Belgarath

I suspect that you may possibly be referring to the new "quarterly statement" requirement of PPA 508, which amended ERISA 105(a) and 502©? If there are participants who have the right to direct the investments of all or a portion of their account in a DC plan, even if the investments are "pooled" then a statement must be provided no later than 45 days following the end of each quarter. But this statement can be on the basis of "latest available" information. If you are referring to something else, then I'm sorry but I don't know what you might be referring to. (Perhaps you mean the new requirement to provide DB statements at least every three years, or annually for DC where there are no self-directed accounts? Since ever TPA I know of already does this, I tend not to think of it as a new requirement!)

I like Janet's idea. This should allow the new Plan Administrator to "reasonably conclude" that it is ok. Someone could perhaps point out to the previous PA that IRC 1.401(a)(31)-1 mandates that a plan cannot "substantially impair" a participant's right to elect a direct rollover. Whether this refusal rises to that level I can't say, but it might be enough to sway the PA.

Hi Andy - I think what you are saying is the same as my feeling on this, but let me regurgitate it and see if you agree? My non-actuarial thinking always gravitates to DC allocations, so my thinking is this: You take your DB benefit and convert it (only for purposes of an apples to apples comparison) to a DC percentage allocation. So your present value DB benefit/increase equates to, say, 7% of pay for a given year for a given individual. In addition, his life insurance premium dollar amount equates to another 3% of pay. So in the DC (presumably profit sharing plan) you'd have to contribute 10% for this individual. Is that what you are saying? I can't see much that's good coming out of this type of plan design, but then again, I root for the Red Sox, so my judgement is questionable.

Yes.

The fact that this occurred, apparently, over a number of years is likely to work against getting a really favorable solution. If you are talking about the kind of money I think you are, I'd strongly recommend you take this to experienced ERISA counsel.

In the absence of further guidance, it does appear that this can be done.

What if the employee wasn't hired until age 69, and NRD is 65/5? That's the only reason I specified NRD. Am I missing a point here? (Probably...)

I think they are fine for 2006. Since there were NO NHC, then that is the precise purpose of the regulation 1.401(k)-2(a)(1)(ii). They are deemed to pass ADP, and are not limited to 5%.

I have found that obstinate clients can usually be cured by saying something along the lines of, "What you propose to do is clearly violating the nondiscrimination requirements of IRC 401(a)(4). I suggest you contact an ERISA attorney to obtain confirmation of this if you are unwilling to take my word for it." This usually shuts them up. Note that I said usually...

Does the plan allow distribution upon attainment of Normal Retirement Date? The RMD is only a required minimum. Subject to plan provisions/requirements, you can otherwise always withdraw more than the minimum.

Doubtful. However, since the correction for the defaulted loan under 6.07(3) is only available through VCP, you can request it as part of your VCP filing if you want to. I very much doubt that the the IRS will allow this, however, as it violates the whole principle of the otherwise allowable correction.

Also, this is optional and not mandatory. So the plan involved MIGHT use full year comp, even though this isn't required under 1.401(k)-3(b). Some do.

I agree with you.

No, this isn't at all what I'm talking about. I'm talking about establishing a "qualified replacement plan" under IRC 4980. After looking into this a bit more, I don't really think there's a problem with the 2 years on the PS plan. Off the cuff, I don't think what you are proposing will work. The fact that you roll assets to a DC plan doesn't mean that you are now increasing allowable funding in the DB plan just because the assets are lower. Some of the DB folks here will probably give you specifics on 415, 404, etc., but I don't have time to look into all that right now.

Question - if they set up a profit sharing plan, then terminate it after two years (which is what it will take them to use up the excess assets) is this likely to create a problem? I know with a PS plan you have the "substantial and recurring" contribution issue. While I wouldn't expect a challenge from the IRS on a subsequent termination, I just wondered if anyone had thoughts on this. Would it be better to simple set up a money purchase plan instead? I appreciate any thoughts on this. Thanks.

Thank you both. Becky, fear not, we have no intention of getting involved in any ESOP administration! They have another firm handling that. I suspect the other firm will end up taking over the admin on the current plan as well, or that we'll end up dropping them if they don't get us good data in a timely fashion. Which, given past history, is pretty likely...

Yes. The ownership test is at any time during either the determination (current) year, or the lookback (prior) year. See IRC 414(q)(1)(A).

Yes.

I juat happened to be looking at some older threads for something else, and came upon this one. I think of the top 10, all time nastiest, most horrific cases of malfeasance, litigation, ill will, etc. that I have seen personally in this business, 9 of them have involved closely held family businesses. Your client should make sure to do everything by the book!

It isn't uncommon for minors to work in a family business. Teenagers work for family and non-family businesses all the time. I will say I've never seen anyone under the age of 9 on a payroll, but that doesn't mean it is impossible. Whether child labor laws apply to family members I can't say. Even if "legal" it may raise red flags on audit, and client had better be prepared to justify it (assuming legal to start with.) How much did they earn? If they pay them 5 dollars a day to pick up trash in the parking lot or something, it may be perfectly legitimate. If the 4 year old is being paid 10,000 per year, I think I'd have serious reservations! I can recall that as a 9 year old, I legitimately and honestly worked an average of around 5 hours per day during the summer - lawn mowing, weeding gardens, etc., etc. - if the family has some sort of agricultural business and sells vegetables at a farmstand, for example, then a certain level of compensation could actually be legitimate. If the business is software consulting, then it gets questionable... So I have no firm answers - just discussion.

Interesting. Well, I guess I'll stick with the old "if it ain't broke, don't fix it" approach! TGIF!!! This business really stinks this time of year...

If an employer sends us certified census that lists a termination date of 12/29, we don't question it, and the participant is treated as excludable. Our valuation system just uses what we input.

I'm not sure I agree. I see nothing in 1.410(b)-6(f) which requires this interpretation. If the employer/employee relationship is officially severed as of 12-29, then I think the employee can be cinsidered an excludable employee. I'm also not aware of any other official guidance which requires the "last work day" interpretation. Janet, do you have a citation?

I second Mike's comments. I do seem to recall some discussion on a message thread quite a while ago where it said that plan provisions that were acceptable for plan testing purposes could still run afoul of ADEA requirements. Or something in that general vein. Of course, discriminating against young people due to age is almost always ok in this country. Why? Because, of course, the knuckleheads making the laws are older so it doesn't affect them, and the young folks largely don't have the money to buy off Congress the way the better heeled older crowd does. Gosh, I'm being awfully cynical for a Friday. I'd better get a cup of coffee and improve my attitude!

If the ground starts shaking, we'll know for sure that you are right! Thanks for the comments. Ditto here. That's why these boards are so great - they force me to look at things through another pair of eyes, which are frequently sharper than mine.