Mike Preston

Larry, good to see you posting. I've been gone more often than not the last two years myself. I don't understand Toolkit's response. "Can 2 plans with different eligibility standards (one with a y/s wait, and the other with immediate entry) be aggregated for 410(b) & 401(a)(4)?" The answer is yes. "When testing the HCEs' plan (for 410(b), ADP & PS non-discrimination), I think I cannot use the 1 y/s requirement of that plan--but I can't find the reg stating that. Does anyone know where it is--or am I once again hallucinating?" This is the corollary question. Above, you asked whether you can test everything together. Now you are asking whether you must test everything together. The answer to that is no. The citations you are looking for are two-fold. First, you will want to look at 1.410(b)-6 "Excludable Employees". The second is 1.410(b)-7 "Definition of plan and rules governing plan disaggregation and aggregation". Combining those two citations gives the Plan Sponsor a lot of flexibility. At one end, the plan sponsor can permissively aggregate both plans and determine that there are no excludable employees. This results in the "yes" answer to your first question. At the other end, the plan sponsor can select to test each plan separately, in which case each plan considers those participating in the other plan as excludable. Note that you have separate 410(b)/401(a)(4) tests for PS and 401(k), so it gets a bit messy.

Maybe the attorney is saying that the plan is drafted so badly as to make those who the code and regs would consider NHCE's as being part of the group that is tested against to see whether the ADP test is passed or failed. I would think this should be a document failure correctable under EPCRS rather than something which causes somebody who is not an HCE to be considered an HCE under the plan. In fact, if the lawyer insists on treating somebody who would otherwise be an NHCE under the code and regs as an HCE for any purpose under the plan I would run for the hills. The potential for abuse is frightening. So, I would ask him to read 414(q). It is short and sweet and demands you to define, as of the first day of the year, everybody who is an HCE for the year in question, other than those who become 5% owners during the year. Your description is a little bit off to me as to what you are doing. Under the code and regs you not only identify the number of HCE's, but you actually identify them as of the first day of the year (other than the 5% issue previously mentioned) BY NAME. You don't take the number of HCE's and apply that number to the census for the current year. We stopped doing anything with the current census (other than for 5% owners) after 1996! How old is this lawyer?

"I'm thinking that perhaps the plan was restructured into component groups and the allocation within each component group otherwise meets 410(b) and (a)(4) without cross-testing. The question - can you avoid cross-testing based on the document language that I posted below? The other firm is saying "Yes". The allocations are not comp-to-comp or permitted disparity." Now, this is starting to make some sense. Yes, you can create as many component plans as you like and if each and every one of them passes a4 without use of cross-testing then there is no gateway required. However, I've never seen a plan broken into component plans for testing that didn't end up using cross-testing on one of the components.

"If coverage is to be met on a benefits basis, I know there is no required gateway." This sounds like nonsense to me. "benefits basis" = "cross-testing" Maybe I just got up on the wrong side of the bed. Is there a DB plan hiding in the background that satisfies one of the other tests (benefits being primarily DB in nature, for example)?

I'm with Reed (and the others) on this one. It sounds like the other firm is just plain doing it wrong. However, your description doesn't make any sense, either: "It seems the other firm is not using cross-testing to pass (a)(4). If anything, they are using the ABPT, but I want to make sure that this doesn't fly in the face of the Plan Document." First, there is nothing in the document that ties your hands one way or the other. Second, if they are not using cross-testing then no gateway is required. Third, one cannot "use the ABPT" to satisfy a4. If you pass the ABPT you get a lower threshold when testing your rate groups. That's all. No matter what the ABPT says you still need to pass a4 by testing your rate groups. Fourth, I have serious problems with people being completely eliminated from receiving a contribution along with use of the ABPT at all. It seems to me that the IRS has stated on many occasions that use of language like you have in your plan to eliminate one or more people who would otherwise qualify for a contribution is the same thing as eliminating them by name and hence would disallow use of the ABPT. Are we having fun, yet?

Logan, there may be a confusion. Your title implies that you are looking for a table that is somehow defined along with an interest rate. If that is the case, you are looking for a commutation table, not a mortality table. So, what exactly are you looking for?

I like SoCal's answer better than mine, if you are talking about a cash balance plan. Mine still holds if you are talking about a unit accrual defined benefit plan.

The technical answer is yes, the practical answer is probably not. What you have to watch out for is the 133% rule on accruals. Most COLA's will cause that test to fail.

This is wrong. Even if the plan year will be calendar and the first year is 2013 that can still give rise to a deduction on the 7/1/2012-6/30/2013 tax return. In this case the plan documents need to be signed before the end of the fiscal year. That is, on or before 6/30/2013.

Well, I don't like the NRD being defined as "2032". Is that 1/1/2032? Or 12/31/2032? Doesn't it make a difference?

Different prototype sponsors built in different options. Instead of asking for a general response here the best thing you can do is to look at the employer's prototype and see whether it would allow for this sort of change. As mentioned earlier, the change will cause the ACP test to be more difficult to pass, but no more difficult than the ADP test is now. If you are passing the ADP test by way of what is known as "borrowing", then this will definitely make it more difficult to pass. But this assumes that the HCE's are the ones that primarily benefit from the change and that isn't at all clear to me based on what you have posted. Instead, it may encourage additional deferrals by NHCE's and that will definitely make the tests easier to pass. In other words, you can't tell in advance which way to predict based on the information you have provided.

