Blinky the 3-eyed Fish

The employee is not "entitled to commence participation in the plan" until 11/14/03. Until that date, he has not satisfied the eligibility requirements. BTW, you are not requiring employment on the entry date. That is not the date referenced in the code section I used. For example, say the retroactive entry date was 7/1/03, not 1/1/03. If the person was hired 11/15/03, fired 6/15/03 and rehired 7/15/03, upon reaching 11/14/03, he would enter the plan retroactively to 7/1/03 although not employed on that date.

Let me see if I can surmise the argument for the person being eligible. A year of service does not require employment on the last day of the period, so the person is credited with a year of service on the basis that 1,000 hours were worked from DOH to DOT. The plan can condition that employment is required on the entry date, but since the entry date is retroactive while the participant was employed he satisfies that requirement as well. Here is a portion of the DOL reg previously quoted: For example, under section 202(a)(4) of the Act and section 410(a)(4) of the Code, a plan may provide that an individual otherwise entitled to commence participation in the plan on a specified date does not commence participation on that date if he or she was separated from the service before that date. The individual is not entitled to commence participation in the plan until satisfaction of 12-months of service. The magic date here is 11/14/03, not 1/1/03. What this is saying is that the employee has a YOS for eligibility and has satisfied the eligibility requirements if ever reemployed. But the employee was not employed 11/14/03 and thus never became eligible for the plan. Now if he was hired between now and the end of the year, he would be eligible 1/1/03. BTW, see pg 2.37 of the 2003 Edition for some discussion on retroactive entry. I see nothing there that hints toward him being eligible. Also, from personal experience, this whole discussion is a first.

Thanks for trying.

For a DC plan the 401(a)(17) limit depends on the compensation being considered for the short year. But is this a short year? You mention the effective date of the entity sponsoring the plan as 11/26/03, but is this the effective date of the plan too? Anyway, look to how the plan defines compensation. Proration of the 401(a)(17) limit is required if the plan uses a compensation period of less than 12 months. Chances are the plan's compensation period is the plan year. The fact that deferrals did not start until 12/8 should not affect this unless there is some strange document language there.

Then how do you deal with the 411(d)(6) issue? It would seem nonexistent if one called any amendment after the end of the plan year an -11(g) amendment.

Mike, are you saying you don't need any type of failure to implement an -11(g) amendment or are you pointing out that it also applies for failures other that nondiscrimination?

The overriding provision would achieve the same goal. It works exactly like TH does and that has worked for years. It would go like this: Last day and 1,000 hours requirement for cross-tested regular PS contribution of 10%. A participant who doesn't meet the hours requirement would be required to get the TH minimum under the terms of the plan. Additionally, the overriding gateway terms of the plan would move this person to 5% / 1/3. Same concept for safe harbor nonelective if a participant does not work 1,000 hours or last day. Overriding gateway language moves his allocation up to the gateway amount. We have had TH language in all our documents, so why differ from that concept of having a simple overriding provision for gateway is all I am saying. But again, your way would work too. I just have a preference.

I think we should all use the word "sussed" more often.

Although they accomplish the same thing, I prefer an overriding provision that works much like the TH minimum language, to allow those that need to get the gateway minimum to receive such.

Andy is correct, per usual.

There is no difference in how the QJSA requirements are handled based on the size of the plan. While my statement is true, upon re-reading the question, I now know it does not address the question as questioned below. The header threw me off.

Mike, I didn't say that a majority owner couldn't "walk away from" anything less than 100% of the his benefit. What I tried to express was that most often where there is a majority owner, it is in a smaller plan. Those plans tend to have benefit formulas that produce benefits in excess of PBGC guarantees. When the owner ends up waiving, or whatever you want to call it, a portion of those benefits, the unwaived portion, still is often in excess of PBGC guarantees. Thus, the PBGC would not be required to pay these benefits under any circumstances. The waiver is simply to facilitate a standard termination.

Note the question relates to 2005, when there are no NHCE's to look back upon for 2004. Thus no NHCE's in 2004 and none in 2005. What would be the difference as to which testing method is used?

No, there can be safe harbor and non-safe harbor 412(i) plans.

Mike, I would have otherwise agreed with Tom's conclusion, so I am curious as to why the testing method would matter when you only have HCE's? It seems like a free pass situation to me regardless of the testing method. For both prior and current testing methods, if the plan continues to have no NCHE's, their testing percentage is nonexistent.

The circumstances would dictate why a plan, any plan, would be permissively aggregated with another plan. For example, it would be possible that you had the following: 412(i) plan Covers all employees of the employer, so 410(b) is not an issue, but it provides a 10% of pay benefit to the owner and 1% to all the NHCE's. This is not a safe harbor plan and the NHCE's will need to have increased benefits to pass nondiscrimination testing. PS plan of same employer Covers all employees with a 10% of pay allocation. This plan is a safe harbor plan. So, as you can see in this situation, the 412(i) plan does pass coverage on it's own, but cannot pass nondiscrimination on it's own, so it is permissively aggregated for both in the attempt to pass the otherwise failing nondiscrimination. So, in summary, no, I don't agree with your statement blanketly. It depends again on the circumstances.

Okay, then I would ask for what purpose is this amendment needed? Is there nondiscrimination testing that failed and will pass by bringing in these new employees? In that case a 1.401(a)(4)-11(g) amendment could be used. Is it a safe harbor plan and the client just wants to bring in the people because he likes them? In that case, no, you cannot bring them in unless each person is already receiving the max annual additions, in my opinion. In this case, to bring people in would be a 411(d)(6) cutback, because other participants would receive less of a share of the contribution. Is the reason for bringing them in as asire states? I wouldn't think so, since PS contributions often aren't funded until after year-end and you appear to be quite aware of the eligibility. The 2 1/2 month rule is under 412©(8), is for plans subject to minimum funding (DB, MP, TB) and is not applicable here.

Generally, the benefits being "waived" are in excess of the PBGC guarantees, so I don't think it's correct to state that the form is being used to not hold the PBGC responsible for benefits they might be required to pay. It's semantics in what it's called, but effectively it is a waiver of benefits.

I mean you won't have the concerns raised in the article. And I didn't say only aggregated for nondiscrimination testing. If you aggregate for nondiscrimination you must aggregate for coverage. My point was that if each plan already passes coverage on their own, then it doesn't matter if one plan has features the other doesn't.

The waiver being referred to is by a majority owner of the entity sponsoring the plan and is needed because the plan lacks sufficient assets to pay all benefits. In small plans this is a routine occurrence and the means to continue with a standard termination for PBGC covered plans. It raises none of the questions you list. However, the IRS doesn't officially recognize the waiver, but rather lets it slide.

You are referring to the Larry Deutsch article in the ASPA Journal. I think his issues to aggregating a DC and 412(i) plan arise when the aggregation is needed to satisfy coverage. However, if you need to aggregate just to satisfy nondiscrimination, all should be well.

Email me and I will send it back to you.

There is no difference. Is it that you are reading §318 but not considering the expanded definition that Appleby cites? (I have not personally read §318 lately.)

Mbozek, that is not correct for pension plan purposes. For example, a mother working for her son's sole proprietorship WOULD be attributed his ownership.

What type of plan is this?