AndyH

Yes. That is why you provide a subsidized early retirement benefit (like 0% reduction). Plus you need to adjust the formula going forward if you don't issue a 204(h) Notice because you need to avoid both accrued decreases and avoid a significant reduction in the rate of future benefit accrual. And if the plan is not a safe harbor, the changes will have testing implications.

Thanks for the feedback Mike. The contrary view (as I am sure you realize) would be that there is a failed coverage test for a DB plan until the PS is funded, and we have only the 11-(g) period to correct it. And that expires 4/15/10. But I suppose that as long as an amendment is not required, the PS allocation is not necessarily an 11-(g) correction, although in this case the PS is funded only because of DB coverage testing failure. But you've convinced me that there is a valid argument for a due date later than 4/15, as long as a corrective amendment is not required.

Safe harbor DB plan with 6/30/09 year end fails ratio/percentage coverage test and is intended to be aggregated with a calendar PS/K plan. Together they would pass the Average Benefits Test. The Plan Sponsor has a calendar fiscal year end and files an extension. As I understand it, the DB plan 7/1/2008-6/30/2009 would be aggregated with PS/K plan year calendar 2009. By when must profit sharing allocations, which are necessary to pass the Average Benefits Test, be contributed? If the answer is other than 4/15/10, can someone offer a cite?

Agreed. Thanks. Seems like a way around the new NRD rules.

Is there anything that would prohibit the establishment of a cash balance plan for, say, 5 years, the termination and distribution of assets, and the restart of a cash balance plan in, say, 2 years? The real purpose would be to allow the self direction of allocations to bypass the low NRA prohibition. This is not my idea and not something I would advocate - it is a question posed to me. Thanks for any comments.

The answer of course depends on the document, but unless the termination amendment changed this the payment would not consider the plan termination date. Remember you must satisfy 417(e) regardless, which is based on the acc bn payable as of the later of NRD or the payment date.

I see your point about the earnings. Don't know what the answer is, but I see the illogic.

Interesting, thank you. Maybe I can scare away people with the 404© issue.

Regarding the investment performance issue, I'm a bit puzzled. Let's say there is an owner 60 years old, and he gets a DB formula of 12% of pay per year and everybody else gets .5%, all offset by the act equiv of a 7.50% PS contribution. If the doc says so, don't you project the PS forward at, say, 8%, and the DB becomes clearly zero? And, for testing purposes, if the measurement period is the current year, can't you ignore investment earnings, in fact, aren't you required to ignore investment earnings attributable to prior contributions? So, unless I'm missing something, my concerns would be focused on issues other than the self directed asset part. But maybe I'm missing something, or the self-directed issue may be more prevalent in a safe harbor floor offset??

But we should not forget that not too long ago some law passed that allowed (if my memory serves me right) a DB valuation to be completed only every 3 years. That lasted about 5 minutes I think.

On the other hand, my company does only BOY vals (with very limited exceptions). But we don't do a lot of real small ones.

Boy means you get the numbes much earlier. Eoy can take into account current year compensation, so contribution might move up or down with compensation changes, and mid year planning can allow some manipulation of comp level to support desired pension deduction level.

Well, among the purposes to a valuation is to derive and support the contribution requirements, which are generally due 8.5 months after the plan year ends, which for 2009 would be 9/15/2010. Second, it derives and supports the figures reported on Schedule SB which is due 7 months after PYE which means 7/31/10 for 2009 unless extended to 10/15/2010. But it also determines interim things like quarterly contribution requirements, funding-based restrictions, etc. that are more urgent depending upon the specifics of the plan. So it is not a simple question. The timing of numbers for 2009 depends in part on what the valuation date is. If it is 1/1/2009 (a beginning of year valuation), the 2009 figures should be available well before now. If it is 12/31/2009 (end of year valuation) it would not be normal to have results yet. Hope this helps.

What is your role in this? This is a very beginner level question without a simple answer.

Are there really documents that would allow a 4% safe harbor nonelective contribution?

Good points.

Seeking opinions on non-safe harbor floor/offset plan designs. Lately I have see many floor offset proposals and fairly new plans done by others. Some floor offset plans appear to comply with the Schultz memo ( .5% accrual before offset and uniform offset) and some clearly comply with nothing. I admit to a bias against non-safe harbor floor/offset plans on the grounds of concerns about the consistent interpretation of 401(a)(26) by the IRS, some ambiguity in the regulations, and the general "thin ice" that I perceive them to be bullt upon when there is a $0 net accrual. In contrast, a DB/DC combo (cash balance or traditional) can do much the same with the complication that lots of people might have small benefits in the DB plan. But a CB accrual is less powerful for testing purposes. Do others share my view or are others ok with full offsets and general testing of non-safe harbor floor/offset plans?

......and the sale of the assets may create capital gains that are then taxable, so where are you in the end? In need of an accountant/tax planner I submit.

Well, I can rule that out then. They definitely don't want Dad hanging around! No SOB language, but I agree it would be a weird calc, then throw the QDRO on top of that! It's going to "take a village" to decide how this gets handled. Thanks for the sounding board.

A multiple employer plan by definition has assets segregated by "plan", so I don't see why a transfer out would create any problems with the possible exception of contractual agreements such as plan administration or asset management. Just an educated guess - I have not been involved in exactly this situation.

Thanks for the comments. I like rcline's approach (and agree with the sentiment) but I suspect the IRS woudn't. The lump sum would be severely diminished if it were reduced by prior payments. Mike, do you think putting retired Dad back on the payroll for a day (he has been off the payroll for several years) might allow us to justify use of the current 415 dollar limit for the QDRO-assigned benefit?

Before or after Health Care Reform passes and the bills for Stimuli come due?

Right. Even if the 1.2 became 1.8 retro and prospective there would be a future benefit accrual rate reduction on account of the top heavy situation.

Right, but, assuming a 6% annual actuarial increase, the 10% (5 x .02) top heavy accruals would instantly become roughtly 15%, so if there were no pay increases there would be no top heavy accruals for 2.5 years. Right? That's my issue.

DB plan with top 25 restriction provided large accrued benefit to owner, who then retired and also got divorced. Full benefit (at 415 limit when owner retired) assigned by QDRO to former wife, who started collecting in as a life annuity with the intent to convert to lump sum when plan is sufficiently funded. Now the plan sponsor (company is now run by the son) wants to terminate and fully fund the plan. Mom has been receiving a large pension monthly for several years now. How is the amount payable as a lump sum to be determined considering the payments received since the 415 regulations have this section "reserved"? Must the old 415 limit be used and the lump sum reduced by the pv of the monthly payments? Any suggestions to avoid a cutback to Mom other than to have the plan buy Mom an annuity of select a reduced lump sum? Can we put Mom on the payroll for 1 hour and then take advantage of the current 415 limit? Or can we use the current 415 limit regardless?