Belgarath

With no research, I'd say probably yes - I assume the AB plan has at least one employee participating? If so, both plans are part of the required aggregation group for TH purposes, since at least one key employee participates in both. But I'd have to do a little checking to be sure...although I should probably remember this off the top of my head, I don't...

I think you misunderstood. My real point (which I didn't make very clear) was that NOT all pre-approved documents allow the option. As to nondiscriminatory or not, that's a separate issue, and I can certainly see why you wouldn't worry about it when you have a pre-approved document that permits it. I'm very likely overly paranoid, but as I said, it doesn't really matter to me in real life! Just as a matter of curiosity only - have you ever actually had this request? I haven't, thankfully...

Austin - you might want to be a little careful with such a blanket statement. The pre-approved VS document from at least one major provider does not provide such an option. Now, the fact that many or most pre-approved docs permit it would indicate to me that the IRS doesn't seem to have a problem with it - however, I still wouldn't want to be forced to defend it. It is only an academic issue for me, as I would simply tell a potential client we can't do it. Some of these "Roth problems" are just holdovers from investment platform issues where they couldn't properly handle some Roth issues (and perhaps still can't, for that matter...)

I'm not convinced there isn't a potential nondiscrimination issue. You have both current and effective availability requirements, and depending upon the auditor, I can see an effective availability issue if you can't get a match on your Roth deferral. I wouldn't want to have to defend it...

Not yet! What error(s) did you encounter so we can be on the watch for them?

IRC 416(g)(4)© defines the determination date for a plan year to be the last day of the prior plan year. (except for the first plan year of a plan.) So you are looking for employees who satisfy one of the key employee tests for the plan year that includes the determination date. So, if you are doing a 2016 valuation, your key employees would be those who satisfied any of the key employee tests for 2015 (the plan year that includes the determination date.)

I think you are both saying (or meaning) the same thing - just saying it a little differently. At least that how I read your posts.

Interesting question. I'm going to vote for the $4,367. The taxable terms cost is not an actual distribution of plan assets - it is, rather, a taxable "economic benefit" to the participant.

If you'd like an additional source, look at 1.416-1, T-16 - again, it specifies the words MORE THAN. I'm not aware of any official guidance that states explicitly what you are looking for. I think the IRS probably assumed that the rather plan language was self-evident. My 2 cents - is that really true? Or is it just one of those enjoyable stories that have no basis?

Per IRC 416(i)(1)(B)(ii), it is more than 1%.

So, when reviewing the prior firm’s coverage testing, they ran the average benefits test for the safe harbor plan by showing zeros for all the hundreds of nonexcludables (those are the employees in the controlled group covered by other plans but not covered by the safe harbor plan), then averaging the results. The averaging takes into account all of those zeros. However, for the current year tested plan, they ran the average benefits test by including allocations for all employees in all plans, including the allocations made in the safe harbor plan, then they averaged those results. I agree with Mike. I think they did it incorrectly for the safe harbor plan. I think it all hinges upon the clause in 1.410(b)-7(e)(1) to which you already alluded, which says that the ABP testing group includes all plans that could be permissively aggregated if paragraph ©(1) of 1.410(b)(7) didn't apply. And as Mike states, there's no special exception for a safe harbor plan.

Thank you for your input. On my own personal level, I'm reluctant to adopt that interpretation, and I'll explain my logic, or perhaps lack thereof. (And I'm ignoring the potential practical ramifications of attempting to track these employees through (potentially and theoretically) several subsequent sales of the same corporation. Or to perhaps be more accurate, it is because of those practical considerations that I prefer to find a defensible interpretation that says otherwise!) As to 11.7, it says that in such situation, the assets shall be retained pursuant to the provisions of Article VII, which are basic Trustee responsibilities. If the Plan Administrator determines that there is a distributable event, distributions can be made. Seems to me that under Notice 2002-4, when combined with 1-401(k)-1(d)(2), there is a reasonable interpretation that in this specific situation there is a severance of employment and therefore distributable event. However, there's most certainly room for disagreement. Anyone else encountered this situation, and if so, what did you decide? Thanks again.

That's a tough question - I don't think the final regs under 1.414© address this - they specifically address two TAQX-EXEMPT organizations, but not an overlapping for-profit and tax exempt. First, I'd leave it up to counsel. But my own personal opinion is the same as yours - it smells like a CG/ASG, and I'd be inclined to consider it as such, but I'd merely present that opinion to counsel and let counsel and client make that determination!

Can you point to where it answers these questions? I'm looking at a Corbel/Sungard/FIS - whatever - VS document. In Article XI, specifically 11.7, I don't see where it addresses any such question. And Article XIV deals with Multiple Employer Plans, which this isn't, unless you take the interpretation that a plan automatically becomes a MEP the moment one of the affiliated employers becomes non-affiliated due to the sale...and I don't think that is a reasonable interpretation. Thanks.

