KJohnson

I don't understand your problem. All you need is a comp to comp forumla The Employer’s contribution for the Plan Year, if any, will be allocated to each Participant in the same proportion that the Compensation of each such Participant for the Plan Year bears to the total Compensation of all Participants for the Plan Year. If you only have one participant, then you can put in whatever you want and you have the requisite predetermined formula.

Many, including the IRS, woudl say that you cannot modify an exisitng allocation formula after someone has satisfied the criteria for the allocation (employment at the end of the plan year etc.) pursuant to TAM 9735001. I know you take a different view of the TAM. . http://benefitslink.com/boards/index.php?s...=0entry108423 http://benefitslink.com/boards/index.php?s...opic=25607&st=0 Also there could be distinctions betweent "adding" a formula as opposed to modifying a formula

I think your instincts are correct. I would think the IRS would have a problem with you changing from year to year solely on the basis of how much your refunds are going to be. The "refund" to the HCE is the "penalty" for not having enough NHCE's deferring. Thus, changing from year to year to solely benefit HCEs is not something that the IRS is likely to view in the most favorable of light. I don't know of any formal or informal guidance, however, on what "reasonably consistent" means.

I assume your talking about ADP since that is about the only thing you would test in a multi that doesn't benefit any non collectively bargained. I think the answer is you have to be "reasonably consistent" this is from the regs: B) Plans benefiting collective bargaining unit employees. A plan that benefits employees who are included in a unit of employees covered by a collective bargaining agreement and employees who are not included in such a collective bargaining unit is treated as comprising separate plans. This paragraph (g)(11)(ii)(B) is generally applied separately with respect to each collective bargaining unit. At the option of the employer, however, two or more separate collective bargaining units can be treated as a single collective bargaining unit, provided that the combinations of units are determined on a basis that is reasonable and reasonably consistent from year to year. Thus, for example, if a plan benefits employees in three categories--employees included in collective bargaining unit A, employees included in collective bargaining unit B, and employees who are not included in any collective bargaining unit-- the plan can be treated as comprising three separate plans, each of which benefits only one category of employees. However, if collective bargaining units A and B are treated as a single collective bargaining unit, the plan will be treated as comprising only two separate plans, one benefiting all employees who are included in a collective bargaining unit and another benefiting all other employees. Similarly, if a plan benefits only employees who are included in collective bargaining unit A and employees who are included in collective bargaining unit B, the plan can be treated as comprising two separate plans. However, if collective bargaining units A and B are treated as a single collective bargaining unit, the plan will be treated as a single plan. An employee is treated as included in a unit of employees covered by a collective bargaining agreement if and only if the employee is a collectively bargained employee within the meaning of Sec. 1.410(b)-6(d)(2). © Multiemployer plans. Consistent with section 413(b), the portion of the plan that is maintained pursuant to a collective bargaining agreement (within the meaning of Sec. 1.413-1(a)(2)) is treated as a single plan maintained by a single employer that employs all the employees benefiting under the same benefit computation formula and covered pursuant to that collective bargaining agreement. The rules of paragraph (g)(11)(ii)(B) of this section (including the optional aggregation of collective bargaining units) apply to the resulting deemed single plan in the same manner as they would to a single employer plan, except that the plan administrator is substituted for the employer where appropriate and appropriate fiduciary obligations are taken into account. The noncollectively bargained portion of the plan is treated as maintained by one or more employers, depending on whether the noncollective bargaining unit employees who benefit under the plan are employed by one or more employers.

I would say that there is a difference between what the regs require and what a reviewer has caught in issuing a determination or opinion letter. I don't know of any exemption from the definite formula requirements for a Keogh and a Keogh is subject to all of the requirements of other qualified plans. Twenty-three years after TEFRA I don't even hear that many people talking about Keogh's since the term doesn't have all that much current meaning. The definite formula is one area where a lot depends on the reviewer. I know for a matching formula, some were fixated on this notion while others were not. A good number of aproved plans also have a discretionary match formula which may not pass muster as a pre-determined definite formula.

