Mike Preston

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! Uh, you missed the part about this being a non-PBGC plan, huh?

I think that allowing CAS to float up is one of the exceptions under a4, is it not?

Blinky, if a plan which has not previously had a certification for 2007 (so is presumed to be less than 60% at the moment) gets a 2007 certification done on 4/29/2008 wouldn't it apply until 9/30/2008? Or has that boat sailed and only a 2008 certification (either regular or range) can save it from being restricted between now and 9/30/2008?

You are very late to the party. I think this has been pointed out to the IRS in the comment letters that have been sent by ASPPA and COPA. The bottom line is that they tried to get too clever and they most assuredly should just have said less than 90%. What they meant to say, but didn't end up doing so, is that the restrictions on plans with percentages less than 60% will apply to any plan with a prior year percentage of less than 70% and the restrictions on plans with percentages less than 80% but equal to or more than 60% will apply to any plan with a prior year percentage of 70% up to, but not including 90%. But I guess that would have been more words than they wanted to print.

I think the assumption as to when a distribution is assumed to take place is still within our purview, absent the circumstances where the law takes it away. So, on (1), I'd say yes, IMO. At least, yes based on the fact pattern you've given. On (2), it is up to you subject to the first sentence of this response.

415? Why does that matter? I haven't the time to look it up today, but certainly it would satisfy 414(s), would it not? "CODA"...... means that this is a non-issue, doesn't it? I'm so confused.

In my wildest imagination I can't get to it being rollable. But I guess stranger things have happened.

Seems like the answer is an obvious one. He was a long time participant as of the end of Year 1 (boy, is that a poor choice of numbers). He terminates at the end of year 1. Before a full year goes by, he is rehired. Since it is fundamentally impossible for this individual to have incurred a break, as of the date he is rehired, he is immediately eligible to participate in the plan. He is a participant until he again terminates before the end of the year. This time, however, as of the end of the year, he has less than 500 hours. Now, at the end of Year 2, he has incurred a BIS. He is now hired again at some point in Year 3. Having incurred a BIS in year 2 he does not enter the plan until again working a year with more than 1000 hours. So he never gets back in the plan. What have I missed?

Nu?

Unanswerable question. Need to review engagement agreement with client and see if a potentially injured party might have cause to run the flag up your proverbial flagpole. Unless the agreement with the client anticipates this and takes away any discretion on the part of the actuary, I'd be leery of holding up any work that was in process. If the client isn't willing to put such an agreement into effect, in writing, now that the circumstances are clear, that may tell you something.

A plan which provides for an allocation is not a terminated plan, in the accrual sense and can be aggregated with another plan that provides for an accrual/allocation. A terminated plan, however, can not be aggregated according to one James Holland. Jim is pretty firm in his conviction. I'm not so sure, but haven't chosen to press the issue.

That's it!

dmwe, don't you need common ownership, though? Common ownership is only 49% for B and C.

It is still a prototype. Probably. I have heard some prototype sponsors tell their clients that, once they stop being an administrative client, that the prototype sponsor will no longer maintain the plan. Fair enough. But they go further, and state that any required amendments which are done on behalf of the prototype sponsor's clients (that is, an amendment made to the underlying prototype by the prototype sponsor, without the need for an individual client to execute anything) will NOT apply to their plan and, therefore, as of that first moment when the plan maintained by the client and the "real" prototype plan are different, the client's plan stops being a prototype and is, at that point, an individually designed plan. The prototype sponsor has a vested interest in saying to the client that the plan stops being a prototype the minute it is no longer on the prototype sponsor's list of "clients". I'm not sure that is correct, but it serves the prototype sponsor's interests so I understand why they advance it.

It is one approach I've used. It certainly works. Each case stands on its own. There are many other approaches, depending on the number of HCE's, how much the plan is underfunded, benefit history, etc.

I would call it "inappropriate". Need to hie thee to an ERISA lawyer.

The IRS has allowed a post-termination amendment in conjunction with an LOD. Certainly allowable to put it in the resolution. Allocating on the basis of PVAB's doesn't always work because PVAB's already have a built in potential for discrimination (think permitted disparity). Certainly allocating excess assets on the basis of PVAB's has been given the heave ho by the IRS years ago if the underlying PVAB's have a non-uniform context. It *should* be less problematic in the case of an underfunded plan. I'm just leery of using anything other than ratio of 1% of compensation times YOS as a benefit to use to determine the PVAB which, in turn, determines the share.

There really isn't any guidance from the IRS beyond what they allow in their approved plans. Search for a phrase like "to the extent funded." Almost all plans have language that directly deal with the allocation of assets in the event that the plan has insufficient funds. The fact that the language is meaningless in the context of a PBGC covered plan is besides the point! Well, maybe not meaningless. How about "almost meaningless"? In any event, the IRS has always allowed an undefunded plan to allocate its assets on a non-discriminatory basis (I forget the basis for it, was it 81-202? Or 84-175? Will you settle for something "way back then"?). In that context, what the PBGC allows is certainly non-discriminatory from the IRS' perspective, so Jupiter aligns with Mars, etc., etc. when there is a PBGC plan termination where the PBGC allows a majority owner to accept, with spousal consent, a benefit less than that which is promised by the plan.

My message was primarily aimed at Tom, in confirmation of the point he raised about the testing being dependent on the mortality table if, and only if, permitted disparity is being imputed. I haven't the time today to review your latest exchange with Tom or to address the confusion. April 15th is fast approaching! If you get no resolution on this by then, bump it.

If any, the former. But I don't think either works to address this specific issue. Although the first of the two is closer to the mark, I think.

Tom, of course. The permitted disparity amount is an "addon" that doesn't vary as the mortality table/interest changes. Hence, if the other portion of the calculation is compressed (or expanded) the permitted disparity portion conversely expands or contracts (in relative terms). If the compression (or expansion) is not uniform between participants then you get different results with a change in the underlying mortality/interest.

Yup.

A deduction for a profit sharing contribution CAN create an NOL. However, the deduction is limited in a given year to 25% of compensation. If no earned income or compensation in the "second" year, then the deduction is limited to ........ $0. However, had the company otherwise posted a loss, along with compensation of $100,000, then a $25,000 contribution could increase the loss.

I think you put more words into your reply and said......."yes".

Moi? Without a new plan, I don't think so. I suppose it is possible if you establish multiple allocation dates. Seems like a lot of work for one participant's reduction (not elimination) of 10/12 of what they might otherwise get, which starts out at only 2/12 of a normal year.