AndyH

Mike, with all due respect I must disagree. It is the government's fault that simple matters such as these are not clear to everyone. Doesn't this question go back to 1965 or so? Where is the official guidance? I have read just about every relevant thread on this board and I still find that respectable opinions differ. And yesterday's webcast, which included an authoritative goverment official, kicked up the dust again in my view. And, yes, Sal's book gives a "reasonable" interpretation. He does not, however, state that it reflects official or even strong unofficial guidance. Where is that? In the pipeline, apparently, after 40 something years. p.s. Now how do we calculate an MVAR this year? Oh, I guess it hasn't been 40 years yet

Your point makes sense, but ..... doesn't it depend upon which speaker was speaking on which webbbbcast and what stage the moon was in at a particular conference? Yesterday's webcast has many slides on this issue and I for one never heard any definitive answer on this or other questions. But maybe others did??? Pippins did say yesterday that he thinks that eligibility for k deferrals equates to allowable use of that compensation for PS 404 purposes, and if you take that position might not that treatment extend to 404(a)(7)?

But it sounds to me like you could still contribute 6% (employer contribution) to anyone eligible for the dc plan under 404(a)(7).

There was another ASPPA webcast today with Joan Gucciardi and Marty Pippins and if understood this correctly a couple of things jumped out at me for 2006 and 2007: 1. If the DC contribution exceeds 6% then the 150% unfunded CL deduction limit becomes 100%. But from the comments above the 100% is actually the geater of 25% of pay or 100%. 2. There remains uncertainty as to whether the first 6% is deductible if 404(a)(7) applies and the DC contribution exceeds 6% but apparently there is evidence that the intent was to penalize only amounts above 6% so this is the most likely end result. Guidance will be issued fairly soon. Re: #1, if you are doing a beginning of year db val you have no way of knowing the deduction limit since the DC amount is typically determined much later. Do I have this right?

Insane or not, Marty Pippins reiterated in a webcast today that the IRS considers a new plan to be an amendment for this purpose.

Why not convert it to a 412(i)?. Safe secure conservative. No more surplus to worry about. And the client might even be invited for a free yacht ride now and then.

Is there anything new on this? Anything at ASPPPPPA? Was a TAM issued?

It seems to me that the act of freezing plan benefits ceases future accrual service and thus participation service for 415 purposes (at least if you accept the audit guidlines approach).

I'm with ak2ary on this. No benefit accrual service in a year, no 415 participation credit. This is from the 2002 415 audit guidelines, IRM 4.72.6. The bold is my emphasis. In determining a participant’s years of participation for these purposes, Q&A-7 of Notice 87-21 provides that a participant is credited with a year of participation (computed to fractional parts of a year) for each accrual computation period for which the following conditions are met: a. The participant is credited with at least the number of hours of service (or period of service if the elapsed time method is used for benefit accrual purposes) required under the terms of the plan in order to accrue a benefit for the accrual computation period, and b. The participant is included as a plan participant under the eligibility provisions of the plan for at least one day of the accrual computation period. c. If these two conditions are met, the portion of a year of participation credited to the participant is equal to the amount of benefit accrual service credited to the participant for such accrual computation period. Thus, where the terms of a plan provide that a participant with 50 hours of service earns a year of service for benefit accrual purposes, a participant with 50 hours of service could be credited with a year of participation for purposes of IRC 415(b)(5). d. Additionally, for a participant to receive a year (or part thereof) of participation for an accrual computation period, the plan must be established no later than the last day of such accrual computation period.

But since the plan is being terminated, the subsequent election will have to be a feature of a purchased annuity/terminal funding contract that maintains all the optional forms and optional start dates, possibly an expensive proposition.

Effen, we've got a bunch of targets also, although I discourage new ones. They can be more efficient than a cross tested PS plan because they are exempt from the 5% or 1/3 gateway, so the cost for younger employees can be less that the alternative. And some non profits still maintain MP plans so employees have a guarantee. I must admit the super top heavy 415(e) calcs are still messy for those combos though.

A colleague told me he understands that a plan that was frozen but is subsequently reactivated must be reactivated effective, or at least grant credit, back to the year after the freeze. This was news to me so I am trying to determine whether this is true or not. Is my colleague misinformed?

Good comments. I doubt vesting by itself would equate to 415 participation service though. I guess the first "fence" that I was questioning is whether we all agree that freezing a plan and then restarting it with prospective service only, effectively skipping one or more years is in fact a violation of the accrual rules. I agree SoCal's approach seems to avoid the issue but I would like to know if we agree that otherwise it is a problem to unfreeze prospectively.

Mike, the first as well as the second? Or just the second?

Yes, you can test separately or together (provided you meet the gateway requirements). Re the ABPT, you need to include the other plan if the plan you are testing is being cross tested (dc on benefits or db on contribs)., or if you are testing together, one of the plans is being cross tested. Otherwise you may disregard the other plan. Example, you have a DB that must be general tested. The client also has a K plan. As long as the DB is tested on a benefits basis, you may disregard the K plan. If instead the client has a PS plan that must be cross tested, you would need to pull in the DB plan to the ABPT whether or not it is in the NCT test.

I agree those are good suggestions. Consider, however, the uncertainties (IMHO) surrounding how to aggregate prior and current distributions for 415 purposes if that is an issue.

saabraa, I find your comments to be very interesting and potentially useful. Could you elaborate on the source for your last sentence, both the timing and the "deemed or actual" rules that you describe? Thank you.

Only lump sums that are eligible for rollover treatment are subject to mandatory tax withholding, and min distribs are not eligible for rollover.

If what you state is true and it was done properly, then it seems to me that you need to formally terminate the plan but not go throught PBGC. But if the plan you describe had active employees, then I would be skeptical as to whether the contract satisfies all the requirements. If everybody is inactive, it sounds more viable IMHO, but I would still look at it very closely before I thought you could bypass PBGC or IRS. I was involved in one years ago where all employees were inactive and paid out prior to official plan termination and the PBGC was bypassed in the termination but decided to do an inquiry and found that everything was ok and it was no longer covered by PBGC. But there were no actives.

Is it covered by the wonderful PBGC? P.S. I ask because if so, it would be my understanding that you cannot distribute to those with entitlements now only due to the termination until the PBGC review period has expired, e.g. actives.

Yes, and the addendum typically includes pictures, like your college reunion invite, and avatars like Blinky's and Tom's so there is no ambiguity about who is eligible. Sometimes they have hyperlinks to personal sites at myspace.com.

Thanks for the picture Blinky; if you don't mind I'll post it so we know what you really look like. BTW Blinky, Does this guy have "Being eligibility?" Is that like "street cred"?

If you tell your dog that he is a cat and deny him dog food he is still a dog but gets no more dog food. But does he get that minimum top heavy benefit of water? Don't think so but I'm not completely sure.

leerie, if you let some of these people in after 3 YOS or more then you have a 410(a) issue. Say instead you had a pattern of suspending participation then periodically declaring "open enrollment" you also might have a 410(a) issue. But you are not descibing either of these situations. A permanent closure is not an extended service requirement.

Never say never. How's that for thoughtful insight?