Mike Preston

Sorry, but nothing you have posted is inconsistent with the plan's ability to defer distribution until the participant's early retirement age. You are, essentially, making things up that are not written in the regs, the law, the explanations or any court case.

I understand your anger, but I'm not sure that I have the same level of concern that you do. First of all, just because the legislative history declares that it is inequitable to force widows/widowers to wait does not mean that the folks who drafted the law decided to alleviate the inequity statutorily. In this case, they left it to the plans and stated there would no longer be a legal mandate to delay until earliest retirement age. I think taking what they said and elevating it to a statutory mandate is a stretch. There is another argument for leaving it to the plans. In most plans, the benefit is adjusted for early commencement. By starting a benefit 28 years before it would otherwise be scheduled to begin, you reduce it substantially. For example, a $500/month benefit accrued at age 37 but payable without reduction at age 65, might only be $117/month if it were to commence at 37. [94GAR 5%]. Hence, the government left it to plans to decide when it was practical to commence benefits, based on benefit levels promised by the plan. I don't know about you, but $500/month at age 65 might mean something to somebody, while $117/month might not.

Angelf, there may be a rationale found in the QDRO rules. One of the hard and fast rules that QDRO's must adhere to is that they may not force a plan to pay a benefit to a spouse that would not otherwise be payable to a participant. There are many administrative functions that revolve around annuity distributions and if your plan has decided that it will purchase annuities for participants who are at early retirement age or above then no QDRO can force a plan to provide an annuity to an ex-spouse before the participant would have been eligible to receive benefits. I would be surprised if the law allowed a widow anything better, as a requirement. Plans are allowed to be more generous, though.

More than might, Andy. The IRS has stated multiple times that if the crediting rate you have in the plan doesn't conform to the rules as they eventually are written, you will be given the opportunity to change them. At the least, this change will be prospective and be given a 411(d)(6) free pass. What some people wonder is how far back the IRS will require one to go in order to receive the relief. One would hope that the answer would be "not at all", but I'm not convinced the IRS won't require something other than that. All we can do is wait and see.

OK, Reed. Spill. State law issues? Glitches? Curious minds want to KNOW!

If the combined plans pass 410(b) you can combine them for ADP and/or ACP purposes. There is nothing special about a Davis Bacon plan as far as testing goes. It is usually just a plan that provides heaps (that is a technical term) of employer allocations to those who receive Davis Bacon wages.

No take, just answered a question too late at night. Yes, gateway is determined prior to component test.

According to the Notice, the due date is 1/17/12. It is not the extended due date, is it?

I don't think the 4 NHCE's in component plan B require gateway. From where I sit, component plan B satisfies 410(b) and 401(a)(4) on its own as does component plan A.

Yes.

Precisely. $255,036.73 for 2010 to get $245,000. $255,035.00 for 2011 to get $245,000. $260,310.19 for 2012 to get to $250,000 I'm still using the .596 multiplier method rather than the .5715 method because it tracks the law rather than an algebraic manipulation of the law. I'm still a few months away (g) from needing the 2012 calculation to be correct. Is it?

It is a very choppy bit of guidance. In some parts you will see headers that indicate insurance in excess of a certain limitation will lead to problems even though the text of the guidance gives no such result and the examples specifically allow it. You really need to read the 2004 guidance, in all its glory, to appreciate what is going on.

The point is that the 2011 Schedule SE has been changed and the reduction for pension purposes (again) shows up on the form. But the 2010 Schedule SE didn't show that number anywhere. If you went by the 2010 Schedule SE for your calculation you are incorrect. I'm happy to see they changed the 2011 form so that it again shows the pension reduction. I like relying on my spreadsheets, though.

So, you didn't get the memo (read the law) where it bifurcated the calculation such that the Schedule SE deduction is no longer the appropriate measure to use as a reduction to SE Income for pension purposes, huh? Check Sal's stuff.

Most entertaining thing I've read in a month. Yes, I need a life. I would agree: a very, very low risk.

I don't think the $30,000 pyramids. Small comfort, though. Whoever is doing this at the DOL should be referred to their supervisor, as this sort of behavior is not at all consistent with the DOL's usual stance. Something else must be going on that we are not aware of.

ERISAToolkit, What about the 59.6% multiplier on the amount exclusive of the Medicare component? Have you run the numbers? Do they really work out for you as you describe? My spreadsheet shows that if the amount before reduction is $100,000, the deduction is $7,063.30, resulting in $92,936.70 If I ran that same calculation through 2010, the result is $92,935.23. As I said, a buck or two off. But your response was off the mark. Unless I misunderstood what you wrote. mike

The way the calculation works out is that you do the same thing as you would the prior year. Really, they thought of everything. OK, rounding might make it $1 off or two, but the bottom line is that if you have an "old" spreadsheet that hasn't been updated to reflect the new percentages, use it just as you would have before the change and the result will be correct. Maybe somebody else can run down the citations for you.