A ps plan does have to have a definite formula. For a self-employed person it probably just a comp to comp fomula and if there is only one person you can then contribute whatever you want keeping in mind the 415 and 404 limits. This is from 1.401-1--(note the word "pre-determined") (ii) In the case of a profit-sharing plan, to enable employees or their beneficiaries to participate in the profits of the employer's trade or business, or in the profits of an affiliated employer who is entitled to deduct his contributions to the plan under section 404(a)(3)(B), pursuant to a definite formula for allocating the contributions and for distributing the funds accumulated under the plan (see paragraph (b)(1)(ii) of this section); ******** ii) A profit-sharing plan is a plan established and maintained by an employer to provide for the participation in his profits by his employees or their beneficiaries. The plan must provide a definite predetermined formula for allocating the contributions made to the plan among the participants and for distributing the funds accumulated under the plan after a fixed number of years, the attainment of a stated age, or upon the prior occurrence of some event such as layoff, illness, disability, retirement, death, or severance of employment. A formula for allocating the contributions among the participants is definite if, for example, it provides for an allocation in proportion to the basic compensation of each participant. A plan (whether or not it contains a definite predetermined formula for determining the profits to be shared with the employees) does not qualify under section 401(a) if the contributions to the plan are made at such times or in such amounts that the plan in operation discriminates in favor of officers, shareholders, persons whose principal duties consist in supervising the work of other employees, or highly compensated employees. For the rules with respect to discrimination, see Sec. Sec. 1.401-3 and 1.401-4. A profit-sharing plan within the meaning of section 401 is primarily a plan of deferred compensation, but the amounts allocated to the account of a participant may be used to provide for him or his family incidental life or accident or health insurance.

No discretion is allowed. There is a kind of a drop dead date. If you don't cash out by the end of the second plan year following the plan year of termnation of employment you cannot forfeit until there have been five one year breaks.

Here is a link to an 2002 article: ALERT: To Wrap or Not to Wrap In Light of Privacy http://www.haynesboone.com/knowledge/knowl...=pubs&pubid=432

If participant refused to change election under 125 Plan, would you then assume that any payments toward coverage as orderded by the QMSCO are post-tax?

Just to be clear, the language cited by 401 Chaos was expanded in the correction of 2005-1. Under Chaos's example, you not only have a change in form and timing issue but potentially an acceleration issue because of the lump sum option. The revised 19© was clairified to provide that the new payment election in '05 would also not be considered an acceleration. the revised language is: With respect to amounts subject to § 409A, the plan may be amended to provide for new payment elections with respect to amounts deferred prior to the election and the election will not be treated as a change in the form and timing of a payment under § 409A(a)(4) or an acceleration of a payment under § 409A(a)(3), provided that the plan is so amended and the participant makes the election on or before December 31, 2005. The explanation of this change was: Paragraph © of Q&A 19 in the December 20 version of the notice provides transition relief under which certain amendments and elections will not be treated as a change in the form or timing of a payment under section 409A(a)(4). The revisions to the paragraph make it clear that those amendments and elections also will not be treated as an acceleration of the payment under section 409A(a)(3).

From Benefitslink in August '04 and link to 20 page Vaguard Article https://institutional5.vanguard.com/VGApp/i...efaultFund.jsp# 8/5/2004: Selecting a Default Fund for a Defined Contribution Plan (Vanguard Center for Retirement Research) Excerpt: "Many plan sponsors currently choose a fixed-dollar fund as the default option for their defined contribution plan. This report analyzes the legal and investment considerations underlying the selection of a default fund, and suggests that in light of the 'prudent investor' standard that governs such fiduciary decisions, a better choice for a default fund is one or more balanced investment options."

125 provides that a plan cannot discriminate against highly compensated participants. If all HCEs are excluded from participation then you don't have a discrimination problem under 125. If you are fully insured you don't have a 105 discrimination problem. I asked Harry Beker this question at a conference and he said that this plan design should not present a discrimination problem. Also, the EIBA green manuals indicate that such a design should be o.k.

I agree that they are eligible rollover distributions. But only "eligible plans" have to comply with the automatic rollover rules and an eligible plan is defined as "a plan which provides that any nonforfeitable accrued benefit for which the present value (as determined under section 411 (a)(11)) does not exceed $5,000 shall be immediately distributed to the participant." Where I have a question is when you have a plan that does not contian such a provision but provides for non-consensual distributions for whatever amount upon termination of the plan pursuant to 1.411(a)-11(e)(1). Is that plan subject to the automatic rollover rules? Just from reading the statute, I would say no. From a logic standpoint based on the purpose of the change in the law, I would say yes.

1) Agreed on the first sentence but I think the whole premise of the thread was a distribtion that met 1.411(a)-11(e)(1). 2) I agree with the second sentence as well except that if a plan did not provide for cashouts, I am not sure if they would be an eligible plan and would be required to make non-consensual plan termination distributions in the form of an automatic rollover.

