Blinky the 3-eyed Fish

I agree. Referencing the code section is acceptable.

Ah yes, thanks. He has a point. If I were any of you I certainly wouldn't tell anyone you got advice from a fish. Although, with any advice taken you should have a well-reasoned and thought out answer and cites if applicable so that you can be sure you aren't fed by someone who is "full of crap". One other note. I have found it invaluable to research items myself instead of being spoonfed answers. You don't learn that way. I copied a paragraph of what was said for all to see. "Or, this one, “We like to research things ourselves on the Internet. Everything we need is available and it's free!” Well it's not free, first of all you spend your most precious asset, your time. Secondly, the information you receive might not be up-to-date. Additionally, some of the answers and opinions obtained from free sites are just plain wrong. I acknowledge that the Internet is a great source of information. However, pensions are not your hobby, it’s your livelihood. What would your customers think if they found out that you are receiving advice from an unknown source named ‘Blinky the three eyed fish’?"

First, only majority owners can waive benefits, not substantial owners. See here: http://www.pbgc.gov/forms/500_instructions...c9000c5&cmd=xml I copied the important portion below. Majority owner means, with respect to a contributing sponsor of a single-employer plan, an individual who owns, directly or indirectly, 50 percent or more (taking into account the constructive ownership rules of Code section 414(b) and ©) of -- (1) An unincorporated trade or business; (2) The capital interest or the profits interest in a partnership; or (3) Either the voting stock of a corporation or the value of all of the stock of a corporation.

Can't - no access.

I have fins.

I was applying my answer to the fact that we have over a month and a half until 3/28 and that the payout could occur before then. As for the question, I haven't researched it so I withhold comment like a miser does with money.

I have said this before, but ask the document provider what % to use in the ADP test for someone with $0 compensation. Then have him explain why he doesn't remember his math classes in school.

How about this simple example: Cross-testing compares the value of what a person receives at retirement age instead of their current age. Joe Schmo is 30 and gets 5% of pay. After 35 years to retirement his money is worth 86.90% 5% * (1.085^35) = 86.90% Big Boss Man is 50 and gets 20% of pay. After 15 years to retirement his money is worth 67.99% 20% * (1.085^15) = 67.99% So the Schmo's benefit is deemed to be worth more. You just need enough Schmo's to pass testing.

No, the 1099 & 945 are reporting withholding from the plan, not the individual. There was no withholding from the plan, so put a $0. That answers your questions as to how to match up the withholdings too. Remember, he needs to terminate after age 55. Just because he's 58 and terminated does not mean he necessarily meets the exception.

Here is some more information. As most of us thought, except the "consultant", the IRS is not changing the rules on us. The sky is not falling people. http://www.irs.gov/pub/irs-tege/shortservice_letter.pdf

First, your last post is all correct. Next, to the quote, you must always treat coverage and nondiscrimination the same way. Thus, if you disaggregate for coverage, you must disaggregate for nondiscrimination testing. It is the disaggregation that allows you not to have to give the gateway to those with < 1 YOS because you aren't cross-testing that disaggregated group of people.

There are many prior threads on this if you want to use the search feature. But to reiterate the jist, you can cash him out. If J&S annuities are available, then you must purchase the QJSA. If not, then pay him out in a lump sum. Of course when faced with these threats, especially when an annuity is involved, a participant will be more likely to respond.

Yes, I know we are on the same side. I guess it just boils down to me thinking there is a strong case for being able to not including the compensation post EGTRRA based on existing regs and you thinking differently. I guess time will tell, but in the meantime I feel most comfortable operating plans accordingly.

I realize that is the purpose of the reg, but consider that when that reg was written, EGTRRA didn't exist. It doesn't negate the argument I presented, nor does it negate the fact that Holland too has an opinion without needing to issue further guidance. Speaking of purposes, what was the purpose of the EGTRRA change eliminating the TH minimum in a frozen DB plan? Was it to mirror DC plans in that a benefit need not be provided if no key benefits? Was it to keep DB plans from terminating, by offering a freeze option and no new accruals? I don't know the behind the scenes info (maybe MGB can chime in), but I have to think that it was one of the two or both. If either, then the intent has to be that compensation is frozen as well.