I don't think there is too much relevant in that Notice other than what I posted. It would be a "good thing" if the page you linked to had hyperlinks to the 2004 guidance, because that is where the details are.

Check out IRS Notice 2009-59 for information on listed transactions. Specifically, the 27th item therein is: (27) Situation 2 of Rev. Rul. 2004-20, 2004-1 C.B. 546, modifying and superseding Rev. Rul. 55-748, 1955-2 C.B. 234 (certain arrangements in which an employer deducts contributions to a qualified pension plan used to pay premiums on life insurance contracts that provide for death benefits in excess of the participant's death benefit, where under the terms of the plan, the balance of the death benefit proceeds revert to the plan as a return on investment) (identified as "listed transactions" on February 13, 2004)). See also Rev. Rul. 2004-21, 2004-1 C.B. 544, §§ 1.79-1(d)(3), 1.83-3(e) and 1.402(a)-1(a)(1) and (2), and Rev. Proc. 2005-25, 2005-1 C.B. 962, modifying and superseding Rev. Proc. 2004-16, 2004-1 C.B. 559; mike

scarabrad, you sound incredibly informed. While there is a part of me that wants you to post tips on what to invest in, I will avoid coming out and asking for that. However, there are still a few areas of concern that I have about your situation. First, you mention that the employers are all distinct. I would just caution you that "distinct" is not a technical term. If you can substitute "not aggregated under 414(b), © or (m)" for "distinct" then you will have obviated this concern. Can you? This should have been one of the very first things that any of your potential advisors determined on your behalf. Second, there is something that bothers me about the fact that you say one actuary told you that it would be of no benefit for you to start a plan. Was he the most careful of the professionals you dealt with or the most cavalier? One can usually suss this out by a conversation or two. More importantly, did he tell you WHY he (or she) thought it would be of no benefit for you to start a plan? If the letter which explains that is not available, even a snippet of whatever conversation you had would go a long way toward addressing this concern. Third, one of the not very well known parts of the law that may impact you is section 415(k)(4) of the Internal Revenue Code. That Code section says that your 403(b) is considered to be maintained by every employer you have "control" over. Certainly this includes your sole proprietorship (what you refer to as your self-employment). Hence, it appears, at first blush, that you would go through the motions for 2011 by considering your 403(b) and your defined benefit plan together. As you already point out, if the 403(b) plan wasn't in the picture, your sole proprietorship could establish a 401(k) (or, a profit sharing plan) to which you could fund an employer contribution of only 6% of pay. With the 403(b) plan in the picture, however, it is possible that you had contributed on your behalf the $20,000 you mentioned. If so, while I wouldn't necessarily agree that you could get "no benefit" from a defined benefit plan, it may have been necessary to scale back the ~100k a bit. If it is too late to scale 2011 back (since it is after the end of the year), you may find it necessary to deduct less than the full contribution to the defined benefit plan in 2011 and then put the balance in as the first dollars deducted in 2012. Note that this technique is not universally agreed upon so you would need to confirm with your advisors as to how to handle this circumstance, should it be relevant to you. I note that you do not give your birth date or age (and I couldn't find it on your profile) or the history of your self-employment income so it is impossible to opine on the amount calculated on your behalf. But if you have truly have gone to 4 different actuaries and received 4 wildly different responses you may have the documentation to make it a piece of cake for somebody to analyze their respective responses and tell you which of them have merit. Good luck.

Are you sure it is a transfer issue? Assume we are talking about a plan that was started in 2009 and we are dealing with a PFB in 2016. Wouldn't the same "fix" that the IRS gave us in the regulations apply? The issue, as I see it, is that you end up being able to count the excess contributions towards additional PFB, but the amount that is generated that wouldn't have been under the proposed regs is subject to an immediate real rate of return adjustment, rather than an effective rate adjustment.

It depends. The Code doesn't have a proscription to including said contributions, but the final regs do. Hence, for years prior to 2010 you can, if you feel so inclined, count said late contribution (discounted to BOY for years after 2008, which in this case means 2009 only).

The doc should say (mine certainly does). If it doesn't, it has an ambiguity, which the Plan Administrator should resolve.

4/1/2010, but as of 1/1/2010. You will not change anything on a 2009 government report.