Mike Preston

To be honest, I request, and have so far been blessed with clients that agree, to have their limitation years match their plan years which match their fiscal years. I may consider an off fiscal year approach later this year for new plans, but this issue would need to be resolved first.

That DB answer is based on old law and regulations. Have they been effectively changed by new 404 language? I don't think there is any guidance, hard or soft, on this issue. Simplify it: Fiscal 6/30, plan adopted 4/1 (full 12 month years) with effective date 4/1. Is deduction 0% in fiscal year that ends 3 months after inception of plan due to new 404 language? 404(o)(1)(A) sure looks like zero to me. 404(o)(1)(B) has potential, but sure looks ambiguous to me. I would think the "safe" approach is to apply the rule cited above to 404(o)(1)(B) (3/12th of the MRC for the first plan year is deductible in the first fiscal ending 3 months after plan's effective date). But a more agressive reading would be that the new law calls for the MRC as of 6/30 (whatever that is) as deductible. Guidance on this stuff would be really welcome.

Here is a link to the letter. Meetings are already scheduled. Let's hope it gets a receptive audience. http://www.asppa.org/pdf_files/PBGC_missed..._ASPPA_COPA.pdf

ACOPA, in conjunction with ASPPA, is both writing a comment letter and arranging for meetings with PBGC to try and get some relief. Stay tuned. There are currently at least 4 separate subcommittees charged with drafting comment letters on a lot of subjects. Quarterlies, 430/436 regulations, hybrid plans, etc. Putting something on the table that is researched properly, worded properly, has appropriate action steps included, etc., etc. takes a tremendous amount of work. I'm happy to say that we have dozens of actuaries (and others from ASPPA) investing a lot of time towards these projects. Anybody who wants to be involved in matters such as these is encouraged to send me or Judy Miller (jmiller@asppa.org) an email.

Hard to imagine that it would be a problem. Unless the contributions were so rich as to cause a deductibility problem. Even that is hard to imagine. Amend plan now, call for a current contribution calculated with reference to the missed amounts and then see what happens from there. You haven't said anything about the benefit structure, just the contribution structure, so there are many things unknown that might derail the process, but each of them are somewhat unlikely. But you can't rule them out until you.....rule them out.

Well, if I understand things, I think you are making it more complicated than necessary. If we agree that the SH will be provided to everybody in the plan, then doesn't that establish a minimum for everybody of 3%? Certainly, a minimum for every NHCE of 3%. The next level is 7%. Finally, you have people who can get more than 7%. BTW, as worded it sounds like somebody with 20 YOS would get 27%. Was that intended? Or was it that somebody with 21 YOS would get 8%, 22 YOS 9%, etc. Hard to imagine that this wouldn't pass on a cross-tested basis, and with 7% between SH and discretionary it should satisfy gateway. I think.

If I understand what you are intending, then disaggregating is not an option.

Depends on your definition of recently. PPA 2006, I think.

Yes. Confusion (I hope the answer is yes, but no regs under 404, to date.

The excise tax for contributions in excess of the maximum deductible amount was eliminated in 4972 for all db plans that are not multiemployer. If the potential reversion excise taxes don't disuade your client from contributing then perhaps the confusion that exists over whether the amount contributed would ever be deductible at all might.

Let me clarify a bit. My understanding is that any portion of a balance (either COB or PFB) which is elected to be used to satisfy the RMC for the year is automatically assigned first to the first quarterly, notwithstanding when the election is made. Even if it serves to modify a previously held belief that an actual contribution might have been used to do so. Personally, I think the proposed regs will get a facelift in this area, because the ordering rules that are built in to the regulations as this is written, are just illogical. To the IRS' credit, they have already acknowledged that this is the case. At this point, I've come to the conclusion that it *IS* necessary for the plan sponsor to make the election in writing, but the election has nothing to do with whether or not the balances are used towards satisfying quarterlies.....it is the election to use the balances towards the required minimum contribution. The rest follows automatically.

Nope.

Note that there is still some confusion as to exactly HOW to do that. Is a written election required? If so, does the date of the written election have a bearing on the additional interest charge? That is, would an election signed 4/16/2008 to apply $10,000 from the 1/1/2008 COB to the first quarterly from 2008 result in a different "offset" than a similar election signed 4/15/2008?

Yes. And we ensure that assets would fall in the 90%-110% corridor in case your asset valuation method was something other than market value. SoCal already answered this. It is reflected by reducing the net contribution credited towards the minimum required contribution. If a BOY val, follow SoCal's write up. If an EOY val, follow SoCal's writeup with respect to any payments which are late with respect to the 4th quarter. For the other three quarters, if we are to believe the preamble to the 430 regs issued in April of 2008, you would calculate the credit that a late quarterly receives by first accumulating it to the valuation date at the effective rate and then discounting it for the period of time it was late by 5% per annum. So much fun. As per SoCal's description. Line 19c. Nice try, but the reverberation is loud and clear.

Don't think you *have* to round up. You can do "whatever" as long as you are consistent. But rounding up may be the most conservative thing to do, whether you have to or not. And it isn't really 20% of all employees. There are certain exclusions. Gotta look it up to get it right.

For this purpose, anyway.

[ ] Agree [X] Disagree [i think] I don't think either example is on point. Example 2 stands for the proposition that the range certification in your hypothetical may be done currently, may reflect a number lower than 80% and may then, when the contribution is made [without electing any portion of it towards prefunding balance], be recertified as now being more than 80% without it being a material change. That is not quite the same thing as I understood your original hypothetical, which would have entailed making a range certification now, taking into consideration the potential contributions, certifying to >80% and then recertifying to another percentage which is greater than 80% once the contribution has been made. At least, I think that is what I thought I might of, potentially, maybe, theoretically, possibly understood. Perhaps.

I think if done blatantly, the IRS would say that it doesn't conform to the regulation, since there is a pretty clear statement to the effect that anticipating contributions is not allowed when certifying. But if a range certification is made and, for any reason, it turns out to be wrong, the addition of contributions before a final certifying signature is laid on the paper may serve to right the ship.

Only if you cross test.

Good point. However, if the employer has other employees who have never been union members, of the same age or higher, in the plan, that concern would be lessened, yes?

Don't quite understand the question. Prototype reliance is simple: don't change a single thing that isn't already provided for in the document or you lose reliance. So, you can make the effective date of your change retroactive and if adopted during the appropriate period it can satisfy the requirements for 11g, but if you have to change even a comma in the document itself, no go.

From a qualified plan perspective, it seems reasonable. Whether it is reasonable from a employer/employee relations perspective is another matter.

Actually, a little less restricted than that. Merely a simple rule that eligibility is by plan, not by source and this person was eligible for the plan as of the first day of the year and received a $1 of employer money somewhere along the way, triggering the gateway.

I think full year. Sorry.

This is the first you have commented on the fact that the Target is a safe harbor. Even if it is a safe harbor, if the only ER contributions to the k plan are the QNEC/THMins, if you subtract out the QNEC, you are left with a single, solitary 3% THMin contribution for a single, solitary HCE. That won't pass anything, so you'll have to aggregate with the Target to pass non-discrimination, which means that even if the Target *was* a safe-harbor, the aggregation of the Target and the K plan is NOT a safe-harbor. Whew! Since the target will no doubt find it easier to satisfy a4 on the basis of cross-testing (it might also pass on contributions, you should check), you have gateway issues once you go through this process.