Mike Preston

Tom, ask the question you really want to ask. Of course it can be amended.

Bump.

If that cockamamie position of the IRS is a reasonable interpretation of the law, then the law, as written, needs to be modified through Technical Corrections. Strong letter to follow.

By definition, if the whipsaw applies, the lump sum payable is greater than the pay credit. Round and round we go.

Indeed. Without whipsaw it will equal. With, it will exceed. I think.

Blinky. I don't know that. In many plans, the "requests" of the individuals are routinely denied because the plan would suffer the slings and arrows of 401(a)(4). I know that for sure, since it is my tests that guide the committees in determining how the benefit levels are set. I can assure you that the ultimate decision rests with a central authority and that, while not fixed (and therefore it does indeed fluctuate), it is absolutely obvious that the participants are not the ones making the decisions. In a partnership, things are a bit different. For some reason, the IRS believes that some things which are perfectly acceptable in a coporate environment are nonetheless 401(k) type (deemed CODA) issues. So, with a partnership I recommend that the proverbial ERISA attorney be involved so they can assess the landscape intelligently.

If the plan truly covers NHCE's only, then no discrimination testing will fail. However, you will want to confirm that the individual who was a former owner doesn't fit the definition of HCE somehow, someway. Best to get an attorney's opinion on this one. If S puts in a plan just for the employees of S, you must run coverage and non-discrimination tests based on those not employed by S receiving nothing. That happens all the time and does not, in and of itself, represent an extraordinary challenge.

Corp or partnership/soleprop? If the former, should be no problem as long as the "elections" each year are not left solely to the participants and that the entity applies appropriate safeguards to ensure the decisions are made in a manner intended to uphold/maintain the plan's qualified status. I've never seen a plan that provides for an interest credit in the first year, so how else would it work other than the way you have defined?

I wish somebody would, though, because I was under the impression that the new mortality table WAS in effect for 417(e) and 415 and did NOT require technical corrections. I thought this came from the 415 regulations. That is, we can rely on the regulations, for plan years that begin after the effective date of the new 415 regulations and that regulation references the 417(e) table in effect at the time of distribution. It doesn't specifically say the 417(e) table in effect as of the end of 2007 because that would mean the regs would require updating/amending to reflect any table other than, essentially, 94GAR. I know that Jim H. said as much at the EA meeting, but, again, I thought this issue was thoroughly vetted back when the 415 regs were finalized and the conclusion at that time was that the 415 regs authorized the use of the 417(e) table. Maybe WDIK might even have that discussion archived somewhere.

Yo, Jamaica Boy, you mean we can't right now? (Good-faith and all that jazz....)

What Kevin said with the one small, and irrelevant to this particular case, annotation: if there were no deferrrals in a 6 month period ending on 6/30/xx and there were ADP excesses at that point (brought about, obviously, from deferrals in the 6 month period ending 12/31/xx-1), it is an open debate whether those amounts should be considered xx catchups or xx-1 catchups. I'm not suggesting we are going to come to a consensus on this issue in this thread, when we couldn't do so in a prior thread. I just wanted the fact that there is no consensus on this issue noted.

There are two schools of thought on this. First, if technical corrections passes you will find that the 150% rule will enable a contribution which is precisely the Cash Balance pay credit. Second, if you can show that the at risk liability equals at least the pay credit, you will find that, again, the minimum is less than the pay credit, while the maximum exceeds it.

I believe the IRS position is that in order to actually be a safe-harbor, the plan's provisions must actually be a safe-harbor. If you need to change something after the fact, it isn't a safe-harbor and, further, it isn't something that can be thrown out with the morning coffee filter. If the intention is to be a safe-harbor and you fail in your endeavors, the only correction is through EPCRS.

Re: PBGC...if we are talking about 2008 or later, sure. But what if the plan being tested is a 2007 year? Stuck with 31%, aren't we?

What does PBGC have to do with it?

There is no such thing as a 2008 EOY AFTAP. At least, not for 2008. If there were such a thing, it would be for 2009. Note that the 2007 AFTAP is based on the "2006 EOY" numbers. And, yes, we must wait for something we as yet don't have in order to push the methodology forward one year. Unless, of course, you want to claim that you are satisfying whatever standard the IRS has set up for this particular item (good faith? reasonable good faith? sort of maybe, it really might be good faith?). You can do a range certification based on the hairs on your head if you were so inclined and thought it actuarially reasonable to do so. Heaven help you if you end up being wrong though, for whatever reason. You certainly don't get a different result if the range certification changes materially based an the methodology used to concoct it. And you can't change to BOY because if you used the guidance to do your 2007 on the basis that was published, one of the requirements is that you must stay on EOY for 2006, 2007 and 2008. Ridiculous, but there it is.

But I don't think OEE fits within the definition of component plans.

I'm pretty sure that "AS" stands for average salary. I think "C" stands for carrer, but it might have some other meaning associated with it. In any event, it is the compensation upon which the benefit is based and the question is close, but not precisely a Letterman question: It is "can it float?"

No idea, as I haven't kept range cert details front and center due to the fact that I have yet to issue one. Check with me on 4/29.

Having thought about this a bit, I think there are two separate issues: 1) Can one withhold from a non-cash taxable fringe benefit? I believe the answer is no. It can hardly be a "cash" or deferred election if one of the pieces isn't cash. 2) Notwithstanding the above, what compensation does one use in measuring whether discrimination is taking place? In this case, the IRS really just gives you four choices with respect to the non-cash taxable fringe benefit: a) include it, along with all of the other types of compensation that must be included in order to satisfy the safe-harbor 414(s) definition of compensation b) exclude it, along with all of the other types of compensation that must be excluded in order to satisfy the safe-harbor 414(s) definition of compensation c) include it, even if you don't include all of the other types of compensation that would need to be included to satisfy the safe-harbor 414(s) definition of compensation and pass the compensation ratio test d) exclude it, even if you don't exclude all of the other types of compensation that would need to be excluded to satisfy the safe-harbor 414(s) definition of comensation and pass the compensation ratio test. Pick your poison.

I think that is exactly what it is saying. A gateway applies to the plan as a whole, not to the myriad of hypothetical plans that you might set up (component plans) just for testing purposes.

Have you looked in the EOB to see what it has to say on this issue?

I really don't have time to do an exhaustive search. Maybe somebody else will pitch in. But I think it is in there. Look around the fresh start rules.

Well, it takes care of the DC gateway requirement, anyway.

No, not everyone's - not in standard termination. The benefits must be 100% covered after majority owner's waiver or sponsor's commitment to make make the plan whole by depositing additional funds. Otherwise, no standard termination! Q1: even if the plan can be terminated under IRS rules, dont the non owner plan participants have a claim for suing the employer and plan for violating the cutback rule of ERISA? #2 don't the non owner participants have to be notified of the plan temination and the reduction of their benefits as part of the IRS termination process? #3 Dont they have the right to object to the termination of the plan? Q1: The plan has language in it to deal with underfunding on plan termination. That is what they are entitled to under ERISA. Neither the Code nor ERISA requires a plan sponsor to actually fund a benefit. Q2: Of the termination? Sure. Of a "reduction"? No. There is nothing that precludes explaining it, though. Q3: If PBGC they have plenty of time. If non-PBGC only if submitted to IRS. That is the purpose of the NTIP and the deadlines stated therein for comments to be received by the IRS and the DOL. If non-PBGC and not submitted to IRS, then only option is going to court, as far as I know.