Mike Preston

And I admit to being totally confused. 410b states that the plan year is 5/1 to 4/30. Yet Tom provides an example based on a calendar year plan just to confuse me (and he does a marvelous job). Then, at the end, 410b uses an example of somebody hired 3/14, which to my way of thinking would come in on the entry date next following 3/14/x+1, which would be 5/1, wouldn't it? Why hold for 9/14? I will crawl back into my shell now.

Until further notice, I am taking the same position you are taking with respect to an election made to apply a balance (COB or PFB) to the MRC. That is, it doesn't matter when the election is made, the effect is the same as if the election were to have been made on the first day of the plan year in question for 430 purposes. It seems perfectly reasonable in a tit-for-tat kind of way. If the IRS thinks nothing of requiring a Plan Sponsor to make elections to apply balances to MRC in order to satisfy quarterly contribution requirements that might not be known as of the date the election theoretically needs to be made, we should be able to delay said election and get the same mileage we would have gotten. I agree with you that a plan with more participants than the PBGC threshold (25) would have triggered at least a one-time filing.

I don't see where the $325k comes from. Can you elaborate?

Correct what?

I'm with jkolsen on this one. The granularity required under the regulations is annual. And when looking at the annual period, the requirement is that they be eligible for a matching contribution should one be made. Your 7/1 entrants satisfy that definition. About the only stretch you can possibly worry about in this instance is whether the removal of the SH match provision was discriminatory due to timing. I find it hard to believe it is, but I guess one could conjure up a situation where it could be. So, the short answer to your latest question is: yes. The medium answer is: Rephrase your question to *had* the employer made a matching contribution would they have received a portion of it?

Only for purposes of determining the shortfall amortization base. For other purposes, such as MRC (which is what is being discussed in this thread), funding shortfall, and FTAP the value of plan assets is always reduced by the PFB (and the COB, too). Note that the language of 4972©(7) clearly (at least it is clear if you just read the Code, itself, as it exists, and ignore the history of what it has previously said) eliminates the excise tax on non-deductible contributions made to defined benefit plans (other than multi-employer plans). Caveat: when this was pointed out to somebody at the IRS who will remain nameless they were of the opinion that 4972©(7) couldn't possibly say that, and believed that interpreting as saying that would be an unreasonable interpretation.

No protection, so you can do it retoactively.

Scott, what have you been doing to take into account 417(e)?

It should, I think, but the fraction to use is 5/10.

Do your materials include the Internal Revenue Code? See 416©(1)(B).

Bummer.

Interesting take on it. But I think you are overthinking it. As long as the plan doesn't require that the allocation being made satisfy a given requirement (such as passing 410(b) or 401(a)(4)) then the fact that an allocation to the HCE's is not supported, 401(a)(4)-wise, by the allocation to the NHCE's does not create an additional right for the NHCE's, nor does it allow reducing the HCE's. The HCE's benefits are accrued. No question about it. The only question is whether the plan sponsor wants a qualified plan. Yes? I thought so. In which case they need to do something. How about an -11g amendment? Grand idea. But, if the plan says that the allocation has to satisfy a rule of some sort, then the allocation has to satisfy that rule. Does the plan say that?

Can't be removed from an ERISA plan. You can eliminate it with respect to future accruals only.

Separate issues and I agree with you that for the IRS to kick back a form that isn't signed when the instructions say not to sign it is.....a problem and for them to ask for small penalties when a postmark isn't clearly readable when a form is received within a day or two of the applicable deadline is.....a problem. But neither one is triggered by the problem originally mentioned.

He was an advertising agency exec, wasn't he?

Ignore it. The IRS letter asking for a copy of the extension approval is a boo boo. Just attach the extension request (5558) as always. Be happy.

Which, as far as I'm concerned, is just fine.

No, it need no be an involuntary cashout.

You should probably include a caveat in the post, although in a sane world, one wouldn't be necessary. Go ahead and protect it if you like, but be aware that protection is easily broken. I think your caveat is stronger if the worksheet is not protected, but that is just a personal opinion.

Well, I may be the only one who feels this way, but I think the language lends itself more to the conclusion that the MRC includes its interest adjusted amount as the basis for the 404(o) language. Hmmmm, that doesn't read mellifluously, does it? Let's try again. I think that you can deduct the amount specified in 404. 404 says you can deduct the MRCs (not MRC, the "s" is critical). A contribution made 8 and 1/2 month after the end of the plan year in an amount that is necessary to satisfy the MRC for the year constitutes a piece of the required "MRCs". Don't you love the English language?

Or disqualified for having a plan that ignores the a17 limit.

Just what your potential new client wants to do about his not qualified plan.

Yes.

Your understanding is wrong. Read what mwyatt wrote.

I think we need to back up a bit. If the 2008 funding ratio is 90%, then they do not satisfy the threshold for ignoring credit balances when determining the AFTAP. But they *ARE* exempt from restrictions in 2008 because the 2008 AFTAP is 80%. What am I missing? As far as 2009 goes, you do not look back to 2008. Instead, the proposed regulations have two provisions that bear on this. The first is illogical and calls for 1/1/2009 to be a determination date. Nobody has really figured out what this means, so everybody is ignoring it, to the best of my knowledge. The second one calls for a presumption of continuing your 80% until 3/31/2009 and then, assuming no AFTAP being done by the stroke of midnight on 3/31/2009, a "deemed" waiver of the balance, what you have called the FSCB, which I call the COB, takes place if it is sufficient to restore the restriction that would otherwise apply if the 80% were reduced to 70%. The question is how much of the COB is deemed to be waived. You haven't said what the 1/1/2009 assets are, but you need to know that to do the rate of return calculation so you can bring forward the unused portion of the 1/1/2008 COB to 1/1/2009. So, let me first ask the question: how much of the 1/1/2008 COB was used to satisfy the 2008 minimum required contribution? Then, second, I'll answer it: probably zero, and for this purpose I'll pretend that there was a $150,000 contribution required for 2008. So, let's assume that the rate of return was, oh, -30%. Your COB at 1/1/2009 is therefore $700,000 and your assets are around $9,000,000 * .7 + $150,000 = $6,450,000. You are presumed to have a 70% AFTAP before deemed elections, so your presumed FT is $6,450,000 / .7 = $9,214,286. In order to move your AFTAP from .7 to .8, you would need to waive $921,429. But you only have $700,000 so you are not deemed to waive anything because even if you waive it all, it doesn't get you to 80%. But watch what happens when there are significant distributions in 2008. Let's pull out $2,500,000 from the plan (not unlikely in a given year where the AFTAP is 80% or more, since the lump sum floodgates are open, which if that hasn't been the case for a while, the queue will be long indeed!). The assets at 1/1/2009 are reduced by the $2,500,000 paid out (assume it was all paid on 12/31/2008) to $3,950,000. You are still "presumed" to have an AFTAP of 70% and the presumed FT is now $3,950,000 / .7 = $5,642,857. To move from 70% to 80% all you have to waive is $564,286. Since your COB is $700,000 on 1/1/2009, you *ARE* deemed to waive that amount and your remaining COB on 1/1/2009 is $135,714. So, we have a barely funded plan that *IF* it pays out a significant amount of lump sums (at, no doubt, 417(e) rates that would cause the plan to experience a loss), it has enough of a COB to waive so that the plan never has a lump sum restriction. But, if it doesn't pay out and is therefore, by definition, better funded at the beginning of the next year, the restrictions apply. Kind of a silly result. But it is what it is, assuming the proposed regs get finalized in their current form.