Mike Preston

Yes, that can be done. And that makes sense. But merging Company B's plan into Company A usually makes no sense from a liability perspective.

It is what it is. What is the death benefit? If it is a lump sum then that is the account balance as of the date of death and it shares in earnings from that point. What else could it be?

If the NHCE is due more money, then there is no question that he/she is participating.

The problem is that I don't have any indication one way or the other. I suspect there is a detailed and incomprehensible regulation which tells the FDIC's computers how to determine the coverage percentage based on the inputs from the declaration. If I have a choice, because the instructions are vague, I would like to make those choices in a manner which is best for my client. But first and foremost I want to do it right. Both require better information than the website instructions provide.

I may be wrong on this, but I really don't think there is any direction available. You are absolutely right about your description. We are between a rock and a hard place on this one. You have to do something reasonable and go with it. What would help me make my decision would be a better understanding of the rules. The form obviously asks how well the plan is funded, overall. Is that used as a ratio to ratchet down the coverage (sort of like a an under insured casualty claim)? Example: sole participant, with more than $102,000 in the account. Assets are only 75% of present value using actuarial equivalency. However, actuarial equivalency is 3%, 1983a projected to the year 2016. If one uses 417(e) rates and notes that a lump sum is a viable (indeed, 100% likely) alternate form, can one use the 417(e) rates and determine a funding ratio of something well in excess of 75%? Both sets of assumptions are "in the document".

The form also demands that you acknowledge that you used the assumptions specified in the plan. Doesn't that cinch it down pretty tight?

Like many things made up by those in the marketing end of things, OCPP is an illogical name, because I have never seen a plan that has TwoCsPP or ThreeCsPP or FourCsPP. In fact, the nature of the beast is that every single plan is OCPP. Now, had they named it OPPC, as recently suggested, at least the name would have made some sense. So, in a nutshell, anybody who would tread on their "patent" would be marking themselves as people who do not understand the product they are selling. Sounds a bit like Congress and the bills they pass.

Company B is being less than conservative. Why not have the employees roll their money into a plan established by Company B?

Is it incongruous that a fish has rights to air? Or is that an intentional portion of the analogy?

Your view is dangerous in my opinion. 415 increases are tested in the current year, as you indicated (but you also indicated that you ignored it), changes due to salary changes are tested in the current year, why wouldn't changes due to interest rates be tested in the current year?

It is not unique. Many volume submitter plans have language which directly supports the concept.

What you describe as a random walk is nothing more than a change in the accrued benefit brought about by continued age/service. That change is reflected in the a4 accrual for testing purposes. I just don't see how it can be any other way. There are ample precedents in the a4 regs, me thinks. I just don't have time to look them up today. The annual testing method is not "what have you accrued this year". Instead it is "what are you accrued in now less what have you tested in the past". At least that is always the way I've done it.

The latter for 401(a)(4). Otherwise, you could potentially have benefits accruing which are never subject to testing.

I think this is a matter of reasonability. If you accrue expenses and appropriately charge them to participant accounts (even if you have to have a special valuation to do so), you should be fine. If the expenses turn out to be less than originally accrued, folks are entitled to an additional distribution. If your accrual is unreasonable, it could very well be viewed as subterfuge for an impermissible 411(d)(6) cutback. Otherwise, it just has to be allowable. With that said, if there are any questions as to the validity of the approach, ERISA counsel should be engaged.

I don't think it would be a problem whether or not there is a DL in the works. You can look at it a different way. Distributions from accounts are allowed at any time. The accounts will be charged a pro-rata share of expenses (including accruals) immediately. You accrue whatever you want to "hold back" and allow distribution of the balance. Once the accrual is reconciled, you again have account balances that can be distributed. I just don't see the issue.

I don't see a problem. The only potential pitfall is extremely remote. That would be a claim of discrimination. But for the life of me I can't see that flying (although stranger claims have been made by IRS auditors in the past).

I didn't look at Laura's cites, so I'm not specifically saying that the rationale used is the definitive supporting argument. But I know her conclusion (No.) is correct.

The New York state bar (and the California state bar) maintain an up to the minute attorney search capability. It appears she is working with RIA in New York City. If that isn't enough information for you to track her down (for example, if you are at a location which blocks the New York state bar search form), send me a private message and I will send you the details from my search.

My goal has been to ensure that the issues were appropriately vetted. I think the arguments are squarely on the table and that people can make up their own minds. So, I'm happy to let it go at this point, as well. If you get any further input from additional sources, either way, please drop in. Take care, mike

Here's the link to subscribe to the service (pun intended): https://service.govdelivery.com/service/mul...html?code=USIRS

The IRS publishes monthly, early in the month. The last one was Notice 2008-65, sent to me via the IRS GuideWire email service on 7/8/2008. It contains the June segmeent rates for 417, so as long as you don't have: 1) a one month lookback and 2) need to pay somebody out in the first few days of the month, you should be ok.

This is an example of torturing the law to get a benefit for the HCEs (read money) that goes beyond the contractual intent of the employer as expressed in the terms of the employer's plan document. Pardon me for asking, but how do you know the intent of the law? Have you read the Blue Book? Do you really need me to dig it out to see whether the obvious rationale is stated therein? You really don't believe me that the IRS and Treasury reps have repeated that concept at many conferences over the years? Ok. I can agree with that. But they are restored to a position of "unhurt" by relating the maximum age and service requirements allowed in the code to their (the employer's) participation guidelines as expressed in the plan for their company. Strangely enough, I actually understand what you are trying to state, here. And, yes, I think we should agree to just disagree. However, with that said, you used the word torturing earlier and, to me, that is what you are trying to do. Example: Employer A has a plan with 10 HCE's and 80 NHCE's. The plan uses the statutory framework for age/service and participation. The HCE's contribute just enough such that they are not required to receive a refund. Employer B is identical to Employer A, however, the participation dates are monthly rather than semi-annual. Instead of 80 NHCE's, there are 85 NHCE's. Because this group of 5 additional people has a lower average deferral percentage than the other 80 NHCE's, these 10 HCE's are subject to receiving a refund. For you to state that Employer B is "is restored to a position of "unhurt" by relating the maximum age and service requirements allowed in the code to their (the employer's) participation guidelines as expressed in the plan for their company." is, in a word, hooey-pooey. They were more generous than the law allows, and under your philosophy, the HCE's are disadvantaged, plain and simple.

As long as I think there is hope, I'm an "or not". But I certainly understand the sentiment.

I guess I'm coming back to the underlying reason for the provision: the employer shouldn't be hurt by allowing for age/service/entry earlier than required by law. By allowing for entry dates before the statutory entry dates, the test shouldn't be worse than they would be if the employer kept everybody out as long as possible. With that as the rationale, it makes perfect sense to me that a plan with a 1 year wait, with age 21 as the age requirement, might still have "otherwise excludables" if the plan's entry dates were not as restrictive as they might be.

And, the other side of the coin, you'll find: www.abanet.org/jceb/2006/JCEBQAwithIRSfor2006.pdf where the IRS makes it clear that they no longer have a clear position on the matter.