Especially when Congress changes the law so that the different sources are treated differently in ways that aren't on our radar at the moment. Then where will you be? Sued by your client?

I agree with ERISAToolkit. It is far more likely that the design of this plan incorporates a non-elective contribution for each individual determined as a percentage of deferral with a factor based on age. While clever, it would fail one of the basic 401(k) requirements that no form of compensation or employer contribution OTHER THAN A MATCHING CONTRIBUTION be dependent upon deferrals and hence would be disqualified. It therefore is a requirement that anything talked about as a matching contribution (with or without an age component) must, in fact, be a matching contribution. As ERISAToolkit accurately points out, there is no age leveraging of a matching contribution in the ACP test (one CAN argue that age leveraging is available in the average benefits test on all contribution types, but my guess is that this level of detail is beyond the scope of the initial question).

He can do a QACA.

Nothing. It is done all the time. I confess that the term "alumni" throws me a bit. Care to define? If you are saying that a collective bargaining unit negotiates a high(er) benefit for a group of its collectively bargained employees such that it then agrees to a lower wage - this happens all the time. It is the nature of collectively bargained plans. Yes, there are limitations on the total benefit that can be paid to any participant (generally referred to as the Section 415 limit) that usually revolve around the person's wages. These limits are actuarially determined and it would therefore not be uncommon for an individual whose compensation was $500 to have a benefit that would "cost" $1,000. But things are much more complicated than what I've described above, so without context the description, although it agrees with your conclusion, is basically useless.

This is one of those unfortunate circumstances where the PBGC has been inconsistent in their handling. Very unusual for the PBGC because they are typically very consistent. Some people I've talked to say exactly what ERISAToolkit said and if you follow that reasoning you would answer the question yes, you have found everybody. Others have said that the autorollover provisions of a plan are overruled by the Missing Participant regulations. For amounts under $5,000 though, the amount that is autorolled is the exact same amount that is sent to the PBGC. This gets messy, though, because if the PBGC doesn't accept the autorollover you either have to get it back from wherever it was rolled to or double pay. Neither is really acceptable. The point in time to deal with this would have been when the Form 500 was filed and assigned. Calling that person at the PBGC and then following that person's lead would have been the safest course. I would still call the person it was assigned to and see if you can't get him or her to adopt ERISAToolkit's point of view.

You are mixing apples, oranges, grapes, strawberries and bananas. Care to take another crack at it?

Before the limit is imposed.

Where are you located? There may be low cost or zero cost legal services available in your area that are focused on women. For example, in the Los Angeles area you can find (www.hbcfl.org/) the Harriett Buhai Center for Family Law. Maybe there is something similar in your area that you can contact. As I'm sure you understand by now, the Plan has to follow the terms of the QDRO, until the QDRO is modified, even if the QDRO is inconsistent with the settlement agreement. Hence, the first thing that somebody working for you will determine is whether what the plan thinks is a valid QDRO is, indeed, a valid QDRO. If it isn't, and you convince a court to that effect, then you are back at square one. Even if it is a valid QDRO it can still be amended if your lawyer thinks it is different enough from the marital settlement agreement to convince a judge that it should be modified. Nobody can give you a percentage chance of that happening without reading both documents and asking a bunch of questions. Good luck.

My head hurts. You can't offset cash balance allocations by DC annual additions. You CAN offset hypothetical account balances by the actuarial equivalent of the defined contribution account balances (although to do so requires very careful drafting in the plan document and brings up many questions as to whether the cash balance plan remains an applicable plan. I'd need to see the complete language in the plan to go further because something is lost in translation.

Are you asking for the rate determined using 4.75% times 120% (which would be 5.70%) using the UP84 (unisex) table set back six years? If so, I get 11.56209 as an annual rate and 11.1038 as 1/12th the monthly rate. So, I think you are spot on.

Yes, they have stopped working, again. <sigh>

Kevin, this isn't the first issue that presents itself when you have overlapping plan years with calendar year tax years or different fiscal years. I think the plan sponsor takes on the responsibility of doing things timely when the circumstances dictate. For example, in your 10/31 example on the day the plan is adopted they should have a procedure in place to make sure everything gets tested before 12/31. Can't do it? Adopt a 12/31 plan year end. Fiona, it is very difficult to answer when facts are left out. How much of the deferral went in between 1/1 and 6/30? How much of the $6,000 excess is from the employer's contribution versus the deferral? What does the plan say about correcting 415 errors? There is just so much left out that no general answer is available other than: you are safe only if you limit people in such a way so as to guarantee no 415/402(g)/414(v) violations.

Things are working as before. Thank you; thank you; thank you!

The one link I rely on is the Get New Posts link. It always comes back with an empty search unless I log out and log back in. Maybe this is a new "feature". If it is, then I'd like to request yet another feature for a link that lists posts in the last 7 days. Yes, I know about the list new posts in the My Assistant wizard and it is helpful, but not nearly as useful as what the View New Posts link used to provide.