AndyH

Blinky, your approach may be ok if the GATT/GAR rate is unchanged since the first distribution, but if rates have increased since the prior distribution, I think that a conversion to a life annuity, then a recalculation, is necessary. At least that is what the written comments that I have seen say.

Hmm, I was thinking that the poster may have done the work, but upon re-read I guess not. Maybe it was a crossed up tested plan, or maybe it was a plan simply tested by an imcompetent cross dresser.

Chris, I'll take a stab at your question. You'd be going from a general tested allocation to a safe harbor, and my reading of the regs (and I could be wrong, I am willing to be corrected) is that you would need to separate the old and the new through the use of some "fresh start" approach which I would think would be best done with an amendment. I would think that your cleanest approach would be to start the formula new, i.e. the target would only reference years of participation starting now (future only), i.e. 2% of pay x years of participation starting 1/1/2003. And then I would use no theoretical asset for this new peice, starting as if new. And new (safe harbor) plans must be participation to the best of my recollection. There could be other ways, but I think this is one of them.

Yes, that comment about testing on a contributions basis makes sense. If everybody got the same percent then you actually have a safe harbor allocation that doesn't even need to be tested. But often in your situation you would ideally test part of the allocation on a benefits basis and part on a contributions basis, which is often called "component plan testing". You'll find some discussion of that if you want to search this board. But there is no way you should have needed to give rank and file more than your HCEs. Your worst case scenario should be that the rank and file get slightly less than the youngest HCE, because you can inpute permitted disparity to make slightly less be treated as equal to.

Have the previously-mentioned multiple actuaries and attornies now changed or moderated their views?

Sounds like a typical cash balance plan to me, albeit with an inaccurate accumulation as you suggest, but maybe the accumulation is intended to be as of the end of so many years?. It certainly isn't a DC plan and it sure doesn't look like a normal DB plan. Is the 46 year old getting the same as the older partner? Sounds like that might approximate a 415 limit. My knowledge of and experience with cash balance plans is limited, but from what you are describing, I'd say that the normal pro's and con's of cash balance plans, including the legal uncertainties, apply.

I'd like to hear a little more about this. What exactly is being defined by group, the benefit level or the contribution? And if it is a benefit level, does that level change when one advances to the next age group? Now obviously since it's a proposal some of this could be disguised, but I think that the answers to your questions depend upon the answers to mine.

Mike, I lost the cite reference you gave me way back with your acronyms. Got a new one? I figured you may have had WOW added to it. Not that I want to keep you from vacation though.

Strange conversation, or at least is seems to me. "The doc states comp can be waived." Is this a misstatement? What kind of a pension document affects compensation? Did you mean to say that a contribution can be waived? And if so, please elaborate on what the specifics of this are.

But on the deduction side the answer seems to be different. Chapter 7 Section XVI "Pension Plans Since the deduction limits for pension plans are based on the minimum funding standards with repect to a plan year, a short tax year or a short plan year will affect the computation of the deduction limit. The IRS' position is that the deduction limits are based on a 12-month plan year associated with a 12-month tax year. ........ a. Tax year also changes to mirror plan year change. Where the short plan year is associated with a corresponding short tax year, the prorated deduction limit applies to the short tax year." So, regarding your third question, maybe the question is, "Is it a short fiscal year or does the fiscal year go back to 1/1"

OK, the descending tone caused me to look this up quickly. Here's another hearsay comment for the collection. Verbatim. The ERISA Outline Book (the version I'm quoting from is the 1998 edition, page 3.74) The context is Chapter 3: Accruing Benefits Section IV Special Rules. There are references to earlier paragraphs that discuss problems with an initial short plan year. "3) What if the employer was not in existence before the effective date? A plan might start with a short year because the employer was not in existence before the effective date. Suppose in the prior example that the employer did not exist before May 1, 1998. Could the plan be effective January 1, 1998, or treat the compensation period as 12 months long by specifying the calendar year (rather than the plan year) as the compensation period, as suggested in the prior paragraph? The answer is not clear. IRS personnel have expressed the view at certain employee benefit conferences that a plan's effective date can predate the existence of the employer, thereby creating a 12-month plan year and supporting the use of the full compensation dollar limit for that year. The IRS has also informally noted that the compensation period can be defined as a 12-month period, even though the company did not actually exist for that entire period, also supporting the use of the full compensation dollar limit for an initial short plan year." While this may be addressing a somewhat different issue, it is clear evidence that some of us are not hallucinating when say we have heard these things answered in the affirmative. Now if I had Q&As in electronic format, I could probably find a Q&A on it quickly, but I don't. Effen, this may be all that exists in print other than a Q&A.

