Blinky the 3-eyed Fish

I am wondering how this plan ever passed coverage considering these waivers were in place.

Defining groups by name though is certainly fine. Follow Andy's advice if pops wants to give the little fashion boy something. Tom, you are back on top!

My post assumed the deferrals that were not deposited were included in the test originally. I had thought their deposit date wouldn't affect the testing, so I thank Tom for teaching me something.

Is there any way it's reasonable? Absolutely, it is certainly possible. Is it reasonable? Not nearly enough information to tell nor am I the judge and jury on that one.

You assume correctly. When testing the non-union employees, the union employees are excludable provided their retirement benefits were subject to good-faith collective bargaining, less than 2% were professionals, blah blah...

I am confused as to why you think you should retest. The fact that the employer didn't remit the final 2003 contribution doesn't change the amount of deferrals by the participants. It just means the employer kept the money too long and they have a PT for their lateness in remitting. So, sure they sent in the funds now, but they need to add earnings and file a 5330.

You could post the details needed for someone here to recreate the maximum possible amount, but you certainly can't justify paying out a maximum lump sum for a person at a Hi-3 limit at age 63 when he is actually age 65. It's an inherent fact that the lump sum for a person at a Hi-3 limit is decreasing once they hit 10 years of service.

Not in my opinion because the union people will continue to earn vesting credits with continued employment.

So it appears you are one of the higher-ups in your company and your overall compensation package dictates that you take home less pay and instead receive a defined benefit accrual. I would completely disagree with how the costs are being allocated to people if they are being based on normal cost. Because a person's normal cost, like you have discovered, is tied to funding assumptions and not to actuarial equivalents nor 417(e), it can easily be incongruous to what you will eventually be paid from the plan. These situations are very tricky. You might want to invest in an actuarial analysis to determine how this arrangement is working for you. It looks like your questions relate to these prior question, eh Bob? Well upon further review, it looks like this whole arrangement has been an ongoing source of questions. http://benefitslink.com/boards/index.php?s...opic=27279&st=0

BDZ, keep in mind that penman's response to the first post was regarding the dollar limit of 415(b)(1)(A), which is increased after age 65. Your are asking about the Hi-3 limit under 415(b)(1)(B), which is not adjusted for age in any way. If you post details of the calculation, someone may give you some insight.

The reality of that situation is the day the plan sponsor of all but a very large plan picks the funding method is the day I walk on land.

I don't think DBtech understands the concept yet feels he has such an advanced understanding only known to him that he needs to make a rude comment. Are you MoeHoward2 in disguise? DB if you are funding for a benefit in future years it matter how much your current investment will grow. How much your current investment will grow depends on what it is invested in.

I didn't check your math, but it's an intuitive result considering you aren't actually allocating the contribution on an integrated basis within each rate group in your example.

There is no one size fits all. It would entirely depend on the client. Going to the reasonable factor, you wouldn't necessarily pick the same interest rate for a client invested solely in Treasury Bonds versus one in growth stocks.

I have a little different spin on the topic. The criteria of all the assumptions made in the valuation, including interest rates, is they have to be reasonable at the time of the valuation, not before and not after. The ultimate judge of what is reasonable in this case is the IRS. I don't hold that a 2-point range of current interest rate nor trends in past performance of assets or the overall trends in the stock market are necessarily a judge of what is reasonable because they are not a judge of the future. They are merely pieces of the puzzle to determine what is reasonable. Now the long and short of it in reality is that if you choose an interest rate between 5-8%, you are highly unlikely to be challenged. I wasn't around for the small plan audits, but I hear that didn't go well for the IRS when they did challenge many 5% assumptions as being too low.

The facts posted are confusing. The husband and wife run the company and are the only 2 employees, but the husband is not an owner. Is the wife? Anyway, how it would generally work is that the directors fees are not paid from an employee/employer relationship and that is why they are 1099 income and not W-2. Now where they could be counted for 414(s) purposes is if the entity to which the 1099 income flows into (in this case a sole proprietorship) is in a related group with the employer paying the W-2 wages.

I am not sure but maybe Jquazza's point was is to be concerned with how the document is defined with two groups, ownerns and non-owners. If there are multiple people in the owners group and the allocation within each group is based on compensation / total compensation in the group, well then of course you need to follow your document and you won't be able to mirror an integrated formula if the people have different compensation amounts. In short, follow your document, which I hope always goes without saying. P.S. Tom, you are up by six posts now.

If you are talking about a plan year that has passed, it's too late to amend the formula, but you really don't need to. What you should understand is that general testing can be passed on a benefits basis (i.e. cross-testing for a DC plan) or on a contributions basis. If you provide an allocation of the same percentage of pay to everyone, you are assured of passing on a contributions basis without even running the test. Thus in effect you have a safe harbor. Now if you impute permitted disparity for the general test, you can get the same result as a integrated plan with the excess contributions based on 100% of the taxable wage base.

Nice to hear that comment or frightening?

I agree that there is ample reason for the ER to want such a letter. The way you phrased the first post though, "... to know just how generous they are", the image that popped into my head inspired my comments.

I think a shrine erected outside the employer's office would be more appropriate. I picture a standing owner, with a staff in one hand and the Erisa Outline Book in another, surrounded by kneeling and worshipping ancillary employees. I forgot someone needs to be holding a palm frond.

Although Earl you aren't making up that 5-year rule. I am not sure if EGTRRA changed it, but it did exist at one time.

Merlin, no, see 1.410(b)-3(a)(2)(iii). The person needed to have "satisfied all the applicable conditions for accruing a benefit". The cite you mentioned is in case the actuarial increase is greater than the benefit accrued. Andy's guy didn't work the 1,000 hours to accrue the benefit in the first place.

What does your document say?

I agree. Also keep in mind that the plan could have been designed before that Schultz memo or the designer could have just willfully ignored the Schultz memo. Justifying a $1 benefit as meaningful under any circumstances is a big stretch.