AndyH

jpod, you have stated it exactly as I understood the discussion. That part of the discussion seemed clear to me. Separate 15% and 25% limits, no further fees from plan 1. I agree with TAG's suggestion to obtain the tapes, however, and I'm referring to the General Session IRS Q&A. TAG may have been referring to a different session that I did not attend, although it sounds like the same answers were given. Also, remember that the MP plan must be updated for GUST before year end, or they stated that you could somehow reflect the needed GUST MP language when you later amend the PS for GUST, but it's not at all clear to me how this would work or be practical.

I agree there was some ambiguity in the discussion, but I went away with the impression that funding the MP into the PS after the merger was perfectly acceptable. What I wasn't completely clear on was the timing of the movement of assets, i.e. can you "deem" the MP assets to be PS assets as of 12/31/2001 by merger resolution or does there have to be an account liquidation. And by discussion I'm referring to the IRS Q&A general session.

I agree with MGB's comments in the small plan world as well.

Unless something changed under EGTRRA that I missed, a deduction is not permitted for a life insurance premium paid on behalf of a self employed person in a qualified plan, so I think the answer is no, it is not doable from a practical standpoint unless the organization is incorporated.

merlin, first, that was a matter of some considerable disagreement (Paul Schultz disagreed with that answer on stage and Wickersham gave a different answer last year), and second, allocation groups or classes don't have to be reasonable. You could have classes with all people who have white or blue hair if you wish; reasonable is only an issue with respect to eligibility to participate in the plan because it's needed to get to use the average benefits test. I think both Medusa and Belgarath make valid points.

You certainly could specify the assumptions and/or methodology used, but you do not have to and probably should not for the reasons you've described, that they may change each year. In practice, nobody does this, because there is no need or benefit to doing so. But, some documents do have specified assumptions and/or methodology within the document, even though it is generally recognized that it is neither necessary or advantageous to do so.

To elaborate on Tom's comments, the theory is that if you can have multiple profit sharing plans all with discretionary formulas, you should be able to have multiple "plans" within one document. But, as I'm sure Tom knows, many cross tested documents do contain the allocation formulas, or at least relative allocation formulas. I agree that the approach that Tom outlined is usually preferable, but the fact remains that many plans are not written this way. I've been trying to get a feel for what percentage of cross tested plans do and do not specify the individual relative factors and have not been able to do so. I know Corbel's volume submitter uses classes only. I don't know how the other national document providers address this, but I would like to know. I asked several business owners at ASPA how their plans were written in this manner and received mostly "I'm not sure. Good question." or "We'll have to see how that shakes out", the latter one from a particularly prominent ASPA actuary. So, I'd love to encourage some discussion of this issue and how others are writing their cross tested plans.

My understanding, which was reinforced at the recent ASPA conference, is that the retroactive application of the comp limit increase will not be a discrimination issue. If the plan is general tested, of course, it will affect the discrimination testing result, but by itself it would not be an issue.

Agreed, but, as an aside, what now with 30 year bonds no longer being issued?

Harry O's comments are (as usual) completely true. I would just add that because this document sounds so messed up, you should make sure that the pbgc rates are not part of the "applicable interest rates" for 415 purposes, because only the 30 year treasury GATT references belong there.

Just another opinion. I agree with merlin's comments. Zero accrued benefit.

I haven't looked at this recently, but I think you could file under the delinquent filer program and pay a relatively small penalty versus a potentially big penalty. I don't think I'd do this, but it is an option for minimizing the damage.

I didn't mean to imply that Tom was incorrect. I was merely trying to supplement his answer. What I was trying to point out is what I thought the ramifications would be if a company had a simple plan, then did adopt another plan and make a contribution to such a plan in the same year. I have seen this occur. So, it is possible to have both. Not a good idea, and very problematic, but it is possible.

p.s. jpod, the exemption appears to cover purchase by the plan from either the participant or the plan sponsor.

I'm not sure where I got this from, but here's one: http://www.sisterstates.com/

I think you could have both, but the exclusivity rule means that the Simple plan would not meet the requirements for tax favored treatment, i.e. not tax deferred and not deductible as retirement plan contribution. So, for example, if a DB were the second plan, the Simple would not meet the requirements for tax favored treatment for the year, but the DB would be fine.

bingo. Thanks to all of you for your help.

David, thank you for the feedback. I haven't yet found anything in print supporting this, though I'm sure I will. Do you by chance know a cite? I've found cites related to it possibly being a prohibited transaction, but not anything yet on point about funding, though the two may be related.

Question I've never been asked before: Can a sponsor of a small DB plan make, as part of the required contribution, a contribution to the plan of corporate owned life insurance, presumably taking a deduction for, and credit for, the cash value of such policy? Presumably the company's owner is the insured. Is there anything preventing this from being viable? What are the issues related to the deductibility? Clearly there are issues such as PS 58 costs, tax issues upon death or distribution, need to provide equivalent BRF's to other participants, need to satisy incidental benefit rules. What else? I'm not advocating this; just trying to answer a series of questions. Thanks for any comments.

There's a Q&A on the PWBA website. I don't think it says anything like what you've quoted them as saying, unless you're directly affected. Check it out and draw your own conclusion. Mine is that they're playing hardball. http://askpwba.dol.gov/091101faq.html#section4

NPaleveda, this is the wrong board for this, but are you advocating a 412(i) plan, and if so, why?

Tom, just to enhance the discussion, I often see non-profit "cross-tested" plans pass the ratio percentage test for each rate group. These usually have allocations based upon service or some "non-uniform" points system. They might not be your protopypical "cross tested" plan, but they often must be general tested, and often do not pass on a contributions basis, so they must be tested a benefits basis. For whatever reason, non-profits seem to have HCEs with short service, so allocations based upon service often pass cross testing easily. This also might occur when an HCE terminates in a plan with a last day provision.

I'd appreciate any information on what, if anything, other firm's cross tested plan documents will say about the gateway rules. I'd be interested in any insight into how Corbel's volume plan will deal with this, plus anybody else who sponsor's volume submitter plans. My company intends to have two versions, one discretionary ala Corbel's volume, plus another with defined allocation factors. But in each case we're trying to figure out whether there should be any 3/1 or 5% language in there as a backstop. Another issue is what to do if a plan doesn't use 415 comp for allocations. Either they change to 415 pay (my preference but not that of some clients), or have some rules in the plan document requiring either a minimum of 5% of 415 pay or a maximum disparity of 3/1. Any comments or thoughts would be welcome.

I agree as well. I was involved in cleaning up a somewhat similar situation a few years ago where there were two 50% owners, and one embezzled a similar amount and never filed any forms for the DB plan. The IRS assessed only the excise penalties for funding deficiencies. Their position was that this could not be waived. The 5500 IRS penalties were waived. We never heard from the DOL. The PBGC played hardball, despite an attempt by the IRS agent to help with that.

See the thread I started in the DB section for a discussion of this. I'll try to link it below There was a notice issued and there is a link to it. It is not easy reading. Something more may be issued today regarding 5500 filings. http://benefitslink.com/boards/index.php?showtopic=11552