Mike Preston

If alternate payee was enough older than participant such that $200 monthly payment just happened to be precisely actuarially equivalent to $200 deferred normal retirement payable to participant, then it would all work out and no overpayment took place. I think I just saw an angel dancing on the head of a pin, though.

I was speaking about average compensation. But I should have used numbers of 1, 3, 4, etc. 2 is the only one that isn't available. Of course, if there was an amendment in a prior year such that a fresh start could be claimed, that would work, too.

You use the threshold for the year that the compensation period BEGINS in, which is 2001. In 2001 the threshold was $85,000 <= Corrected to conform with Tom's posting, which I appreciate.

NCT? I think you are stuck, given the parameters you identify. Remember that you can test on any period, not just "all years of service". Does going back only 2 years work? How about 3? Why isn't component testing available?

GBurns, not in this context. What was meant is that the amount that would be funded would exceed the amount that ultimately could remain in the HCE's account. The intent is quite noble, actually. But it ignores the realities that are associated with testing.

There doesn't appear to be specific guidance on this issue, although Tom Finnegan and I have "discussed", at length, whether the principles of 98-1 and 99-44 should apply. However, in a post-GATT environment, if the new document doesn't, in some way, establish an "old-law" benefit, then the approach that Blinky advocates may be all that is available. Then again, maybe not. (g) Unfortunately, in the absence of a PLR, an individual client doesn't seem to be able to get any advance comfort.

I agree with QDROphile. A strict reading of the a typical savings clause is that it gives the Plan Administrator the right, without asking that the QDRO be redrafted, to ignore the QDRO's provisions to the extent they provide for "any type or form of benefit, or any option, not otherwise provided under the plan". A more strict savings clause merely hamstrings the Plan Administrator into requiring the Plan Administrator to ask for a modification to the QDRO should it provide for something which is not otherwise provided under the plan. Assuming the QDRO asks for something which is allowable under the plan (such as immediate distribution to an alternate payee when authorized by the plan notwithstanding the participant's right to an immediate distribution) one never gets to the savings clause in the QDRO, as it is not needed.

Doesn't the FSA also presume that the partnership in question is subject to the same share requirement? Whether such a requirement applies to a given partnership, is advisable to be applicable to a given partnership or can/cannot be avoided with respect to a given partnership is another item that is not the purview of typical discussions between a plan sponsor and its ERISA advisors. Instead it is properly the responsibility of its attorneys.

One of the key provisions of the FSA is: "The partnership agreement makes no provision for allocations of Keogh plans different from the partners' profits percentages. " The partnership clearly needs to understand its own partnership agreement. That is not the province of the actuary or the third party administrator. It wouldn't surprise me if somebody tried, some day, to hang their plan advisor for their own failing of not having a properly drafted partnership agreement. I would hope that since plan advisors have historically never, ever provided advice as to how partnership agreements are structured the responsibility would end up where it always has been: with the drafter of the partnership agreement.

'might"?

No and Yes. They can make the correction retroactive themselves, without anybody's approval. They can not cure the disqualifying defect themselves, however. So, if corrected the plan again becomes qualified and the Plan Sponsor has probably insulated itself from any ERISA claims the participants might have brought. However, the plan's qualified status is not retroactively corrected. I think.

AJR: Run from this client. They are going to create a situation that will be impossible to untangle.

Let's put this in the third person, shall we? (;-)) I know lots and lots of people that have filled out lots and lots of 5500's and it has never dawned on any of them that a participant loan or a trust deed is what is being targeted by the language "not having a readily determinable market value."

I don't think there is much difference between using the monthly rates or the annual rates in determining the monthly benefit payable at an age lower than 62, is there? The key is that the benefit of $160,000, payable at age 62, is multiplied by the "annual" APR to determine the 415 limit at age 62. Once you start there, you will find that the 415 limit at other ages should similarly be about 5% higher than what you would get if you just multiplied the monthly benefit times the monthly APR. No, not on vacation yet. And only 2 or 3 more 1/31's to do. :-(

Ah, but what language are they speaking? You are comparing (A) to (B) and since (A) is bigger than (B) you are reaching a conclusion that (A) is "too big". But (A) shouldn't be compared to (B). (A) should be compared to ©. (A) will always be less than ©. In this case: (A) the amount payable at 60 using annual rates: $139,079.67 * 13.70915 = 1,906,664.06 (this matches yours) (B) the amount payable at 60 and 7/12 using monthly rates (I get a slightly different number because the program I have available to me while reading this message interpolates 415 dollar limits between integral ages rather than use exact actuarial equivalence) $144,932.73 * 157.02776 / 12 = 1,896,538.50 (this is about $3k bigger than yours - close enough for now) © The amount payable at 60 and 7/12 using annual rates: $144,932.73 * 13.54398 = 1,962,966.00 (this is the real 415 limit)

MGB, no there is not. You are thinking of the rules associated with, first, 71-446, and then the non-discrimination regulations. But as to 415? Never. It has always been the amount payable as an Annual Annuity.

Well, you won't be violating 415, will you? Might you be underpaying the participant?

Even though the SSRA reduction to the 415 dollar limit is applied on a monthly basis, I don't think the RR is specific as to whether the participant's age is determined to the nearest or closest age, whether you want to use years or months.

One actuary's hooey is a another marketer's sale.

Yes, right. 2 and 1/2 month deadline.

Well, we are getting there. A little more context?

In a way, FundeK, you did answer the question. At issue is when does the loan stop being a PT and start being something that the IRS views as an exclusive benefit violation? If the answer to that is "never", then there is no problem with merging the two plans. However, if the answer to that question is something less definite, the result of merging the two plans is that the potential for disqualification now rests on the combined plan, rather than merely on the MP plan. Bottom line is that I would not recommend merging the plans as long as the loan remains outstanding. I'll leave how it might happen to somebody else.

Reed, I've heard of short term memory issues before...... ;-)

Without looking it up, if under $100, 2003, if over $100 2002 if more than that amount deferred in 2002. This kind of silliness is why most will wait until after the three and 1/2 month period to return the excess and just pay the 10% excise tax.

I'll disagree with the middle one, but ever so gently. I think one generally thinks in terms of collectibles, limited partnerships, etc. when the phrase "does not have a readily determinable market value" is mentioned. Determining the market value of a fixed income obligation does not, to me, seem to require that said obligation be traded on a recognized market. The Trustee or an advisor can put pen to paper and readily come up with something. Whether what they come up with rises to the level of a "market value" is subject to argument, of course. Further, there are some who hold that a fixed income obligation with a low risk of default and intended to be held to maturity should be valued at its amortized value. Can something more sophisticated be developed? Sure. But I'm not sure it is required in most instances.