AndyH

Well I for one appreciate the opinions and comments. I don't think this is a dead horse at all. I still am not sure of the FINAL ANSWER and would welcome more discussion.

Very well-stated comment IMHO,

The deduction limit is always the same for combinations of plans that cover at least some of the same employees, that is the deduction is the greater of the DB minimum or 25%. And a 412(i) is a type of DB. Beginning in 2002 employee deferrals do not count towards the 25%; previously they did. This means that you can have a DB plan with a contribution over 25% of payroll and still have a 401(k) with deferrals only. But you could not also have profit sharing contributions because they would not be deductible. Regarding coverage, the rules are the same regardless of the plan, assuming it is a qualified plan (i.e. not a SEP or something similar). You need to either pass the ratio percentage (70% not 40%) test or the average benefits test. The latter is a test that allows you to have a lower percentage head count (40% might work) provided that the benefit are skewed 70% towards non HCEs. Advanced techniques sometimes allow plans to be combined for such tests, thus the DB/DC combo approach. However, stringent testing requirements must be satisfied. Comments in this thread refer to this being overlooked by novices. Hope that gives you a start. Others can chip in as well. I respect the sales guy who wants to understand what he is selling.

Was the blue collar plan subject to collective bargaining? If so, that is what was bargained for. You get what your unit bargained for. Period. If not, the answer to your question is not readily apparent, since there are rules that make such discrepancies difficult to justify.

Maybe our old friend Dom would chip in if you email him if George does not elaborate. Could be a fun New Year's Eve.

The ILP matter is Rev Ruling 74-307. The 1/3 to 2/3 is from the DB answer book but I don't see a cite, so I am presuming that it is in the same revenue ruling. I speak hearsay; I have never ventured to try this, nor do I intend to.

Whew, Blinky. I thought you were going to ask about how to fund a "Special UL" and get $150 in by year end. Actually, I've seen more than my fair share of insurance. I though there were three options: 1. Not more than 100 x (I'm not sure if salary scale is allowed or not) 2. Premium not more than 50% (25% for term) of Normal Cost regardless of funding method 3. Premium not more than 2/3 (1/3 for term) of Normal Cost if ILP method were used (can be theoretical-don't have to use ILP). We just took one over recently where the face amounts approached 400% of anticipated benefit. Report said that the ILP method was being utilized under whatever revenue ruling that was that allowed it. Can't wait to see the test. I suppose Hell will freeze over (or pigs will fly or the Red Sox will win) first.

The ability to use 2004 rates in 2005 is news to me, for both 415 and 417(e). Any elaboration would be appreciated. I'm with you on the ASD stuff, just not 415 and 417(e).

Gary, these guys have had TOO MUCH EGGNOG. But, as is implied, you are dangerously approaching if not past prohibited transaction territory, where the big fences with the scarecrows are. I suggest that you get a reference book (Pension Answer Book, Fiduciary Anwser Book, DB Anwser Book, ERISA Outline Book) and read through prohibited transaction and fidiciary responsibility sections before you comment to any clients about such issues, or maintain relationships with clients that do such things. There may be other reference sources but I am familiar with these. Even if this stuff is legal it is still not good for DB plans.

Hey Bob, if I may chime in, if the plan contains no specifics about how the lump sum is to be calculated then you have a plan that is not a qualified plan and you've got bigger problems than you've identified. Or the plan may incorporate certain rules by reference which is even more difficult to understand. The plan may not speak in plan English about how the lump sum is to be calculated but you've got a better chance that is has code words that experienced people will know how to interpret to answer your question. Your odds of that are better than finding a three eyed fish in the desert. Effen et all all raise valid issues. I suggest first that you re-look at the relevant plan language and if you don't understand it feel free to follow up here or engage someone who understands such bizarre code words. But if you do hear from a three eyed fish in the desert that beats a four leafed clover so you should listen to such fish.

The original poster asked what issues other than the need to make substantial and recurring contributions might be relevant to the situation. I think we've raised several of them: 1. There are expenses associated with the new plan. 2. There would be 410(b) issues with the esatablishment of a new plan if the businesses are considered controlled or affiliated. 3. If there are 410(b) issues then the ability to self direct in one plan but not the other could be a BRF issue under 401(a)(4). 4. The new plan may or may not provide ERISA protection and it may or may not be more than protection than an IRA would afford. 5. There would need to be a triggering event to allow the distribution and rollover. It seems to me that we've provided a pretty good discussion of several relevant issues.

