Blinky the 3-eyed Fish

Can you give insight as to where the IRS made that statement?

2muchstress, not to nitpick, but the ownership determination for HCE's is based on the current and prior year.

I think I am going to take Kirk's answer and add "purple monkey dishwasher" to it.

Yes.

I have used "Business Decison" and never been questioned. I like it because it's generic and truthful.

Doesn't a two-tired integrated allocation formula with contingent top heavy language yield the same result as a four-tiered formula?

Andy, I see now what you are saying and I agree with you.

Here is a quote from Tom's post: "however, for purposes of cross testing, 1.401(a)(4)-2©(3(ii) clearly states that to pass the classification test you only have to pass the midpoint test among the rate groups. The reasonable classification is deemed to pass." Andy, it seems he agrees to me.

I assume that this question is referring to the allocation groups within a cross-tested profit sharing plan. That being said, the requirement that the classifications be reasonable does not apply. It applies for performing the average benefits test for coverage.

Quite often the exact asset value is not available as of the date of plan termination, especially if that date is not at the beginning or end of a month or if there are illiquid assets in the plan. I believe that an estimate of the assets as of that date is sufficient considering there is no useful purpose in knowing an exact value.

Vebaguru, as a Phoenix actuary I must point out that not only are some Phoenix actuaries to be avoided, but some Salt Lake City actuaries are to be avoided as well. Come to think of it, some LA, NY, Miami, Houston, etc. actuaries are also to be avoided. There are good and bad in all businesses. With actuaries it is easier to have a client choose you if you are able to promise them a higher deduction. Thus, there is that tendency for some to push the envelope. So you pick one of those actuaries, then if you try and terminate the plan, but are unable to payout the plan's assets because they are too high, or if the IRS audits your plan and disallows the deduction due to bad actuarial practices, you will wish you had made a wiser actuarial choice. By the way, firstq, you have already posted enough information to figure out who the actuary is you are consulting with currently.

Mbozek, from my experience a plan is terminated when it is terminated. While 5500 filings may continue until the assets are distributed, that does not extend the termination date. In a DB plan the funding standard account is maintained through the year of termination. The extra 20k was deductible as part of the actuarial determination of the min and max contribution in that final year of the FSA. It was not specifically to fund an underfunded accrued benefit. There is a rule for plan years beginning after 12/31/01 for PBGC covered plans that allows the funding of amounts to bring the assets up to the benefit liabilities. However, this rule is not applicable to this situation. Lastly, the benefit of the 20k contribution is that it effectively went to the owner of the company. The benefit liabilities were greater than the assets at the time of distribution.

Mwyatt, the plan was underfunded at the time of distribution but not covered by the PBGC. I don't see an opportunity for a deduction though. Mbozek, on what basis can the contribution be deducted for the plan year ending 10/31/02? The plan had terminated in the prior year, so there is no funding requirement and not a way to deduct unfunded liabilities that I know of. Also there is not a 412 issue since the required minimum contribution was $0.

10/31 is the fiscal year and plan year end. Obviously the contribution is made after the extended due date for the tax return (7/15/02 in this case since its a corporation), so it is not deductible for the 10/31/01 plan year end. I am trying to determine if there is a way to have it be deductible prospectively since the plan terminated 10/31/01.

Here is the situation: Defined benefit plan for a corporation with a 10/31 year-end terminates at 10/31/01. For that year-end there is a minimum contribution of $0 and a maximum contribution of $50,000. A contribution is made for 30,000 on 2/1/02. Another contribution is made 8/1/02 for the additional 20,000. However, the 8 1/2 month deadline for funding is 7/15/02. Is there a way that this second contribution is deductible in the future?

Are you testing the PS and CB plans together? Are the 26% and 3% allocations in the CB plan or both combined?

That actuary is on crack. I am in Phoenix also and have a guess as to who told you that. In light of the facts below, that 2 plans are proposed and there is a spouse, I retract the crack comment.

Reywal, are you sure? An excerpt from Notice 2001-42 reads as follows: • Good faith EGTRRA plan amendments must be adopted no later than the later of (1) the end of the plan year in which the amendments are required to be, or are optionally, put into effect or (2) the end of the GUST remedial amendment period. In limited situations, earlier amendment may be required to avoid a decrease or elimination of benefits prohibited by section 411(d)(6). Rev. Proc. 2002-73 extends the GUST remedial amendment period to 9/30/2003 for most plans, so therefore the date required to adopt the EGTRRA amendments is delayed. I believe the RMD amendments aren't needed until the last day of the 2003 plan year, so plenty of time for them.

I know the 404(a)(7) limits are disregarded if there is a DB plan and a 401(k) only plan. I know there was some debate as to whether the 401(k) plan can hold existing dollars from other than 401(k) sources. Technically a person in the DB plan with profit sharing dollars in the DC plan and be a participant for this purpsoe in both plans. That being said, I would tend to believe that your situation would push the envelope further and bring the 404(a)(7) limits into play.

Call the Department of Labor. Actually, calm down first, then call the Department of Labor.

Page 8.201 of the ERISA Outline Book says to use both plans' nonexcludables only if they are permissively aggregated.

Anyone else confused?

Rcline46, you cannot have a catchup contribution without a 401(k) feature. Also, while the 40k remains the same, if compensation is not sufficient to allow for a 40k deduction, the 401(k) feature is helpful because then you only need a 29K deduction (2002).

Rcline46, I have never seen a 401(k) plan without a profit sharing feature. That being said, the 401(k) plan has the greatest potential for the maximum amounts to be contributed because the 401(k) dollars no longer count against the deduction for plan years beginning in 2002.

Agree.