AndyH

Variable rate actuarial equivalency factors for purposes other than 417(e) should be illegal and/or avoided. IMHO (but I got some too)

Looking for testing options for non-safe harbor floor offset. DB offset by profit sharing that started in the same year. Questions: 1. Is there anything that prevents the minimum aggregated allocation gateway from being measured using the accrued to date method? 2. If ok and using the accrued to date method, all investment income attributed to employer profit sharing allocations during the measurement period can (but is not required to be) included, right? p.s. I think the answer to 1 is that it is prohibited, but I am not sure.

With respect to #1, John's averaging method comment is true but it is an option not the only approach. The allocation values can also be done on an individual basis instead of an average basis. And either way you will find that If you project forward, at say a 5% CB earnings rate and discount back using a 7.5% to 8.5% testing rate you will get an "allocation rate" for gateway and testing purposes that is much less than the original CB allocation.

Agree with Effen (as usual). p.s. I can't wait to read some day about a plan that uses the actual rate of return that terminates following a couple of up years, so it has to lock in above market experience for future years....

You have managed to provide both too much and too little information in the same post. Principles - Gateway - if you receive an employer contribution in either plan and the plans are aggregated and tested on a benefits basis you must provide the gateway in one or both or through a combination of plans, following the plan document conditions for allocations first. And assuming exemptions such as primarily DB in character do not apply. Top Heavy is an employer contribution that generates the need for a gateway just like any other ER contribution. An employee eligible to defer in a top heavy K plan must get a top heavy allocation which creates the need for a gateway if relevant. Maybe this helps?

Agree. But the accrued benefit must be reduced by the pv of the payments, or at least the pv of the payments in excess of the accrued benefit, right? So what is accomplished?

I would like to know what happens if owner dies close to NRD in a maximim insurance DB. Would the death benefit equal the insurance plus the pvab, or the insurance with a minimum of pvab. Are the same old tricks being played to justify the death benefit as incidental? And how does the death benefit definition affect the funding in the "proposals". Is the position being taken that there is no pre-retirement mortality assumption, therefore no death and no excess death benefit problem. But what happens if that occurs. Not new questions, I understand; but I wonder what the current thinking is on those items.

415 is one qualification requirement, 416 is another. They must all be satisfied, not one more than another.

New plan with a past service liability and accelerated payment provision effective 1/1/2012, adopted 12/30/2012. No 436 contribution being made. When is the 101(j) Notice due - looks like 30 days from 12/30/2012. Anybody disagree?

HCEs cannot be in each others rate groups (unless both the NAR/EBAR and MVAR are identical). Each is in only one rate group. If a person's (including an HCE) EBAR/NAR and MVAR are not both equal to or higher to that of the the HCE forming a rate group, then the person is not in the rate group.

Certainly cannot argue with that. It is just that the SEP sponsor's ERISA attorney and CPA can be hard to get a hold of the last week of December when they want to put in a plan that day.

Yes, why not?. It is the SEP that has the exclusive plan rule. The DB just has 404(a)(7) doesn't it? I could be missing something, but I don't know what. WDIK?

Effen, what was your concern about the loss of the DB deduction? I would have thought no matter what the DB minimum was deductible.

The comparison part is correct. The exact actuarial increase formula is a matter of opinion, and also may depend on the wording in the plan document. It happens to be a contested matter in some circles. If the plan has a pre-mortality assumption for actuarial equivalence, your method (assuming it is N(12)65/N(12)66) is the correct one according to one of the relevant government agencies. Others say that the correct method is APR 65 x (1+i) /APR 66 if there is no forfeiture of the accrued benefit upon death. (Edited due to initial misread of first post - thanks AtA)

Thanks for the help. Neither did I until yesterday.

Company with a 401(k) plan and a few hundred employees acquires a small company that maintains a Simple 401(k). Is it true that the Simple 401(k) may not be maintained because the employer has more than 100 employees, and if so when must the Simple 401(k) arrangement be disbanded? (Is this the same timing as the qualified plan rules?)

The Boards were much more lively and interactive when 412(i)'s were thriving. Posters like Quint the Shark Hunter were well fed.

Have him hire somebody so he becomes covered by PBGC and the combined deduction rules become N/A?

So are you saying there would also need to be a 401k PSP that benefits the NHCE? How did you think you would pass 410(b) and 401(a)(4)? I took the two plan scenario as a given for this reason.

Maybe the incorrect part of this discussion is "cash balance". And the incomplete part was the formula description of what the 1.25% means. Otherwise, if it were a regular DB the question would make more sense.

Right. But need to pass 410(b) and 401(a)(4) also, obviously.

Thanks for the memory jar.

I agree that the maximum account is higher than $170K I think what we are saying is that an allocation of $160K or $170K or $180K would all be within 415 on a current payout basis, but would all produce the same normal cost since the accrued benefit would need to be limited to $19,500 in any case. Based on this particular fact pattern that is. Interesting.

Effen, could you elaborate please? I have not heard of this before.

Thank you. I agree with your calculation on a current lump sum basis. But, for valuation purposes, assuming retirement age 65, the annual accrued benefit it seems to me of a $170,000 allocation equals: 170,000 * 1.05^7/138.6807*12=$20,698. Since this exceeds $19,500, is there an issue based upon the assumption of an age 65 ARA?