I was confused by your current year comments and statement that there is no 1-year lookback for key determination. But it seems we are on the same page, so let's forge on like Sgt. Hulka.

I disagree with the last post. The EGTRRA change removed the 5-year lookback and replaced it with a 1-year lookback, except in-service distributions continue to have a 5-year lookback. Example for a 2004 calendar year plan: Determination date is 12/31/03 (assuming it's not a new plan), so you look from 1/1/03 - 12/31/03 to determine who your key employees are for both balances and to see who gets the TH minimum (there is a second viewpoint on the last item but I don't think it's widely held, so I won't mention it). You look at 12/31/03 to determine balances to see if the plan is top heavy. Watch out for former keys. Note how 2004 happenings aren't a factor.

That's just not the case though as I spelled out in the cites I quoted. You most definitely do not include years in the averaging period for which the person was not credited with a year of service. That is the mechanism for which you can logically argue that you don't include compensation in years for which the plan is frozen.

Now WDIK, we all know that you have taken credit before.

Janet, that is not necessary when you can simply separate those with less than 1 YOS & 21 from the testing.

This comment makes me believe that otherwise excludable employees are not being separated for ADP testing. Have you tried that for a little help?

I know what QDROphile would say about that document.

It is standard language in our document.

They did address it in LA last week, but I honestly don't recall the response offhand and my notes are at home. I guess the answer wasn't that compelling to me to sink in. SoCal was there so perhaps he can chime in. I agree this is less than clear. As for your interpretation, take a look at this cite. If (D) stood alone, why would the regs exclude a YOS for average compensation when a person didn't meet the 411(a) requirements cited? My thought is that because the statement in 416©(1)(D)(ii) is not just excluding years defined in 416©(1)(D)(iii). Look at one of your documents and I bet it excludes years in which the person didn't earn meet the accrual requirements. IMHO, the same logic would apply to a frozen plan. 1.416-1 M A-2© © In determining the average annual compensation for a period of consecutive years during which the employee had the largest aggregate compensation, years for which the employee did not earn a year of service under the rules of section 411(a) (4), (5), and (6) are to be disregarded. Thus, if an employee has received compensation from the employer during years one two, and three, and for each of these years the employee earned a year of service, then the employee's average annual compensation is determined by dividing the employee's aggregate compensation for these three years by three. If the employee fails to earn a year of service in the next year, but does earn a year of service in the fifth year, the employee's average annual compensation is calculated by dividing the employee's aggregate compensation for years one, two, three, and five by four. The compensation required to be taken into account is the compensation described in Question and Answer T-21. In addition, compensation received for years ending in plan years beginning before January 1, 1984, and compensation received for years beginning after the close of the last plan year in which the plan is top-heavy may be disregarded.

I don't agree with the thought that the average compensation must continue to factor into the TH benefit for years beginning in 2002 when a plan is frozen. Here are 416©(1)©(iii) and 416©(1)(D): (iii) Exception For Plan Under Which No Key Employee (or Former Key Employee) Benefits For Plan Year.-- For purposes of determining an employee's years of service with the employer, any service with the employer shall be disregarded to the extent that such service occurs during a plan year when the plan benefits (within the meaning of section 410(b)) no key employee or former key employee. (D) Average Compensation For High 5 Years For purposes of this paragraph-- (i) In General A participant's testing period shall be the period of consecutive years (not exceeding 5) during which the participant had the greatest aggregate compensation from the employer. (ii) Year Must Be Included In Year Of Service The years taken into account under clause (i) shall be properly adjusted for years not included in a year of service. It seems to me that because the year of service is not included for benefits purposes, that translates to not including it for average compensation purposes.

What was the circumstance(s) to present this to the IRS? Did you just submit the document via the regular determination process? Were they being audited? Was it a VCP submission (or a predecessor program)?