Blinky the 3-eyed Fish

Ah, but it doesn't say merged. I know I am grasping at straws.

Why would I have to count the contribution receivable on a cash basis? I see nowhere that you must use accrual basis for determining the $100,000 threshold. Belgarath - let me rephrase my question of concern. Do I need to file a final 5500-EZ for the MP plan since it merged into the PS plan? I see on pg. 2 of the instructions that an EZ must be filed for the final plan year. (I know it's regardless of the asset amounts.) The final plan year is defined as the year in which distribution of all plan assets is completed. This was not the case with my situation as the assets were merged, not distributed, and they will continue to be reported with the PS filing in the future. I am looking for a way in which there would not be a late 2001 MP filing if it wasn't technically required.

I have a takeover plan from an accountant. There was a MP and PS plan that merged 12/31/01. Neither plan has ever filed an 5500-EZ due to the asset threshold. However, as of 12/31/01, the assets exceeded $100,000 on an accrual basis, but remained under $100,000 on a cash basis. Obviously, I can report the accounting on a cash basis and make 2002 the first filing for the ongoing PS plan. But for the MP plan I feel that a 2001 final filing should have been made. Agree or is there any argument for not filing for the MP plan because it was merged and was not necessarily terminated?

You can't operate the plan outside of certain EGTRRA changes regardless if amended or not. The required minimum vesting schedule for matching contributions applies to matches made for the plan year beginning in 2002. If that participant received some match dollars for that year, those dollars need to have the minimum vesting applied, while the other match dollars can have the old schedule apply. However, most people that I have heard of are applying the new minimum match vesting to all match dollars to avoid the recordkeeping hassle.

1.401(a)(4)-11(g) provides the mechanism for correction. No need to submit to the IRS.

No, the TH contribution you mentioned made in 2004 is for the 2003 plan year. It would not cause you to be outside the safe harbor only contribution in 2004. Think accrual basis.

To the degree the actives are assumed to remain active, I would roll forward the interest at the active interest rate. If there are pre-retirement decrements, then it would seem the inactive interest rate would kick it only a participant is decremented out. There's one opinion.

Andy, what do you mean by segregated amount? I presume this is the same as the restricted amount and not a 414(k) question.

404 costs are not prorated. See this recent discussion. http://www.benefitslink.com/boards/index.p...ST&f=22&t=19852

That is a concern only for performing the average benefit test for coverage, not nondiscrimination testing. It looks as if the post I was reponding to by gkaley was deleted by said person. It's okay to be wrong g.

Mike is right that the 404 normal cost and bases are not prorated. While you are correct that the same assumptions must be used in developing 412 and 404 costs, this is not an assumption, but rather a methodology. It's along the same lines as requiring different 412 bases to have one set of amortization periods, while 404 bases are over 10 years. What problems with the IRS would you have on this issue. If someone went ahead and prorated the bases for 404 they would simply be understating their maximum deductible contribution and penalizing themselves possibly. The IRS wouldn't care about that.

I think wcoleman knows about the similar thread, when he/she started them both.

What do I know? I just sign the 5558's, not mail them.

Lynn is correct. Although, keep in mind for a 401(k) plan, it's the date of the allocation, not the year in which the allocation is made. So, if there was a 2002 profit sharing contribution not deposited until 2003, then you have yourself an active participant for 2003.

I never knew actuaries had this program. It makes me feel all warm and fuzzy to know that actuaries are buddying up with the pensioneers to help save their retirement benefits.

Did they extend their corporate tax return? If so, would the filing still be timely using the corporate extension? If so, provide that. If not, respond truthfully and hope for the best. I would imagine the DOL keeps extension copies that are filed.

The transfer issue does appear to be the key. See also PLR 8743096. Although with the new regulations that say a DB plan and 401(k) only plan do not trigger 404(a)(7), there is some room for interpretation since those PLR's. My recollection is that the IRS was leaning toward or decided that a plan that had existing sources other than 401(k) dollars would not trigger 404(a)(7) if the only contributions in the year in question were deferrals. Thus, it certainly would follow that the requirement that a DC participant would have to have their account transferred would no longer apply. Of course, it's all a gray area until something gets decided formally.

Not a chance. This is a very conservative design with only 2 rate groups. If this was deemed a nonqualified CODA, then every cross-tested plan sans a select few would be.

I wish I could zap my incoherent and incorrect messages.

Two things: You mention the plan passes 401(a)(26) on the basis of 1.401(a)(26)-1(b), but this also requires the plan not to be considered frozen under 1.401(a)(26)-2(b). How do you satisfy that? Second, you have to consider the timing of amendments and whether or not they are discriminatory. If the NHCE's in 2003 would be eligible for the plan, I would be extremely wary of providing them with a 0% benefit, then increasing the formula right after they terminate.

Okay, good info. First, we look at the gateway requirements (the lesser of 1/3 of the highest HCE and 5%). You are providing 7%, so we move through the gate and on to cross-testing. Next, based on the nonhighly concentration percentage of 75%we need to have the lowest rate group (which is the only rate group in this case) be greater than 33.75%. So, at least 2 of the NHCE's need to have a higher rate group than the HCE. In this case the your only rate group looks like: (2/3) / (1/1) = 66.7%, so you pass, but must move to the average benefits test since your percentage is under 70%. Average Benefits Test: Avg NHCE's: (1.02 + 5.37 + 3.48)/3 = 3.29% Avg HCE's: 3.13% Avg Benefit % = 3.29/3.13 = 105.1% So, you pass that test as well and you PASS the cross-testing. In fact, you could set the allocation to the NHCE's lower, so that the NHCE with the 3.48% EBAR is right at 3.13%. To not do that will not be achieving your client's objective. Going back to the question of your original post now that I understand your terminology, yes, I think you are being too conservative in giving the GREATER of the 1/3 or 5% versus the required LESSER. No reason to do it if the testing would pass otherwise, unless the client were aware of what you were doing and why.

Wrong. The gateway is merely that. It is what gives you the right to cross-test the plan. So, first you provide the gateway minimum, then you run the cross-testing. You haven't provided enough information to say whether that passes or not. I am not sure what you are referring to by "safe harbor minimum" and "both gateway tests". You mention that your average benefits test for 410(b) fails. Why are you running this when you pass coverage on the ratio percentage test? I have the feeling a few pieces of the puzzle are missing for you. Perhaps you could post the ages of the participants (if not too many) and someone can walk you through the test.

Jig, you are misinterpreting what mwyatt is saying. He is referencing waiving benefits to facilitate the termination of the plan, but as pointed out, waiving benefits is not valid to reduce the funding requirement. Post the specifics of your situation and perhaps I or someone else can provide a solution. Waiving benefits is NOT that solution to reducing the funding. The first thing to know is what the valuation date is and for what plan year. That will immediately determine if an amendment under 412©(8) is available. Mwyatt, sorry for the she. Your handle reminds me of someone I know, so I put it without thinking, but changed it now.

Technically, since 94 GAR kicks in on 12/31/02, would you say it could be used for 2002 testing?

Without knowing the details of your situation, have you tried reading Rev. Proc. 2002-47? It should guide you to the proper correction method and if your situation is available for self-correction or must be submitted under one of the IRS' programs.