AndyH

Kirk, your comment could not be more right on. It is amazing what they focus on and what they miss.

Red Sox Nation is quite large you know. Gotta go, got an offer of some type from Hoard2!

Thank you. That much is very helpful. Now I'm back to where I though I was before I read the thread! And I'm not in MA (but I was born there), so you can't blame Kerry and Dukakis on me, but I will not say where I am until, as they said in Planet of the Apes "you reveal your innermost self unto" (in that case, to the doomsday bomb, in this case to the other Board Members).

And that they shoot first and ask questions later.

Noelle, you probably will get better answers THAN THAT by moving this question to the DB Board.

Sorry for not letting this die, but apparently I am too dense to understand what people's conclusions are and I have to respond to a similar question. Blinky, it is probably me, but my read is that you changed your conclusion at least once. Are you saying that a DB/DC combo deduction limit is 25%? Or not? What do you mean that 404(a)(7) does not apply? Then what does? Belgarath, you keep making a point that interests me and seems to me to make other discussions moot, that the deduction limit is NOT 25% but the GREATER OF 25% of the 412 minimum. Does anybody disagree with that? As long as you do not contribute to a DC (other than deferrals) then this is a non-issue unless you want to deduct more than the 412 minimum. Here is a simple question, followed by the real question which is a bit trickier: 1 person corporation has a calendar PS plan. Contributed $100 in 2004 for 2004. Wants to set up a DB plan with a 412 minimum of 100% of pay. Assume pay is $150K and the DB minumum is $100K. What is his deduction limit, $150K or $37,500 (25%)? (ed. $150K s/b $100K and 37,500 s/b $25K) Now the real situation is more complicated. The business is actually a proprietership that once was a corporation which has a 3/31 year end. Apparently the calendar proprietership had a PS plan and kept it and it's a 3/31/04 PYE. There was a contribution actually made in 2004 for 3/31/2004. We are not yet certain whether it was deducted 12/31/2003 or would be deducted 12/31/2004. If it was deducted 12/31/2003, can't we still deduct the full DB minimum for 12/31/2004? If it was not deducted 12/31/2003, isn't the deduction for 2004 still the DB minimum which means all they lose is the PS deduction? But then I guess excise penalties would apply, right? Sorry for the rambling and thanks for any clarification.

Some more thoughts: 1. No can do. 2 and 3 are, IMHO, a termination of one plan and the establishment of another, and I believe that you would need to satisfy the appropriate notice and form procedures related to plan terminations and plan establishments. IRS reps have said that to be true many times in the case of situation 2 in particular. 4. I do not want to go there today.

NOGO there, No Name. Not Nondiscriminatory.

Hi Lori: It seems that we live at different ends of the Boards. Tom, if you invite her to one of your sessions, she can either sing with you or treat people who faint at the sight of a scarecrow in a pension session. Perhaps both.

How about a round for KateSmithPA?

Has anything changed on this? I have a plan that was calendar that changed to 3/31, so there is a short plan year 1/1-3/31. If not for the change, quarterlies would apply and the first would be due 4/15. Quarteries were not paid. The entire amount will be funded 12/15. Is quarterly interest due, or might it be a reasonable interpretation that no quarterlies are due for three month period because it ended prior to the first due date?

mal, Mr. Burns is a bit of an odd sort, so you are right to ward him off. But in the situation you have described, you don't know what you don't know, so I would simply correct the matter as best you can (distribute it) and be done with it.

cosmo, you are mixing two things that are apples and oranges. Allocations and the method of allocating contributions are apples. Testing methodology used to prove that such allocations are nondiscriminatory are oranges. All plans must have apples. Well written plans do not have oranges.

I think you are stuck until 2005. I don't like this rule and have looked for ways around it, to no avail.

1. Yes. 2. Probably but not necessarily for the reasons Tom cites and also not if they are "otherwise excludable" employees. 3. Yes.

Agreed. As long as coverage is being passed by the ratio percentage test, I don't see any issue at all. If you are using the average benefits test, they may be asking you to justify the reasonability of the exclusion based upon objective business criteria; otherwise that test is not available. In Effen's case, the issue may be the same or it may be one of an arguably vague definition raising questions of excessive employer discretion or violating the definitely determinable benefit requirement.

Excellent comments.

What about a lump sum caused by a fixed rate in the plan? I don't see the argument against that.

Thanks, Merlin. Good thing for those tapes (I don't have them but their existence reassures me). From past discussions, I believe that you and I both heard him say no at ASPA 2001 and then reverse himself in ASPA 2002. In 2002, I think we were both in the "white freezer room" when LD went so far as to suggest avoiding including 417(e) in the MVAR by designing the plan to have no lump sum over a certain (low) limit until the owner goes to retire. And he admitted he was reversing his position because JH told him he was wrong. And I believe you may have been in the 2001 General Testing session done by Carol Sears. Someone asked about this and she said yes and several people, myself included, responded by saying that such answer conflicted with comments LD had just made and she essentially said "so be it". Why can't we hear a direct IRS opinion on something as basic as this? p.s. I don't know who Newel Kimlin is, and I'm certain he wasn't a speaker in any of the sessions to which I refer.

.....unless it is aggregated with another to pass coverage.

Merlin, now look what you've done! I know, it's actually Mr. Piper who caused this to resurface. How about an email to LD who is the one that originally took ak2ary's approach but two years ago said Jim Holland told him he was wrong; that the 417(e) lump sum must be in the MVAR?

Right. Unless you have two different ones. If some get something and some don't, then some who don't don't have anything to test for. The BRF test is nothing more than a simplified coverage test anyways. If your group that gets the match passes 410(b), it passes BRF because that is in fact the same test, albeit much easier to pass.

That gets my vote. You need to test for coverage under 410(b) and for nondiscrimination under 401(m).

Thanks for your comments, pension222. I have spent the last few years collecting opinions on this issue, and this is the first such opinion I have heard. Does anyone else out there still think that the 417(e) lump sum need not be considered in the MVAR calculation?

Merlin, I thought that issue was resolved conclusively. He waffles considerably in the outline. He says that IRS employees have said no, but that newer employees might say yes. It seems to me that this is unhelpful. I was not at his session or I would have questioned him on it. Did/were you? There are other matters in that outline that contradict discussions that have taken place here as well.