Do you mean current allocations without regard to investment return, i.e. no revaluing of the balance each year? If so, I don't think your cite allows that; it's all or a portion of the account balance, which means adjusted for investment return. But maybe I'm mis-reading your question. It is late TGIF after all.

Sorry, Blinky, but I gotcha. Shoulda stuck to 1 word. Q&A 38 ASPA 10/2002: Q. "Spouse works for husband's business for many years (over 1000 hours/year) without taking paycheck. In 2002 spouse begins taking paycheck. For plan purposes what is spouse's hire date? When she originally started working or when she started getting paid?" A. "When she started getting paid". And, from a few years back, my recollection of Holland's comment was: No compensation. Not an employee. Not in the test. Any test. That is from memory, without looking it up.

Cat's got his tongue er um gill.

Jim Holland has said repeatedly that you are not an employee if you do not have compensation.

Thanks, Pax. Great discussion. I wouldn't have thought to look there. And the bonus is that Blinky was giving more than one word answers back then.

Thank you both.

First, I admit to not yet researching this nor asking the PBGC for a coverage determination, both of which I intend to do, so I am asking only for information that anyone knows without research. A DB plan formerly subject to PBGC coverage used to have 4 employees but two of them terminated many years ago and the last employee except the owner terminated about 2 years ago. All benefits have been paid out within the last year under normal plan terms except the owner's. Now the plan is being terminated. There are no employees other than the owner. Is this now a one participant owner-employee plan exempt from PBGC coverage, e.g. exempt from the 60 NOIT and PBGC filing upon termination?

I agree with Blinky and dyrett as well, but I also lack instant recollection of a cite.

If I may chip in, this is not complicated IMO. If you "benefit under the plan", you are subject to the gateway. Benefitting under the plan means receiving a share of employer "non-elective" contributions. This could be a top heavy contribution, a 3% SHNEC, or a regular profit sharing contribution. Eligibility or ineligibility for top heavy contributions has nothing to do with the gateway. Make that separate determination. Then if the person gets a non-elective contribution as a result, they are benefitting, and must get the gateway. It does not matter why the person gets the non-elective. Deferrals and matches are not relevant to the gateway determinations because they are not part of the "plan". Now it can get a little more complicated if you want to separately test otherwise excludables, but if not I don't think this is complicated at all.

Add me to the list of people who have never heard of this before and have been in the business before TEFRA.

I'll try to help you guys out a little. A "cross-tested" defined contribution plan is designed to take advantage of different ages of different participants. A number of criteria can be used to determine who gets what, but in general these plans are designed to give higher $$$ to older people. Typically, however, this is disguised by using classifications of people and giving different classifications of people different contribution levels. If such a plan is to pass testing, however, generally speaking higher contribution levels must go to some older people, although not necessarily all older people. Does that help?

Blinky, Mike Preston covered this in his ASPA presentation by dismissing this option as practically useless, as you also implied, so I'll channel my curiosity in other directions, but thanks again for your comments.

Blinky, thanks for the comments. But, typically when you do a BRF test, there is some legitimate reason why the BRFs are different, even if it is greater years of service, as might occur with a test of different rates of match. It could be a different plan or a different division, or some other objective business criteria which satisfies the NCT criteria. But if the only reason the BRFs were different were age, does that satisfy the NCT objective business reason criteria, or must you pass ratio percentage? I admit that this is a little "out there". I have a non-gateway and I'm using the occasion to explore the other options, and this is not one I've looked at before.

Plan being cross tested plan has allocations that are based on age but do not meet either the 1/3 or 5% gateway. Assume it does not meet the smoothly increasing at regular interval standard. I'm trying to look at the broadly available rule. The only criteria for an allocation is age. What standard is necessary for each rate group to pass the 410(b) criteria in order to satisfy the broadly available criteria? Does each allocation rate containing an HCE need to have a ratio percentage equal to the safe harbor percentage or does it need to be at least 70%. If I understand the rules, this depends upon whether having the groups defined by age would be a valid objective business criteria. Comments? This is the first time I've tried to apply this exception to the gateway rules