Mike Preston

Seems like it would be ok if the timing of the amendment was non-discriminatory. It is a benefits, rights & features issue. So you would look to 1.401(a)(4) regulations for guidance. I think I'd want the IRS to bless it before I'd tell the client that it is something that would definitely work.

I'll go a little further. I think it is highly probable that you can do the former. A quick review by ERISA counsel should settle the matter.

It depends on whether you want the answer from a theoretical basis or from a "real world" perspective. The bottom line is that you have to follow the terms of the document as it is drafted with respect to the provision of gateway contributions. Theoretically, however, a plan can be drafted such that those who do not satisfy statutory eligibility are excluded from receiving a gateway minimum. Personally, I don't see why documents provide any language at all with respect to the provision of the gateway.

I think the IRS is on record saying you can use any rate in the range. I usually take the position that the rate you use is the rate you publish on the Schedule B.

I don't think a plan is limited in any way. If overpayments have taken place they can go back as far as they deem appropriate under the circumstances. I have no idea about Social Security's ability to reduce future payments or to collect on past over payments.

Here's a sample letter, although it might need to be updated, since it was written quite a while ago: http://www.volumesubmitter.com/forms/transmitletter.html A prototype document can not be modified by a single letter (other than by filling in the blanks as anticipated by the IRS) without creating an individually designed plan. Sorry.

Sorry, not 411(f). Instead, try 1.411(a)-11(f). I agree with Katherine. Nothing describes how the process is supposed to work with respect to secondary consent - that is, the consent of the spouse. Separate login and separate pin seems to be a minimum threshold (otherwise the participant could merely indicate consent when none existed).

Keep in mind that there are some organizations that have primary execution and submission dates that are later than 9/30/2003. It depends on when the LATEST opinion letter was issued with respect to that organization. I believe the latest letter was issued in April of 2003. Hence, there is at least one organization in the country with an execution and submission date of 4/30/2004!

As I believe everybody most likely is. I think the "fourth paragraph" you cite in the original message is intended to allow offsets of only a portion of the DC plan, but the implication is that the offset will be inclusive of earnings on whatever portion is being used as an offset. Maybe it is a facts and circumstances analysis that would allow what you want whenever the DC plan has positive earnings in all years, but results in extra testing in years where the DC plan has negative earnings. Maybe a maximum offset equal to the actual account balance? Consider the DC plan that has an initial contribution of 5% of pay and the earnings in the first year are negative. Your desired "offset" exceeds the DC account balance. That can't satisfy the rules, can it? I seem to recall that there is an exception available once an amount that would be used as an offset is distributed. In that case, the IRS allows the use of a theoretical continuation of earnings. Such as the case where a plan is offset by another plan but the other plan is terminated and paid out. In that case, the offset is fixed at the amount paid out increased with theoretical interest. This would be the functional equivalent to what takes place when a participant terminates employment and invades the DC balance but is not entitled to an annuity until a later date. To be honest, I can't think of any reason why the offset would necessarily require an increase for positive earnings, but I don't think you can use an offset that ignores negative earnings. But try as I might, I can't find anything, yet, on the issue that gives me any comfort at all. So I'm back to my "get a letter from the IRS" on anything such as this. Sorry I couldn't find anything more definitive.

Bingo. There is no question that a Plan can provide for electronic signatures. Those signatures are not limited to just the participant, so, in theory, a Plan could provide for completely paperless transactions involving both participant and spouse signatures. IRS Notice 99-1 has significant information in it. Have you reviewed it? It containes guidance with respect to, among other things, under Section 411 (the one that requires the signatures on distribution paperwork) the "Method of Providing Notice and Obtaining Consent", the "Timing of Notices" and examples. See the final regulations under Code Section 411(f), also, as they indicate how "consent" is allowed.

In the beginning (sounds like a typical fairy tale, doesn't it?) there was concern about 411d6 with respect to -11g amendments, whether they cured a problem or not. In fact, I don't see where -11g specifically overrides 411d6 in any manner. So let me return the question: How do you get around 411d6 with respect to any -11g amendment? The answer is, I think, that if you can do so with respect to a curative amendment, you can also do so with respect to a non-curative amendment. The pattern I see followed most often is: 1) Contribute for year pursuant to document provisions in effect at EOY 2) Institute -11g amendment that states additional contributions for the prior year are being made pursuant to the terms of the -11g amendment 3) Deduct contributions made pursuant to -11g amendment on subsequent tax return (assumes FYE and PYE coincidence)

I think you can do it. Of course, it would apply equally to all people employed by the same entity. If you have any doubt, bring up the issue in an LOD submission.

The former. The IRS has made it clear that they would have needed to word -11g differently to force an -11g amendment to be curative. Instead, it happens to be curative most of the time, but there is absolutely no requirement for it to be so. The IRS felt that it would be unfair to force an -11g amendment to be curative because to do so requires a plan sponsor to exhaust all permutations and combinations of non-discrimination testing before it could definitively be established that a failure exists.

