Blinky the 3-eyed Fish

It's about a year too late to do that in this situation. As a general rule, I always like to switch the valuation date to the beginning of the year in the year prior to termination to avoid hassles with an EOY val in the year of term.

Mike, rescinding the termination is not an option since participants were paid out based on the termination of the plan prior to the business dissolving. So, it looks as if I have to keep the IA funding method and decide to go with the 93 Gray Book answer and fund as if the terminees were still active or some other variation like Mike's suggestion. BTW, I agree that part b to the 99 Gray Book answer is a bit ridiculous.

Where do you see that 6.01(5) only restricts 3.02 - 3.09? I have a feeling I am going to look foolish, but I don't see that language. Mike, I think you are talking about 6.02(5), which applies to a frozen plan.

Sure, if the timing of such a provision does not favor HCE's.

I don't think 3.13 is available due to the plan termination restrictions described in 6.01(5).

Not available because the plan terminated late enough in the year for people to accrue a benefit. The company then dissolved before the end of the year valuation date creating no active employees.

Situation: terminated DB plan now with only inactive employees has been funded under the individual aggregate funding method. The liabilities exceed the assets. My first question is how is this a reasonable funding method when there is no methodology over which to spread the PVFNC? Would you consider no normal cost reasonable? That being said, I don't see that I have the option to change funding methods pursuant to section 4.02 of Rev. Proc. 2000-40. The PVAB exceeds the assets as of the date of plan termination. I am looking for recommendations and thoughts.

I know a guy named Vito who breaks arms. Does that help?

Starting on page 9.91 of the 2003 ERISA Outline Book, Sal certainly agrees with your conclusion Andy. It appears I have some documents that are deficient in keeping my plans as a safe harbor. As an addendum, most of my plans are career average and most of the FAP plans consider compensation from date of hire, so it is at least a limited few that may have a problem.

Why would you think that?

How about this memo created by Pricewaterhousecoopers? 1. Under Code section 62(a)(6), the deduction from gross income for a self-employed individual (Code section 401©(1))is the deduction allowed under Code section 404. Regulation section 1.62-1T©(7) limits the deduction under Code section 62(a)(6) to the deduction under section 404 for contributions "on behalf of" a self-employed individual. 2. Where the deduction under Code section 404 is not for a contribution "on behalf of" a self-employed individual, it is a trade or business deduction under Code section 62(a)(1). 3. Code section 1402(a) and Regulation section 1.1402(a)-1(a) define net earnings from self-employment as gross income minus trade or business deductions. Thus, the deduction under Code section 404 and Code section 62(a)(1) reduces net earnings from self-employment. But the amount that is deductible under Code section 404 and Code section 62(a)(6) does not reduce net earnings from self-employment. 4. Under Code section 404(a)(8), for purposes of contributions to retirement plans, a partner is treated as an employee and a partnership is treated as the employer. 5. Under Regulation section 1.404(e)-1A(f)(1), a partner's distributive share of the deduction under Code section 404 for contributions to a defined contribution plan is the contribution made "on his behalf". It is accounted for separately under Code section 702(a)(8). A partner's distributive share of the deduction under Code section 404 for contributions to a defined contribution plan for employees is determined under Code section 704. 6. Under Regulation section 1.404(e)-1A(f)(2), a partner's distributive share of the deduction under Code section 404 for contributions to a defined benefit plan is determined under Code section 704. Under Code section 704, in the case of a defined benefit plan, no contribution is identified as being made "on behalf of" the partner, and the deduction is determined under the rules for contributions made for employees of the partnership. 7. Therefore, in the case of a defined benefit plan (1) there is no deduction under Code section 404 for a contribution made "on behalf of" the partner; (2) Code section 62(a)(6) does not apply; and (3) Code section 62(a)(1) does apply. Thus, the deduction for contributions to a defined benefit plan reduce gross income to determine net earnings from self-employment.

Crap, I hate it when I am wrong. Next time I will just nod politely with whatever Mike says.

I looked at three since reading this post and none of them have that language.

Quickdraw? Anyway, the answer is no that plans that are permissively aggregated for TH purposes need to be aggregated for 410(b) and 401(a)(4). Plans that are aggregated for that purpose are part of the required aggregation group for TH purposes. So, there would be no such thing as permissive aggregation if the answer to your question was yes. Also, regarding the TH and gateway issues: If permissively aggregated, the associates plan would not be TH no matter the results of the overall top heavy test. (Keep in mind I am assuming the associates plan has no key employees which would make it part of a required aggregation group.) If the plans are not aggregated for 410(b) and 401(a)(4) there would be no gateway requirement to meet, since the associates plan is not being cross-tested. "I concur that if the permissively aggregated plans are top-heavy that it essentially makes no sense to permissively aggregate them. " - Mike, I am not sure what this means.

It was an extreme example at an extreme bank with extreme overdraft protection.

I will try and go through the steps and maybe that will help (or maybe not). First, a required aggregation group would exist if there was a key employee in both the plans or if the plans were being aggregated for coverage and nondiscrimination testing. I imagine you are not looking to aggregate the plans for coverage and nondiscrimination testing and I assume there are no keys in the associates plan. Obviously, there would have to be HCE's in the associates plan for it to pass coverage on it's own. So, now by permissively aggregating the plans for TH you are hoping to lower the top heavy ratio (which it would since there are no keys in the associates plan). Whether the plan is cross-tested or not has no bearing on the end result for TH purposes, as the plans are not considered to be aggregated just because all plans are considered for the ABT. Thus, the end result is as you state. You do not have to provide TH benefits to the associates plan because of the permissive aggregation. You do not have to provide the gateway contribution to the associates plan because it is not being aggregated for coverage and nondiscrimination. You do have to treat the people in the associates plan as not benefiting for coverage and nondiscrimination.

Let's have an extreme example: 1 HCE with a balance of $500,000 1 NHCE with a balance of $1,000 There is a loss of $50,000 proportionately. Would this change your thinking if this amount was made up by the employer? In other words, just because participants get more, it does not mean that it is okay.

Accumulated reconciliation account. (It was in the subject header.)

Think of the 401(k), 401(m) and nonelective portions of the plan as separate plans for this purpose. How you test one portion does not affect how you test the other portion (otherwise excludables used or not). What has to be consistent within each portion is the use of otherwise excludables for coverage as well as nondiscrimination.

I am curious as to what purpose you propose "use the assets reduced by the ARA regardless of funding method". Would your actuarial value of assets differ from the fair market value?

I am betting it was a contribution which was probably not allocated according to the plan document.

The guideline is there is no guideline from what I know. In restating this document, I would ask why the plan remains in existence. Many times it is to retain the availability to invest in certain vehicles that many IRA's will not allow. You may want to restate it into a 0% money purchase plan to avoid the substantial and recurring issue.

Give some of the cash back? Seriously, there has to be a logistical way. Have you tried talking to your employer?

I think 1.411(d)-4 Q&A-2(a)(iii)(2) says it all. Optional forms need to be protected if no election is made, but not if the participants do affirmatively elect one of the forms.

I would recommend they marry each other for ease of filing reasons. Perhaps after time they will grow to love each other.