Blinky the 3-eyed Fish

Who's ferisa and what did the tire do to her?

A prospective increase doesn't negate the facts and circumstances review of the amendment. However, in this situation, I don't believe you have a problem. There isn't a pattern with this client increasing benefits in the past when another employee terminated is there? Helping the facts and circumstances review is that the employee wasn't terminated on a whim, but through explanable circumstances.

Okay, now let's focus back to the question. Like I said, I don't think it is necessarily wrong, but I don't like it and I want to change it. If I can classify it as an assumption, then no problem in me having different assumptions. However, if it is a component of the funding method, I don't see a recourse without applying for approval. Just seeking opinions here.

The prior actuary used actual compensation for the year for a beginning of the year valuation (ex. 2003 comp for a 1/1/03 valuation). I don't chalk it up to the wrong category, but I also don't like that methodology. Do you think this is: a) a component of the funding method b) an assumption If a), do you see a way to change this with automatic approval?

I couldn't disagree more that this in any way could be considered price fixing if fee information is shared. With all the variables that come into setting prices and the fact that it's one person out of literally thousands sharing information, IMHO that's one giant leap for sure.

What is your fee? As for the submission, most of my clients choose not to submit. We give them the pros/cons and let them decide. Personally, I don't see a tremendous amount of value in it for most of my clients.

Proval is good for these size plans and it does the calcs you mention. I edited to "it does" from "we do" (typo)

My world has blinders on like the debater in that beer commercial. No peripheral vision!

No, why do you think that?

Reasonable classification is not an issue when performing the general testing. Repeat thoroughly. The issue you raise is with coverage. For example, if you had everyone in their own rate group and chose to benefit all the HCE's and 1/2 of the NHCE's that could easily be deemed to be a classification issue for coverage. If the 1/2 that didn't benefit couldn't be grouped as some objective business criteria, then you would have to pass the ratio percentage test. Repeat the first sentence again. There have been many discussions on these boards regarding this. BTW, is that your real name or are you a new EA? I don't see you on the directory.

Tom, you are right about that actuary crack.

I have seen a DB proposal for credit unions (non-profit entities) to utilize the overfunding technique, but have never researched its correctness. Basically (and this is in the simplest terms and may be forgetting important details), for a credit union they have to have so much in cash reserves earning minimal investment returns. By intentionally overfunding a DB plan, they can count that as part of their assets and invest the money as they see fit. I don't know if the credit union had an existing DC plan, but at least it's a similar scenario.

You have to be consistent in the method of reporting. If this is not a new plan, then determine what was done in prior years and do the same again. Barry, you definitely did not understand what Tom was saying about the independent audit and I won't go into detail, but I will say that whether you report on a cash or accrual basis will not cause an audit.

The latter. Rollovers do not impact funding at all as they are a separate source altogether and must be tracked as such.

I think Cheryl's website is not up anymore because she was defrocked for that article and is now a real estate agent. Just kidding, but I agree with Tom's thoughts. Although, has anyone run an analysis of the benefits of deferring the max knowing the plan will fail versus the extra TPA costs to prep the refund?

To answer your question about a match formula that will satisfy nondiscrimination best, then logically it depends on the level your NHCE's are deferring versus your HCE's. If it's 5% and 7%, respectively, then you are probably okay with a formula that considers deferrals up to 4% of compensation, but might have a failing test if it's up to 7% of compensation. Also, if your ADP test passes each year with flying colors you will have room to shift some dollars to the ACP test and you can have a higher % matching formula. Just do the math and know it will vary by client. In asking what is a good source for plan design, other than overall knowledge, I find that seminars provide the best information. ASPA's are always good ones and they have them all over.

I recall the attachment being used before the EFAST system, but not required around the time it came to be. Some insurance companies are slow to adjust and continue to provide signed certifications of the information, although it is not needed. I think MCarey is talking about something different.

Hypothetically, what if the participant rolled over the distribution originally and then repayed the plan back from those dollars. That would seem okay in my mind and of course there would be no basis. Agree? If the participant took the cash originally but had a separate IRA from which money was rolled over into the plan (assuming the plan allowed for rollovers), do think that could count as a repayment? This is the first time I have encountered this, so I might as well know all the nuances.

Ah, I found someone with the same question. Does anyone know the answer?

Huh? One of us is not understanding the other. All I am saying that whether you have the one year wait for the new company or not doesn't matter as far as nondiscrimination/coverage testing goes as long as the otherwise excludable group doesn't have HCE's (a likely scenario). Do you not agree with this? I am not sure what you mean by this. The participants will enter the plan after 1 year. Also, the first year would be the year where coverage and nondiscrimination testing is not an issue at all because it's a new company. All the employees would either be not eligible if you put in the 1-year wait or in the otherwise excludable category if they were immediately eligible.

Isn't your otherwise excludable category only going to have NHCE's? If so, then there is no difference as far as coverage and nondiscrimination testing go whether you have a 1-year wait or whether you test the statutory employees separately. That's supposed to be the point of the rule.

First, Brian, you can test otherwise excludable employee separately for coverage and nondiscrimination if you wish, but they aren't excluded from the tests per se. Arch, how does turnover in the new company eliminate any testing issues? You could just test using otherwise excludables. Why do you think there will be testing issues by excluding the new company employees altogether? If you have statutory and non-statutory census counts I would be interested in these. Also, does 410(b)(6)© buy you any time?

It would be so. I should have said, it wouldn't necessarily be a controlled group. Father owns 51% of A and B, friend Bob owns 49% of A, and son-in-law owns 49% of B = no controlled group, yet the father has controlling interest of both companies.

The ancillary employees' (you refer to them an non-member employees) contributions are just like other expenses within the partnership and they are divided up amongst the partners. This expense, like any other expense, reduces each partners' earned income. As for the EBAR being reduced, first, if their net earned income is over the 401(a)(17) limit, then there is no effect. Also, writing off that business lunch is doing the same thing, so tell them to eat the costs if so concerned.

That last statement is not entirely correct. For example, the father could own 51% in both companies and it still wouldn't be a controlled group.