Blinky the 3-eyed Fish

No differently than any other match. You need to operate the plan in accordance with its terms, so this shouldn't happen. If you are saying there is a mistake, then see Rev. Proc. 2003-44 for correction mechanisms.

Nothing in your posts says you are exempt from ACP testing. However, you may pass because no match is being provided. I am not saying this to be mean or condescending, but I hope you have knowledgeable people to verify your work (on vacation right now?). Your questions are very very basic, so without those people, I fear this and other plans are at risk.

You need to do this in any case where a key employee gets an annual addition. This testing entails more than can be explained here. However, your safe harbor nonelective will meet the TH requirement if it's based on full year's compensation.

Then I jack up the pre-retirement interest rate to 12%. In any case where this was used, the communication would be there to avoid any surprises. I used a 3-person example, but if it's 5 or 10, then the horrors you speak of diminish in possibility. Also, I could set the formula in the "other" plans to be 0.5%, so worst case is there is that extra amount of funding.

To your last 2 questions: maybe and maybe. Why not talk to whomever proposed this and see what's going on as all the facts apparently are not to light?

The rate of match is a BRF issue, so you could design the plan that way as long as it passes nondiscrimination testing on that fact as well as ACP testing.

The same mechanism that makes this possible applies in having a single life DC plan. You simply need to discuss the situation with a small plan actuary that you perceive to be credible. I have many clients like that if you want to go over specifics. (The last statement is meant to help, not solicit business.)

Self-direction and not being responsible for other owners' benefits in case they leave is the reason behind this as well. As for needing to accrue meaningful benefits in both plans, I am not sure how the IRS could assert that you must decrease another plan's benefit to allow a person to accrue something in this plan. The regs clearly say that 415 is disregarded in determining whether or not someone benefits. The formula in the plans would be over the meaningful benefit criteria sans 415. So, I am not sure from where the IRS opinions came you reference, but I don't see an argument for that position.

To answer your first question, no, I don't think that at all. What I do know is that for DB plans the account balance method is available. Not to speak for MGB, but I don't think he is saying it's not.

Your ACP test will give you the answer.

So you are struggling with whether or not the account balance method is available or does your last sentence mean you are clear they are? You say you haven't used the annuity method where someone takes a lump sum eventually, but you have used the account balance method, right? I am not sure what you mean by the last sentence. If your guy rolls his benefit over in October 2005, then you have the 2004 and 2005 minimum distribution that needs to be satisfied from the plan. 2006's minimum distribution will be paid from the IRA, but it won't be based on the rollover value. We are 3 posts deep and I am not a whole lot clearer on what your questions are, so the above is my guess.

Care to share what's in the post-EGTRRA amendment?

"The guy" is off on a limb. When you say you have never had to deal with something like this before are you talking DB minimum distributions in general? Why are you focused on the monthly payments? Is it because the participant is already in pay status or are you trying to satisfy the minimum distribution through the annuity method? If you have the ERISA Outline Book, a walk through that would help you. One thing you will notice is that April 1st is the deadline, not April 15th.

I liked it when you wore that stork dress.

I have to assume that this plan is covered by the PBGC and the $200,000 was an amount to satisfy the shortage in plan liabilities versus assets. Why the $200,000 was put in in 11/03 is beyond me. It was not necessary (and one could argue not appropriate) to put it in then "so that the termination process could begin". Now I would ask why is the $200,000 necessarily above the maximum deductible limit? Have you tried looking at the unfunded current liability run using the lowest available interest rate (4.98% for 2003)?

There is no longer any debate that this is applicable since they delayed the new 401(a)(9) rules for DB plans. See Rev. Proc. 2003-10 and Notice 2003-2. They clearly spell out you can use the old methods, of which the account balance method is one. I don't understand the rest of your post. It almost sounds as if you want to make monthly minimum distribution payments while determining the amount using the account balance method, but since that doesn't make sense, I must be misinterpreting what you are saying.

I wonder if you are thinking of comments that if the plan had only deferrals, then 404(a)(7) is not triggered if there are existing balances. This of course is a different situation.

Hypothetical situation of 3 doctors who own 1/3 each of a company and are separately incorporated, an obvious controlled group. There are no other employees. Now if each doctor were to have his own DB plan for his corporation, then obviously 401(a)(26) would not pass for any of them. But, what if each plan included the other doctors' corporations and benefits in each were at the 415 limit? Now each doctor would be getting 3 times the 415 limit, so language would call for benefits to be reduced appropriately because the 415 limit benefit was provided under another plan. Doctors 2 & 3 would have benefits reduced in doctor 1's plan, doctors 1 & 3 would have benefits reduced in doctor 2's plan, and so on. (I would have to perfect the language.) The 415 limit is disregarded when determining if someone is considered benefiting for 410(b)/401(a)(26), so each doctor would be considered benefiting in all the plans and 401(a)(26) passes while the doctors get nothing but in the plan sponsored in their own corporation. Anyone see a problem with this?

Absolutely. A QNEC is not a deferral and the DC plan needs to have deferrals ONLY. What experience have you had on this for you to make this statement?

What do you mean by the 110% threshold? There is the 80-120% corridor that can be reduced to say 90-110% as part of the asset valuation method, but I have a feeling you don't mean that. I should have read your title. I see what you are talking about now, but I would have to look it up too and I am lazy.

I agree with WDIK's assessment. The exclusion to 404(a)(7) applies when there are only 401(k) contributions made to the DC plan. This is obviously not the case here because the NHCE in the DC plan needs a nonelective contribution to have any hope of passing nondiscrimination. Now to extend it further, the new rules, as far as I can see, don't even override the fact that the IRS will consider the mutually exclusive rule to be violated if the DB participants even have a pre-existing balance in the DC plan (PLR ruling # not handy).

Chris, so we have established that you aren't trying to use a safe harbor only plan to exempt the plan from top heavy, but rather are trying to use the contribution for top heavy purposes. To that I would ask why? The safe harbor plan should be used foremost to pass ADP and/or ACP testing or to exempt the plan from TH requirements. It should never be used to solely provide the TH minimum. TH minimum characteristics: - to receive it you must be employed on the last day - subject to the vesting schedule Safe harbor characteristics: - no allocation requirements - 100% vested So by giving the TH minimum to satisfy the gateway you are effectively giving away gobs of the employer's money by providing full vesting and by giving it to participants who would otherwise receive nothing. A much better solution is to simply figure out what each person is due at the end of the year, whether it be the TH minimum or whatever, and have the employer make the contribution.

So are you providing only safe harbor contributions or not? In other words, is there an additional profit sharing contribution or non-safe harbor match?

Prior discussion on this http://benefitslink.com/boards/index.php?showtopic=20993&hl=

I am not entirely clear what you are trying to do. Are you trying to have the only employer contribution be safe harbor 401(k) contributions, thus the plan is exempt from TH (details spelled out in Rev. Rul. 2004-13)? If so, then the fact that compensation from date of plan entry is used still meets the criteria for the plan to be exempt from providing additional TH contributions and you don't need to amend the compensation definition. If this is not the case, then please say so, because then I really don't know what you are trying to accomplish.