the same be typically available after 6 or so years for a full withdrawal, and if so how would the withdrawal amount be derived? I wouldn't imagine that you'd get a universal life type of statement with opening balance, insurance charges, interest credit, ending balance at any reasonable interest rate after 6 years, or would you? Topgun, what is your occupation?

Thank you. That Q&A answer makes absolutely no sense to me, but clearly that is what it says. I thought I had read conflicting answers more recently so I will take a look. Obviously there is a difference between nondiscimination and coverage but that seems to be ignored in the answer. P.S. I cannot find anything in the ERISA Outline Book indicating that this is prohibited but I pulled out a folder I set up a couple of years ago labeled "ESOP X Testing" and right on top is Q&A 27 which could not be clearer, so I guess I did know this once but forgot it. Anyway, thanks again.

Doug, I haven't heard that before. Is it in print anywhere? Is it a recent comment?

As I understand it, she was the proponent of the surprise legislation last year while Paul O'Neil was "away". Remember the ERSA, LSA, etc. version 1 that would have wiped out everything but DB plans? And it was apparently proposed without consulting the "in crowd" on the Hill regarding such matters. Mike Preston called it the "actuaries full employment act" but many others had different words for it. How can anybody forget this: http://benefitslink.com/boards/index.php?s...opic=18329&st=0

Oh.

Well, that is terrific news, if Olsen is gone. I missed that one. Maybe it's her turn to tour with Bono?

Nothing new in several years that I'm aware of.

You can ignore NHCE distributions if you wish. You can ignore any distributions made before a chosen date that is not later than 1/1/86. 1.401(a)(4)-(8)(b)(2)(ii)(A)

"The next generation" should perhaps be replaced with "the greatest generation" per Tom Brokaw's book about WWII era people. This design sounds more like a WWII era pension plan that one of the Star Trek era.

Thanks for the comments, Flosfur. The discussion is very useful, but multiple wrongs don't make it right. I would be more convinced of the errors of these documents if I saw the underlying prototype. That is where I would expect a "notwithstanding _____". And, yes, I recently took over a plan that used only participation comp in the first and second years. But I am convinced that it was just plain wrong. I think this is just one of those things that is just not commonly known. Anyone out there able or willing to go back and check the LRMs? Problem is, I don't know when they would have been issued on this subject.

It still must pass the general test, so I'm not sure how we are giving HCEs anything higher than otherwise allowable. And you'll probably need to aggregate under the general test, so you've got the db/dc gateways to consider.

What does the plan say? It probably says it is due by the due date (including extensions) for filing the sponsor's tax return, which for this purpose would be the due date for the filing of the 990, which can be extended beyond the 5500 due date (by one month if I recall correctly).

Sorry, I've been away a bit doing the tax thing. Kind of hard to put that off on 4/15. I was questioning what had to be reasonable and uniform (as Doug also did in his initial comments), whether it was the DB plan, the DC plan, or the relationship between the two. Clearly it is not the DB plan or the combined plans because a safe harbor floor/offset can have one plan be a general tested plan provided that the other is a safe harbor and the same employees benefit in each plan. My conclusion is that the uniformity requirement applies only to the PS plan and that Blinky's example satisfies that. And therefore it satisfies the condition for the concurrent offset program outlined in the regulation that I cited. Levinrad's outline did contain only one paragraph on 401(a)(26) but I thought that was telling in and of itself. And I believe that the one paragraph supported the interpretation that only the PS needs to be uniform and reasonable. Mike, now you can do a more complete Floor/Offset outline for us and we'll shut up.

Mike, send me an email with your email address and I'll send it to you. I know you've had a few of them. I just tried sending it to you through Benefitslink email and I didn't seem to be able to attach it. The outline doesn't say you can do what Blinky wants. It outlines the requirements that an offset must meet, and Blinky's design passes all of them. And at the end of the outline there's a note about 401(a)(26), and it is consistent with Blinky's interpretation.

pax, that link is no good. I've been using it also and discovered that the updated dates are no good. In fact, all of the IRC links throught BenefitsLink are outdated, it appears to me. The GPO printing office's version is also outdated. I've gone back to BNA after using the online links for years. I discovered this recently with the interest rate stuff that my code version was missing sections even though it indicated that it was current.

That is consistent with my understanding, but that doesn't necessarily affect a(4).

Well, having read some more stuff on this, in particular an outline done by Norm Levinrad #15 at the ASPA National conference in 2001, I think you are right. I think you've got a non-safe harbor floor offset but since the offset is uniform you are ok under 401(a)(26). Sorry for the confusion. Like I said, I was a little rusty on this and this was very useful to me.

My read is that nobody in an offset plan that does not accrue a net benefit can be counted as benefitting unless the requirements for either concurrent or sequential offset are met. I think that is a precondition according to the following: "An employee is treated as accruing a benefit under a plan that includes an offset or reduction of benefits that satisfies either paragraph (a)(2)(ii) or (a)(2)(iii) of this section if either the employee accrues a benefit under the plan for the year, or the employee would have accrued a benefit if the offset or reduction portion of the benefit formula were disregarded.." And the requirements of a concurrent offset include the following: (iii) Concurrent benefit offset arrangements--(A) General rule. An offset or reduction of benefits under a defined benefit plan satisfies the requirements of this paragraph (a)(2)(iii) if the benefit formula provides a benefit that is offset or reduced by contributions or benefits under another plan that is maintained by the same employer and the following additional requirements are met: (1) The contributions or benefits under a plan that are used to offset or reduce the benefits under the positive portion of the fomu1a being tested accrued under such other plan; (2) The employees who benefit under the formula being tested also benefit under the other plan on a reasonable and uniform basis; and I think your example violates (2) which is a precondition to having anybody with a $0 net benefit being counted as benefitting. I agree that the people with a net benefit are benefitting and the people with DC accounts benefit due to aggregation but I'm focusing on 401(a)(26), not 410(b). How would you propose to pass 401(a)(26) since we cannot aggregate for that purpose? If you fail the above you've only got the owner benefitting under 401(a)(26), right? And, yes, I understand it's hypothetical. I've seen a few offset candidates recently but don't have any actual offset plans now so I've been meaning to brush up.