Blinky the 3-eyed Fish

FWIW, someone in my firm once researched the use of Sch F income and came to the conclusion is was not available to be used for qualified plan purposes. I would assume the same is true in reverse in that it does not offset Sch C income for qualified plan purposes. Of course this is all heresay and the information may not be worth a turd in the lawn, but there you have it.

I assume your question relates to performing the actuarial valuation. That being said, the assumed retirement is just that, an assumption. The assumption must be reasonable. Most often it mirrors the retirement age in the plan document, as there would generally not be a reason to differ except for certain circumstances. This is one of those circumstances. It sounds as if it is reasonable to assume he will actually retire at 70 and that certainly can be reflected in your valuation.

Is there anything in Rev. Proc. 2003-44 that may help you?

Mike, I am revising this because of your successful return from vacation. I am still in the dark on this.

He can't get $40,000 in each plan. It is a controlled group, so it's just like it's one employer.

This is an inherent problem with the prior year testing method, but you can always switch to current year testing. I smell an amendment to the plan.

Correct.

Yes, the deminimus benefit overrides the Hi-3 compensation limit, so compensation is not needed.

It's not the rate group that's electing to receive x%, it's the employer that is electing to contribute x% to the rate group. The percentages can change from year to year. There is the deemed CODA argument which has been discussed on these message boards, but it doesn't seem to hold much water at this time. P.S. Andy and Tom, I win!

The refunded deferrals are considered annual additions, so I believe the answer to be 1.8% even though 1.416-1 Q&A M-20 doesn't specifically reference annual additions.

No, that rule applies to SIMPLE plans, not SARSEPs

Here are a couple of books you might want to look into. http://www.amazon.com/exec/obidos/tg/detai...glance&n=507846 http://www.amazon.com/exec/obidos/tg/detai...glance&n=507846

Do it like this: blah, blah Employer adopts this amendment ,effective January 1, 2003, as follows: Effective March 30, 2004, the benefit formula will be amended to x% blah, blah. These are the 2 dates I am talking about. One is the effective date of the overall amendment, the other is the effective date of the change.

To meet the broadly available separate plans option each plan must be nondiscriminatory on its own without regard to the average benefits test. So, for the cash balance plan you are performing a general test on the plan which would require you to test net benefits. BTW, the $16,000 = 8% accrual rate is not on a contributions basis? $16,000/$200,000 = 8%, is that a coincidence?

When was the EGTRRA amendment adopted and can you confirm that it has the language that no longer requires a frozen DB plan to provide TH minimum benefits? If it was adopted on or after 7/1/2003 and your document provides TH minimums for all years of service (you already stated it was years of participation), then I understand the actuary's answer. Otherwise you may want the actuary to walk you through it again.

While the effective date of the of the 412©(8) amendment is the beginning of the prior year, it doesn't mean that benefits accrued to date can be cut back. You still have to satisfy the 204(h) requirements like any other amendment. In reality you have 2 dates to consider. One, the effective date of the accrual reduction (15/45 days after the notice), and two, the effective date of the overall amendment (retroactive for 412©(8) or 77-2 purposes)

Yes. The loan is an asset like any other for this purpose.

I do not agree with that approach as it would benefit those that got paid out while the applicable interest rate was lower. Maybe I didn't listen when my mom told me that life wasn't fair, but I prefer the approach that puts people on an equal playing field. And it's not just that, we are looking at a lump sum limit. To convert a prior lump sum to an annuity and back again using different factors makes no sense. I know that is not the criteria for our decisions in this business, but I would argue to the death, or at least until lunch, against another methodology.

Just curious if you have any experience with the IRS in a situation like this. Personally, I am not sure that just because the match does not exceed 6% that there is a free pass. Anyone have a cite that I am not aware of? What if the plan is for a low paying industry and no NHCE deferrs over 3%, yet the management freely does? Again, without some specific cite that this passes, I would see that as a problem.

I would ask why you are attempting to assess an SLA value to the lump sum? Ultimately, when the proposed plan is terminated and the participant rolls over the dollars, you will be most concerned that the lump sum payout limit is not exceeded. Thus, I would fund for a lump sum. So, you have a lump sum value based on the proposed plan's actuarial equivalents and 94 GAR 5% at age 69. You have the 1.078M paid out at age 59 that should be increased with interest 10 years. The net is available to fund. To me, converting the lump sum to an annuity under the old AE and then subtracting that annuity paid is comparing apples to oranges. You have a lump sum limit under EGTRRA that are all new-law benefits and certainly greater than if any old-law benefits under Rev. Rul. 98-1 if they were considered.

rffahey, the "-11(g)" amendment I was referring to is simply an amendment to the plan that would allow the plan to pass nondiscrimination testing by giving accruals to one or more people. For example, if everyone was getting 5% of compensation, but the testing fails, an -11(g) amendment can be done to give one person, say 10% of compensation, or whatever is needed to pass the testing. So, the basic theme of all of this is that there are many ways to skin a lizard. (I am in Arizona and all our cats withered and died in the heat this summer.) While many firms do cross-testing, as Andy said, many people are instead doing crossed-up testing. There is more knowledge than just pushing a button and accepting the results, so, if you aren't associated with these TPA's and care about your clients, follow rcline's advice and recommend to them to find a new TPA.

How does your document read the allocation is to be performed? It sounds as if you are giving each NHCE a percentage of compensation. I seriously doubt your document would have a special provision that allocates equal amounts to others if someone reaches the 415 limit. In other words, my guess is that it will work like this: You need a 1.75% to pass testing. But because the one guy at the 415 limit is getting only 1%, you now may need 1.76% or greater to everyone else to pass.

I am not sure who informed you that a tiered match is not allowed because it is a bit more complicated that that. The rate of match must satisfy the benefit, rights and features (BRF) test. The first part of the test is the currently availability test, which certainly passes in this case because the rate of match, if one defers enough, is available to all. The second part of the test is the effective avaliability test. This is strictly facts and circumstances. What you would need to ascertain is whether or not enough of the nonhighly compensated employees versus the highly compensated employees are able to defer 6% of compensation and reap the full match. I won't even speculate as to what percentage that may be as I have no actual experience with such a determination by the IRS.

A 1.401(a)(4)-11(g) amendment could also have been done to help the results. Somebody get that adminstrator's head on a platter.

Plan termination is a distributable event. Logically, if current employees couldn't take a distribution upon plan termination, how would an ongoing company ever terminate a pension plan without firing everyone, including the owner? There are no successor plan issues either.