AndyH

Unless the amendment runs afoul of the nondiscrimination requirement of 1.401(a)(4)-5 that the timing of a plan amendment not discriminate significantly in favor of HCEs or former HCEs, which is a facts and circumstances determination. The psychic friends network senses some uncertainty about the intent.

Assuming that you are testing on a benefits basis, You must use average annual compensation (3+ years) unless the measurement period is the current plan year in which case "plan year compensation" may be substituted for "average annual compensation". Plan year comp is comp for the current year only.

Agreed. If figures I think I have the other 1% situation, with one plan being small and widespread allocations using calendar pay and the other much larger allocations but covering only a small percentage of participants and using off calendar pay. Thanks for the comments.

Tom, are you agreeing with abanky who says add em together first, then impute, or Blinky who seems to be saying inpute on one of them and then add them together?

Thank you all for your opinions. Much appreciated.

Testing a DB plan for 410(b) using the Average Benefits Test which for the ABT is combined with profit sharing allocations. Want to impute permitted disparity. Happen to be testing on an allocations basis (but that should not matter for this question). The Plan years differ so the allocation rates are being separately computed and added together. Is permitted disparity imputed on one of the plans and then the two are added together, or are the allocation rates first combined, then permitted disparity imputed? I thought it could be done either way but 1.401(a)(4)-9(b)(2)(iii) seems to say that if you choose to impute, you must impute on the aggregate allocation (or accrual) rate. That does not make sense to me. It seems like you're integrating two plans. Plus, how do you inpute one aggregated allocation rate if you have two sets of testing comp? Opinions? P.S. Said another way, what does 1.401(a)(4)-9(b)(2)(iii) say, and why?

p.s. 1.401(a)(4)-3(d)(1)(iv)(B)(2) says "(2) Current year testing service. In the case of a measurement period that is the current plan year, testing service for the plan year equals one (1)." (I thought that was there but could not find it.) So the correct answer using the annual method equals the increase in the accrued benefit divided by testing comp divided by (1) not (5/12). Thanks to Rick G.

One issue to consider is what the plan document said. Some documents say that 401(a)(17) applies. Period. If so, and you want to use something higher, best to run that by ERISA counsel. I know one that says that is the end of the calculation.

But, Andrew, the change in NRD was supposed to be retroactive to 1/1/2009 (for a calendar year plan). So that makes the fix a bit dicier.

There are many plan designs that don't accrue on hours. I can think of several versions that would have a 5/12 accrual if the plan were frozen May 31. I am leaning towards agreeing that the testing service should be 5/12, not 1. But I'm not sure because years benefitting for 410(b) purposes, which would be 1, is an alternative.

Sorry, my 5/9 should have been 5/12. I will go back and edit it. Benefits accrue on days. Same question.

Calendar year DB plan freezes 5/31/2009. Benefits accrue on elapsed time. The annual method is being used for 410(b) testing, i.e. the measurement period is calendar 2009. 1. What is testing service, 5/12 or 1? 2. What are the options for testing comp other than an average of 3 or more years, i.e. is calendar 2009 ok despite the freeze? Some very different results will occur depending on the choice. I don't see anything in the regs that helps with these issues. I suppose this could be viewed as a change to a 0% benefit formua and under that approach the accrual divided by the full year comp could be used, and since benefit service is capped at 5/9 that could and perhaps should be the testing service. Opinions? (5/9 changed to 5/12)

Are there any issues such as 415 or 404? Maintaining two plans by itself doesn't necessarily violoate anything that I can think of, but there are many things to watch for such as vesting, integration, and big picture things like the nondiscriminatory timing of amendments and past service grants. Having said that, I'm not sure many people would want this type of client.

Andy the Ayatollah, would you describe the correct averaging techique? Should each month be weighted for the number of days it contains? (Sorry, I could not resist). carrots, why would anyone want to add more complications to this stuff?

Agreed. i should have been clearer on that point. Thanks for the followup.

No, as long as you satisfy 410(b) by using the ratio/percentage test. The average benefits test is unavailable for 410(b) purposes since you don't use a reasonable classification (as defined in 1.410(b)) to define who participates in the plan. IMHO that is. p.s. but it appears that you would fail the ratio/percentage test, so this does not work.

Mike, I initially viewed it exactly as you do; our legal people view a 414(k) as a hybrid plan other than a rollover. WDIK? I do know that the IRS could have used the word "rollover" in the FAQ but did not.

Well, FWIW, we've concluded that Larry is right, it was not exempt, that the 414(k) situatioh is not directly analogous. Also, FWIW, TAG agrees.

Right. That makes sense.

Thanks. Makes sense to me, but I'd love to see it somewhere in writing, even in a conference Q&A.

Is GAR 94 a standard mortality table for purposes of a 2008 or 2009 general test? In other words, does the 417(e) table cease to be standard once it is outdated? (One would think that if UP84 is standard, GAR94 would be). Has this come up?

I don't think so. I think it needs to be paid back and the plan needs to be made whole and you've got a PT and a possible disqualification for the reason that David Rigby references.

Where do you find these people? People in practice fun from these clients. Did he sign proper loan documents, or did he use the plan as a savings account? It was either a loan or it was not a loan. It is what it is. If it was not a loan it is a PT. And if you know about this and do nothing except look the other way I would bet you will regret it.

Thanks for the reply. That is what I thought. But this was on the IRS website (my emphasis): http://www.irs.gov/retirement/article/0,,id=96989,00.html#12 Does the 2009 RMD waiver also apply to defined benefit plans? No, 2009 RMDs are waived only from defined contribution plans (including 401(k), profit-sharing, money purchase pension, SEP, SIMPLE IRA, SARSEP, 403(b), and certain 457(b) retirement plans) and Individual Retirement Arrangements (IRAs). They are still required from most defined benefit plans. However, in some rare instances, a defined benefit plan may provide a benefit based in part on the balance of a participant’s separate account. This type of an account, known as §414(k) account, is treated as a defined contribution plan and is covered by the 2009 RMD waiver. Participants should contact their employer and /or plan administrator to determine their type of plan.

Was a DC rollover account in a DB plan subject to a Mininum Distribution for 2009? If not, was some type of amendment required?