Blinky the 3-eyed Fish

Yes, both Mike and WDIK are correct. They win my everlasting respect. Pmacduff, then you absolutely can give the HCE's less. Now I want to know how the NHCE's are grouped. Are they all in the same group or separate or something else?

Pmacduff, your last post confused me. You say it is a cross-tested formula already. Is each doctor in his own rate group in the current document? Mike, see I said "rate group" again. A prize to whomever can tell me who said this line, "He can be pedantic. He can be pedantic."

Pmacduff, it's a 411(d)(6) issue as to when you can amend the plan. If we are talking about 2003, then the HCE's would have accrued the right to the contribution and the plan could not be amended. But for 2004, if there is a last day or hours requirement, then you could amend the plan now to put each HCE in his own rate group. Then you could give them less if they want. Also, with this design try testing on a contributions basis. That way at least you can use permitted disparity. Or if you have some older doctors, you could use component plan testing.

I just had to look this up and agree it could be clearer, but don't think it is permissible. 1.410(b)-7(a) defines a plan for purposes of the section as one within the meaning of 401(a) or 403(a), so obviously a SEP is not within this definition. Sal states that a SEP cannot be aggregated on page 8.72 of the 2003 edition of the ERISA Outline Book, but gives no cites.

The government representatives at the LA Benefits Conference mentioned specifically the "one-day employee", meaning an employee is paid $100 or so and given a $100 accrual to jack up the cross-testing results. They didn't address specifically the permissibility of having entry dates near the end of the plan year, but I think the theme was to give notice they are on to such ideas designed specifically to provide less benefits to NHCE's and are considering their options.

Absolutely! Regarding the cite, use the search feature. Like I said, this topic has been discussed ad nauseam.

Regs. Is the plan providing a safe harbor nonelective or match? If it's the match, does the match satisfy top heavy for everyone or some?

Many prior threads on this. I will assume that the otherwise excludable rule is not a factor here. That being said, if participants here benefit in the nonelective portion of the plan, then they must receive the gateway. Benefiting in the nonelective portion includes ps contributions, th minimums, safe harbor nonelectives and QNEC's. You actually don't provide enough information for your specific case. You could be providing the safe harbor match, that match could satisfy TH and then, if they otherwise did not receive a contribution from another nonelective source, they would not be required to get the gateway.

I do not believe that the groups referencing deferrals are acceptable. There is a requirement that no contributions, other than matching contributions, be based on deferrals (cite not handy). These rate groups would violate that requirement. I am not sure though how you would structure the groups based on the owners' intent. Their intent is a clear violation of the rule.

What? A multiple employer plan consists of ONE plan, yet you say one of the plans has a disqualifying event? Please repost what you are asking.

You accrue interest from the last loan payment to the next, don't you? Why would this be different?

Just to expand a little, by failing the compensation ratio test, that just means that your plan's definition of compensation does not satisfy 414(s). Since you appear to just have deferrals and matching contribution in the plan, that just means, as Andy so eloquently stated, that you need to test under a definition that does satisfy 414(s). If there are PS dollars, let us know and the expounding will occur.

That last solution could easily be discriminatory depending on who was eligible for the catch-up.

The fiscal year does not matter for the full funding limits, whether they apply or not. As for the other component of 404, the interest is credited only to the end of the tax year IF they are taking the deduction for the tax year ending in the plan year. If the deduction is being taken for the tax year beginning in the plan year, then all calculations are done as normal. As for your last question... yes.

He would have to take 2004's minimum distribution first as well.

How about this for an example. I love examples! Funding method: individual aggregate Years of participation accrued: 5 Years of participation at NRA: 10 Before amendment: Benefit formula: 10% of pay times average compensation Average compensation: 100,000 Projected benefit: 10% * 100,000 * 10 years = 100,000 Present value of future benefits: 800,000 (made up number) Allocated assets: 300,000 Present value of future normal costs: 500,000 Normal cost: 80,000 (made up number) After amendment reducing the formula to 2% of average compensation prospectively (i.e. without wearaway) Projected benefit: (10% * 100,000 * 5) + (2% * 100,000 * 5) = 60,000 Present value of future benefits: 480,000 Allocated assets: 300,000 Present value of future normal costs: 180,000 Normal cost: 28,800 See how it works. The funding is spread over the lifetime of the participant. The reduction in the projected benefit serves to reduce the normal cost. Of course this is a simplistic example and you would factor in the FFL and RPA override. The 2 effective dates are correct as well. The overall amendment is effective retroactively to the first day of the plan year. The effective date of the benefit formula reduction is effective as allowable by 204(h).

1. No, the RMD must be taken first 2. N/A due to the answer of the first question. 3. No, you are not.

Kirk, as a small plan actuary, I can tell you that those amendments are chiefly designed to either raise or lower the required/allowable funding amount per the client's needs. Mike, you are referring to the Schedule R where the question about 412©(8) is asked. However, the instructions go on to say to see Temp. Reg. 11.412©-7(b) for details on when and how to make the election. Because that line is still there, I continue to attach a separate election that complies with that cite.

1. Yes, but you might take your document out of reliance with the standardized prototype. 2. A 5-year cliff is permissible for nonelective contributions if the plan is not top heavy, otherwise, as cliff vesting goes, 3 years is the most allowable.

Austin, your question is way too broad. When you can amend the plan depends entirely on the purpose and scope of the amendment. Knowing things like 411(d)(6), 412©(8), 1.401(a)(4)-11(g) and 404 (somewhere) spell out deadlines for some of the different applications. So, if I just were to answer your last question. Consider this. By accelerating the vesting schedule retroactively, what is happening? The answer is that participants vesting percentages are increased. No problem there. But, what you also may be doing is decreasing forfeiture dollars. That would be a problem if the document calls for the forfeitures to be added to the contribution. Then you are taking away from what participants already earned. So, you see in this case there are a couple of things to consider.

Austin, why is the last day of the plan year your drop dead date? Why is adopting the amendment after the end of the year requiring a loophole? Think of why the amendment may or may not be permissible and the answer is 411(d)(6). The argument that an amendment changing the testing year is a violation of this statute is that the NHCE's have earned the requirements to receive a QMAC to make the test pass. Amending the plan would reduce the QMAC. The argument that it is permissible to make the amendment after the plan year is that HCE's would return dollars, and the amendment is just reducing their returns. But no guidance means go with your gut.

It is actually not known if you are too late or not because there is NO STINKIN' GUIDANCE! And being a fish, I know stink! Amending the plan to current year testing for 2003 at this time would be aggressive, but not necessarily a 411(d)(6) violation.

It's 0%. This topic has been discussed many times on these message boards, so yes, others have had this problem too. Consider switching to current year or have a big failure in the 2003 testing.

If the language of the document has that HCE's will get the safe harbor nonelective, then you are stuck for 2003 and to current date 2004 or you otherwise have 411(d)(6) issues.

Yes Mike that is clearer. I too agree that if in my example the sole proprietor got $40,000, that would be fine for 415 and 404. I had picked a 25% allocation randomly.