Mike Preston

Gosh, I sure hope so!!!!

On day of liquidation I'd be tempted to limit amount to AP as required by the DRO and send the rest ($0.42?) back to the participant's account. EDIT: The DRO did, in fact, provide for the 42 cents to be paid to the AP.

I might have gone with 119 as a BOY count.

And what is the practical effect of having approved a DRO as a QDRO that calls for $X to be paid to the alternate payee only to find that the participant is only entitled to $Y where Y is less than X? Just give it all to the AP? Reject the previously approved QDRO as no longer qualified? Other?

You said: "This is a true statement. I think in his particular situation the point is moot because he mentioned he cannot pass it, but I was just trying to be thorough." Ahhhh, I see the confusion. I'll just pretend you said: "This is a true statement. I think in his particular situation the point is moot because he mentioned he DOES NOT pass it, but I was just trying to be thorough." I usually use "cannot" in the context of one never being able to satisfy the test, not in the context of this plan's actual demographics not satisfying the test.

Of course, I wouldn't put up much of a fight, if any, if such a DRO were rejected in the first place. A DRO can't order a plan to pay a benefit to an alternate payee that, in effect, requires an increased benefit not otherwise payable from the plan. What if there is another 2008-type year and the plan finds that the total balance of the participant is less than the "flat dollar amount"?

Shouldn't it be?: "and NOT just the 40 NHC and 6 HC actually in component plan 2?" In any event, your conclusion is correct. The example is made more clear, IMO, if you replace 15 with 9. Now the rate group's ratio percentage is: (9/50) / (2/7) = 63%. And while you can't use the ABT to allow use of a ratio percentage of less than 70% when testing component plans under 410(b), you *can* use it to allow a rate group's ratio to drop to the mid-point. So, in this case, if the ABPT is 70% or more, 9 NHCE's in this rate group "works".

Remember that the actuary can adopt, as part of the funding method, a policy to include in the valuation (assuming a BOY val date) those employees that are employed as of the valuation date who will enter the plan before the end of the plan year. Fits like a glove.

Austin, care to edit your response? Your second paragraph doesn't seem right. It mentions not being able to pass ABPT and then the third paragraph contradicts that. Maybe a numeric example would clarify things.

GMK's example also works. It is not uncommon to have a single entry date. To satisfy the rules, it is retroactive.

The 2003 Q&A I referenced was from the ABA, not ASPA. Back then, the questions considered to be highly relevant were repeated at a few conferences to make sure the answers were shared with as many as possible. In addition to the ABA cite I gave and the ASPA cite you gave, I found this from the 2004 ASPA Annual Conference Q&A: 9. If a plan document provides that the administrative committee may limit HCE deferrals in order to prevent ADP testing violations, and the plan administrator takes that action through resolution and not by plan amendment, is this considered to be an "employer-provided limit" so that contributions in excess of this imposed limit are eligible to be treated as catch-up contributions? A: Yes I note that Sal's practice tip in the thread you provided a link for seems to lean away from the administrative committee route and leans, ever so slightly, in favor of my interpretation: "Plan practice tip. Given these comments, certainly the preferred practice would be to set forth the limit in the plan document, or at least a formula for determining such limit (e.g., HCEs are individually limited to three percentage points more than the NHC average for the preceding year)." As with many things in pension practice there are things I personally wouldn't do but would be more than happy to defend anybody else's use. This is one of them.

I already said the practice is a good one. I found some support for your position in the ABA Q&A from 2003, so while I don't think the IRS would agree *TODAY*, they appeared willing in 2003. I suppose as long as the limitation remains the same for an entire plan year, nobody will complain. I still think that if presented with a bad fact pattern, like a manipulative Plan Administrator that changes the limit for the benefit of a small number of HCE's, the IRS will NOT treat it as a plan imposed limit.

People in component plan 1 are treated as not benefiting when testing component plan 2.

I'm with David. One more post with advertising and all his threads and posts should be removed.

What you have described is simply not a plan imposed limit, IMO. I'm not saying the technique of administratively limiting HCE's to avoid an ADP failure is bad. It isn't. It's good. But that doesn't impact what is and is not a catch-up.

Sigh.

Correct, he could not. Yes, it does, with respect to existing benefits. If an individual retired at 55, receiving $1,000/month is provided with an increase from $1,000 to $1,200 through an amendment to increase benefits, said retiree could be offered a cashout of the additional $200/month. Once the payment of the increased $200/month is commenced in the form of an annuity, no cashout unless the plan is terminated.

Yes. Keep in mind that a person who elects to commence an annuity at any age must select an option that satisfies 401a9. The RBD stuff we fixate on is only for defining the latest age at which benefits must commence. But 401a9 is much more than just a pointer to how an RBD is determined.

What was left unsaid is that a deferral election form that includes separate elections for regular deferrals and catch-up is that these sort of electable catch-ups are, by definition, related to a plan limit being exceeded, not a general limit being exceeded. That is why payroll companies have a code of "catch-up deferral" available. In the absence of a plan limit being exceeded there is no way that a payroll clerk can know that a deferral goes in as a catch-up. In the case where there is a "testing limit" (I assume a plan that uses prior year NHCE ADP to determine this year's ADP limit for HCE's), as Austin suggests, the division of the 5,500 over 26 payroll periods does NOT result in the $211.54 of deferrals in the first payroll being a catch-up. The last $5,500 for the year is a catch-up because the ADP limit (even if known in advance) isn't a plan limit. Right?

True, but in reality they are designed to have separate elections for deferrals and for catch-up deferrals on one form and at one time. The key is that both are deferrals and a change in either is effected via a new deferral election form. The original question was whether a plan that allowed deferral election changes at specific times during the year can provide for catch-up deferral election changes more frequently. I'm pretty sure there is a prohibition on doing it that way.

Catchups are just deferrals.

Is everybody else as offput as I am by the tone of Joel's posts? Enough, already.

Citizenship and country of residence have no bearing.

Your brain is completely raw.

IMO, it was NOT well written. The writeup confuses direct rollover (which is referred to as a transfer) and "lump sum distribution, subject to mandatory withholding, followed by a personal rollover with the need or at least advisability of personally augmenting the funds received to the extent desirable and allowable", which is referred to as a "401(k) rollover". Use of the term "transfer" is a confusion that those who are competent to advise would avoid in this circumstance. That word doesn't exist on the first few websites I just visited discussing rollover "options".