Blinky the 3-eyed Fish

I could be misinformed, but my understanding is that the capital gains rate is the lowest since 1911. I think a more appropriate analysis would be to factor in an average capital gains rate over the last x years, because that 15% is much more likely to go up and is unlikely to go down.

I personally don't see the issue with continuing with either aggregate or individual aggregate for a frozen plan from an actuarial standpoint. The funding is still being spread out over the period to retirement age for the participants.

I hear the black pot talking.

How about this? Our company is struggling financially and we are unable to continue to make a matching contribution as we need to use the funds to pay our creditors. By the way, I need to see all those hired in the last year in my office as soon as possible. CEO

Include

No, it wouldn't be easy to set up a huge deduction because of the 415 dollar limit and the fact that each participant is limited to 1 year of participation the first year. My personal opinion is that it is not considered an amendment.

The original post is not looking to correct a failure, but rather to avert the need for correction by taking back the deferrals and spewing a big "Oops, didn't mean to contribute that.". No, this is not a mistake of fact and not an available mechanism to alleviate your problem.

If the right to the allocation has not been earned you could always amend the plan to alter the design of the groups.

Dsyrett, is it your opinion that the initial implementation of the plan is considered an amendment for purposes of determining the UCL? How about others?

Don't go by a choice in a document, but by what the law reads. TH must use 415 compensation.

It takes a lot to bring out the wow. FWIW, I agree with Mike's assessment completely. His arguments are more concrete than having some IRS agent "say so". With all due respect, there are good and bad within the IRS, so having one or two opinions is worth very little. I mean I have had an IRS agent argue with me that you couldn't offset DB benefits with DC employer contributions. Lastly, if the plan is a 401(k) plan, there is no way to make the participant whole outside the plan without the employer taking the hit. If the employee wishes to defer his own money, how does the employer make up for that without costing itself? If the original post is not talking about a plan amendment, then they are talking about operating the plan outside of the document provisions.

I think you do need a cite because I don't think I could agree less.

Don't these employees in Europe meet the definitions of nonresident aliens?

Kevin, with your argument you would also have to restrict providing something like a larger contribution one year to an NHCE because he might in the future become an HCE. Personally, I think the rules are pretty clear you do not have to make this consideration and will be interested to hear your response to Mike's query.

Pmacduff, how can it be discriminatory (under ERISA) if the person let in the plan early is an NHCE? The definition of discriminatory for ERISA purposes compares HCE's versus NHCE's, not NHCE's with each other. Now if you want to argue it's discriminatory under a dictionary definition, then that's another story. BTW, like mentioned in the first post, it is a very easy determination of HCE/NHCE status, so there shouldn't be an issue there.

No, an annual table is not the same as a monthly table times 12. Don't forget mortality is a factor.

And that lawyer might tell you that options to purchase stock can count for ownership purposes even if not utilized.

Generally, the document will not specify such to provide flexibility in testing. I think the question lies in what language you have in your document to provide the gateway contribution. Here is how this type of plan would be worded with my document provider. -Various rate groups -Overriding gateway language that works just like top heavy overriding language. -Silent on the use of otherwise excludables So, in this case, if the nondiscrimination testing does NOT use otherwise excludables, the overring gateway language provides the gateway minimum to the one participant as required by law. Without the gateway language in the document, there would be no provision to get the one participant a gateway minimum. However, if I do use otherwise excludables, the person is not required to receive the gateway minimum and thus my overring gateway language is not triggered. But here it depends on how this is worded. For example, if it says something like "Yo, yo, yo give the gateway to all who benefit under the nonelective portion of the plan, dude", then this language would bring in the one participant. So, in summary, as often touted on these boards, what does your document say? BTW, your attorney is not giving you the full picture. (I hereby caveat this comment to state that such behavior is not typical of all ERISA attorneys and should be judged on an individual basis.)

I have almost been in the business for 7 years and don't know much about SARSEP's either, but huh? Doesn't the exclusive plan rules apply to SIMPLE plans, not SARSEP's. I thought the SARSEP would be the same as a DC plan for this consideration.

(7) Limitation On Deductions Where Combination Of Defined Contribution Plan And Defined Benefit Plan (A) In General If amounts are deductible under the foregoing paragraphs of this subsection (other than paragraph (5)) in connection with 1 or more defined contribution plans and 1 or more defined benefit plans or in connection with trusts or plans described in 2 or more of such paragraphs, the total amount deductible in a taxable year under such plans shall not exceed the greater of-- (i) 25 percent of the compensation otherwise paid or accrued during the taxable year to the beneficiaries under such plans, or (ii) the amount of contributions made to or under the defined benefit plans to the extent such contributions do not exceed the amount of employer contributions necessary to satisfy the minimum funding standard provided by section 412 with respect to any such defined benefit plans for the plan year which ends with or within such taxable year (or for any prior plan year). A defined contribution plan which is a pension plan shall not be treated as failing to provide definitely determinable benefits merely by limiting employer contributions to amounts deductible under this section. For purposes of clause (ii), if paragraph (1)(D) applies to a defined benefit plan for any plan year, the amount necessary to satisfy the minimum funding standard provided by section 412 with respect to such plan for such plan year shall not be less than the unfunded current liability of such plan under section 412(l). Yes. Here is 404(a)(7). Note the highlighted portion. (1)(D) is 404(a)(1)(D).

Although, you don't say how you are performing the cross-testing. You could perform the nondiscrimination testing by splitting the otherwise excludable employees. If you do that AND your document makes this allowable, you would not have to provide the gateway minimum at all to the non statutory participant.

Hope is lost. 404(a)(1)(D) will not transfer to any contributions in the DC plan because the full DB limit is not used. 404(a)(7) will still apply and the employer contributions in the plan will be nondeductible. At least there is no excise tax up to 6% of comp ($300,000), so maybe hope is restored, if only a little bit.

Ronnie, what kind of amendment are you talking about?

You are misapplying this rule. This applies for example when you have a full plan year, but a person enters the plan mid-year. As I mentioned the rule for pro rating the 401(a)(17) limit applies when the compensation period used is less than 12 months (1.401(a)(17)-1(b)(3)(iii)). Since you have a new entity and plan that began 11/26/03, how can you not have a short compensation period?

How about neither. The plan would either have the break-in-service rules in effect or not. If they are not in effect, then the person would enter 1/1/05, their rehire date, because they had previously satisfied the eligibility requirements. If they are in effect, then the person would enter retroactively to 1/1/05 after completing a year of service from 1/1/05.