Blinky the 3-eyed Fish

There is no such rule. Eligibility is not a protected benefit and can be removed. You of course need to pass 410(b) and 401(a)(4).

Jim, I am not sure if you are saying that Moe has been executed or if you meant to post on the topic titled "Late Document Amender". Moe has some issues, but execution is a bit harsh.

Cash balance plans can now have interest credits no more than a market rate of interest. I was surely hoping it would be the true return of the plan but I haven't been able to get a handle on what is meant by this because of this passage: (III) MARKET RATE OF RETURN.—The Secretary of the Treasury may provide by regulation for rules governing the calculation of a market rate of return for purposes of subclause (I) and for permissible methods of crediting interest to the account (including fixed or variable interest rates) resulting in effective rates of return meeting the requirements of subclause (I). Anyone heard what this will mean?

It's the standard group: doctors, lawyers, any single person operation like a real estate agent (making big bucks in Phoenix the last few years), financial consultants offices, basically any money-making entity with an older owner(s) and younger or no employees. Why do you think DB plans are such an issue in the small plan market? The main reason to put in a DB plan has always been the availability of higher deductible contributions. EGTRRA increased those limits dramatically and this new pension bill offers some possible additional increases.

A TAM being issued was the cause of this discussion. I don't think it is released yet.

Harry, the small plan comment is just not the case at all. EGTRRA and now this new pension bill have made DB plans in the small market very attractive. The interest we are seeing from clients has never been higher in the last 10 years.

I had assumed B had adopted the plan, but now I re-read your first post and you clearly state it has no plan. I agree with Charlie that is a necessary step in order to consider that compensation paid. I stand by the fact that if both entities adopt the plan, the deduction can be taken any which way amongst A and B. Moe in his normal abrasive self shall be ignored.

Double-dutch confirmed.

A 5% owner is one that owns more than 5% of the plan sponsor or a related entity of the plan sponsor. The participating employer is a plan sponsor (and a related entity for that matter) and therefore the attribution of the husband's direct ownership is attributed to his father for MRD purposes. His father is therefore a 5% owner and requried to take MRD's.

There are no hard and fast rules as to how related entities deduct the contribution amongst themselves. You are correct. I am betting the EOB has an explanation of this.

Funding is effectively the same in a CB vs. a traditional DB. There are some minor differences, like a CB is most often funded pure unit credit and would rarely incorporate a salary scale.

That's a fine question from the large plan standpoint. From a small plan standpoint the contribution limits are the reason Dewey, Cheatem and Howe will set up a CB plan.

TH is unavoidable. If you disaggregate the otherwise excludable employees for nondiscrimiation testing and you don't test the otherwise excludables on a benefits basis, then you don't have to provide the gateway minimum. Your suggestion to exclude compensation is not viable.

SH 401(k) plan has 3 month eligibility and SH is given to all who are eligible. The plan sponsor wants to change eligibility to 1 year and do it mid-year. This would prevent some recent hires from entering the plan in the next few months of 2006 and push them back to 2007. Is this permissible? I tried some research and couldn't find anything definitively prohibiting it, but yet I remain unconvinced that is correct.

What triggered a notice from the IRS?

Designing allocation groups that split people by age was probably not the best idea. However, giving higher contributions to younger workers in of itself is not an ADEA issue. Otherwise, every single cross-tested plan would be subject to this problem. Businesses have a right to make sound financial business decisions and giving more to a younger worker to pass nondiscrimination testing to save the company some dollars fits into that category. So, what you have is a semantical (is that a word?) problem. The IRS routinely has approved documents that put each person in their own rate group. You could have easily done that, achieved the same results and not drawn the ire of the auditor. You need to make this argument and take it to the agent's supervisor if necessary. If you don't get anywhere, then perhaps bring in an experienced party. Reich, Luftman in LA are replete with IRS negiotiation experience.

Jpod, you reference a new comp plan, but what about just a plain profit sharing plan with a pro rata allocation? What about a defined benefit plan that has a range between the minimum contribution and the maximum deductible contribution? What about any partnership that has any plan? It's the same argument for all and a ridiculous one if you ask me. Separate existence of a corporation is a legal concept but one that is no different in determining pension contributions for owners. The fact that this is an issue at all boggles my mind.

Think of it more that the DC plan is deemed if of itself to meet the top heavy contribution requirements, not that it's not top heavy. You still need to combine it with the DC plan for determination of the top heavy status of both plans.

Andy, this is a very interesting question. Before delving further, how was the plan operated in the past?What DB accrual went with what DC year? Greybeard, regarding your question, ongoing DB and DC participants could be capped at 10 YOP and require no further TH minimums. In this case though, with a frozen DB, you no longer have multiple participation and would seemingly need to provide the DC TH minimum of 3%.

Since the IRS is approving documents with each person in their own rate group, I don't see the problem. You could define the groups by how low they can limbo and it shouldn't matter.

QUOTE Second, assuming that you can, what about deductibility? Is it deductible for fiscal year 2006, or not until 2007? You could recognize it prorata for 2006 or defer any recognition to 2007. Check RR 77-2. The point of 412©(8) is to be able to amend the plan and recognize it for the valuation for the preceding plan year. If you don't recognize it, then it really is just an amendment and not a 412©(8) amendment. I know it's semantics, but you would never have a 412©(8) amendment that is recognized not until the next plan year. Also, regarding 77-2, you simply avoid the hassle if you make the amendment effective as of the first day of the plan year. Unless you have a complelling reason not to do so, it's a no-brainer.

How is it that you are converting the DB to a DC, yet participants remain in the old DB? It's one type of plan or the other, so that doesn't make sense to me.

This is how I do it as well, but I was seeing if others did it differently. Does anyone still care to admit they do it differently despite the unofficial opinion?

I am curious if there are different opinions on this question. If a change in pre-retirement interest from the previous valuation is made, do you think that interest rate is in effect for the entire plan year or starting with the valuation date? I understand it's a moot question for a BOY valuation date. But for an EOY valuation it does have an effect, so I am curious if everyone has the same opinion. I will withhold my opinion for now.

I agreed previously that ownership in a related employer counts as ownership for the substantial owner purposes. However, your ownership percentages make me question whether this is a controlled group. Is it an ASG? If not, what are the ownership percentages?