Corps A & B owned 100% by Mr. Big. Mr. Big sells Corp B in a stock sale to Mr. Little. Corp B is now officially not part of the controlled group. Mr. Little has no interest in any sort of spinoff, etc., and does not want to sponsor a plan. So, Corp B. has to be removed as a participating employer. 2 questions: 1. Assuming the numbers are over 20%, is this a partial plan termination? 2. Since a stock sale and not an asset sale, is this treated as a severance of employment for purposes of permitting a current distribution? I believe the answer is yes to both questions, just curious if others agree.

What about a group annuity? I seem to recall that they are essentially individual "sub accounts" under the group annuity umbrella, and would presumably have the same crediting rates, etc... - but you'd probably want to contact Ned Ryerson about how it works.

It's interesting - I could have saved myself some time by reading Sal's stuff before I plowed through all the regs and cross references, because I ended up focusing on the precise phrase that Sal mentions in his analysis. See section in bold below. This phrase is what seems to me to prohibit requiring the full 365 days. But again, the whole subject is obscure enough that I do think there is room for reasonable disagreement. (e) Benefit accrual. (1) For purposes of section 411(b), a plan may provide that a participant's service with an employer or employers maintaining the plan shall be determined on the basis of the participant's total period of service beginning on the participation commencement date and ending on the severance from service date. (2) Under section 411(b)(3)(A), a defined benefit pension plan may determine an employee's service for purposes of benefit accrual on any basis which is reasonable and consistent and which takes into account all service during the employee's participation in the plan which is included in a period of service required to be taken into account under section 410(a)(5) (relating to service which must be taken into account for purposes of determining an employee's eligibility to participate). A plan which provides for the determination of an employee's service with an employer or employers maintaining the plan on the basis permitted under paragraph (e)(1) of this section will be deemed to meet the requirements of section 411(b)(3)(A), provided that the plan meets the requirements of 29 CFR 2530.204-3, relating to plans which determine an employee's service for purposes of benefit accrual on a basis other than computation periods. Specifically, under 29 CFR 2530.204-3, it must be possible to prove that, despite the fact that benefit accrual under such a plan is not based on computation periods, the plan's provisions meet at least one of the three benefit accrual rules of section 411(b)(1) under all circumstances. Further, 29 CFR 2530.204-3 prohibits such a plan from disregarding service under section 411(b)(3)© (which would otherwise permit a plan to disregard service performed by an employee during a computation period in which the employee is credited with less than 1,000 hours). See the regulations under section 411(b) (relating to benefit accrual).

Attempting to avoid ERISA status for the 403(b)?

Actually, we expect that they WILL just take the reversion. The Administrator just wants to know the options.

Many thanks.

Hmph! What I've found isn't terribly enlightening. It seems to me that it would be unreasonable to require the amendment to be signed prior to the termination date, as it isn't necessarily known by then whether there will be excess assets or not, and if so, how much? So does it seem reasonable to do an amendment currently, making it effective 12/31/2015 (plan termination date?) It'll be submitted to the IRS for a d-letter anyway, but it would be nice to know up front if they generally allow this approach or not....

Seems to me there are two issues. First, a failure to properly implement an election - assuming a proper deferral election was made. I think the fact that the "employee" in question is the owner is immaterial - an election was made, and not properly implemented, which is an operational error. This can be corrected under EPCRS - a portion of the under-withheld deferral (amount will depend upon specific dates) will need to be contributed as a "make-up" contribution, with interest. Second, taxes will need to be re-filed as the deduction taken was too large. Fun for everyone.

Haven't done any research on this yet - thought someone might know off the top of their heads. Non-profit organization is terminating DB plan, effective date is 12/31/2015. They have substantial excess assets. Plan currently is written so that excess assets upon termination revert to the employer. Can an amendment be done post termination date (i.e. currently) to allow reallocation, if they want to, or would that amendment have needed to be done on or before the termination date? P.S. - if they want to transfer to an existing 401(k) plan as a Qualified Replacement Plan - same question. As I said, I haven't done any research yet, but I'll have to do some as soon as I can...

Interesting. Thanks for posting that response. I neither disagree nor agree, since I wasn't sure in the first place! But as an observation, it sure sounds like a last day requirement to me, whether explicitly stated as such or not. Under the interpretation above, you don't get 12 months unless you are employed on the last day. My gut feeling is that something seems amiss with that. Fortunately, it isn't anything I have to worry about, and for that, I'm very happy!

I'm not convinced the regs are terribly clear on this. Take a look at 1.410(a)-7(e)(2).If you plow through that garbage and the references, I THINK ( but I'm not by any means certain) that you have to credit at least a partial year of service. And I sort of lean toward having to count a full year in your situation, since there really is no hours requirement. But I defer to the actuaries on this one...