Blinky the 3-eyed Fish

By deeming the $400,000 as being made for the 2002 plan year I am not sure if that in of itself requires you to recognize the contribution for excise tax purposes the same as if it was made during 2002. See 4972©(1). However, there is the EGTRRA added 4972©(7), which basically says that if your FFL is greater than $400,000, then no excise tax. SoCal, I don't agree with this statement. Since the $400,000 was recognized for 2002, there is going to be a $100,000 credit balance as of 12/31/02. Also there will be a $100,000 nondeductible contribution. There is no FSA interest credit on the contribution. So Chaffee, the $100,000 can only be deducted in future years if there is enough spread between the minimum and maximum deductible contribution. For example, if 2003's minimum is $250,000 and the maximum is $330,000, then you could contribute $250,000, deduct $330,000 and have a $20,000 nondeductible contribution remaining.

Flosfur, you have confused me now. The plan was terminated early 2002 and you still haven't paid out the assets to date? The plan is well past the one-year rule. And if the plan was terminated in 2002, there is no valuation for 2003, so why are you concerned with that? SoCal, in the year of termination automatic approval for a change to unit credit is only available for a fully funded plan. In the small plan world, especially due to the stock market through mid-2003, I find that most plans do not meet this criteria and must continue with the same funding method they have been using.

Matt, I took the first post to mean that the PS contribution would be reflected on the 5500 (i.e. on an accrual basis) before the contribution was made. Thus, there would be no amended return needed, unless of course they failed to actually make the contribution timely. To your last sentence, you have to be consistent in reporting on either a cash or accrual basis and can't just switch.

Maybe they are not actuaries and have been fooling you all these years. How well do you really know them? I would contact the FBI. Either that or pax is correct. Take your pick.

Ah, but he's not an actuary, and therefore subject to the laws of the land, without room for leniency. Kirk, can I say the same thing about lawyers? BTW, it's every 3 years. To further share the apparent allure of being an actuary, I once heard a story of someone who had ACTUARY as their personalized license plate. Of course, you guessed it, the person was not an actuary.

No, that wouldn't matter. Then you would have 2 non-spouse owners of a corporation, which too doesn't meet the criteria to file an EZ.

I didn't know the origins of the directory. Even without an organization, the JBEA could be reporting to the list. I know that before I joined ASPA as an MSPA, I was on the list, so that's why I think it may be all inclusive. Of course I could be wrong. I think prison time is deserved if he is impersonating an actuary.

I would say no. Stating the rate according to the plan document would be redundant because the rate has to be in the plan document. But it does say "in effect". For a calendar year plan, the 12/03 rate is not in effect until after the last day of 2003. It may be published for that time frame, but it certainly is not in effect.

I missed the amending it every "other" year when I first read it. While it is a facts and circumstances test and it is not clearly abusive, since the amending of the plan is ADDING benefits to NHCE's, I am on your side and wouldn't do it without some IRS approval.

Why do you think it could possibly be discriminatory?

With that logic, you could say that every fee taken out of a participant's 401(k) account over its lifetime should then be added onto the distribution amount when it is finally taken from the plan. I can't state it any better than pax that a fee is a fee. Add me to the list WDIK.

Pax, what enrolled actuaries are not listed on this site? I thought it included all EA's. Andy, yeah, it was me who confused someone else calling themselves an EA who was an enrolled agent. Effen, welcome to the club. Dubya, I am curious as to what you find.

I agree that a 5500 is required. While the instructions don't specifically address this situation, they do clearly state that a corporation can cover only the owner and his/her spouse; no longer a spouse, no longer can file an EZ.

A simple request, yet it yields a few comments: 1. UP84 is not mandated solely. There are a host of standard mortality tables available to use. See the 1.401(a)(4) regs. 2. You don't need the qx's and px's. Px = 1 - qx. 3. Try the Society of Actuaries website www.soa.org.

