Blinky the 3-eyed Fish

But they wouldn't for sure because it's just one minor mod to a VS document.

It's not a word-for-word adopter and cannot rely on the opinion letter but it's not individually designed. The plan would need to be submitted to the IRS for a FDR to have reliance but would still use a 5307 when submitting.

Based on the 1.401(a)(26)-5 language: "The employees who benefit under the formula being tested also benefit under the other plan on a reasonable and uniform basis" I don't see that the document language is a factor in the determination and think having cross-tested language in the document is acceptable. But again, I would be cautious.

All I know is I would be very hesitant to put in an offset plan unless the DC provided strictly uniform beneifts. I would think an integrated allocation would meet that requirement. I do recall there are a number of these plans in technical review and that's been the case for 2-3 years now. Maybe someday we will know the rules.

I have a related question regarding a takeover plan. It's a non-standardized prototype document and the 401(k) provisions are checked in the adoption agreement. The plan has been around for 20 years. An SPD too was handed out that spells out that it's a 401(k) plan. However, the employer has never made the 401(k) feature available to participants. It's a small employer and I suppose they just didn't want to add complexity to their responsibilities regarding the plan. Any opinions on the situation?

Is she not going to be an HCE soon under this design? Let's say it's a 401(k) plan, so to get her to $45,000 in total, she needs $29,500 in employer contributions. Since she is the only one benefiting in the plan, she needs $118,000 in compensation so that the $29,500 is deductible by the employer. That makes her an HCE next year unless the top paid group somehow keeps her out. Of course you could give $10 to a lot of the other NHCE's, or whatever you feel comfortable with, to treat them as benefiting so you can use their compensation and not have to pay the sister so much.

I too would expect calcs at 62 for both plans. I don't see how the cite they gave you explains their position.

Why is "by the way" a sign of arrogance and an insult? Does the same apply to "nonetheless", "for your information" or any sort of transitional phrase? I reread Felicia's comments about 5 times trying to figure out what she said. Jefe, you were way out of line.

I have seen it before. I have also seen where the TPA lists themselves as plan administrator and signs on that line. I have also seen where they list the plan adminstrator the same as the employer (like it is 99.9% of the time) but the TPA still signs on the plan adminstrator line. In each case I shake my head.

I am of the opinion that the Gary Book answer is incorrect because the annuity is not the elected form of benefit. But what do I know? Perhaps the controversy over this issue will persuade the HCE to take no distribution at all until the benefits become unrestricted.

That would be an extremely aggressive position. The IRS has always maintained the same position on deminimus benefits as is now stated in the final regs.

The scope of "reasonable and unform" is still under debate within the IRS. Supposedly there are numerous cases in technical review but that was the case a year ago and still nothing new as far as I know. I can't imagine that operationally providing comp/total comp benefits operationally despite having a cross-tested design is an issue whatsoever. I too think an integrated allocation will prove to satisfy the criteria. We'll see. Someday. Maybe. Sometimes I just want to know the rules.

Harsh? Maybe. But if the document doesn't give the extra year until the 5 years are up, then it's not accrued until the 5 years are up. Equate it to a last day requirement in a DC plan if you like.

Felicia, are you trying to figure out a way for people to avoid paying taxes on the pre-tax dollars?

No.

David, I wanted to thank you for sending me the articles. I finally had a chance to read through those and after re-reading the proposed regs and commentary, I finally am seeing the entire picture. It is much more obvious to me that the 415 regs language I quoted is not a straightforward actuarial increase offset.

First, I am assuming these are plans of the same employer or related employers. That being said, if you are not aggregating the plans for coverage then you are not aggregating the plans for nondiscrimination. Therefore, when testing plan 1, the EBAR's for the participants of plan 2 are 0 and vice versa. Of course when performing the average benefits test you consider the EBAR's of both groups.

Your question is poor and your comment is rude.

I am posting this in advance of reading David's draft article and maybe that will clarify things when I do. In the interim though, it seems that the language in 1.415(b)-1(b)(1)(iii), "In determining the annual benefit for such a participant as of a particular annuity starting date, the plan must actuarially adjust the past and future distributions with respect to the benefits that commenced at the other annuity starting dates.", is a clear indicator of the need to consider past distributions in my example. I appreciate that there is a good-faith reliance here because there is no mention of how the actuarial adjustment is calculated. However, I don't see not adjusting 415 limit by the prior distributions in my example as any sort of good-faith reliance of this language. Would either of you two argue differently? I am looking for your opinions.

Why do you think an RMD won't reduce the 415 limit?

I am not concerned with any increases to the annuity. That doesn't solve the problem. Now back to my first post...

Situation: a one-person plan has been overfunded. The person has been receiving a monthly annuity for years and now wishes to take a lump sum. The person's benefit was at 100% of Hi-3 compensation. That Hi-3 has not increased since. Obviously, the change in the payment structure causes a new annuity starting date. The new 415 regs provide that prior distributions are actuarially adjusted and counted toward the 415 limit. However, the final regs aren't applicable until 1/1/2008 in this case (calendar year limitation year). So, my question is what is your opinion about ignoring the final regs and going back to the pervasive thinking before they were issued? I know my opinion then was that when a person was at a Hi-3 limit, because that limit didn't increase as the person got older, prior annuity distributions didn't count against the 415 limit. I found this thread along that line of thinking: http://benefitslink.com/boards/index.php?s...or+distribution My thinking is there wasn't really guidance beforehand and these 415 regs, while not effective yet, do provide the IRS' line of thought on the subject. I would be largely inclined to follow the methodology spelled out in the final regs.

Sure there is silly unless you didn't have an accrual during the year (and why do the plan if that was the case?). Remember the UCL calculation is considering benefits accrued through the end of the year. Read Q&A-9 of the Notice. It should clarify for you what you are allowed to fund when DC contributions don't exceed 6% of pay. By the way, what do you mean by "funds 100% of the DB contribution"?

On a new plan? Like I said, the IRS said over and over the adoption of the plan was considered an amendment for 404(a)(1)(D). While I certainly understand that mistake for existing plans, I have no sympathy if applied to a new plan. Correction: instead of the word "mistake" above, I replace it with "proper interpretation of the code". IMHO, Notice 2007-28 is the mistake on this front.