Blinky the 3-eyed Fish

If a new plan in 2007 has an EOY valuation date, how is its 2007 AFTAP determined? Obviously 12/31/06 numbers are non-existent and my understanding is that means 0%, not 100%. I feel I am missing something.

Mirrors the jist of that promulgation saying excess assets will be allocated in a nondiscriminatory manner, blah blah....

DB plan is aggregated with a DC plan for general testing. Both plans terminate 12/31/07 because the firm is dissolving on that date. The company will remain in tact largely as a shell for the time being to collect receivables and pay invoices. There will be some residual employees to perform these tasks. The DB only benefits the HCE principals of the business. Upon distribution soon in 2008 the value of the assets will exceed PVAB's under the plan formula. If the excess is allocated to the principals, the value of the benefit due to that excess will not cause the plan to fail general testing if the excess is tested as a 2007 accrual. So here's my question. Do you think the excess allocation is a 2007 accrual even though it technically doesn't happen until 2008? The doc has the standard Rev. Rul. 80-229 language for excess assets. I am having trouble thinking it's a 2008 accrual since both plans terminated 12/31/2007.

I don't like that example. Thanks to that nuclear waste in my lake, I now have that third eye.

Tell me if I am wrong about a calendar year plan. If the 2007 and 2008 AFTAP are not certified, then there are no distribution restrictions until 4/1/2008 under this special rule this year. So, it's a potential advantage to not certifying to the 2007 AFTAP too soon. Of course if the numbers are available and it's clearly underfunded but it's just that no actual certification has been signed, anyone see that as a problem? It seems strange that there is an advantage to burying your head in the sand.

A husband and wife each own separate LLC's, 100% each. The 1563(e)(5) attribution exception notes that neither can be a director in each others' businesses. In this case being LLC's there are no directors, instead there are members. Does anyone think that makes a difference? Anyone know of a TAM or other legal precedent?

Long question, short answer: yes.

TH matters not. A cat stole my voice.

A non-elective contribution to be precise. A match wouldn't trigger gateway.

Is there a trick to the question? Assuming not, I will answer. There are different interpretations to this day as to whether or not you use plan entry dates or statutory entry dates for determining otherwise excludable employees. I still believe the pervasive thought is statutory entry dates are permissible. And on that basis, your person is an otherwise excludable employee. Your questions as to whether or not you have to test or give gateway depend of course if there are HCE's in the otherwise excludable category and if so, more details are needed.

VCP submission with a half-fee if filed by 1/31/08. 5300 filed with VCP sub.

The second and third posts to this thread by Kim and Sully tell you what you need to know.

By rule you can NEVER discriminate by providing more to an NHCE.

Ok, forget the design aspect, I provided the offset example as a means to show that basing costs on PVAB doesn't work necessarily. As an aside, I don't think you should blanketly state that offset plans are a poor design. It actually decreases administrative costs if the plan is PBGC covered by saving premium payments and distribution costs if the staff can have their entire DB benefits offset and just get DC contributions. It too decreases staff costs as DB contributions generally are worth less for gateway and nondiscrimination purposes. Doug's comment about a pooled PS account is right on the money. Also, I wouldn't propose designing anything other than UC since you have to use that next year, so scrap EAN. I too would scrap EAN in a partnership without PPA coming as you can easily skew results like I described with IA in a previous post. But I digress and still am looking at what people think about allocating costs.

Let me throw a wrinkle into simply basing it on PVAB's with a more complex plan design. A good example of how PVAB's can get screwy is with an offset plan. Say there are two partners of the same age, compensation and benefit formula, thus equal PVAB's without considering the offset. Year 1: costs are allocated on PVAB's - no issue Year 2: partner A has tremendous DC returns and thus has a reduced DB. Partner B is the opposite with very poor DC returns and an increased DB. Partner B is allocated a higher amount than A. Year 3: this time partner A has poor returns and an increased DB, while Partner B has good DC returns. At the end of year 3, they are back to having equal PVAB's net of the offset. So, in years 1 and 3, they had equal cost allocated, but year 2 partner B had increased costs assigned to him. However, the have equal PVAB's after year 3 remember. Oops. What would you do here?

And that last post is an example of where a large disconnect begins in assigning cost under the funding method versus assigning truer costs. For example, under IA a benefit formula funding 10% of Hi-3 per year of participation will cause a relatively low normal cost for someone 20+ years to retirement versus someone within 10 years. I know of nothing that requires costs to be allocated in anything but a reasonable manner. Of course I believe it to be much more reasonable to allocate the cost much differently than what the funding method produces. Any different approaches?

Partners have different ages and thus have different levels of benefit value in a traditional DB plan. I wonder what philosophies you folks are using to "assign" costs to each partner in these DB plans of partnerships in year 2, 3, ...... Of course each partner wants to make sure they aren't getting the shaft by having a greater percentage of costs versus benefits assigned to them than other partners.

Wants to verify results? Why not just take what the computer spits out and go with it? Of course I am kidding. EVERYONE should and want to verify results, yay! The formula is: EBAR = [contribution * [(1 + testing interest rate) ^ (testing age - attained age)] / purchase rate] / compensation Let me know if you want the permitted disparity formulas and I or someone will come back with those.

I know of a guy but I am not sure where is office/van is parked right now.

The contribution to a plan sponsored by two members of a controlled group should be able to be deducted amongst either group in any manner. However, there is a lack of guidance in this area. The most conservative approach is to deduct it based on the accruals in a reasonable manner.

Is the 1099 income from services of the individual that are producing income? It can't be just any old 1099 income for retirement plan purposes. If so, the sole proprietorship for which the 1099 income is generated must adopt the plan.

404(a)(8)©

Didn't MJB offer you the cite which you then quoted?

Are you asking whether or not you can take a deduction for a contribution to a plan where the partner has no net earned income? If so, NO! Aren't you discussing this in other threads?

There's not enough info in the first post. Are they unrelated entities, a controlled group or an affiliated service group? Oops... I didn't read the post title.