AndyH

Blinky, it is a takeover. How has it been operated? In short, incorrectly. One of those deals where one firm handles the DB and the other handles the DC. The DC tester reported it to be not top heavy. The DB plan, which was the first plan and covered the same people, was not included in the DC test. And the DB firm was one of the international firms that have apparently never seen a top heavy plan because they cited top heavy status based upon the current valuation pvab (no lookback, no distributions, no determination date) using funding assumptions which of course bear little resemblance to the ones that the document say must be used for top heavy testing. But they did say it was top heavy so they got that part correct. So, in short, past practice in this case is not helpful. To add insult to injury, the k plan has a 3 month eligibility period, so there most likely were overlooked top heavy minimums due on account of that over the years. But for now I'm just trying to focus on the most pressing question, which is for which years are DC minimums due. Thanks for all comments. Carol, the DB is custom, but your suggestion of looking to prototypes (or even LRM's) may be useful, thanks.

Both of the sponsors that will continue to maintain pay related, non-frozen DB plans after 2006 could perhaps benefit from one or more official industry-group commentary documents that they could be referred to.

If you are talking about coverage testing of the plan for 410(b) purposes then that is true, but that test is concerned with who is eligible for the plan, i.e. the age and service requirements. We are presuming those are reasonable. If you are talking about the NCT sub-part of the 401(a)(4) test then if you look closely you will find that you get a "free pass" past that requirement. I don't know the cite off hand but it is there if you look for it and IRS officials have both noted it and confirmed this interpretation at conferences. p.s., the cite is here, from I think 1.401(a)(4)-2©(3). The bold is my emphasis: A rate group satisfies the nondiscriminatory classification test of §1.410(b)–4 (including the reasonable classification requirement of §1.410(b)–4(b)) if and only if the ratio percentage of the rate group is greater than or equal to the lesser of—</p> <p> (A) The midpoint between the safe and the unsafe harbor percentages applicable to the plan; and </p> <p> (B) The ratio percentage of the plan. This post has been edited by AndyH: Jul 13 2006, 03:30 PM

All nonexcludables are in the test. Those with no PS, or those with a PS but in a different plan that is not being aggregated are treated as 0%'s for 401(a)(4) but their allocations and deferrals are counted for the ABT because aggregation is required for that portion of the test.

Pehaps the question is unclear. The DC plan says that if a non key participant is in a DB and a DC, then the DB plan provides the top heavy minimum; otherwise the minimum is provided in the DC. All of a sudden, the DB is frozen and the DC plan must provide minimums because the DC plan no longer is. The question is one of transition. What DB plan year (7/1 to 6/30) satisfies the top heavy minimum that would otherwise be requird to the DC plan for 2005? 2006?

Sorry, Nate, but I must disagree. It is not the allocations but the plan eligibility criteria that has a reasonable classification issue. If, for example, the plan only allowed people who earned over $20K to participate, then I would agree with you. But if the question is allocations, not eligibility, and everybody gets something, then I don't think that reasonable classification is an issue.

Company has an off calendar DB plan and a calendar K plan. Call the DB plan 7/1/2005 to 6/30/2006. The plans are top heavy and the documents say that the DB provides the minimum. Which year goes with which year for top heavy minimums? Or does something say that the differing years make this arrangement impossible? The DB was recently frozen so this is a real issue. The aggregation rules for testing are clearly defined in 1.416, but I have not as yet found anything that correlates the minimum benefits. Anybody have a cite? Thanks.

Good point.

One could argue that such a grouping violates the definitely determinable benefit requirement, that by using compensation, which is within the employer's control to some extent, there is room for excessive employer discretion. Just a personal opinion-I don't know if the IRS has raised this type of objection. It may be done; I have not seen it.

What you have said is correct, although a technical clarification to the comment below might be useful: That is true only if you are not permissiviely aggregating plans for 401(a)(4), in which case you would include PS allocations from both plans. Since you have stated that their are PS contributions in only one plan than this is irrelevant to your example, however.

Tom, you continue to amaze. Talk about being ahead of one's time. You predicted the 401(k) in the 1960's and Congress didn't follow your amazing forethought until 1978! And you scope out Church. You should be looking for quill pens and manuscript paper! And great link, BTW.

Powerpuff girls? Yoko Ono a Powerpuff girl? http://billboard.com/bbcom/news/article_di...t_id=1002764892

You don't know what a Yoko Ono is?

