Blinky the 3-eyed Fish

Merlin, the gateway is the lesser of 1/3 of the highest HCE's accrual rate using 414(s) compensation or 5% of 415 compensation. Both amounts need only use compensation from the date of plan entry for the nonelective portion of the plan. (Of course your document would have to conform to plan operation.) So, you wouldn't have different entry dates for the 1/3 vs. the 5%. Andy, I didn't understand your second paragraph.

With your mega-dittos, I presumed you encouraged that design. I was going to knock you down a couple of rungs on the Benefitslink golden ladder, but now I will keep you up there high on your perch. I agree with your second paragraph. Me no communicate well dis time of year. Too many sole proprietors want to file their taxes on time.

Chris, if the plan is top heavy any non-key participant eligible for the plan would need to receive the top heavy minimum. Then, depending on how the cross-testing was performed, with or without the statutorily excludable participants, determines whether or not the participant who was only eligible for the 401(k) portion would need to receive the gateway.

I wasn't too clear on my "2 is a must" comment. I actually meant that since the plan had only NHCE's, it was an automatic pass. Mike and Andy, are both of you setting up DC plans with people each in their own allocation group? If yes, are there accrual requirements for the nonelective contribution?

Question 1: No problem that I see Question 2: Our DC document has approved language that allows everyone to be in their own rate group. I don't use it because of these outstanding issues. 1 - it could be a deemed CODA; 2 - you must pass 410(b) on the ratio test; 3 - most importantly, I think it goes against the spirit of the law and is overly aggressive. In your situation with a DB plan, 1 is not a concern; 2 is a must; and 3 is up to you. I think in a DB plan 3 is not as big of an issue than in a DC plan where contributions are discretionary each year. Also, with 3 NHCE's that in my mind adds more to it being acceptable.

That I agree with pax. And yes, Mike, I did go from a logical point of view. That certainly doesn't mean it's right. Fortunately, I have never had a person choose an annuity in a plan that terminated or be forced to purchase one for a non-responding participant. Lucky me so far. Mike, must not have liked his post. It went bye-bye.

I have never heard of this reasoning, so without looking anything up I have to disagree. At the time of plan termination distribution, the plan ceases to have to preserve anything. It is at that time that any participant with an accrued benefit will choose his benefit form. If he chooses an annuity, whether it be payable in the future or now, he has opted not to take the lump sum. The reverse would be the same if he chose a lump sum. Obviously then, the annuity form does not need to be preserved. Whether or not the plan allowed for in-service distributions is moot. The plan is no longer after the payouts have been made. Now suppose a participant chose an annuity and then 2 years later wanted a lump sum. Would it be allowable for the insurance company to provide the lump sum? I suppose so, but it would be the lump sum value determined by the insurance company and not under 417(e) rates or the plan's actuarial equivalents. If that were the case, I could just see a 25 year-old participant who chose a deferred annuity until 65 changing his mind at age 64 and requiring the insurance company to go back 39 years and find that old plan document.

The accountant could be intending to use the flip-flop method to avoid 404(a)(7). That would actually be very irresponsible of him/her to try and do this without coordinating it with you beforehand, but it's a thought.

If the same 3 people each wholly own 2 companies, it is a controlled group.

My understanding is that in a related business scenario where both companies adopt a plan, one company can deduct contributions attributable to the other company's employees. This appears to be a similar situation, so I certainly believe that the the contribution can be split so that none of the contribution is nondeductible regardless of how the tax return is filed.

Considering the loan balance is included in a participant's account balance, how is it mathematically possible for the loan balance to exceed the value of the participant's account. Even if the remaining 1/2 of the vested balance at the time of the loan went to zero, worse case is you are still left with the loan balance equaling the account balance.

Not quite. Only the nonexcludables who benefit under the plan being tested are in the compensation ratio test. 1.414(s)-1(d)(3)(iii)(A)

When a MP plan is merged into a PS plan, what submission process would be used to get a determination letter on the MP plan? I would consider using the 5310 and submitting it as a plan termination, but it's not really that. Thoughts?

What would be the IRS' reasoning be for not allowing a plan to be amended for a 2002 calendar plan year versus 2003? I am trying to think of a distinction, but can't. It's not like the right to a QNEC has been earned, since the plan could always refund dollars.

I am curious why there is the need for plan #003. It seems as if the goal is to keep the HCE's at the maximum DB benefit. Why not do 2 things: 1) increase the formula in the DB plan for the HCE's, so that the net benefit after the offset is still at the limit; and 2) only use the balance attributable to contributions after a certain date to offset the benefit. Am I missing something? (It's been know to happen.)

For what it is worth, I asked this question to Sal Tripodi at a conference I recently attended and he did say that a plan can amend to prior year testing even after the restatement is done. He did not qualify his answer based on if the plan has submitted or not, but I also didn't bring it up specifically. Personally, I have yet to look further into this.

Mike, I asked the question to Sal Tripodi at a conference I attended and he agrees with your comments. It's a good thing I have none of these plans.

I know of nothing past Rev. Proc. 2003-10 and Notice 2003-2.

What 2002 annual limit are you trying to determine? I don't follow.

The former.

Andy, Dad could be 92 and the sons around 70. Then there would be a fine chance of passing. Newbee, not to dispare your company in any way, but where is your supervisor and what sort of involvement will he/she have in the final say of this document being generated? Hopefully, you are not really being thrown to the wolves. Because if you are, I would look to a new company to work for before your reputation is tarnished while learning this business.

In looking at the 318 attribution rules, I think the following is true: A person is attributed the shares of a corporation for determining HCE status if they own 5% of the corporation or more (416(i)(B)(iii). Unless there are roughly 15 kids and they live in a shoe, I think the kids own more than 5% of A. Double attribution simply relates to attribution by family members and not to the above situation (318(a)(5)(B). So, looks as if you have yourself a bunch of HCE's, as the kids' ownership is attributed to the parents. Darn, jaemmons beat me to the answer.

My mistake, I meant to refer to the need to pass 410(B) to determine if the plan design is a safe harbor or not, not the general 410(B) test.

You are right about the follow-up, but that needs to come later. First, how can it be (11/11)/(2/2)? Keep in mind that I stated this plan would not be general tested. So, we can't treat those that just receive the TH as benefiting.

I would like to pose one additional question, "Vampire" Mike. In performing the 410(B) test for a safe harbor designed top heavy 401(k) plan (not a safe harbor 401(k) plan) with a 1-year wait for deferrals and a 2-year wait for profit sharing with the following census information, what would you say the ratio percentage is for the profit sharing piece assuming no general testing? Met 2-year elig and received PS contribution: HCE's - 2 NHCE's - 5 Met only 1-year elig and received only TH contribution: HCE's - 0 NHCE's - 6