Gary

thanks good information

one approach that i have historically found to be reasonable w/r/t RMDs was as follows: Say owner/employee reaches age 70 1/2 in 2011. Say his AB at 12/31/10 was $10,000 per year. An RMD for 2011 would be 10k. Now to determine AB as of 12/31/11: Say the gross AB is now 12k per year and the actuarially increased AB is 11k and the actuarial equivalent benefit of distribution is 500. So the 12/31/11 AB would be max (11k, 12k) less 500 equal to 11,500 as the AB at 12/31/11. This amount could not be less than the 10k at end of prior year. The above being one approach that seems reasonable and consistent with the proposed regs under 1.411-2(b). I ran into a situation where such 12/31/11 AB was computed as the gross AB of 12k as described above (and not offset by value of distribution). I am not personally opposed to the method in the sentence above per se; but is it reasonable? is it not overstating the AB? hmmmn thoughts? thanks

I do remember that amendment. i'll check into that. I thought the PPA amendment addressed it and superseded it. thanks

In order to assess that a document is compiant I am trying to verify the statutory amendmenst from GUST to EGTRRA Say a sponsor has an approved GUST doc and has not yet restated for EGTRRA The statutory amendments in the interim to my recollection include: EGTRRA good faith 401(a)(9) regs - i thought there might have been one for that, unless included elsewhere applicable mortality table - I belileve it was 2002-65 rev rul or some number in 2002 401a31 auto rollover 415 regs NRA regs PPA, including HEART 436 regs (i think in certain situations) Then when plan restated for EGTRRA the PPA amendment survives the restatement as part of EGTRRA doc look forward to comments thanks

thank you, makes sense

does anyone recommend a document provider if i only need one document? That is, is there a doc provider that accomodates such a situation at a reasonable fee, inclusive of amendment updates, etc. The plan sponsor has a prior plan doc, but no longer uses their prior pension consultant and thus the plan needs to be restated by 4/30. So on behalf of plan sponsor I would prep an egtrra doc (form a doc provider) and submit by 4/30. thanks

yes, my understanding was that you couldn't have a SIMPLE and DB in same year, but it didn't apply to a SEP. The combined plan 25% limit excludes the first 6% to DC plan so thus allowing 31% in total and that is where the additional 6% to DB come from. Though still not sure if the SEP can be voided with contribution returned. It does seem like using SEP for 2011 and DB beginning in 2012 is the route to take. thanks

An individual implements a DB plan in end of 2011. The individual also is told by a financial advisor to set up a SEP and contribute 25%. The individual comes to us the tpa and asks how much they can cotribute to db plan. it seems the deductible limit for 2011 would be only 6% of comp and then excess contribution not deducted until later year. Can the employer return contribution made to SEP (or all of it except 6% of comp amount) as a "mistake of fact" prior to 4/15 in accordance with 4972© and proceed to make the desired contribution to DB plan? Does the return of SEP contribution satisfy 4972©(3)? thanks gary

I recieved a Schedule SB to review. The plan (one participant) has term date of 3/15/2011. Prior to 2011 the valuation was a last day of plan year val, thus the 2010 val date was 12/31/2010. The lookback month was 3 months prior to val date (i.e. 9/2010). The 2011 val is a 1/1/11 val with a four month look back. Hmmmn. As far as I know: the val date can't be automatically changed in 2011, so it would still need to be last day ofplan year and the lookbackmonth cannot be changed for 2011 either. Of course the changes would have been fine for 2010. does anyone know of anything that supersedes my assertion? I thought there may be some latitude in year of plan term, but didn't explicitly find it post PPA. thanks.

say an employer can create a profit sharin gplan where of 100 NHCEs, if they only covered 50 of them it would still pass the non discrimination tests quantitatively. the questions is: how might plan doc specify which employees are eligible? they can't name the 50 employees to be included by name I presume. So essentially the tp adminstrator would need to obtain job classifiacations (eg. sales, nurses, hourly, salaried, technician, etc.) from the plan sponsor and then determine which type of employees to exclude? If they included these NHCEs and gave 0% I presume they would be obligated to give them a gateway, thus the reason to exclude them from the plan all together. thanks

Say a 401k plan provides: deferrals discretionary profit sharing plan is top heavy and does not make profit sharing. does plan have to provide top heavy allocation? my understanding is that they have to provide the highest deferral (up to 3%) made by a key employee to the non keys. also, what section of code, regs explicitly provides this requirement? thanks

It is not uncommon for a plan sponsor to have a DB/DC combo plan where the plans are aggregated for testing. Say the plan provides large DB benefits for the owner, small db benefits for the staff, but provides relatively large DC allocations for staff to pass tests. Now say the owner goes one step further and provides lilfe insurance in the DB plan tied to the projected benefit. Of course the owner has a large projected benefit and the staff do not (as explained above). I pose two questions. 1. Is the life insurance death benefit in any way factored in determining the accrual rate or equivalent allocation rate? 2. Would the above type of life insurance be discriminatory on its own, thus preventing plan from passing non discrimination testing? thanks

a profit sharing plan accepts rollovers in its adoption agreement. i do not have possession of it's plan document at this time. If a profit sharing plan accepts rollovers, does it follow that it accepts rollovers from all employees or could it be drafted to only accept rollovers from plan participants and thus employees not yet participating in the plan could not rollover an account into the profit sharing plan? And if it requires an employee be a participant, then such plan can be amended to eliminate its acceptance of receiving rollovers and thus new participants after the amendment could not rollover money into theplan. Thanks