I'll comment because nobody else has. These are not questions that have textbook answers which I think is why you have not had responses. Regarding age 66, I would test it with and without adjustment to age 65 and make sure that either approach passes. Regarding gateway, I am not sure what your question is. Whatever the PV of the increase is as a percent of pay generates the gateway calcs. Maybe some clarification might be useful. Regarding one plan or separate plans, it you have only deferrals or a match then the combined test is not one plan at all, it is mandatorily dissaggregated plans and I would think you have separate calcs as you seem to be inclined. You are not permissively aggregating for 401(a)(4); you are aggregating as required for the ABT. I would use the testing age in each plan separately. Just a couple of reactions that might help stimulate some other comments.

Tom, that is a terrific comment about NHCE 21! Good luck and have fun in Vegas. Got tickets for "Love"? Maybe you can go with Yoko Ono? You gotta have one vice.

Well, I tried. Maybe it is an issue of terminology rather than facts but something is missing. A "conversion" from a DB plan to a 403(b) plan as I would understand the term is not permitted.

I thought that people with white robes throw nets at people that still do end of year valuations.

lexi, you have some facts incorrect and some concepts messed up. No you do not. It sounds like the old plan is being kept but only some participants are going to earn benefits. A "conversion" is not permitted. The closest thing is the termination of a DB and replacement with a DC but that is not what you are describing. If you have a DB plan, you don't know what their "contributions" are because it is not a defined "contribution" plan. If it happens to be of the cash balance variety then it might be more quantifiable but you still don't know the value of ancillary benefits and benefit options and features. Sorry, but your question #1 makes no sense to me and your #2 is not valid because you do not have a "conversion". You may have a situation where some people are no longer earning benefits under a DB plan but instead may earn benefits in the future under a DC plan and that is a permitted change provided that an ERISA 204(h) notice is properly issued and the plans as redesigned meet the coverage and nondiscrimination requirements of the law. My suggestion is to go back and use this to learn more of the correct facts. You do not have them.

Don't forget those PBGC Participant Notices for the plans that were Fully Funded for the past 15 years. And of course the informal notices explaining why the formal notices are needed and the letter to the client explaining why the informal notices about the formal notices are a good idea, and how the plan has only dropped from 100% funded to 81% funded "temporarily"! But Congress is gonna fix it all one of these Holidays.

Does this mean, for example, that the use of a variable rate of 3.95% for PBGC calcs will apply this year??!! I know, that is minor compared to other things, but it is still a complete outrage IMHO when I consider that I have spent 4 hours in the last couple of business days trying to fix problems with a client's mypaa.com account. The PBGC is a bottomless pit.

Thanks for the comments. I would welcome opinions from attorneys as well. I am having a bit of trouble with the need to negotiate the source of the benefits rather than the benefits themselves. Probably just my lack of knowledge in this area but the contracts I have seen say very little about pension benefits except the basic formula and some plan highlights. Is the document some sort of implied contract? p.s. From what I've learned from experience of others, Effen and pax's comments are right on. Thank you.

Just curious. I saw one a few years ago that covered only a couple of people and it provided an unreduced J&100 for married participant, life annuity for unmarried. And a lump sum was an option. I agree with you-it probably does depend upon the wording which I don't recall exactly. The actuary overseeing the case did specify that the J&S would be reflected in the lump sums, married or not, but I always wondered whether or not there was something that required this or whether it was merely an interpretation of the document.

Is the answer the same with a subsidized QJSA (as normal form)?

chris, that is impressive. How much experience did you have going in? I took them from 1998 to 2000, so much of the format has of course changed, but when I took C-3 and C-4 the "required" reading was much more extensive than the earlier tests, and I did not know much of the subject matter going in (particularly in C-3). By contrast, I knew a lot of the subject matter on the earlier ones before studying through work experience. I actually postponed taking C-3 twice because I found the reading so boring that I had trouble getting through it. Then it was PT's and Exemptions, hundreds of pages of them, then basis recovery rules, etc. Brutally boring to me. And the investment stuff, while interesting and not particularly difficult, was all new terminology to me. I could not answer any of the prior test questions going in. But in the end of course 85% of the reading was not on the test.

That is a good point to consider. I would not have thought that the employer would need union approval as to the plan structure, just what is being provided. The contracts that I have seen over the years have always been unspecific about the hows but that doesn't mean they all are. But certainly that should be looked at. In this case the union actives are dwindling so I don't think there will be future CBA's to deal with, or issues with benefit levels. The union plans will all cover exclusively inactives soon. But actually you are right; the one active group better have equal or better benefit levels or there could be PR issues. Thanks for the comments.