Blinky the 3-eyed Fish

It matters in that you have to correct something, either the tax return or the document. So in summary, I think that matters.

So the entity has not yet filed their tax return, correct? If that is so, then this was a non-issue.

Mike, your MF example is correct, unless they have filed their tax return and taken the deduction for the match, which I assumed was the case or there wouldn't be a problem (not considering your last scenario). You don't think the amendment I recommended would be permissable under APRSC in your last scenario? I can't see why not. Steve, I don't follow why you don't think you have a problem still. As I see it the plan was operated contrary to how the document reads.

Your only issue is not complying with the document as written. Therefore, do an amendment and correct the document retroactively. There is no 411(d)(6) issue.

Pax, your solution is flawed. To make all this happen the employee would have to do something when your first statement is the employee does nothing. Other than that, it seems like a logical solution.

Nameless Company: Mr. Johnson, we would like to give you some free money. Mr. Johnson: No, you spiteful, evil jerk!!! Nameless Company: Mr. Johnson, there are no strings attached to this free money. Mr. Johnson: Noooooooooooooooooooooooooooooo!!! Rest of the world: Mr. Johnson is as foolish as the man who built his house on sand.

My solution is to purchase the annuity. There has to be someone out there to accept this, even if it is disproportionately in favor of the insurance company.

Mbozek, why would the employer subject itself to risk by cashing out the individual in your option 3? Your recommendation to consult with counsel is fine, albeit an additional expense, but any competent counsel would not allow their client to run this risk to protect a participant that is not cooperating.

I assume you mean you want to switch to the current year testing method, not make a calendar year election, which would be unavailable to a calendar year plan. You can always amend the plan without restriction to go from prior to current year, regardless if it is past the remedial amendment period or not. But that was stated in the link to the post you referenced, so why doesn't that answer your question?

I am assuming by "terminate", you mean you want to pay out the plan assets of an already terminated plan. The answer to your question is you must purchase an annuity for this individual that will commence on her NRD. That is your only option and one that does not please most individuals. I would give her another call and perhaps this may enlighted her into returning her election forms.

Pax, none of our documents specify how the actuarial increase is made, only that it needs to be made.

This question intrigued me because I hadn't thought about it before. Most of the plans I work on are small and do not have pre-retirement mortality assumptions. I do the calculations opposite of Keith, without mortality, for both the actuarial increase and 415 limits past SSRA.

Listen to Mike.

Dave, to clarify, are you saying the plan allocations are within a designed base safe harbor of 401(l), but the language is not a designed base safe harbor? If that is indeed the problem, then no, you cannot rely on the safe harbor pass on nondiscrimination, but must pass the general test.

Before revoking this person's benefit, I would ask the question, "What if it were reversed and an eligible participant was not given a benefit?". I don't think you'd seek out that person to make him whole, just like I don't think you should take away from this person. What's done is done is my feeling on this case.

I agree the result might not make sense, but I don't think that is a necessary criteria for regulations. Any other actuary out there want to chime in?

Mywatt, while I'll agree that your method is plausible, a different methodology was presented in every problem I encountered while I studied for the exams. For every solution I saw relating to late quarterlies the credit balance received interest from the last day of the prior plan year, not from the date of contribution. To paraphrase Notice 89-52 Q-11, contributions made within the 8 1/2 month period following the end of the plan year are deemed to be made on the last day of such plan year. Unfortunately, every problem I saw had the contribution for the prior year made by the first late quarterly due date, not like the situation I have here. The above, coupled with the statement in Q-12 that contributions for the prior plan year will not be reflected in the determination of the credit balance until actually contributed, leads me to my methodology stated in my first post.

My question relates to the use of the credit balance to satisfy the 412(m) charges. I have an employer who funds the plan throughout the year. His schedule of contributions in 2001 is: 2/28/01 - 10,000 5/31/01 - 25,750 7/31/01 - 10,000 11/30/01 - 10,000 The 5/31/01 contribution was deemed to be for the 2000 plan year and was the exact amount to satisfy the maximum deductible contribution. As a result there was a credit balance in the amount of 5,000. From Notice 89-52, I know that a credit balance will accrue interest from the last day of the prior plan year to be used to satisfy the late quarterly contribution for the year. But I also know that the credit balance cannot satisfy a late quarterly payment until the contribution that caused the credit balance is actually made. Assuming the quarterly payment due 4/15/01 is 20,000, I am thinking that I use the 2/28/01 and 7/31/01 contributions to satisfy it and disregard the 5/31/01 contribution until the 7/15/01 payment? Then when using the 5/31/01 payment interest would accrue from 1/1/01. Anyone think differently?

Thanks for the complement. I just meant that you need to arrive at the compensation as defined in the plan versus the information the client has provided.

Unless a plan's compensation definition excludes these amounts, I can't think of a reason why you would need it anymore.

I am in the same boat with many plans. Me: Sorry, Joe Blow cannot receive his lump sum distribution. Client: Why? Me: Because... Client: Do you know of any reputable insurance companies that will issue an unsecured bond or letter of credit. Me: No. Client: Why not you imbecile? Where's pax; he should know of someone?

I have always interpreted the rules to be as described by MGB.

Yes. The latest freeze date is the day before the plan year beginning in 2000. So, for example, if you have a November plan year-end, you could have a freeze date of 11/30/00.

I think the lesson here is definitely to have language that only requires the safe-harbor contribution IF the proper notification is made.

Why do you think the restatement date should be 9/1/01? The situation is that you need to make the document compliant for the years in which it was operated contrary to the laws in effect at the time. In general the GUST restatement should be effective to the first day of the 1997 plan year. I would think you document provider will have coded those sections that were effective earlier or later. You may still be able to get away with a slap-on amendment, but I am not sure how valid it may be.