Blinky the 3-eyed Fish

I found this on page 14.13 of the 2002 version of the ERISA Outline Book. Since you can't copy it, this is retyped. "No spousal consent is required if the value of the total accrued benefit that is subject to the security interest is not in excess of the cash-out limit in effect under Treas. Reg. 1.411(a)-11©(3)(ii). See Treas. Reg 1.401(a)-20, A-24. For a defined contribution plan, the relevant value is the participant's account balance. For a defined benfefit plan, the relevant value is the present value of the participant's accrued benefit. Note that the total benefit is taken into account to determine if the $5,000 threshold is exceeded, not just the vested portion of that benefit. This is different frm the other consent requirements (see IRC 411(a)(11), for example), where only the vested interest is taken into account." Both times "total" is mentioned it is underlined. (I couldn't get it to work here.) Also, Mike, where is my typo? Addition: So the question is whether the whole balance is considered a security interest or not. I know my whole house is considered collateral for my mortgage, but that's not the best analogy.

I think you may be confusing elapsed time provisions with what is used for the top paid election. See 1.414(q)-1T - A-9(B)(2). It says nothing about counting one day of the month as a full month.

I have heard of cash balance plans with determination letters that credit active employees with a "supplemental interest rate" for remaining employed. While this may not state that explicitly, it is operated similarly.

I interpret the rules as you do, except if no match was given, then no HCE's benefit for that piece as well. (You would still be left checking 2 boxes on line 3.)

If the top paid language is already in the document, then the conservative approach would say you can't make changes after someone earns the right to the contribution for the year for fear of a 411(d)(6) cutback. However, I recall this question being posed at the LA Benefits Conference and the panel was no so quick to make this strong a statement. Obviously, if it's not in the document, you have free reign until the RAP is up.

Yes.

The way I read 1.401(a)(20)- A24 it does not contradict that you consider the total account balance (not loan amount) without vesting being a factor. And this makes sense if you parallel the situation to a partial distribution. The loan is not a distribution, but if not repaid it would effectively become one. I think you would need spousal consent in this situation if the loan is less than 5k (with a > 5k balance), or if the vested balance is less than 5k but the total balance is greater than 5k.

I don't agree. Even if your document spells out the testing method to be used that does not restrict you from amending your plan to another testing method as long as it is within the remedial amendment period. In other words, one plan does not get punished for restating its document earlier than another.

Any help here? http://www.reish.com/practice_areas/Techni...ps/IRStip91.cfm

Yes and no. All who benefit in the nonelective portion of the plan must receive the gateway contribution. EXCEPT those that do not meet the statutory eligibility requirements (age 21 and 1 YOS) do not need to receive the gateway IF you are not cross-testing them. In other words those that are not statutorily excludable and have not met the 2 YOS requirement need to receive the gateway. Those that are statutorily excludable may or may not need to. And as always, your document needs to have provisions that allow the gateway contribution to be given.

Yes.

That is the term Adam Rich would prefer.

In answer to your first question, you would include in the determination of whether or not the plan is top heavy all those that did not terminate before the one-year period from the determination date. Those employed on the last day of the plan year are those eligible to receive the top heavy contribution. They have no bearing on the determination of whether the plan is top heavy. Another note that if the plan was not amended for the EGTRRA changes as of the end of the year, you need to determine the top heavy status under the old rules as well, if the new rules show it is not top heavy. In answer to your second question, an emphatic "NO".

The phrasing that this is the one and only HCE. leads me to believe he is the owner. So, if that is the case it is his error any way you slice it. If not, then he does have an issue to work out with the employer and the employer may have an issue with their payroll company. What I don't think is involved is the plan in any correction. The plan was administered properly from what I gather, it's the payroll that was improperly reported. My comments of too bad were based on him being the owner. Also, my deduction comments would be a similar situation in which too much tax is being paid.

I am glad you are more diplomatic.

You can't call it after-tax because it would have had to been legitimately after-tax and passed the appropriate testing. In short, too bad.

I too agree with Mike. This is now only an issue between the HCE and his personal taxes. It's really no different than if I missed that deduction I could have taken years ago. CRAP! A hard lesson in paying attention will surely be learned.

DISCLAIMER: I am an actuary and don't always know how these things work.

When switching from PBGC rates to GATT rates there are options provied so the change is afforded anti-cutback relief. These options are: 1) use calendar month preceding the distribution date; 2) use the same month, or the first or second months preceding what the PBGC rates used; 3) provide a without wearaway approach for a year. Since your situation is using the same month in option 2, you should be fine. Point the IRS reviewer to 1.417(e)-1(d)(10)

See Rev. Rul. 80-229.

In determining if there are late quarterly interest charges due for the 2002 calendar plan year, when are the prior year's RPA liabilities redetermined? I am thinking that in accordance with 412(m)(7) and 412(l)(7)©(i)(III), if you use an OBRA interest rate for the 2002 valuation which is above 6.00% (the limit at 105% of the range), you MUST redetermine last year's RPA liabilities using 120% of the range as in effect on 1/01 (i.e. 7.10%). If at or under 6.00%, then don't redetermine the liabilities. I am less than certain. Additionally, I looked at the Sch B instructions for 2002 and it replaces MUST with COULD, effectively. Meaning that you might not be required to recompute.

Actually, I amend my 5.99% to 6.00% since 100% of the interest rate is 5.71% and since 6% does not exceed that amount, I don't think it's allowable. All that for a rounding error.

One side note is that compensation from date of plan entry can be used in testing regardless of how the plan contribution is allocated unless there is something in the document contrary to this. This is because compensation from date of plan entry satisfies a 414(s) definition of compensation.

Right now I assume your document converts the DC account balance based on the actuarial equivalents in the document. There certainly is no problem adding another section which states that for purposes of calculating the offset benefit, you use another set of actuarial equivalents. I doubt such a small change would automatically throw the plan out of VS status. Just disclose the modification to the document when you submit the plan for a determination letter.

On another note, what is your interpretation of what underfunded means? Is it based on termination liabilities or actuarial assumptions? If the latter, do you also think it's based on the funding method?