AndyH

My two cents on this. Once again I agree with Blinky. When I started in this business, the typical DB plan based benefits on service but accrued on participation, exactly for the 30 year versus 1 year reason that Blinky mentioned. Then this design was prohibited as a safe harbor design under the a(4) regulations. To suggest that this is now allowed by simply general testing is not correct. The testing service must relate to the benefits being provided. ok, I just found the IRS audit guidelines Document 9240 4/2000 page 11: "Testing service, for purposes of determining accrual rates, generally means the employee's years of service as defined in the plan for purposes of the plan's benefit formula. Alternatively, testing service can be determined for all employees in a reasonable manner. An example of a reasonable alternative definition of testing service is the number of years of service the employee has benefited under the plan." I don't think that basing benefits on participation but testing on service meets the reasonable criteria in most cases.

I don't understand your first sentence, but even if I did I think the answer depends on who is the plan sponsor and how "employees" are defined and how compensation is defined. I think you can use 1, but only if the plan says so.

What does the plan say? Just a couple of comments. These people would not be leased employees since they don't meet the 20% requirement. Does that make them employees? I guess so. And it seems that their comp might be includable for 415 but not necessarily under the terms of the plan. Sounds like a mess calling for an 11(g) amendment. So it sounds like you may have a 410(b), 401(a)(26) and maybe 401(a)(4) and/or 414(s) problem. Can you include the W-2 amount from the "Leasing" company. It seems to me that it would depend upon the plan language. If you can include it for the owner, you can probably include it for the employees, and then your problems may be alleviated.

mwyatt, I found the audit guidline that you mentioned and it is conclusive to me, just as you stated. Thank you.

Thanks, MGB. Hmm. What might be an appropriate Christmas present to send these "people" who have given us such lead time.

And, Mike S., while your attempted creativity is interesting, I agree with MGB that the stretching is excessive. And I repeat my citations. They are called 401(a)(26) and 410(b). These people are participants. They are earning and retaining credited service. They have rights under ERISA. They are beneficiaries. p.s. And Mr. Preston's son's story was terrific. Get the tape.

No, not overtly. An election is a cash or deferred arrangement (i.e. 401(k) plan) being offered only to partners. But, Chris, I'll bet this is done covertly by some, but do so at your own peril.

This looks like it may have what you are looking for: http://www.actuary.org/ear/pdf/winter_2002.pdf

It would seem to come down to the definition of "beneficiary" for 404 purposes. Where is that defined?

If you could argue that you only had one participant in the DB plan, wouldn't you have a problem with 401(a)(26)? What about 410(b)?

I was alluding to situation D in particular. I'll bet there are lots of documents that don't handle that type of scenario well.

The definitions in the plan will have to be overruled (e.g. amended) if the gateway is not satisfied, however.

Blinky, shall we zap that incoherent message? Are you consuming mass quantities (with other people from France) amidst a Christmas party?

A. For the gateway, you can start counting compensation on 7/1/03, i.e. in date of participation. For top heavy purposes, you need to provide the 3% for the entire year. So, you need to give the greater of these. B. Only 5% from DOP is necessary. C. What is the question? You still have the gateway to satisfy or you must limit HCEs to 9%. D. Yes, the 3% must be increased to 5%.

We're being asked some difficult "what if" questions about a probable distress termination situation. I've never personally been involved in one, yet. Looking for some general information. Let's say a plan is 90% funded, enough to cover guaranteed benefits, but not all accrued benefits. For example, EGTRRA increases would not be guaranteed. Would the PBGC pay benefits to the extent funded, or would people be cut back to guaranteed benefit levels? Anybody know how the PBGC converts assets to benefits, i.e. determines what benefit levels would be paid (above guaranteed limits) based upon available funds? Do they, for example, use certain annuity rate tables? The situation, which may not seem to make sense but does, is that there may be some additional funds available to make 90% funded 95%, but the parties want to know how the participants would be affected before agreeing to release the funds. (And I know that is not normally an option-this is a unique situation). Can anybody shed light on this process?

I don't know the answer to your direct question, but I'll add that he can obtain his wage history from Social Security very easily, and solve the problem.

So would I but I wonder what an IRS auditor would say if we cited Blinky the 3 Eyed Fish as authority. How about Tax Court?

And they'll accept confirmation from Blinky the 3-Eyed Fish?

Just a side note on CPAs and DB plans. I have known very few that are not terrified of DB plans. And fewer that understand FAS87.

http://bostondirtdogs.com/ Gotta love that Saddam picture!

Yes. Got it. Thank you.

No. Why would you think he could?

No, that is not true. You cannot exclude him from receiving the top heavy minimum, but even if he gets the top heavy you can still test him as "otherwise excludable" under the 401(a)(4) test which includes the gateway.

If they are not allowed, it would be because the QNEC is given characteristics of employee deferrals, and employee deferrals cannot be used towards the gateway. But I for one am still on the fence about this. Haven't heard Mike's take on this. So let's go with Tom's. But what is Tom's take?Blinky?

DB plan provides for unreduced disability provision if participant has 15 YOS. Plan is frozen. Must participants be allowed to "grow into" the 15 YOS or can service be frozen for this purpose?