Blinky the 3-eyed Fish

PIP, you violated his last request. I want to violate it too but I won't. If they are truly NHCE's and not owners, then I imagine this plan is covered by the PBGC unless they are a professional service corp. If they are covered, then no waiver possible unless this could be a distress termination.

The difference in the price of a $5,000 bond or a $20,000 bond will buy you lunch at Taco Bell and maybe a soda.

Not only do you not have to recognize the amendment in your valuation, you CAN'T. The amendment is past the 412©(8) period of 2 1/2 months after the plan year end. You can never recognize an amendment adopted after that date for a valuation. But let's say the amendment was adopted by 3/15/06. An amendment adopted after the plan year, no matter when it is effective, does not have to be recognized. Rather, you have a choice as to whether or not it is recognized in the valuation.

You would not have to protect the future crediting interest rate, but you would have to protect the accrued benefit associated with the current cash balance. It's all about protecting what is accrued. It doesn't make a difference if active or terminated.

They have stated it publicly many times since then as well. I would have no problems with an effective date that precedes the entity starting date.

Absolutely not. I assume you mean for PBGC purposes. You need to know what is elected by the participant. If they elect an annuity, you use that cost. Otherwise use the lump sum. The whole point is you need to know if you have assets sufficient for benefit costs.

All I know is I would be angry if I got paid every two months and not more frequently.

Dan, you state you have one plan. You state that it's a controlled group, so you don't have a mutiple employer situation. How is it that the whole plan is not top heavy and not just this one portion you cite?

Their impressions are wrong.

Before you even run the nondiscrimination tests, is the cash balance allocation otherwise a safe harbor formula? If so, have you considered testing using component plans?

They don't need to be the same, just tested as a BRF. Sounds like your arrangement has issues. You could always go for a ruling from the IRS (Demo 3 I believe).

Merlin, is your question about a normal small plan with no pre-retirement mortality and post-retirement mortality of whatever table? If so, I have never seen a document that specifically describes the calculation of the actuarial increase for post-retirement, rather it just states the terms "actuarial equivalent increase" or some other like term. That being said, with no forfeiture upon death, the mathematics behind the calculation are clear to me there is no mortality adjustment. Of course as Mike mentions, you could have some strange doc language.

Merlin, it's a non-profit, so they don't care about the deduction. It's for that reason too there is no non-deductible issue and they plan can be funded after 9/15/06.

I think the design could be suspect for plan B. Do you have a determination letter ruling on 401(a)(26)? This question mostly comes up in the context of a DB/DC arrangement. For what it's worth, I have seen determination letters issued on offset plans when the owner is getting a DB benefit and nothing in the PS plan, while the staff's DB benefits are offset by the DC. I have also seen a determination letter where the DB is offset by the DC contributions for everyone but the owner. The practical result is the same as your situation, but in any offset case I would certainly want my own ruling. As to your last question, why the offset at all? Why not just provide the staff benefits in both plans that in total equal the benefits they are receiving now? Then aggregate the plans for coverage and nondiscrimination testing.

SoCal is right that is what I am saying. Your original post inquired about the amendment under the guise it was somehow a reduction in the benefit. I am stating it is not a reduction. As for the BRF's, I was referring to those in the context of what cannot be taken away under 411(d)(6), not regarding nondiscrimination. Along those lines is the need to preserve the right to associated with the original NRA as I mentioned. Because those rights are preserved, I disagree a suspension of benefits is needed even if an actuarial increase is not possible due to 415 constraints.

The limitation years are important. Since most of the time the plan document will state the limitation year is the same as the plan year, I will assume that for the rest of my post. What you need to do is test both limitation years and total the annual additions that occur in each. First, the testing the 401(k) plan 12/31/05 year-end, you include all of the 401(k) annual additions for 2005 and the ESOP annual additions in 2005 (probably the contribution is deemed credited as of the end of the year, so it's the 6/30/05 contribution). For the 6/30/06 ESOP year-end, count the 6/30/06 ESOP contribution and 401(k) deferrals and employer contributions made for 7/1/2005 - 6/30/2006. This gets a little trickier if there is a match and a nonelective contribution. You need to pay attention to the document as to when it is credited.

To be clear, it's not a certaintly that a minor child causes the 1563(e)(5) exception to be voided. A literal reading of the code/regs, says yes. A practial reading (dangerous to attempt) says no. (BTW, if you never heard of that cite, you would have concluded they are a controlled group by attribution, no?)

What about the actuarial increase of the benefit? That should make the two benefits equivalent. But besides that the amendment cannot cut back certain BRF's. Keep in mind that retirement age brings possible perks, like 100% vesting, perhaps the right to take an in-service distribution, etc. You still have a grandfathered $1,000 benefit payable at age 64 to account for. Your amendment cannot take that away.

You need to amend the document to allow for the distribution of the loan balance immediately, not the loan policy.

Rcline, I don't agree with the logic since this is a specific 2006 & 2007 rule. Also, it applies to all plans, not just over 100. Lastly, the 2008 rule includes the funding target normal cost in the calculation.

One plan, one 5500. One plan, one document. If unrelated employers adopt the plan, you just have a multiple employer plan. You used to have to file multiple Sch T's. Your analysis of the controlled group is the exception under 1563(e) (I think that's the right cite). However, if you are in a community property state, that goes out the window and they are a controlled group. There is also the child under 21 argument that some say will make it a controlled group.

Thanks. I too agree the old rules were calculated based on IRS interpretation . What I don't like is the new specific reference to 412(l)(8)(A). I said I was fairly confident it was an EOY calculation. I want to be supremely confident.

404(a)(1)(D)(i) IN GENERAL. --In the case of any defined benefit plan, except as provided in regulations, the maximum amount deductible under the limitations of this paragraph shall not be less than the unfunded current liability determined under section 412(l) section 412(l)(8)(A), except that section 412(l)(8)(A) shall be applied for purposes of this clause by substituting '150 percent (140 percent in the case of a multiemployer plan) of current liability' for 'the current liability' in clause (i). This paragraph shows the change in the law. The old rules determined the UCL at the EOY. I know this was clarified in Gray Book answers. Now the new rules specifically point to 412(l)(8)(A). (A) Unfunded Current Liability The term "unfunded current liability" means, with respect to any plan year, the excess (if any) of-- (i) the current liability under the plan, over (ii) value of the plan's assets determined under subsection ©(2). 412(l)(8)(A) is clearly the current liability at the beginning of the year. On this alone, I would take that the new UCL calculation is based on beginning of the year current liability and ignoring the current liability normal cost. However, being that the old rules referenced 412(l), which then referenced 412(l)©(8), and because the old rule was an EOY determination, I feel fairly confident the new rules are too an EOY determination. Anyone disagree?

Pax, remember that the right to defer payment ceases when a participant reaches NRA or age 62 if NRA is earlier than 62. C2C, because the actuarial increase is a prospective increase, I don't see it as a protected benefit. The timing of benefits is a protected benefit. So what could work is if you cease the actuarial increases and issue a suspension of benefits notice. You have then preserved the right for them to keep their money in the plan, yet you have avoided additional actuarial increases. Note that actuarial increases must occur for those past 70 1/2 who aren't taking RMD's.

The DB(k) is another thing that stinks. To much in a box to truly fit many, if any, clients.