Blinky the 3-eyed Fish

I ran into this problem once with Piper Jaffray on a takeover case for which our office was the TPA. Because it was a qualified plan's investments, they insisted that the document be one of their prototypes. Nothing else would be considered. When the GUST restatements came around, they actually mailed the adoption agreement to the client to complete the provisions. Needless to say, I think the secretary filled it out and of course butchered the intent of the doctor sponsoring the plan. It was fun cleaning that one up.

This would be a document specific question. If the document is silent, then I see no reason why you wouldn't be required to provide the new vesting schedule. A solution of course, is to not transfer the balance. No 1099R required. By reading those instructions, you will find this transfer meets one of the exceptions to filing the form.

I agree that mathematically it will work both ways. Conceptually though, I have trouble justifying a retroactive assumption change made as of the valuation date. But that is just my opinion as I am sure you will find multiple actuaries that do it either way. Now if you are basing your decision on convenience due to the limitations of your software, well then I would say get better software or embrace inconvenience.

The portion of the loan offset that is satifying the RMD would not be eligible for rollover.

I don't see anywhere where she says the plan does NOT have a last day amendment. We might want to find out if any participants have accrued the right to the allocation before offering any more opinions.

I am of an opinion the opposite of SoCal. I believe the valuation interest rate is used from the valuation date to the next valuation date, not retroactively based on the plan year. So for 412(m) for an EOY valuation, I have applied the old pre-retirement interest rate in bringing back the current year's minimum funding to the BOY.

Pax, could you elaborate on your post? I can't think of a scenario where a participant is cut back because dollars were forfeited sooner rather than later.

Maybe they are picking on you WDIK, because I have never had the IRS come back for a late 5330.

401k, I don't understand your post. What do you mean by "the better of two schedules"? Anyway, to the question, since the change would only increase people's allocations, you are fine. Go forth!

Lynn, how do you propose to get rid of the J&S requirements?

This allocation does not violate the 415 limits.

I see merging the MP and 401(k) plans and the easiest solution. It is what we did as soon as the PS deduction increase took effect which yielded MP plans virtually useless. Tracking a separate source should be a routine bookkeeping function. You may want to search the boards going back a ways to read up on questions people had about these mergers. Terminating the MP plan is only going to be more expensive for the client because of all the distributions that will need to take place.

Could you provide the specifics as to how the decrease occurred?

Just write the client a letter stating your services are terminated for lack of payment. Of course if this advice is wrong, I suppose I should call the number too, because that's what we do with our clients.

Since Pax correctly points out that a waiver is not an option, I wanted to ask if everything has been done to lower the contribution by other means? Some thoughts are changing the asset valuation method, changing the funding method or changing assumptions. Unfortunately you are past the 412©(8) period.

By funding shortfall are you talking about a funding deficiency or funding to make the plan whole to pay out its liabilities? I am just curious, as your answer really has nothing to do with the question. But to your question, there is no reason why the contribution cannot be made. Even if it ended up being nondeductible that is not a concern of Principal. I am not sure of Principal's reasoning. Did anyone get an explanation from them?

And you need to know when the determination of the applicable interest rate is.

I think people do this both ways. I bet your plan document also says that the plan year begins 3/1, so if you file a 2/28 year-end this year, you have a 2/29 beginning next year. So, it's just a matter of preference and in the end, I am not sure that anyone at the DOL really cares.

It is infinitesimal the chance of any deduction being disallowed because participant's compensations were being counted for the deduction limit because they had the right to defer but didn't. In fact I would say it would NEVER happen with the current state of guidance and pervasive opinion on this matter. So according to my math. 1 cent of cost / no chance of any audit sanctions = 1 cent was too much.

Of course to allocate the $10 you would first need an amendment to the plan that would allow for such an allocation. This amendment would be unique and would require the separation of the forfeitures from the nonelective contribution. This would run the client a few hundred dollars. Second, there would be the potential for many participants who previously didn't have an account balance to now have one worth a few cents. There is no deminimus amount that would justify not distributing these amounts. These small distributions would continue each plan year. The price for this distribution instructions and 1099's again could run a few hundred to a few thousand dollars depending on the number involved.

I am not sure how that distinction helps you. What if it was a PS only plan, no 401(k), that covered Jack, Jill and her "friend" Butch? But because Butch is jealous of Jack, he decided to leave employment in pursuit of Sally and her seashells and does not receive a PS contribution for the year. Butch was covered under the plan but you can't count his compensation for determining the deduction limit.

That has to be the feel good story of the year.

I think most practioners would agree with wmyer's position, including Sal Tripodi. However, Jim Holland stunned the crowd earlier this year in LA, when he said to not count the compensation of the participant that is only considered benefiting because they had the right to defer. Now of course in your example, to utilize your full deduction limit you are going to have to allocate some of the money to Jill, and of course she will then be do doubt considered benefiting and her compensation will indisputably be counted.

Yes, unless there is some obscure document language preventing it.

I have found that my greater concern is people with enrollment numbers who are impersonating an actuary. You should see the crap on plans I take over. I think too many actuaries know that even if the plan is audited that the auditor is incapable of checking actuarial calculations. I suppose it's only in cases where the funding number is WAY to high or low that an actual IRS actuary will check the valuation calculations.