This topic is strictly to determine which employees if any are excludable for testing (coverage and non discrimination) A doctor starts his business 6/1/2011. Calendar plan and fiscal year. On december 30 2011 he adopts a pension plan effective 6/1/2011. The plan provides 21&1 elig, but those employed on 6/1/2011 enter plan on that date. The doctor and 4 employees have hire dates of 6/1/2011. 1000 hours is required for an accrual. However, since it is a 7 month plan year that amount is reduced to 583 for 2011 (just thought of this now). 2 of the four employees terminated in 2011 after completing 583 hours (less than 1000). So, in effect each employee would have completed a plan year of service for accrual purposes. They terminated prior to the adoption date of plan of 12/30/2011. So must the terminated employees be counted for testing? If they never become participants, then clearly it would be "no". However, since they were employed at 6/1/2011 and if they were considered participants then it seems they should be included in the testing counts. Re: otherwise excludable employees: Can we deem the employees with 1000 hours in 2011 as non excludable (even though they completed 1000 hours in only 7 months) and the terminated employees who worked less than 1000 hours as otherwise excludable? (Also just thought of this) And lastly, if we give the owner and all four employees the same accrual rate for 2011, then there is no issue re: coverage and non discrimination and then the terminated employees would have non vested terminations and $0 distributions. Ideally there would be a cite that provides that if an preson is terminated at time of adoption they do not have to be included. I'm thinking that with less than 5 years past service provided they could be excluded. Thanks

Back to frizzy guy, yes, everyone is covered and receiving an allocation in profit sharing plan and a select handful are covered in db plan. So I agree it is 100% coverage. I have seen these situations where tpa firms draft db plan documents to articulate certain job classifications as eligible to participate in db plan. And my challenge to that plan doc technique is that if combined plans already pass coverage then the document would not have to be so carefully crafted to include specific job classifications and could simply refer to individual names in the doc since coverage passes ratio test. This way you could cover three people with a certain job classification (say technician or administrator or whatever) and not the other two with that same job classification. Or better yet, not even know or care about job titles as they may not even be known to tpa firm. thanks much and appreciate the comments

Further thought. The combined plan passes the 70% ratio test, in fact it is 100%. The DB plan on its own does not pass the ratio test, but the plans are tested on a combined basis. If the combined plan passes the ratio test then does it follow that for coverage only, it does not have to pass the average benefit test and thus the db plan does not have to meet 1.410(b)-4 re: the reasonable classification test and thus can cover employees by name (which is not a reasonable classification), since the classification does not have to be reasonable. Or all employees can be covered in db plan, but only those named in the benefit formula receive an accrual; the rest get $0. I suppose there are several ways to skin the kitten. thanks.

we changed from datair using dos to datair using windows. Would that be considered a change in valuation software, thus a change in funding method? assuming it is a change in software, if the plan does not file a schedule r and instead files a 5500SF then does the sponsor have to approve the change in method? Schedule R item 8 requires sponsor approval, but what if there is no schedule R. The alleged change in funding method receives automatic approval per IRS announcement 2010-3. thanks

it will have to be monitored to meet participation; that's true. thanks

the plan of course is tested with a 401k profit sharing plan, but yes it requires including a targeted group. thanks

a company has 150 employees. 30 are HCEs 120 are NHCEs They are creating a new DB plan and would like to cover the 15 owner HCEs and 35 NHCEs for a total of 50 to pass 401a26 They want to essentially include certain employees, such as lower paid and/or younger ones. Any ideas as to ways in which the plan can be drafted to choose the various employees desired? There are dozens of job classifications/ job titles. I suppose we can name the job titles of every group desired to be in the plan and as close as possible arrive at the desired 50 employees. thanks

say the accd ben is 1,000 per month. of course that amount can be paid for a total of 12k for the calendar year. but if we compute actuarial equivalence based on an annual increase in benefit of 4% and a certain period of say 27 years (age 70 uniform table life expectancy) the actuarial equivalent payment for first year may be as low as say $500 per month. Thus a much lower payment. So question is: can that amount just be paid out and comply with 401a9 or 1) does an election for such a form need to be made and 2) does plan doc have to allow for such a payment form thanks

it seems clear that 401a9 allows a participant to receive their distribution at age 70 1/2 (if 5% owner and employed) over a certain period equal to life expectancy and with an annual fixed increase of less than 5% (i.e. 4.99%). in order to accomodate such a desire does the plan have to provide such a form of distribution or is the fact that it complies with 401a9 acceptable? And I presume that a formal benefit election to support this form of payment while actively employed is required as opposed to computing the amount and paying it each year? thanks

my understanding is that a db plan that is not a "one participant plan" must meet bonding requirements and the amount of bond is generally 10% of plan assets. what are the consequences if a plan is audited and does not have a bond in place? not sure if it is plan disqualification? fine? other? this is under assumption that the plan has not sufferred any damages. thanks looking at erisa 412 i didn't observe anything concrete.

i think then that the plan administrator needs to be advised that the distribution goes to the living trust and not an IRA account of any kind. Of course the 5th year ends 12/31/2012, but if it is to be dsitributed now, it seems it must go into the trust and not any IRA. thanks for discussion.

The benny designation says the guy's name Living Trust. The plan doc uses the 5 year payout method if there is no designated benny. Since the death occurred in 2007 (well before I worked on this case) I am treating this as a situation where the 5 year rule is reasonable. The plan was terminated in late 2010 and this is the only benefit not yet distributed. So if it goes to his this trust (the plan admin refers to it as his estate) I don't see what IRA they can transfer it to. And if they transfer it to say a son's IRA if he is listed as recipient in the will for eg. then it would seem he would have to distribute this IRA by end of 2012. Just trying to sort this out, thanks for the comments.