Blinky the 3-eyed Fish

I assume we are talking about a MP or TB plan, so the 204(h) rules apply. That being said, I am not sure of the answer to your question. I have not seen anything that addresses whether or not a vesting schedule change can constitute a "significant reduction in the rate of benefit accrual". Personally, I think that it could and would provide the notice to those whose YOS are reduced and who don't have the right to remain on the old schedule.

Yes on the first one. Whether you need a new plan doc or not depends on how your current document reads and what language you can incorporate into an amendment.

The mechanism is not a transfer of assets upon termination, but rather a merger of the MP plan into the PS plan. With a merger you also don't have to 100% vest the participant dollars in the MP plan. Keep in mind that the merged MP dollars need to retain the J&S features and the distribution restrictions before NRA.

I can tell you there definitely is a favorable precedent because I have submitted for coverage determinations (actually more along the lines of informing the PBGC the plans were no longer covered) many times where a plan once covered non-substantial owners and later only covered substantial owners. It is that experience that I, as an actuary, have in day to day operations that is invaluable. Other actuaries who work on small plans would surely have this experience as well, which is why I definitely think an actuary is more qualified in this situation by a long shot. Not to disparage you in any way mbozek because you certainly know far, far more than I do not regarding pension plans, but this proves my point. You are an ERISA attorney who does not know the answer to this specific question.

Kirk, under that guise I then should contact an attorney to tell me how to interpret statutes like 412(l)? Of course that would be ridiculous. The idea that interpreting ALL statutes is the practice of law and therefore should be entrusted to attorneys would certainly lead to more harm than good if the statutes I am interpreting are ones I deal with every day. I am not saying that attorneys do not have a place in the pension world. In fact I believe quite the contrary, as I know many ERISA attorneys who provide valuable services. What I am saying, however, is specific to this case. A 3-person plan covering no one but substantial owners is certainly not covered by the PBGC. There aren't intricacies here.

Andy, a fine explanation. One thing to add for those 401(k) tests that fail this year, a QNEC will also cause those that receive it to be considered benefiting in the nonelective portion of the plan.

The plan did exist 3/31. 404(a)(7) is not an issue because of the size. Thanks.

The plan is absolutely not covered by the PBGC because the only participants are now substantial owners as described in 4022(b)(5). To advise a 3 person plan to retain counsel to determine if this plan is PBGC covered, to me, is a waste of money. An actuary would be far more qualified to know this rule. In fact, even if the actuary doesn't know the rule, you can easily have the PBGC make a coverage determination by writing to them. See the premium instructions for the address. The determination of what plans are covered by the PBGC is in 4021.

I am curious if this has been addressed in a previous Gray Book or IRS Q&A.

Be what it may, how would it satisfy 411(b)(1)?

Existing company with a 3/31 fiscal year-end sponsors a 401(k) Plan. All 100 or so employees, except the 2 owners transfer to an new corporation that takes over sponsorship of the plan on 12/31/02. The old company, I am told, is not a controlled group or affiliated service group with the new company. Does anyone see problems with setting up a new DB plan with a calendar year-end for 2003 where the old company would take the deduction for the 3/31/03 fiscal year-end?

Before going on, can you tell me why John does not get a safe harbor nonelective contribution but Mary does?

Rev. Rul 76-259 has not been modified by a later promulgation. There is a simple solution to the problem of investment losses by bad participant investments causing increased DB benefits - don't allow directed investments.

Moe, no I am not saying that at all. To have allocation groups based on age would certainly be a violation of the ADEA, but grouping on job classification or salary is certainly available. Actually, the IRS has accepted documents with everyone in their own allocation group, although there are some issues as to is validity (see some prior discussions on this message board).

A cross-tested plan's purpose is to provide some people with a contribution of a higher percentage of compensation that other people. The motivation varies to be sure from plan to plan, but in the small plan market, the motivation is clear - to provide the owners and other "important" employees with higher amounts.

You are correct that you cannot eliminate annuities in a pension plan or , say, money merged from a pension plan, but that is not what the question asked. "...a defined contribution plan that is amended to eliminate annuities..." In a pension plan you couldn't eliminate annuities in the first place to get to step 2, the removal of the QJSA requirements.

Yes.

Don't forget the outside chance you may have to run the testing under the old rules as well to avoid a possible 411(d)(6) cutback. If the plan is not top heavy under the rules R. Butler shares, post the plan year you are testing and when the EGTRRA amendment was adopted for your plan, so it can be determined if this is an issue.

Ah, but that's what research is for. Look at Rev. Rul 76-259, specifically the last few paragraphs as they relate to the discussion of the satisfaction of 411(b)(1). It appears from this promulgation that the hypothetical interest credit would cause the offset to violate 411(b)(1) and is therefore not available.

I don't know of anything that would preclude the use of hypothetical interest for the PS plan for the offset.

I have never heard of the fact that it is a community property state altering what consent is needed, and the consent requires no notary? Is the balance over $5K? Are annuities an option? Please explain.

So it sounds as if you have 2 issues: 1) the plan document was not operated according to its terms by paying out lump sums to some participants who had PVAB's greater than $5K, and 2) spousal consent was not obtained for minimum distributions for those with PVAB's over $5K. Both types of errors are discussed in Rev. Proc. 2003-44. Enjoy!

Pax, but does anyone follow the rule MGB quotes, including Jim Holland?

I too have looked that up before. Here is the rule. You might have to break out the code book to follow. 412(l)(7)©(i)(III) (III) Special Rule For 2002 And 2003.-- For a plan year beginning in 2002 or 2003, notwithstanding subclause (I), in the case that the rate of interest used under subsection (b)(5) exceeds the highest rate permitted under subclause (I), the rate of interest used to determine current liability under this subsection may exceed the rate of interest other wise permitted under subclause (I); except that such rate of interest shall not exceed 120 percent of the weighted average referred to in subsection (b)(5)(B)(ii). So, under the old range of 90-105% the 105% RPA limit would be 6.00% as of 1/02. Because in your case the OBRA rate of 6% does not exceeds that amount, you cannot have the RPA rate go up to 120% of the range. In other words, in order to have the RPA rate exceed the OBRA rate, the OBRA rate would need to exceed the 105% corridor, or be at least 6.01%.

While the corollation was unintentional, I can quote that line verbatim. Spalding: "I want a hamburger, no a cheeseburger. I want a hot dog. I want a milkshake. I want potato chips." Judge Smails: "You'll get nothing and like it!"