AndyH

"you test it against an allowable definition of testing comp" True. And the definition cited (excluding bonus etc) is not allowable for testing purposes unless it satisifies the 414(s) test, to answer one of the questions.

Well thanks for all the comments, but I have to say that upon closer read, the second JH article actually does not address my question at all. Before Situations 10 and 11 in the article, it states "In the situations presented below the required beginning date under the terms of the plan is the April 1 following attainment of age 70 1/2." [As opposed to actual retirement if later for non 5% owners] In both examples it states that "No benefits are paid before retirement under the terms of the plan except that benefits are to commence at the required beginning date". So in neither case does the article address what benefits must be provided when a plan allows the deferral of benefit payments beyond age 70 1/2. Instead it addresses corrective action upon failure to distribute timely. I'm beginning to think that the RBD as defined by the plan governs, and that My 2 cents' point is correct. (And we have yet to reach a consensus in my office which is why I am raising the question).

Thank you.

Effen, do you now think the answer is clear? The 2007 gray book answer seems to be way off the mark. Or perhaps the respondents did not fully understand the question. Calavera, it's my understanding (perhaps incorrectly?) that the offset is not permitted after age 70 1/2. The document I am looking at says nothing helpful, and certainly has no specific offset provision. It has a SOB provision so the offset is N/A through 70 1/2. Otherwise it basically incorporates the 401(a)(9) rules by reference. I think post 70 1/2 benefits must be both the actuarial equivalent of the 70 1/2 benefit plus future accruals plus the actuarial equivalent increases on the future accruals. But I cannot find any clear example other than Jim Holland's article, and even that article does not detail what "actuarial equivalent of any additional benefits accrue" means. It seems obvious except that the gray book answer seems to dismiss it outright.

Plus, make arrangements for someone to measure future vesting service and interact with the insurer. The insurer isn't going to do evaluate future census. Or, amend the plan to give everyone that could grow into the ER provision that entitlement as of the plan termination date.

This seems like a basic question but there seem to be different opinions. For an active employee in an active plan, do additional benefit accruals after age 70 1/2 need to be actuarially increased to the start date? Example: participant age 75. Benefit accrued each year is $100 starting at age 70 1/2 (plus a benefit previously accrued which clearly must be actuarially increased to 75). Must these additional benefit accruals be actuarially increased to age 75? Jim Holland's articles (linked below) seem to say yes. Relevant IRS regulations seem to say yes. Gray Book 2007-17 seems to say no. http://benefitslink.com/boards/index.php?/topic/56689-actuarial-increases-for-deferred-vested-participants/#entry248292 QUESTION 17 Minimum Distribution Rules: Required Actuarial Increases Question #34 from the 2000 Gray Book provided an example of a late retirement increase, essentially comparing the accrued benefit based on all service and the actuarially increased accrued benefits from each earlier April 1 in a plan with an April 1 anniversary date. The subsequently released Question 8 from regulation §1.401(a)(9)-6 says the benefit payable must be the actuarial equivalent of the benefit from the April 1 following the calendar year in which the employee attains age 70 ½ “ plus the actuarial equivalent of any additional benefits accrued after that date…” [emphasis added]. Does this mean the regulation requires an additional calculation beyond what was illustrated in the prior Gray Book (i.e., a calculation including actuarial increases on top of additional service accruals)? RESPONSE No. The phrase “any additional benefits accrued after that date” are those required under the rules of IRC §411(b)(1)(H), which provide that an accrual for additional service during a year may be offset by an actuarial increase for delayed retirement. The year-by-year calculation in the 2000 Gray Book produces this result

The PBGC position is that mathematical correctness is not relevant; what is relevant is how their lawyers read the document. No deference is given to the Plan Administrator or Actuary.

Just to elaborate, generally an actuarial increase is required unless the plan provides for a SOB notice AND the notice is actually issued timely, which is rare. Except after 70 1/2 at which time the increase is required regardless of the SOB notice. The increase can be offset by payments received if the plan so states.

If the HCEs are at the 401(17) limit, assuming a low inflation rate their benefits to average comp ratio might not change quickly since their pay increase will effectively be at the inflation rate. If NHCE pay increases exceed CPI, the ratio of NHCE benefts to comp could quickly become lower than the ratio of HCE benefits to comp. Add to that the preclusion of new participants, and you could see testing difficulties in the near future.

Happy New Year everyone. George, you should raise your prices and pay your construction crew.

Thanks, subject to Mike's comments it would seem no amendment and therefore no testing needed might be the answer.

"Remember, unless the amendment contains special language, if it cannot go into effect this year, it becomes entirely void at the end of the plan year. So if it is blocked by Section 436, it doesn't exist." I don't understand this either. Could you elaborate?

Mike, would you elaborate please. Why?

Jumping into this conversation late but it's a good one and lots of good comments have been made. One of the questions is about whether an "audit" is required, by that I assume a 5500 audit. In my mind, the question should be how FMV is to be determined. Is a reliable "appraisal" to be done periodically? Annually? Also, this is a 5500 flag, A red one in my experience. IRS audits tend to follow such reporting of assets without readily determinable FMVs. Usually for good reason.

Thank you.

I am looking for a copy of T-10 also. The table that pax attached matches another that I found posted on actuarialoutpost.com except for the rate at age 63. Pax' table lists 63 as 0.00132 The other the table that I located listed age 63 as .000132, but the other rates matched. .00132 looks more reasonable and consistent. Can anyone (or two) confirm from their information or systems? Thanks.

Not sure of direct answer but this seems like a terrible idea. Why would a 1 life DB plan have a QPSA death benefit? If he dies what is the 415 limit?

Plus the excess allocation itself must pass 410(b) and 401(a)(4) You have not stated whether the NHCES terminated or whether there are other non excludable employees

Good point Tom. That would be sufficient for me. And also now I remember JH adding at the end to what I quoted before ", any test"

No, but for what it's worth I remember Jim Holland several years ago in a session saying "Zero compensation = not an employee = not in the test) within the context of 401(a)(4) testing, so under that theory you have only one body to worry about.

Any whispers on timing of IRS guidance?

Seems ok to me as well.

How do you define substance? Wes Welker

The plan will have a deficiency if the contributions are limited to 2.5 months. It may have a deficiency even adding amounts up to 8.5 months, but not sure of that yet. I could not find a Gray Book question on this issue. Or anything else particularly useful. I agree with you that it be wise to count contributions only up to 2.5 months if it did not create a deficiency, but it does.

What is the IRS position on contributions made after 2 1/2 months following plan year end in the case where a funding deficiency would occur if only 2 1/2 months of contributions were credited? DOL doesn't like it, is that correct? Even the MB instructions remain ambiguous on this issue: "Line 3. Contributions Made to Plan. Show all employer and employee contributions for the plan year. Include employer contributions made not later than 2½ months (or the later date allowed under Code section 431©(8) and ERISA section 304©(8)) after the end of the plan year."