AndyH

It would be a PT. The plan could apply for a PT exemption.

True, but the QKA is the least test-intensive ASPA designation. Three additional tests are required to obtain CPC, QPA, and QKA designations, meaning a total of eight. I say this only because the CEBS program also has certificate-type programs that are short of the CEBS designation, so apples to apples means less than 10/8 exams in each case, but 10/8 to reach the end of each program. And the more advanced ASPA tests recommend a considerably greater amount of study time than do the CEBS exam material that I have read. As Stephen said, they are more focused and specific exams.

I have seen one also, and had the same reaction. Good question. Anyone have a different answer?

That was one subject that came up during an ASPA "webcast" this afternoon. I think I heard that the answer is yes, although some reinforcement of that would be helpful. The topics were considerable, so I'd ask for other takes on that issue before reaching a conclusion, but that's what I think I heard.

Fred, let's slow down. Three HCEs with identical EBARs for 401(a)(4) do not necessarily have the same Average Benefit Percentages because the latter includes items that the former does not. So, let's not confuse that. For programming purposes, I would think it would be easier to have one rate group per HCE, because, due to testing methodology, testing one way may produce two identical EBARs for two HCEs, but testing another way will produce different EBARS. This may occur when inputing permitted disparity, for example. So, I think it would be technically and practically correct to have one rate group per non-excludable HCE.

Just a caution. Remember, the regs aren't final yet. Didn't they initially say this month they'd be finalized? Something tells me they may impose greater restrictions in light of new law than a 1/3 or 5% requirement. Any word on when the final regs will be issued? I'll also try to find some time to look at the spreadsheet. My company has developed a proprietary program as well due to the apparent lack of a flexible commercial alternative.

No, lets back up a step. All NHCEs do not benefit in each plan. NHCEs of A do not benefit in B, and vice versa. You have to treat all employees in each company as if they were employees of one company, with two plans, one covering one group and one covering another. So, depending upon the demographics, Plan B could cover 100% of HCes and 10% of NHCEs. In that case, the plan fails coverage. Then you need to aggregate. If the provisions are identical, that plan as aggregated will pass. Then, you have to do a combined ADP test, since they must be aggregated for coverage. So, application of the coverage rules has ramifications on ADP testing, among other things. Same process for the ps "plan". Add all employees of both group together, then do your ratio for the plan with the contribution. Does this help? P.S., no, I don't think that aggregation of the ps "plan" would mandate aggregation of the k "plan".

I think no based upon the "allocation date" requirement. If this were met, I think the comp question depends upon the definition in the document. I agree that deferring severance into a K plan is a no no, but my understanding is that this is plan-specific question otherwise.

Yes, you can do it that way, but only employees of B who meet the age and service conditions of A are eligible and not benefitting from A. But, remember you have to test coverage for both the Profit sharing and k "plans" separately. You need to be certain that the k peices pass coverage separately in the way you've described; otherwise the ADP test must be combined and the plans will need to be aggregated for coverage testing, provided the conditions for doing so are met.

Sorry for any confusion. Seems fairly straight forward to me. One year of service to get in plan. Then, match is 50%, permanently increasing to 100% after another year (provided the employee deferred for the full year). If not, match stays at 50% till 4 elapsed quarters of deferrals. I don't know if the fourth quarter is 100% or 50% off hand, (probably 50%), but I don't see how the answer would be different on how to test and what the other issues are, if any. Thanks for the comments.

I agree with Medusa's comments.

Tom, the situation is number 2 in your comments. At least, that's what is supposed to be done. In fact, of course it's been messed up.

Right. That's my take as well. But what about the dependency of the formula on the deferral. If the plan matched at 50% for employees with 1 year of service, then 100% for employees with two or more, then fine. But that's not what this one does. The rate of match is dependent upon the elapsed time a person defers. So, the match is not dependent upon service, age, pay; nothing but the period of time a person has deferred. Just seems to me that this design must run afoul of something. Maybe not; maybe I'm just paranoid about takeovers! p.s. actually, I don't agree exactly about the test. I think there are two groups, the one at 50% and the one at 100%, not one. The 100% people are not in the 50% group, as I understand it.

Plan match provision calls for 50% match, increasing to 100% after employee has deferred for 4 calendar quarters. How to test under 401(a)(4)? Brf match test with two groups, those at 50% and those at 100%? Other issues or problems with this? I don't like it, but am having trouble pinpointing the faults.

MGB, thanks much for the elaboration. Your insights into these issues have been tremendously helpful.

Thanks, stephen. I think you're right, and that makes a lot more sense.

On first read, the annual additions limit for a PS/K plan for a 51 year old in 2002 appears to be $51,500 for 2002 ($40K + $11K + $500 catchup), or 100% of pay if less. Is that correct, or have I misread something?

But then what does "effective as of January 1 of each calendar year" mean?

I agree. Every deficiency I've seen has resulted in an audit.

I can help with that. My understanding of the process is that the 10% penalty is automatic, but that the 100% penalty is assessed after the client first gets a "Notice of Deficiency" or something to that effect from the IRS. Obviously that would be generated as a result of a triggering event which could be an audit or a response generated from a filed Schedule B or 5500 filing. Upon receipt of the letter, you have a certain number of days to correct the deficiency, or the 100% tax is assessed. I can find the details of the timing if nobody recalls off hand.

Do you mean "irrevocable" in your second sentence? Thanks for the responses. In answer to your questions, my question relates to a new plan being designed. It is hypothetical, so the plan can say whatever within reason we want. I agree with the points you've made, except as noted above.

For what it's worth, someone in my office asked the 7/1-6/30 415 question of Jim Holland this morning who replied that the person wouldn't get the 2001 415 limit unless the person retired after January 1. If we accept that position, the practical application of the 415 law changes and indexing seems to be that it is a calendar year limit. Anybody disagree with this interpretation?

Mark, your points are very valid. The answer isn't readily apparent. It seems the old language is bad, and that it's been interpreted differently by different people. Maybe the existing law needs to be clarified first. Does somebody retiring in July of 2000 who participates in a plan with a July to June plan year get the 2001 415 limit? Is this what existing law says? What is the correct application of "Effective January 1"?

Most of the new stuff is effective for plan years beginning after 12/31/2001, but the DB 415 limit increases seem to be effective for plan years ending after 12/31/2001. This is despite the fact that, according to the joint committee report, both the House and Senate legislation proposed effective dates for years beginning after 12/31/2001. Yet, for some reason, it was accelerated (for non calendar plans). Why?

I have a little experience in these situations, not much. In regards to the question about why the multiemployer might accept liabilities exceeding assets, it is clear from my experience that this can happen for political reasons. I was involved in a situation where the multi offered $x dollars in benefits (which was close to 100%), then virtually tripled the offer when they concluded the deal wouldn't get done because the local obtained expert actuarial advice who advised against the initial deal. But, isn't there a fiduciary responsibility on the part of the trustees of the single employer to protect the participants when they go to the multi? Isn't there an analagous requirement that participants be placed in a position no less favorable after the merger than before?