Mike Preston

Kevin, I see your logic but I just don't agree with it. 401(a)(30) is there as a backstop against a single employer trying to double dip. Once the $900 is determined to be a plan catchup on 3/31 it must count for 401(a)(30). Be that as it may, this is an issue that is not specifically addressed on Sal's worksheets and I agree that a question put to the IRS may be best. Kathy, I have already agreed to share it with one person, but I'd rather not post it publicly on BenefitsLink. In order to share it I need the person (or organization) to accept it "as is" along with a series of caveats. If anyone is interested in the spreadsheet, please send me a private message and I'll send out a preliminary email. It is a messy spreadsheet that has at least one question programmed that is not addressed in the regs (although this thread is not that question) and therefore there are people who might disagree with the way I've programmed things, not to mention the fact that there is always a possibility that the programming is incorrect and therefore the results must be reviewed by someone capable of understanding when the results are incorrect before it is used on an actual case.

I have a spreadsheet which I programmed from Sal Tripodi's ERISA Outline Book on off-calendar year plans. In this case the $900 is treated for all purposes as a 2012 catch-up. So, Kevin, I don't think he can defer the full $22,500. Only $21,600.

I think your RMD methodology is at odds with the regulations. If you are annuitizing X then that benefit is no longer a part of your participant's cash balance account. You are done once the annuitization takes place. Since you said that the plan is frozen, this participant is now in pay status. End of story. Since you said that the plan is frozen, I don't understand what you are comparing in your Late Retirement and SOB section. If there is nothing to compare, there is nothing to "win".

This question is unintelligible. I'll flail around a bit, but since I don't understand what question you are asking, I may miss the mark entirely. The son/daughter are HCE's per 414(q). They are 5% owners, so they are HCE's. They count as part of the top 20% only if their compensation puts them there. Hence, if you have 5 other employees that make more than the threshold (plus the owner makes 6) then all of those 5 count as HCE's even though both your son and daughter do, too. So, with the top 20% election you can end up with 8 HCE's out of 28.

Not an issue. You should check out the MAP-21 IRS Notice to see what happens to your 78% to 80% credit balance reduction.

Remember, for small plans the AFN is due by the due date of the 5500 filing, or, if earlier the date the 5500 is actually filed, but not earlier than 4/30.

I agree with Kevin. It is obvious that the powers that be are softening their position on mid-year amendments. I now have very little difficulty allowing a plan sponsor to, for example amend vesting upwards (a request I received just last week). I think I'm coming around to the position that amending things upward, as long as both the before and after satisfy the SH rules, is permissible (subject to an ERISA attorney approving it, of course).

trbserv, you aren't going to like what I say. I don't know what the custom is in PA, but in CA the way your QDRO was written up is exactly what is required under state law. The rationale is that you wouldn't have the ability to get credit for those last few years (when your benefit increases dramatically - as is the case in many defined benefit plans) except for the years of service you earned WHILE YOU WERE MARRIED. Hence, it is considered UNFAIR to split the benefit accrued as of date of divorce/separation. Instead, a much more fair breakdown is to divide the pension you get when you actually retire. Sorry, but if PA works the same way as CA you won't get very far complaining about this.

That has to be ok, because the holder of the POA has a fiduciary relationship with respect to the participant.

Tom has it right: you pass 410(b) so the 410(b) failsafe language doesn't mean anything. Then you move to 401(a)(4). If the formula is a designed based safe harbor you pass that, too, don't you? Look at 1.401(a)(4)-2(b)(4)(iii) for comfort.

Please learn to spell accrual. Yes, you can run the ABT on ATD to use the lower thresholds for both 410(b) and rate group testing under 401(a)(4) (they are slightly different lower thresholds, but they are definitively lower in both cases). The gateway is always tested on a contributions basis -- you can't pass gateway using the ATD methold. As Tom points out, just because you need to general test doesn't mean you have a gateway requirement. If you pass your general test on a contributions basis there is no gateway requirement. It is only if you need to use equivalent benefits testing on one or more rate groups do you trigger the gateway requirement. So, if the plan passes the ABT and satisfies 410(b) on the lower threshold for each type of contribution (match, employer, 401(k)); and, if the general test, when run on a contributions basis, satisfies 401(a)(4); then, you are done because there is no need to consider gateway. This is true whether the ABT is run on a contributions or benefits basis.

