ETA Consulting LLC

You can rate group test on an allocation basis. I refer to cross-testing as the conversion of an allocation to a straight life annuity at Normal Retirement Age. So, I'm not concerned with the fact there are different allocation rates (i.e. you can have 10 different allocation groups where only one HCE and one NHCE is in each group, and pass on a restructured basis; when each group receives its own percentage). But, you are saying that nonwithstanding any exceptions for broadly available rates, the fact (alone) that the rate group being tested is being defined by an allocation rate as opposed to an accrual rate, then you are exempted from the gateway (regardless of the fact that cross-testing is needed in order to pass the non-discrimination test). I keep reiterating this because I don't want to associate one specific thing with something else (e.g. state it works this way, but have it work for an entirely different reason).

Correct.

I'm familiar with the broadly available, primarily DB exceptions. It is new to me that if you 'define your rate groups on an allocation basis', but test on a cross-tested basis, you're exempt from the gateway requirement. I just wanted to be clear on what you're saying so I can research. Conceivably, you can design a plan with various rates without requiring a gateway. However, it wouldn't work if non of the NHCEs at least benefit (on an allocation basis) at a rate at or above the highest HCE. Would you agree?

He's at 20% when he comes back since he was not zero-vested when he terminated. Any amounts previously forfeited will not be restored because he had 5 consecutive one-year breaks in service. This is, of course, provided that the plan adopted the rules of parity (which is not relevent in this instance) and the vesting breaks rules. Not sure if this answers your question. Good Luck!

You'd have to wait until January. There are no mid-year amendments. You issue the 60-day notice and continue to follow the terms throughout the year; very simplistic by design. In qualified plans, you'd have more flexibility with respect to eligibility. This ship as sailed for this year. Good Luck!

You could amend to reduce the eligibility to zero, but that would've needed to be done prior to the 60-day notification period. When you provided that notice to employees by November 1st (for the 2013 year), that is it for that year. You can change the eligiblity to 5K in 1 year when you issue the notice for the 2014 year. Good Luck!

Better yet, you're saying because the "rate groups were actually determined" using allocation rates as opposed to cross-tested rates would get you out of the gateway? Please advise.

So, you're saying because there is only one "rate group" (defined as each HCE percentage and everyone else at or above that percentage), then there is no gateway? Please advise.

My contention is yes. The calculation is always done separately for each IRA, you are allowed to satisfy the RMD with a distribution from one IRA. This is what you have, apparently, been doing for the past years. What makes this year different is that this particular annuity is being "settled" for a period of 5 years; where the balance goes to zero and the taxpayer will receive 5 annual payments. I cannot foresee how these 5 payments would reduce RMD distributions for the other 3 IRAs. I am trying to understand the contrary position, but just don't see it. Good Luck!

These are two mutually exclusive sets of rules. The only time they are related is that you must take an 'available' loan prior to receiving a hardship. As long as the loan procedures are followed with respect to default, the fact that there is a hardship has no bearing. Good Luck!

You're right. Assets minus Liabilities = Capital Assets = Liabiliities Plus Capital In my haste, I was attempting to get to Capital = Assets minus Liabilities.

This is the information I used to say that you would remove this IRA from the analysis with the other three IRAs. Good Luck!

Each formula must pass non-discrimination. If you merely provide a benefit to an NHCE and run a straight benefit or not benefiting, then you may design a plan to give each NHCE a contribution of $1 while giving each HCE 15%. When you impose a standard to say each formula (or rate) provided must be provided to a non-discriminatory group of employees, then that would require more testing. The software isn't going to tell you which test needs to be ran. Good Luck!

But you're still cross-testing. Please show me a mathematical example of how you would test the plan using cross-tested rates without satisfying the gateway. Good Luck!

If you're not cross-testing, then why would it matter that the NHCE receiving 15% is very young? You'd need the gateway Good Luck!

There aren't any owners. So, the HCE analysis is done on Compensation alone. Good Luck!

