Mike Preston

Not in the current versions floating around. May be added to another version theoretically set for discussion starting in late April.

Sure is.

Lot's of stuff. Have anything particular in mind?

I think that "Thus, catch-up contributions for prior years are included in the account balances that are used in determining whether the plan is top-heavy under section 416(g)." makes it clear that the plan in question has a TH percentage for 2008 of more than 60%. This particular woodchuck can't chuck wood.

It depends on the interest rates. What are you using for your current liability "estimate"? It depends on whether we get technical corrections and are afforded the opportunity to a cushion of 50% of the Target Normal Cost. It depends on whether the accrual can be constructed as a past service accrual or not. It depends, huh? If their current and retirement ages are between 62 and 65 you can use the free trial version of the software I previously uploaded to this board to do an exact calculation. In about 10 seconds.

If you are seriously interested in this topic, you should contact Sal Tripodi and ask for a copy of one of his prior publicatiions that went into great detail on compensation. I think it was nearly 100 pages discussing nothing more than how to detemine compensation under various definitions. I may be mis-remembering the number of pages. It certainly SEEMED like 100 pages. It was either his ERISAViews publication or his ERISAUpdate publication. These are periodic newsletters that he publishes and are not part of his ERISA Outline Book.

QDRO's don't magically change the English language. If I'm awarded 100% of the account balance, then I'm awarded everything that goes along with it. I would certainly expect that in the absence of clarifying language, that should the account balance increase based on a positive investment return that the account balance I'm entitled to would similarly increase. Can a QDRO be drafted such that the account balance is a fixed amount and it never changes from that moment forward? Well, I suppose anything is possible. I wouldn't recommend that a plan adminsitrator accept it, though, since in the case of a loss, it would require the plan to pay a benefit that is not otherwise available. That is a no no, right?

"Can current year catch-up contributions be excluded from the end of year balances for purposes of determining the top heavy percentage?" How much wood could a woodchuck chuck if a woodchuck could chuck wood? I don't know, because the woodchuck can't. And since current year contributions are NEVER used in the determination of the top heavy percentage, you can, of course, answer the above question in the affirmative. But you must include them in the following year when looking at the account balance as of the end of the prior year. Did I misinterpret your question?

At first blush it appears that none of these must be aggregated. Of course, you haven't given any information about whether a potential affiliated service group exists. Since more than just obvious stock ownership is used to determine aggregation (things like rights of first refusal for cross buy-sells, etc.) it is strongly suggested that ERISA counsel be engaged.

I have had that same question.

The pension attorney is a fool for believing that particular actuary. Surely this isn't the first time the attorney has been blessed with such fascinating advice.

But it IS the latter.

I think there is something that is not quite a range certification that you can move toward. Essentially, you can use the 2007 contribution receivable in the determination of the FSCB at 1/1/08, which you can then burn as needed. BTW, are you sure that you must burn from 79% to 80% at a point in time before the restrictions become effective (before 4/1/2008)? I agree you would have to do so on 3/1/2009, because the presumption is that during the first 3 months of the year, the prior year's AFTAP continues and if you burn, you have to burn. (Now I'm getting far afield, but essentially, you would probably have already burned everything you have prior to then, anyway, because wouldn't you have to have burned everything as of 1/1/2009?)

Two issues: 1) Yes, it is deductible in '08. A better way to word it, though, is that it counts against the '08 deduction limitations. It is not automatically deductible. In a year where compensations dramatically reduced, you might end up with either no new monies being deductible. In fact, some of the prior year contributions might not be deductible. Hello, excise tax. 2) If not contributed by 30 days after the due date of the tax return, the contributions count as an annual addition for the year during which they are deposited. Somebody get a match that has no compensation in the new year? Hello, disqualification. Is it worth the wait?

No special rule and it would work if we knew what the IRS' position is going to be with respect to what are referred to as "includable contributions" in the regs. There is some talk of eliminating them entirely and just relying on the annual calculations as defined under PPA for the minimums and maximums. If you want to potentially use $40k or so of your 2008 maximums by flipping or flopping, go for it. Actually, it sounds like the right move, all things considered.

But they won! That should make up, in theory, for the fact that you now have to process a refund. 415 violation and all that Jazz.

I treat non-equity partners as HCE's in the vast majority of cases. Of course, usually their compensation is alone enough to ensure they are HCE's. But in that rare case where the compensation would be beneath the threshold you do the calculation you mentioned and if it is greater than 5% then they are an HCE. At least, that is the way that I *think* I've been doing it.

This isn't new. The IRS is aware of it. I seem to recall that they did, in fact, modify the proposed regulations to ensure that this issue becomes, well, a non-issue. I just can't lay my fingers on the cite at the moment. Maybe it was just an informal announcement saying that the final regulations will provide that this issue never really sees the light of day.

Trick question? Or are you assuming that this individual had a W-2 for the SSWB from another employer? K-1 income is earned income. As such, you reduce it by the 1/2 FICA reduction, don't you? And, yes, you further reduce it by the deferral, I believe, so the non-integral percentage was closer to right than the 3%. Or did you factor in the 1/2 FICA reduction?

No, you've hit the nail on the head, but you have now done what I didn't want to do, which is to ask the OP to interpret the language/guidance as it exists to see what a person who has little familiarity with the process thinks the answer should be based solely on reading the written word. Alas, since that isn't possible anymore, I'll just end with saying that I think the written word is clear that it is inappropriate to include receivables and that the IRS has some contorted logic that revolves around the definition of "account balance" to allow them to render the language which says you don't include receivables to mean that you do include them. I'd love to see a court case because I think a judge would castigate the IRS for such a tortured interpretation. Nonetheless, it is clear that there are some people at the IRS who think you should include receivables in a PS/401(k) type plan and therefore if you choose not to, at least be aware of those folks.

You didn't answer my question, did you?

The text accurately reflects the rules. You'll just need to pull the regs at 414(q) to see that to be the case. I've always found the phrases a bit confusing, though, because the use of the word "may" can be misinterpreted. A quick example: 10 employees and therefore the top 20% is 2. Consider the 10 employees and their ownership and comp as: 1: 50% $200,000 2. 00% $200,000 3. 00% $150,000 4 50% $120,000 Numbers 5 through 10: 0% $50,000 In this case we find that number 4 is a more than 5% owner but is not in the top-20. The language cited is meant to say that even though number 4 is not in the top 20% that person is nonetheless an HCE. So, there are 3 HCE's based on the above using the top 20 election (1, 2 and 4) If not making the top 20 election, then there are 4 HCE's.

Enda, without poisoning the well, based on what was posted above, how do think the answer to your first question should be worded?

Maybe I'm just confused, but I thought the exclusion from the FT for HCE benefits with respect to amendments made within the last two years was only effective with respect to the cushion. I agree it is excluded from the cushion. So, assuming for some strange reason that you have no cushion at all (an existing plan was frozen and an amendment was adopted 1 year ago increasing benefits solely for HCE's (this is getting very weird), the plan is aggregated with another plan for satisfaction of a4, so the only participants in this plan are HCE's, then all the "old" participants were paid out and the assets in the plan precisely equaled what they were owed (have I mentioned this is getting very weird?)), wouldn't the increase in the FT be amortized over 7 years for minimum funding purposes? Doesn't everything that isn't in the NC for the year fall into the FT and get amortized over 7 years to the extent it isn't already being amortized?

All returns include gains/losses. Does that solve your problem?