Mike Preston

Was there only 1 Q&A Session at the conference? I'm trying to pin it down so I can order the tape. Thanks

Alan, nobody else has taken a crack at this, so I'll take a wild stab. It would seem to me that it is not possible to terminate a portion of a plan. To do so without considering it a multi-step transaction under 414(l) such as a spinoff followed by a temrination doesn't feel right to me. I'm certainly not aware of any precedent. However, if I were tasked with seeing whether this is something that could be done or not, I would call the PBGC and ask them whether they would allow such a termination. Their legal department is very responsive as to initial inquiries. Getting something in writing from them, however, sometimes takes quite a bit of time. In my experience, they are a bit gunshy of issuing letters that are theoretical, such as the old General Information Letters we used to be able to get from the IRS. Instead, again - in my experience, they gravitate towards specific advice. Of course, in order to do so they need the appropriate documentation (copies of plans, maybe collective bargaining agreements?). Maybe somebody else has some direct experience that contradicts my gut feel.

No argument from me. I think it can go either way. Your logic is as good as mine. I wouldn't suppose that this issue is something the IRS has high on their list of things to clarify.

The beginning to that section reads: "The normal retirement benefit under the plan must be a flat benefit that requires a minimum of 25 years of service at normal retirement age for an employee to receive the unreduced flat benefit, DETERMINED WITHOUT REGARD TO SECTION 415. (emphasis added). How can that language be interpreted as allowing a benefit to be first reduced by the 415 limit before applying the accrual fraction?

Precisely.

I have always thought there was a giant disconnect between standard mortality tables and what the plan says. The process of normalizing in the development of MVAR's is where that disconnect is reconciled. Hence, I don't think the definition of a standard mortality table should depend on plan action. Then again, as already stated, I don't know what the IRS has in mind as far as an effective date, so you may be spot on.

I thought about that for a moment (but not much more) before I posted. Since we are measuring discrimination for the calendar year, maybe using GAR94 for the year in question isn't ok. I don't really know what the IRS position on that would be.

I agree,with a small caveat. It is possible that the combination of the two still results in an allocation design that is consistent with the smoothly increasing exception. But you probably have already checked that and found that it doesn't.

Let's say you have a formula of 250% accrued over 25 years. Hence, somebody with 10 years to go will get 100%. If you limit the projected benefit to the 415% limit, the projected benefit, by definition, can never exceed 100% of pay. That would mean that your 10 year participant would still get 100%, but a 25 year participant would get, after 10 years, only 10/25 of 100%, rather than what is required, 10/25 of 250%. Limiting the projected benefit to the 415 limit serves to reduce accruals for those with greater than the shortest period necessary to generate the maximum accrual. That is 10 years in this case.

Indeed. Michael v. Riverside Cement is the 9th Circuit case I was thinking about. That case stands for the proposition that 411(d)(6) can be applied in wondrous ways by those Federal judges.

By golly, it is indeed! So, for 2003 and later GAR94 counts. For 2001 and 2002, 83GAM-U counts.

It shouldn't. But are you in the 9th Circuit? Anything is possible there.

What was the specific title of the session? I tend to agree. A document that specifically allows the individual participant to establish his or her own level of contribution is indeed something that might rise to the level of an impermissible CODA. In fact, I would think that it would if the amounts exceeded the 402(g) limit. But that is a far cry from a document that gives that authority only to the Plan Admnistrator or Plan Sponsor. As to exactly how the Plan Sponsor decides on the breakdown, I am just incredulous that an informal, non-binding indication from a participant could be a negative. If I wanted to get into hyperbole I might be talking First Amendment issues!

I believe it works just the way you described it. Those who do not satisfy 21/1 get an auto pass, as do those who do.

pax, doesn't the PBGC charge an administrative fee to accept the monies currently from a DB plan? If they charged the same amount for a DC plan transfer you would think that they would set the level such that there is no subsidy. Maybe.

Originally stated: "No update. It is not a standard table for testing purposes." Later responses indicate that there has, indeed, been an update. The 401(a)(4) regulations were updated via Treasury Decision 8954 on 6/29/2001 to specifically include the applicable mortality table defined under 417(e)(3)(A)(ii)(b).

I agree - receivables aren't included. This is a cash basis disclosure.

Did they take any questions on this issue? For example, did Mr. S. or Mr. H indicate how a pre-approved plan with "each participant in their own group" language is to determine relative allocations amongst the groups without being potentially deemed an impermissible CODA? If not, doesn't that create a situation where use of a pre-approved IRS document might be deemed impermissible?

It does, indeed, unless the pay to pay is a specific amount and the combined amounts still satisfy the test. Unlikely, but possible.

What did you mean by "the director"? The director of what? If you are saying that this individual has shares of a C-corp in his SEP-IRA and those shares are of a company that this individual is a Director of, then you might have a problem. Rolling over the shares to a qualified plan that this individual participates in won't cure that problem, even though it will, as pointed out already, apparently avoid the S-corp problem, if done in advance.

Thanks, merlin. We have some confirmation that Sal's understanding of the IRS position is correct.

I haven't researched this completely, but my understanding is that the contribution to the DB plan, even though it is 100% vested, can not count towards the 3% 401(k) Safe Harbor contribution.

Should is a funny word to use in this context. I would certainly use "normally", though. I guess it would depend on whether the IRS approved language that allowed use of GATT rates as the plan's rates for all distributions where the lump sum exceeds $3,500. By the way, the current threshold is $5,000, not $3,500. It may therefore be that something you are looking at is a bit out of date.

It is not referred to as a "multi-employer" plan. It is a "multiple-employer" plan. Huge difference. Once the new company "signs on" to the existing plan, it becomes a multiple employer plan and creates a situation where there is effectively no severance with respect to employees of the sub. Plan just continues to rock. There are no distributions. There are no problems with the loans. How are the monies moving from the parent's plan to the new plan? Spinoff? No problem. Loans can travel nicely.

Termination submissions are done on 5310's.