AndyH

Thanks for the comments. Yes, an unreduced early would be one way of solving this, albeit an expensive way. But that would be problematic for an integrated plan (this happens to be one) and potentially for a general tested plan The wearaway approach does make sense; it just seems like non-keys will get burned for a while (and lose something that was "required" under 416) so I wonder if any pundits have addressed that.

Top Heavy Plan with NRA of 55 amends NRA to 62 because 55 cannot be statistically supported. Two employees were accruing top heavy 2% for five years. Assume regular formula was 1.2% x YOP. Does the top heavy minimum simply become 2% x YOP max 20% payable at age 62, or is some type of conversion of the top heavy accrued benefit also needed to avoid a cutback and that becomes a grandfathered benefit, which in effect substantially reduces future top heavy accruals? Anybody dealt with this issue? (This is a real situation but I don't know what was done, so I cannot answer "What does the document say?" I am trying to determine what was required to be done.) Thanks for any comments.

Well, no disagreement with any of your main points. I agree it comes down to a comparison of the "Use it or lose it" rule versus the "placeholder" rule. My unscientific break point might be just before 40. I'm considering the fixed versus flexible contribution aspect and the need for cash for life events at this age. So, yes the K1 is an important consideration.

Mike, I'm always interested in your opinion, but I don't understand your question. What do you mean by "in the last 10 or 11 years of a business". He's only 40, and perhaps had the plan start when he was 35 or so (just guessing). And he's only showing $50K of salary, now, so are you suggesting he wants to retire at age 45? Five years ago he could have deferred $26,500 in a DC plan. I bet he did not. I wonder how much he saved in a DB plan above $26,500, net of fees. Why not max out a DC until age 40 or so, then establish a DB, especially with a shaky business? I think I know where you're going with this, but some clarification of your criteria would be appreciated.

1. The 49K is an individual limit, not a total limit. (If your wife has no compensation the two are the same but the 25% will apply). 2.Profits don't count as compensation. Convert some of it to salary or bonus - especially for your wife to use 401(k) provision and to get DB service credit. 3. The rest of your comments may be debatable - not enough information. if your income will increase in the future, your limits will grow in the future, not be used up now. You were too young to have a DB when you set it up IMHO. Did you get sold a bad deal? Hope this helps.

If you don't fund the DB for a year, you can contribute 25% of pay to the profit sharing plan plus the 401(k) deferral. The SEP may be invalid because it may not be able to co-exist with either the DB or profit sharing/401(k) plan. Many SEPs have "exclusive plan" requirements, and others may not be viable when a DB plan exists.

So, are you saying that you have a: 1. DB 2. SEP; and 3. Profit sharing and 401(k) plan? Or are you interchanging 2 and 3, and if so, which one is it?

First, having a SEP and a DB is most likely a problem - with the SEP document. Most require it to be the exclusive plan. You should check the language and wording of the plan document. Is there a chance that you have a profit sharing/401(k) plan instead of a SEP? The distinction is important. Once you have clarified that we can answer your question about what if you do not contribute to the DB. Second, much more info would be needed to identify whether or not we might agree that you should not contribute to the DB plan. We'd need technical details, but to start with your DB plan's benefit formula, your accrued benefit, the plan's Normal Retirement Date, your age, and the value of plan assets might allow some insight.

Geez B. Guess you're not thrilled with having Casey Kotchman at first base?

I think AtA's comments are on point. 1.411(d) -4 does allow both the addition of and modification to an "involuntary distribution" provision. The cite looks like (b)(2)(v). 1.401(a)(4) would require that the timing of the amendment be nondiscriminatory. Also, I would think that the change would need to avoid causing an available payment to go above or below $5,000 if the payment conditions differ at $5,000.

Thanks. The ASPPA ASAP I referenced was very unclear IMHO but it caused concern that the due date is 12/31/2009, which seems to me to directly conflict with announcement 2009-82.

Did anybody else read ASPPA ASAP No. 09-44 and come away thinking that cash balance plans needed to be amended by 12/31/2009 if their existing interest credit might not satisfy the eventual final regulations? IRS Announcement 2009-82, issued a couple/few weeks ago seemed to say that you need not amend the interest credit until after final regulations on hybrid plans are issued, provided that the plan is amended before 1/1/2011 (if it needs to be amended at all). I took that as basically a 1 year delay in the required amendment and change. Then ASPPA ASAP 09-44 comes out and references and discusses 2009-82 but I cannot determine it's conclusion if other than that plans must be amended by 12/31/2009 if the interest credit is inconsistent with the final regulation. Can anybody clarify the rules and amendment requirements if, for example, a CB plan currently credits a flat 5.50% and would prefer to retain this until forced to change? Assuming that 5.50% is no acceptable under final regulations, does such a plan need to be amended by 12/31/2009, or 12/31/2010?

My apologies. Some how I read "under" 5K to be "over" 5K. I agree - maybe you can. It would require some research, but I agree that it is probably permissable.

p.s. The distinguished Board panel was of course correct. Lots of hot air and huffing and puffing followed by acceptance following a bit of education.

If you're missing something, so am I. AtA, do you know something we're not thinking of? I do remember years ago inheriting a plan that provided for distributions the next day or something similarly unreasonable. Then came the direct rollover rules and the 7 day notice periods, etc., plus the plan required spousal consent, so that was another conflict. Some legal conflict might create an exception to 411(d)(6) perhaps, but that does not seem to be the case in this situation.

JBY, they are looking for $6,000 plus what from the PS/K plan? Are they owner/employees? How much are they willing to commit to each year for the next five years? I agree that for $6K it ain't worth it, but there may be other issues that this information might highlight.

You know the answer.

It actually said you can't cite or quote by name anything by someone named Blinky the 3-eyed Fish. But it never said you can't rely on it.

I have a conference call on Monday with 8 people (client and audtors) on this subject. I'm just going to tell them that I discussed their concerns with the esteemed and distinguished industry experts Effen Rigby and cursing Blinky and I would paraphrase the collective response to the auditor's concerns as: "Boo. You don't exist. Go fish. Lots O' Moola".

Thanks for the comments. Our experiences are much different. Our typical client subject to 5500 audit might have used a 7% or 7.50% rate in 2007, dropped it to 6% or 6.25% 1/1/2008 if the segment rates or effective rate was used, then elevated it to 8% or 8.25% if the yield curve was used 1/1/2009. Then for 2010, guess what, the roller coaster goes back down. The auditors are most definitely focusing on the change in pvab reported on the FAS 35, at least the larger auditors for the larger plans. We have seen comments by auditors on the Internet (conference or webcast outlines) that state that PPA segment rates may not be used for FAS 35 (fairly recently). Perhaps because the auditors must reformat their reports to use segment rates or the Effective rate we are getting a lot of attention on this.

Any updated comments or observations on this topic? We're getting pushbacks from auditors and generally encouraging use of the Effective Rate but some are pushing for the FAS 87 LTROR assumption. What are others experiencing and using? Any definitive positions from auditors?

Seconded.

This is important. There is not universal agreement on this. Some would argue that the spousal waiver needs to occur at the time of the first election. I'm not sure I agree but some do. I'd like to hear other opinions.

Is this a valid waiver?

Death by making you read final regulations.