I, respectfully, disagree; because you are now talking apples and oranges. When you go into the annuitization phase, the account has no value, but you will receive a stream of payments not extending beyond the life (or life with period certain) of the taxpayer. This, alone, satisfies the RMD requirement for this annuity while precluding it from being combined with other accounts for purposes of satisfying the RMD. Of course there is some value there (even though there is no account value), because there are a stream of payments being made over the taxpayers life. In this case, the remaining three IRAs may be combined. In rfahey's case, the annuity isn't being annuitized, but merely paid out in 5 installments. This was Mike Preston's argument that they could, therefore, be combined. I cannot fathom a situation where an annuity can enter the annuitization phase while continuing to have it's distributions be used to offset RMDs from other accounts. Good Luck!

The problem is that there is no such thing as a last day rule in a DB plan; and the Cash Balance plan is a DB plan. So, if the CB is part of a Top Heavy group of plans, then you must satisfy that provision. How you do this is done when the plans are actually drafted; so you're merely continuing to follow the provisions of the plan. Speaking of plan design, you have to ensure you do not have accrual requirements that would preclude you (in any way) from satisfying the gateway when needed. This, too, should be contemplated when you're actually drafting the plan language. Right now, all you can do is follow your plan. If you're in the process of designing a combined 401(k)/CB plans, then it's easy to make recommendations to avoid this issue. Good Luck!

The problem you're having is that 100% of the HCEs receive 15% and only 50% of the NHCEs receive that rate. Therefore, that formula fails to pass 410(b) by used of the coverage ratio test on the allocation. You can attempt to cross-test the plan, but must satisfy the gateway into cross-testing before you use the cross-tested rates. Even then, the HCEs would need a signficant age advantage over the NHCEs in order to pass (but that's done with your mathematical analysis). But, to answer your question, you'd likely need the gateway since you'd likely need to cross-test the plan. Good Luck!

There is no comparision of life expectancies between the spouse and the decedant because the participant died prior to the required beginning date. So, no "longer of two life expectancies" provision being utilized. For 2014 and beyond, you are using the spouses "single life expectancy" as long as the account remains with her in beneficiary status (whether in the plan or rolled directly to an inherited IRA). Should the spouse roll into her own IRA, she's have the benefit of using the "uniform life expectancy"; which may have a significant impact. Good Luck!

Anytime I perform an analysis, I would want all percentages to total 100% (For Company C, you only identified 80%). I would also want relationships defined between the owners (are any of them related). We know that C is deemed to be owned by at least 10% by HCEs in Company A. We don't know what percentage of C's revenue is received from services to A (is it 10% or more). Also, is A a service organization?

It appears that you have already decided that no one would ever be allowed to continue to make payments beyond termination of employment; and that appears to be your default. I say this to illustrate that there is always a default position (what to do when you don't get your question answered). In this instance, do you assume that the loan policy allows continue payments beyond termination of employment since this is how it is being administered; and draft the new loan policy to continue with that operation? Or, do you take a default position that unless they show the language allowing continued payments, you'll assume it didn't exist and then file a VCP submission to correct that this wasn't how it was operated. Questions: Is the plan on an adoption agreement? Are the loan provisions written within the Basic Plan Document? Good Luck!

Yes. The participant has died before the RMD. There is no distribuiton due by April 1st. The spouse must receive the 1st distribution by December 31, 2014 (12/31 of the year containing the first anniversary of death since the participant has already turned age 70 1/2). Of course, the spouse may roll it over to their own account. Good Luck!

Are you speacking of a fair market value question where the additional bells and whistles in the contract cause the contract to be valued at more than 120% of the account value. I am trying to ascertain what you're getting at.

This is not a Regulatory issue, but a loan policy issue. If the loan policy does not require you to remain employed in order to continue to maintain the loan (or state that payments must be through payroll deduction), then you would be able to continue to make payments beyond termination. The loan policy (loan terms) is the only means for answering this question for this particular plan. Good Luck!