Kevin, I agree with your general approach. However, there are people in Cincinnati who differ. I have had quite a few conversations with them over the years and I can tell, by reading between the lines (because they can't come out and say it), that amending provisions mid-year is something that one reviewer might approve while another will try to apply a more literal interpretation. But let's forget the IRS for a moment and say it is a two-judge panel (you and me) deciding whether a mid-year amendment should be allowed. It looks like you and I read 1.401(k)(3)(e) differently. I read "plan provisions that satisfy the rules OF THIS SECTION are adopted before the first day of the plan year and remain in effect for an entire 12-month period" to include 1.401(k)(3)(d) [the notice requirements], since that is part of the same section. You don't. Or you make the argument that it can't mean that because otherwise silly little things like a change in address of the Trustee could cause a failure. This is exactly what (I believe) is going on behind the scenes at the IRS. Some folks are in your camp; some in mine. All of that is of little consequence when changing a phone number or address, but when making a change to what would otherwise be required front and center in the Safe Harbor Notice (like changing the allocation of employer contributions from comp-to-comp to integrated or new comp) I just have a hard time reading the existing regulation as allowing it.

You yourself said that the IRS wasn't taking a position: http://benefitslink.com/boards/index.php?showtopic=52172

Kevin, I like your position but I'm not sure I follow. Look at 1.401(k)-3(d)(2)(ii)(B). That section requires the employer contribution be "accurately described" in the Safe Harbor Notice. I think the IRS position is that the plan and the Notice should give a participant accurate information as of the beginning of the year and changing anything in the plan that impacts the Notice is a violation of the timing requirement of 1.401(k)-3(d)(3). But I'd really like your interpretation to be adopted by the IRS!

Where did 5 come from?

OMG. There is so much that you have written that is contrary to the rules of testing that you just have to go out and hire an expert. NOW!

It should probably be done more often. If the possible new client has hired an attorney to let him know whose document is most flexible, wouldn't it take place exactly as you have described? Of course, you don't need to comply, if you don't want to be in a competitive situation.

I like the logic, but I'm not sure it is germane. The issue is the eligibility computation period, not the determination of the length of a year. But it could boil down to the same underlying concepts.

Long since settled. Don't have time to look up the citation. Hired on 7/1/xx, enter on 7/1/xx+1. Sorry for the brevity.

I don't think the IRS splits hairs between an excluded employee and an employee with 0% accrual. Both count as zero in the 410(b) test. As the OP pointed out, though, the latter ends up with a top-heavy accrual and therefore would count in the 410(b) test. Nobody will give you absolution on ADEA issues as none have been litigated. Who knows when the IRS will decide to make it an issue, even in the absence of litigation. All I'm saying is that elimination by classification that has the same effect as elimination due to age is something that the regs specifically say is not allowed (that is, violates ADEA). But as of now, in late 2012, it is routinely done all over the country and there is no hint that anybody is going to go to war over the issue.

gregburst, you need to ditch those people and those resources.

Federal law is quite clear. No QDRO presented to the plan means the plan has no obligation to modify its normal procedures (in fact, it has an obligation NOT to modify its normal procedures). Where things get dicey is when a state court proceeding joins the plan. Many state law judges think that they are able to ignore Federal law. Hence, if joined, it is probably best that the QDRO procedures include a rational way to handle that circumstance, even though, technically, the Plan has the right to refuse to be joined. Most lawyers will tell you it isn't worth the time and trouble to argue with a state court joinder. Reminds me of a case I testified at in the 80's. I told the Judge that the terms of the plan controlled the determination of the benefit of the participant and that the Judge had sole authority as to how to divide the benefit up. The two sides had a disagreement about what the benefit was and again, I told the Judge that the burden of determining the benefit rested with the Plan Administrator and was subject to challenge in Federal Court, not State Court. His opinion was published with a sentence something like: "This court declines to exercise its authority to determine the benefit of the participant under the plan and rules..... blah, blah, blah". So, the Judge listened to me in one sense (he didn't rule on what the benefit was) but didn't in another sense (he was convinced he could have modified the benefit had he felt like doing so). Had he done so, the Plan Administrator was quite willing to go to Federal Court to have the state court's ruling nullified to the extent it modified the participant's benefit.

Can somebody lay out the Vogel Fertilizer results here? I see why A and C are controlled, but once Dad gives 60% of A away his ownership of A is 40% (since this number is not bigger than 50% he is not deemed to own the other 60%) and his ownership of B is 100% and his ownership of C is 0%. How is B controlled with either A or C?

What Andy meant to say was "yes". His cite is correct and one should read the citation to make sure that the facts precisely fit the scenario. As described, they appear to. However, if the reduction was due to presumed AFTAP's (either less than 80% at BOY or at 4/1) then those reductions can not be reversed.

The problem is that it is the enrolled actuary who must sign the Schedule SB, not the client. Would the Joint Board object to an actuary including a contribution made on 9/17/2012 in the contributions reported for 2011 on the 2011 Schedule SB? Remember, the actuary is supposed to check the box if the statement which follows is true: If the actuary has not fully reflected any regulation or ruling promulgated under the statute in completing this schedule, check the box and see instructions The question is whether the citation earlier in this thread constitutes a ruling. Seems like the title (Revenue Ruling) indicates that it does. Note that it doesn't matter that a court has disagreed; the issue is whether the IRS has issued a subsequent ruling walking away from its position. If it hasn't, doesn't the actuary have to check the box?