Andy, I think if you put numbers on it, you'll find that you don't need to include the additional NHCE's at the same percentage. They are needed specifically for 410(b), not for 401(a)(4).

There is no need to have a discrimination failure in order to use an -11g amendment. It is perfectly permissable to make such an amendment that puts these additional people in the plan. However, unless the fiscal year and plan years are different, the deduction for these employees will be pushed to the next fiscal, which I presume is not what the intention is at all and therefore renders the -11g amendment ineffective for what the client wants.

I would like to claim that I'm clever enough to have sussed out the real question, but until the last post, Blinky was right. The original post was about 2005 and I was answering it as if it were asking about 2004. So, I agree with Alf. Everyone appears correct. Certainly Blinky has been all along and I agree that there is no difference in 2005 as to whether the plan uses current or prior as long as there are no NHCE's in either 2004 or 2005. Now, after the last post, it appears that the issue is indeed 2004 so I stand by my originally incorrect, but now correct, response!

I'm reading your words differently than what you are intending, I guess. When you say that "Thus, the PBGC would not be required to pay these benefits under any circumstances." I'm reading it as you saying: "Because the amount being left on the table is typically from an allocation category that the PBGC wouldn't pay anyway, the PBGC really doesn't give a hoot." The form, from the PBGC's perspective, is specifically authorizing a reduction of benefits payable not only to the level that the PBGC would pay, but to an amount that is less than that. I see a huge difference between my characterization and yours, so I'm belaboring it a bit. Sorry.

Why isn't it clear on its face? If you are using prior year testing, the limitations on the HCE's in the current year are based on the deferrals of the NHCE's in the prior year. If the prior year's ADP for NHCE's was x%, then the HCE's are limited in the current year to the appropriate percentage based on an NHCE percentage of x. I don't understand where it is written that if the number of NHCE's in the current year drops to zero that a plan using the prior year testing method can automatically modify x. Maybe I'm not understanding something.

I disagree with both portions of your statement. The amount that can be "walked away from" is 100% of the benefit, not merely the amount that is not guaranteed under the PBGC's insurance scheme. Further, all it does it eliminate the PBGC's liability. The plan's liabilities and the IRS' view of them is not modified. Critically, the IRS demands that the full benefit be considered when calculating any minimum funding requirements. Of course, those stop once the year during which the plan is terminated is complete. Then, the plan's provisions for allocation of assets on plan termination apply. There, you get into 80-229 and the basic requirement that the allocation be non-discriminitory. That's the easy part.

What does the document say? Typically, when there are multiple adopting employers, the plan will reserve the right to amend the plan to the primary plan sponsor. Once that is done, the adopting employers are automatically subject to the modification. Good practice would suggest (demand?) that the primary plan sponsor inform the adopting employers of the new provisions, but I've seen circumstances where that hasn't been done. Don't recall the repurcussions, though.

Tom, I'm not sure I agree with the answer. I agree it is an interesting question. My take on it would be that you would need to change to current year testing in order to get the free pass.

I recommend that the phrase "waiver of benefit" be stricken. It isn't a waiver. It is an agreement to not hold the PBGC responsible for payment of benefits that it might otherwise be required to pay. The PBGC allows a participant to release it from liability only if that participant is a majority owner. Here is what I negotiated with the PBGC many years ago. It has been published in various books of forms over the years. I see no reason why it needs to be changed. Note that it doesn't mention the IRS because the IRS wouldn't recognize it, anyway. From the IRS' perspective, they have always agreed that 411(d)(3) allows the plan to pay benefits only to the extent funded, provided that the allocation of monies is non-discriminatoty under RR 80-229. Waiver of Pension Benefit Guaranty Corporation Liability I, , being a majority owner of , A {State} {Corporation, Partnership or Sole-Proprietorship} and a participant in the Plan hereby agree to accept a benefit that is lower than my accrued benefit under the terms of the Plan if, upon termination of the Plan and allocation of assets, pursuant to Plan Section , assets are insufficient to cover all such benefits. I understand that my signature on this form will release the Pension Benefit Guaranty Corporation from any and all liability to myself or my beneficiaries with respect to benefits under the above mentioned plan. Date: Signed: {type the participant's name} As the spouse of the majority owner mentioned above, I also agree to release the Pension Benefit Guaranty Corporation from any liability to myself or my beneficiaries with respect to benefits under the above mentioned plan. I understand that by signing this form I may be giving up valuable benefits under the Plan. Date: Signed: {type the spouse's name} Witness or Notary

How about if you cite your conflicting answers, first. Also posted in the other thread.

How about if you cite your conflicting answers, first?

Just the 5330's.