Here's the copy of the applicable provision from the PFEA. It says to use the 417(e) rate in effect as of the last day of the plan year beginning before 1/1/04. So, at 12/31/03 for a calendar year plan, the rate in effect is the appropriate lookback month from the appropriate stability period. A typical plan has a plan year stability and one month lookback, putting the rate in effect as the 12/02 rate of 4.92%. I may be dense, but I don't see the argument for another interpretation. I will say though that the ASPA ASAP is somewhat unclear in its presentation of this aspect of the bill. TRANSITION RULE FOR SECTION 415 LIMITATION- In the case of any participant or beneficiary receiving a distribution after December 31, 2003 and before January 1, 2005, the amount payable under any form of benefit subject to section 417(e)(3) of the Internal Revenue Code of 1986 and subject to adjustment under section 415(b)(2)(B) of such Code shall not, solely by reason of the amendment made by subsection (b)(4), be less than the amount that would have been so payable had the amount payable been determined using the applicable interest rate in effect as of the last day of the last plan year beginning before January 1, 2004.

I read that article too, but didn't agree with everything said. He states that the AB is equal to the CSV according to 411(b)(1)(F), but as I mentioned before, that doesn't have to be the case. In fact, I posed that question to Jim Holland during the ASPA 412(i) Webcase a few months ago, and he agreed. Try rereading the article knowing that the AB for nondiscrimination could be the benefit defined in the plan. Of course you have already stated that for this plan the AB is the CSV, so you are right that you didn't want to general test it.

I am confident there is no way a side fund eliminates safe harbor status. Try this line of reasoning. I looked at it quickly, so check it carefully. Look at 1.401(a)(4)-3(b)(6)(i). Then read 1.401(a)(4)-3(b)(6)(xi)(D)(3). I think this spells out that all is well.

I agree with the comments, but wanted to add that a document that defines the compensation definition to use for nondiscrimination testing is a poor document. All that definition does is reduce flexibility and potentially cause problems. In other words, to honor QDROphile, that document would suck!

SoCal, I disagree with your last paragraph. My understanding is that for the 2004 transition period the interest rate in effect as of the last day of the 2003 plan year-end is grandfathered, not the lump sum amount. I added this link to a prior discussion of the calculation: http://benefitslink.com/boards/index.php?showtopic=25021

It used to be 7-21 days for hand-delivery or 10-24 days if mailing. I thought it got changed to the latter for all cases, but don't remember the source. I suppose I should search before posting. I found this link: http://benefitslink.com/boards/index.php?showtopic=22760&hl=

The pervasive opinion is that you have to 100% vest active participants and terminated participants that have not forfeited their balances. In your case, the forfeiture apparently occured prior to the plan termination, so their account balances are not restored. Now, you need to see what your document says to do with forfeitures. Chances are it says to add to the employer contribution for the year or reduce the employer contribution for the year. It's semantics really. If it does say reduce, then declare a PS contribution for the forfeited amount and allocate according to the provisions in the plan.

I agree with your first statement. I don't agree with your next statement. The plan is still a safe harbor plan, meaning you don't have to perform general testing, if there is a side fund utilized to satisfy TH minimums. However, the side fund is what triggers the need to file a Sch B and use an enrolled actuary.

You could set up a safe harbor 401(k) plan using the match. If the employee doesn't defer, he will get $0 and the owners can get something. Of course you can't make him not defer.

To answer your second question first, I think the answer depends on how your document is worded on the definition of accrued benefit. I have seen 412(i) documents that define the benefit as the CSV of the insurance policies, but have also see them define the AB as equal to the formula in the plan. Remember that 411(b)(1)(F) is one way for a 412(i) plan to satisfy 411, but not the only way. So, I think your answer is correct for determining the TH AB if the doc defines the benefit as the CSV, but if the definintion is the plan's formula, then you have an easy comparison between that and the TH minimum. To your first question, I see that as the only way to determine if the plan is indeed TH, except if you had an existing side fund to consider that is funding previous TH accruals.

As mentioned many times on these boards, the date of termination of a plan DOES NOT cause the plan year to end on that date. The only way the plan year changes is by an amendment specifically changing the plan year or upon the final distribution of the plan's assets. To your last question, to only affect of the plan termination on the valuation is that the normal costs and amortization bases are prorated through the date of plan termination pursuant to Rev. Rul. 79-237.