AndyH

What exactly does "that the rolled over amount is converted into a DB benefit " mean? I would think the answer to the question depends upon the terms of the plan.

Just got this email from TAG: Dear Manulife Forum Member: IRS is preparing to release new guidance regarding 412(i) plans, sometime in the next few weeks. We expect to see new regulations, as well as revenue rulings, to be issued. TAG has also learned that IRS will be targeting 412(i) plans for audit. We will post information as it becomes available. Stay tuned. This newsletter, in addition to the full TAG service, is brought to you by Manulife.

I take no credit for this. It arrived in my email this morning. Red Sox and Yankees > > > > On a tour of Florida, the Pope took a couple of days > > off to visit the coast for some sightseeing. He was > > cruising along the beach in the Pope mobile when > > there was a frantic commotion just off shore. > > > > A helpless man, wearing a New York Yankee's jersey, > > was struggling frantically to free himself from the > > jaws of a 25-foot shark. As the Pope watched, > > horrified, a speedboat came racing up with three men > > wearing Boston Red Sox jerseys aboard. One quickly > > fired a harpoon into the shark's side. The other two > > reached out and pulled the bleeding, semiconscious > > Yankee fan from the water. Then using (autographed > > Nomar) baseball bats, the three heroes in red beat > > the shark to death and hauled it into the boat also. > > > > > > Immediately the Pope shouted and summoned them to > > the beach. "I give you my blessing for your brave > > actions," he told them. "I heard that there was some > > bitter hatred between Red Sox and Yankee fans, but > > now I have seen with my own eyes that this is not > > the truth." > > > > As the Pope drove off, the harpooner asked his > > buddies "Who was that?" "It was the Pope," one > > replied. "He is in direct contact with God and has > > access to all of God's wisdom." "Well," the > > harpooner said, "he may have access to God's wisdom, > > but he doesn't know squat about shark fishing.... > > how's the bait holding up?" > > >

Right, Belgarath. I was wondering why nobody else mentioned that. If in fact such protection is legit, and we all know there is some uncertainty about that, I think it's the only decent reason to consider doing this.

Terrific, Doug. Thanks!

Now, Mike, we need you to get off this thread and onto the FAS#87 Discount Rate thread and tell us what rate auditors are going to permit. Or tell us about the results of your modeling analyses are so we can run the numbers once, be done, and refer any auditor questions to you!

The IRS' final regulations under Section 401(a)(4)-(8) of the Internal Revenue Code (Cross Testing) which were published in the Federal Register on 6/29/2001 gives a decent summary of the rules. And it is authoritative. And to answer your question, you don't need to test a safe harbor nonelective contribution. But it is considered an employer "non-elective" contribution so that if a profit sharing contribution is made which is being cross tested, you would include the SHNEC because it is of the same money type being tested.

Anything new on this? We've yet to see any auditor guidelines for December.

I'd bet that a little hike in interest rates, and, puff, it goes away.

Hopefully not, but we may hear from that lady who drove into a "hobo" and left him stuck in her windshield overnight in her garage! What might her username be?

Good point, but the $285,000 is with asset smoothing!

Can't understand why. I got a plan that was fully funded a couple of years ago that has a $285,000 variable rate premium. And that is an off-calendar 2003 calculation, before the "relief" expires!

Can't cause you didn't say "rack him". Now, salute.

Just one opinion, it's too aggressive for me. I'd fall on 1.401(a)(4)(3)(d)(2)(ii)(A) which says that average annual compensation must be determined in a reasonable manner. Granted, that is not right on point, but 1.401(a)(4)(12) under plan year compensation, (4) PERIOD OF PLAN PARTICIPATION DURING THE PLAN YEAR, at the end, says, ..."Further, selection of this period must be made on a reasonably consistent basis from plan year to plan year in a manner that does not discriminate in favor of HCEs." Neither is a direct prohibition, but I would not do what you suggest.

Where is the trick to this question? Yes, you can do it the way your first paragraph asks, but you already knew that. And you know that a top heavy contribution is a nonelective contribution, right? What are you trying to get away with?

Blinky, I happen to agree with you but there are some who feel that the "redistributing" of the 415 excess is not allowed. I do not share this view, but I thought I'd throw it out there in case anyone wishes to comment. I do not even recall what the legal argument was but there was one that was advocated by someone who's opinion I respect. And if I recall correctly this subject was touched upon by Sal Tripodi in a package he put together in 2001 or early 2002 with sample cross tested plan language. He basically said that the plan should state how to address such excess.

If you are asking how to determine which part is employer and which part is employee, then see regulation 1.411© 1. If you are asking about the basis recovery rules, I knew those a few years ago but have forever banned them from my memory banks. Check Tax Facts or the Pension Answer Book or the ERISA Outline Book. Or, somebody who has recently taken ASPA's C-3 exam can probably answer that.

I'll add that there is also disagreement here about how to calculate the maximum lump sum!

Well, thanks, Mike P, that cements it for me. I never looked there before. My interpretation was from the repeated use of the term "average compensation" in the examples under 1.401(a)(4)-(8) plus possibly the original LRMs, and an analysis I read way back when. And Mike W., you are not alone, but Mike P's comments make sense from my experience because I do seem to recall that, to my surprise, the takeover document did seem to support the use of projected average comp. But then again, it was a law firm's document, so who knows if it was in fact intended to have safe harbor status. This issue could have been easily overlooked by either the drafter or the IRS reviewer. But I would not think that safe harbor status should be granted based upon the language in (a)(4)-(8) which includes Mike P's cross reference. Thanks for the help. I'm once again comfortable with my interpretation.

Ok, the 25 years makes much more sense. The 35 did not. As mywatt implied, it does not look like it was ever a safe harbor. But even if it was, taking it out of safe harbor status when you have a 0% formula and no contribution does not create a problem because you would pass nondiscrimination by the fact that no HCE benefits. But if I recall correctly, the new target safe harbor rules came into effect for plan years starting on or after 1/1/89 and there were transitional issues and a later regulatory effective date, so you may have a plan that had grandfathered safe harbor status. But if I understand the situation correctly, you are fine.

ok, now that I have all you target experts in one room can somebody answer a question I posed a year ago and never got an answer: Does a safe harbor target have to fund based upon average compensation or can projected average compensation (current comp. for someone not within the averaging period) be used? We thought the former, then ran across a takeover which did the latter.

This seems to be a document issue, not a safe harbor issue, caused by the way the document specifies the target formula. If you can elaborate on what the document says the formula is, and compare that to what you would like the formula to be, I'll comment further.

sounds like a 5330 situation to me. Ouch! Can you interpret the EGTRRA comp limit as appling just prospectively? Might or might not help but just a thought.

Merlin, they are the ones who rejected 6.25% as of 6/30. Is the range you mentioned something being circulated nationally, or just one person's opinion?

Has anybody seen guidelines from the major auditing firms? We're expecting their maximum range to be 6%. That was the maximum 6/30/03 according to two of them. We actually had to revise one that was done at 6.25% 6/30 down to 6%.