O.k., you actually forced me to go back and look at 401(a)(31)(B) which provides: (B) Certain mandatory distributions.— (i) In general.— In case of a trust which is part of an eligible plan, such trust shall not constitute a qualified trust under this section unless the plan of which such trust is a part provides that if— (I) a distribution described in clause (ii) in excess of $1,000 is made, and (II) the distributee does not make an election under subparagraph (A) and does not elect to receive the distribution directly, the plan administrator shall make such transfer to an individual retirement plan of a designated trustee or issuer and shall notify the distributee in writing (either separately or as part of the notice under section 402 (f)) that the distribution may be transferred to another individual retirement plan. (ii) Eligible plan.— For purposes of clause (i), the term “eligible plan” means a plan which provides that any nonforfeitable accrued benefit for which the present value (as determined under section 411 (a)(11)) does not exceed $5,000 shall be immediately distributed to the participant. It seems to me that (ii) and the reference to 411(a)(11) only serves to define "eligible plan". Once you have determined what an eligible plan is, then any distribution from that eligible plan in excess of $1,000 must be made in the form of an automatic rollover. In other words (ii) defines the plan and not the distribution--(i) defines the distribution. I guess this could lead to the strange situation of a plan that did not have automatic cashouts in the traditional 411(a)(11) sense would also have to apply the automatic rollover rules to any involunatary distribuiton upon termination. However, a plan that does not have cash outs would not since it is not an "eligible plan". I am not sure that this makes sense. Then again, I am not sure that exempting such distributions makes sense given the policy behind the rule in the first place (keeping amounts in plans or IRAs). I would be interested in what the drafters of 2005-5 have to say.

But that is not the only exception to 411(a)(11). The non-consensual distribution of amounts in excess of $5,000 in a terminating DC Plan (not subject to 412) is another exception to the Rules of 411(a)(11). See 1.411(a)-11(e)(1).

As Blinky noted, you sure can if you don't have annuity options in your plan and you do it before 3/28.

I see Belgarath's point, bu tI don't think that there is much question that Q&A 2 states that a mandatory distribution in excess of $5,000 would be subject to the automatic rollover rules. This Q&A provdes: Q-2. What is a mandatory distribution? A-2. A mandatory distribution is a distribution that is made without the participant’s consent and that is made to a participant before the participant attains the later of age 62 or normal retirement age. A distribution to a surviving spouse or alternate payee is not a mandatory distribution for purposes of the automatic rollover requirements of § 401(a)(31)(B). Although § 411(a)(11) generally prohibits mandatory distributions of accrued benefits attributable to employer contributions with a present value exceeding $5,000, the automatic rollover provisions of § 401(a)(31)(B) apply without regard to the amount of the distribution as long as the amount exceeds $1,000.

Also, as a practical matter what are you doing for the medicare portion of FICA? It seems like there is already a mechansim in this regard for "non-account" balance plans to determine the amount subject to FICA each year. Sorry LeeNunn I just read the last couple sentences of your post and see you have just covered this point.

A SERP is obviously deferred compensation, but there is no deferral election in a SERP. An employee has no choice on whether to receive cash or defer an amount. The deferral election rules only apply "if the plan provides that compensation for services performed during a taxable year may be deferred at the participant's election..."

Assuming the doctors are going to perform procedures at the center you really need someone to look at the affiliated service group issues. It sounds very "A-Orgish" and you need to look at the various corporate structures. If you do have an affiliated service group, you have worries other than getting the Doc's some extra $$ into the Center's retirement plan. You would have to test the Doctors plan for coverage including the surgiical center's employees as not benefitting. You therefore could have trouble in the Doctor's plan.

It was probably the significant deteriment rule from the 411(a)-11 regs: (2) Consent. (i) No consent is valid unless the participant has received a general description of the material features of the optional forms of benefit available under the plan. In addition, so long as a benefit is immediately distributable, a participant must be informed of the right, if any, to defer receipt of the distribution. Furthermore, consent is not valid if a significant detriment is imposed under the plan on any participant who does not consent to a distribution. Whether or not a significant detriment is imposed shall be determined by the Commissioner by examining the particular facts and circumstances.

Blinky, My question has not been whether they could be used to meet the gateway, but whether they could still be used as QNECs under 1.401(k)-1(b)(5)(ii) and also 1.401(m)-1(b)(5)(ii). Did he address this?

I think there were over 11,000 views and 90 plus responses on this one: http://benefitslink.com/boards/index.php?s...c=18334&hl=bush

From the ASPA 2002 Q&A session with the IRS: p 10. Regarding Rev. Rul. 2002-42, if you don’t have to fully vest money purchase accounts at conversion to profit sharing plan, are the forfeitures from the money purchase accounts, when reallocated in later years, subject to the money purchase restrictions because they were part of “the assets and liabilities that originated” in the money purchase plan? My initial reaction is of course not. Revenue Ruling 94-76 says if separate accounting is maintained, only transferred assets are subject to the “money purchase taint” and references 1.401(a) – 20 Q&A 5 for acceptable separate accounting. There it says that if the plan is a transferee plan with respect to a participant, the QJSA rules don’t apply to other participant’s solely because of the transfer. This would seem to imply that the “taint” goes away when the originally transferred assets are reallocated to others as forfeitures. A. We agree that there would be no taint. This is a clarification of our discussion at the ASPA conference in San Diego this summer.