AndyH

The one I knew about was in an art gallery, which was thought to pass muster (it did pass an IRS audit or two). But in the end of course the story did not end happily because it was the majority of the plan's assets and it did not perform well (putting it mildly)

So, David, is the answer to Tom's question 3% or 4%? I agree with your comments except that I still question whether the gateway is required at all when considering a(4) without the QNEC because I still don't think he is benefitting.

Paintings, fine antique automobiles, IOU's/accrued interest on loans, undevelopable land, and margin brokerage accounts are some of the fine investments I've seen in DB plans over the years.

Interesting question. If you test with the QNEC, he needs another 3%. If you test without the QNEC, then he's not "benefitting under the plan" and therefore I would say he need get nothing. So I'd say he gets 3% more.

When you say "other than a conversion to a cash balance plan", you are making a misinformed statement. A cash balance plan is still a DB plan. It is not a DC plan. It simply has some similar features.

Circling back for a moment, KJohnson's point is one that I meant to make. It's the QNEC requirement that would be violated, not the a(4) test. To be a QNEC, the a(4) test must pass with and without it. If it doesn't, then I would think you still might have a passing a(4) test but still have whatever problem led you to do the QNEC in the first place. In other words, the intended QNEC would be nothing but a regular nonelective contribution.

I think David et al are right on this one. You need to test with and without the QNEC, so I don't see how it can be used for the gateway.

Does this preclude the use of flip flop funding with respect to maintaing a DB and an MP? (Not that I would ever advocate it but some do).

You can impute disparity in a general test whenever you wish to, regardless of whether or not the plan is integrated. The same is true for the average benefits test. The only thing you need to be VERY careful about is that the money type can be used in the permitted disparity imputation (is that a word?). For example, you cannot impute on employee deferrals, employer matches, SHNECs, etc. That is the main restriction. Then if you have two plans in a test or tests, as Tom mentioned, you can only impute on one, just as you can only have one integrated (fully). Hope this clarifies a bit.

Hands down, Effen has the two best posts on this thread. Or is it threads on this post, BTW? And perhaps the best username as well

Mr. Firmani, I did not attend the 412(i) session at ASPA last year that you are bashing, but I did read the outline presented by Larry Starr and think it was terrific. I found it to be the most informative and balanced material on the subject that I have found. And, if I am not mistaken, Mr. Starr is a CLU just like you. I did attend the conference, however, and clearly heard Jim Holland et al sternly warning, in the general session, the sharks in the water to be weary. Jim Holland is not a member of ASPA. Perhaps you could explain your objections to the session or the outline or the speaker(s). And rather than defending a session that I did not attend, I am pointing out that perhaps the bias may be on your side.

Thanks, pax, your references are helpful. SFAS35 clearly says it can be done either way, and even implies that the way I'd prefer it be done is the better approach due to timing. But I haven't yet found anything that discusses making a change. Still reading on.

I'm trying to get a CPA firm to change it's PVAB reconciliation from 1/1/2002 to 1/1/2003 to 1/1/2001 to 1/1/2002 for a report accompanying a 2002 Form 5500. My experience is that years ago all CPAs reported a reconciliation to the valuation date ocurring 1 day after the audit year, but that over the years most changed to a reconciliation to the valuation date falling within the audit year. I have an auditor balking at such change, asking for a legal or regulatory cite or justification for such a change. Does anybody know these rules or how they are found?

Tom, the brochure advertises a song. Perhaps you'd like to preview the lyrics here?

A quick look at the Conference brochure tells me that Board regulars Tom Poje, Mike Preston, and MGB are all doing sessions this October. Any other regulars, perhaps disguised, also doing a session?

Very thoughful comments, pension222. Can anybody envision a scenario in which it would be a good idea to convert a traditional db into a 412(i)? I would imagine that some estate planning reason may exist; I'm open to learning.

Mr. Firmani, if we thought we could help picwrc with his question we would have. To help someone it is best to envision a sucessful result. Blinky's question went unanswered and it did not seem like an answer was likely, so we had a little fun with it. But now we know that you have the answer, so why not share it with us hypocrites?

Blinky, he's a doctor of course. Geez I thought you would have figured that out!

I rest my case. Who wants to pay for this? And, thanks, MGB, in no way do I mean to minimize the helpfulness of your comments and insight. This just seems like overregulation to the nth power. Is this nonsense intended to support higher auditing fees for accountants that have clients with DB plans? Or is it just another way to push clients to terminate their DB plans? Seems like one or the other to me.

I think that FormsRmylife gave a terrific answer. This must be an employer action that is not only permitted by the document and/or trust agreement but there must be authority or affirmative instruction so as not to make this subject to employer discretion, otherwise you could have a B/R/F issue. And, Janet, it would seem to me that the person who answers the phone at "the investment company" should not be confused with a rocket scientist or an ERISA attorney with respect to pension law.

Zen question of the day, if the accountants can make the actuaries' lives miserable by issuing burdensome edicts and pronouncements, shouldn't the reverse also be true? Kinda like an unfunded mandate in political terms. Who wants to pay for this work?

cease, you do understand that the plan needs to be general tested, right? Some people think that satisfying the gateway satisfies the test; just want to make sure that you know that the plan must satisfy BOTH the gateway and the general test, i.e. the cross test.

Then you probably have a few choices: 1. If you only tried the ratio percentage test for coverage, then try the average benefits percentage test. 2. General test on a contributions basis. 3. Provide the gateway and test on a benefits basis or a combination of contributions and benefits. 4. Redesign the program so that it passes one of these tests.

Two questions: (1) Does each group pass 410(b) separately; (2) Does the integrated formula ignore the 3% SHNEC or are you using it toward the maximum integration amount? If the answer to both questions is yes, then you can restructure the plan into two groups and each is a safe harbor. Then you pass 401(a)(4). If the answer to one or both is no, then you should try testing the plan on a contributions basis, which avoids the 3/1 or 5% gateway. No, you do not meet a gateway exception as you speculated. You need to satisfy amounts requirements as well as availability requirements.

Yeah, and you also beat me to the commentary. You must have a faster computer!