AndyH

Thank you very much.

Thanks for the feeback. I agree with your points except the disaster relief issue. The Q&A says it's the IRS position that this is an ERISA Title I issue, which usually means that they won't or feel they can't do anything about it without legislation.

I have a couple of clients with funds tied up till the markets open. Is minimum funding for a calendar year 9/15 or 9/17 since that is the next business day? Any cites? Thanks. P.S. Everything we've found (including Question 8 from the 1995 EA meeting) says 9/15 is firm. Any dissenting opinions?

Yes, I see your point. Reading it again I can interpret it differently.

MGB, just a note to say thanks for offering your time, insights and considerable knowledge into helping us understand these rather incredible developments. P.S. I don't have the Notice in front of me, but noted in reading it earlier that the introduction seemed to indicate that plans using measuring periods other than plan years (i.e. calendar measuring periods) could use the new limits even prior to the pyb in 2002. I have a 7/1-6/30 plan which uses calendar pay. I have an exec going part time and starting his pension 1/1/92 who has always been over $200k. Does this language say that I can use the 200K for average comp 1/1/2002, even before the pyb in 2002, i.e. 7/1/2002? In other words is this person's average comp 200,000 1/1/2002 (assuming he completes one hour of service) even though the first plan year beginning in 2002 starts 7/1/2002? To me this was always a gray area anyway, but not the Notice seems to be tackling this question head on, in a favorable manner. I wonder why.

I didn't realize that, but I did notice from the ASPA conference agenda that Tom is doing a session at the ASPA national conference this October. Congratulations to Tom for his well-deserved recognition.

It appears to me that if the retirement ages are deemed uniform, then you test using the latest, which would be 65, and if the retirement ages are not deemed uniform, then you still use 65, so I don't see another option. This would appear to me to be consistent with the consistency requirements you reference, not contrary to. Just one reading of the regs. I haven't seen such a test.

This sounds interesting. Can anyone elaborate? Example?

No question it would cause a lot of complications, one of which would be the instant underfunding of many small plans, but on the other hand, I have a number of mid-sized clients who have key people at or near retirement age who would be significantly affected favorably.

[This was in response to sdolce's comments, before I saw Harry's-which is on point] But, remember that the change to $150,000 was retroactive; we were allowed to grandfather accrued benefits, but not average comp. That's part of the argument I've seen for making $200 k retroactive. I would think it would apply only to people working one or more hours on or after pyb in 2002, and not to past plan years with respect to 401(a)(4), 404, etc. Also, it might need an EGTRRA amendment to become effective. This possible retroactive application isn't my imagination. I've read a couple of detailed analyses suggesting that is the probable or possible outcome. One of them is from Milliman. Maybe MGB can help here.

What is a person's average comp as of 1/1/2002 in a calendar plan, when the person has always earned $200,000? Does the new limit apply to past years? I've read a couple of arguments that it should be applied retroactively, but IRS' guidance is needed. Any recent developments, or indication of whether or when guidance will be issued?

MWeddell, I think the answer to your question is clearly yes. You can inpute permitted disparity into general testing (for appropriate plan types) regardless of whether or not the plan is integrated with social security. The opposite is also true, that the testing methodologies have no impact on plan design. You can have an integrated plan and test with or without permitted disparity.

My understanding is that you can use any reasonable definition of compensation for accrued benefits, whether it satisfies 414(s) or not, provided the plan passes the general test. If you do not wish to general test the plan, i believe the definition must satisfy 414(s). And yes, the general test must use 414(s) comp.

I'm not sure of the answer. Just wanted to throw my name into the ring of people interested in this very good question. MGB, can you help with this one?

rcline46: Would you please elaborate about "the brokerage statements must be available for the participants". I haven't focused much on this issue. Please explain. Thanks.

Sorry, I was unclear. Yes, I meant re-term in 2002 and contribute at least some by 9/15/2002. This is pretty radical, and pretty ridiculous, but it may be worthwhile for some sponsors if the IRS takes a rigid interpretation, it seems to me.

Good points, though it may be possible to avoid such a problem if benefits were frozen or under other circumstances. For example, I have a calendar year plan which terminated 12/31/2000 which contributed for 2000 based upon a 1/1/2000 valuation. Now, we're expecting an FDL very shortly and I don't think we can go beyond 12/31/2001 under the normal termination guidelines. So, there's no deficiency, and wouldn't be until 9/15/2002 at the earliest, by which time we could have refiled and made a full contribution to make the plan sufficient. Then, doesn't it become fully deductible?

There must be countless 1999 or 2000 terminations potentially affected by this. I know I have a couple. In the worst case scenario, shouldn't we consider revoking the termination and restarting that process in 2002 (dependent upon the interim accruals of course)? Is there anything that would prevent such a plan from being subject to the new EGTRRA deduction rules?

Check out the comments on page 9 of the corporate summary here. This link comes from a post by MGB a day or two ago. It basically says the answer to this question is unclear, but it might be possible to deduct part in 2001 and the remainder in 2002. http://www.milliman.com/empl_ben/publicati...eginfobulletins If the link doesn't work, it's in a post under Retirement Plans in General related to EGTRRA credits for start up fees.

I wonder if this percentage limit discussion has exposed another benefit to a target plan versus an age based ps plan. A percentage limit is ok for a safe harbor, I agree, but I wonder whether a percentage limit in an age based profit sharing plan would put the plan outside the gateway rules. If so, a client with old participants might be better off with a target if an age based allocation would exceed 25%, since it would appear that they could limit the contribution in the target to a certain percentage of pay.

Meggie, social security offsets have not been safe harbor plans for many years now. Since any such plan is not a safe harbor, you can do virtually any reasonable variation. But, it has to be general tested.

Laura, I agree with you about the 5500 and audit trigger. The question, which most people assumed to be an audit trigger, is no longer on the 5500. Having said that, I was told once by an attorney who assists with distressed plans that her experience has been that the 5310 filing question on Form 5500 was not more likely to generate an audit. Maybe it should have been an audit trigger but never was! Either way, the question is gone now.

I recently was part of a survey from ASPA, just a fairly comprehensive series of questions about the test process, what's good, bad, needs to be changed, etc. Although the survey was by no means scientific, my impression is that they were serious about constantly reevaluating the educational program, which I think is great. Anybody with gripes, compliments, or comments, I suggest emailing ASPA's E&E department. I bet they'd welcome the feedback. Just approach it in a constructive manner. I have to admit that before I was called, I was reluctant to do so, but I am now convinced that they are making a sincere attempt at constructive evaluation of the education process.

Yes, Richard, you're right. Thanks for the cite. I didn't realize the percent of pay limit was there.

Good questions. I'd think you'd have to fund the 412 amount without regard to the deduction limit and pay a penalty on the difference if need be. I don't see any way of limiting any NHCE to 25% without violating the safe harbor rules. So, this becomes a critical consideration of plan design. P.S. I'm not sure this would be any different with an age based ps plan, except that in that case the contribution can be limited to the 404 limit.