Agreed, of course. Duh. I was trying to extend it to a different BRF which was anything but clear, which is why it was a dumb question. What if, for example, two plans were identical except they had different vesting schedules, and there were no contributions to either. Is their BRF testing technically required of the separate vestings schedules even in a year that nobody benefits for 410(b) purposes? Say the plan covering only the owner is 100% immediate and the other plan has a 5 year cliff (or even a 2/20 top heavy schedule only)? That is what I was wondering about.

Last dumb question of the year (hopefully): If there are no contributions to two plans, one of which allows self direction and the other does not, is BRF testing required (for the self directed option)? There is a free pass for coverage. Does that give a free pass for BRF testing undeer a(4)?

Clearly opinions differ on the matter and that is a valid one. Like I said, I have never seen such an animal (NRA>SSRA or 65/5) personally but perhaps other have. Rereading the comments, I don't know what is correct.

A rollover account must be separately maintained, so I would consider it an individual account subject to the rules govening individual accounts. I have not researched it, it is just a reaction. I would not even bother to research it; it just seems like common sense. These rules are so convoluted anyways regarding the account balance method which never existed for DB plans. Talk about massive noncompliance.

I wasn't clear. My (BNA) version of the regulation 1.410(b) does not have an (f). Maybe whoever wrote the 401(a)(4) definition was working with the same BNA reprint .

except that the old IRS' "substantiation guidelines" allow the use of the current year for testing purposes under certain conditions, but I don't think that has anything to do with whether or not it is the first year.

Took a while to find this. Hope it helps. http://benefitslink.com/boards/index.php?a...indpost&p=46667

I don't think that SoCal is correct on this point based upon other discussions on this Board in the past that convinced me otherwise. But I have not seen one with a NRA later than SSRA so I cannot be certain. But Gary, there is no question that you can do as you indicate with SSRA=NRA and reduced benefits payable at 65 because I have one of these. I suggest doing a search of this Board for NRA. I believe that MBG commented on the matter and I think that Mike Preston did as well. And I was in on at least one of those discussion because my understanding then was what SoCal's is now but I was convinced otherwise.

Wow. My version, reprinted by BNA, did not have an (f). Otherwise it is identical including the footnotes. Scary. Yes, that is right on point. I could have used that before! Thanks.

"PLAN" is defined in 1.401(a)(4)-12: "Plan means a plan within the meaning of section 1.410(b)-7(a) and (b), after application of the mandatory disaggregation rules of section 1.410(b)-7© and the permissive aggregation rules of section 1.410(b)-7(d)." And 1.410(b)-7(a) "sets forth a definition of plan within the meaning of section 401(a) and 403(a). Then certain mandatory disaggregation and permissive aggregation rules are applied. The result is a definition of plan that applies for purposes of 410(b) and 401(a)(4)." It would seem clear to me that a "plan" which can possibly be aggregated to satisfy 401(a)(4) or 410(b) must therefore fall under either 401(a) or 403(a) ("qualified annuity plan"-whatever that is), NOT 403(b). pax, my version of 410(b) does not have a 7(f). Is that a typo? Or am I missing something?

I think that your analysis is correct except your last paragraph. I think this is a one way street. The 401(a) plan may not aggregate the 410(b) plan for purposes of satisfying 401(a). I don't have time at the moment for a cite, but I'm sure someone else can.

mywatt's comments are as close to a 5 run home run as I've seen. Those points are going in my 412(i) file.

Hey Leaper, I would like to check out the website you mention but you seem to have included a typo or blank space or two. How about a hyperlink or a correct URL?

I think you need to have "a" benefit payable at the earlier of plan NRA or 65+5P, not necessarily the "full" benefit. I have a SS offset plan with NRA=SSRA, but benefits are 100% vested at 65&5P and early retirement benefits are payable at 65&5P. And it has been around forever and received several FDLs without incident. And the offset is calculated at age 65 (I'm not sure if that is required or not). But I would gladly trade it for a safe harbor plan!